Xilio Therapeutics, Inc 10-Q for FY2025 Q1
Xilio Therapeutics, Inc. (XLO)
About this 10-Q
Xilio Therapeutics, Inc filed this 10-Q on May 8, 2025, covering the quarter ended March 31, 2025 (FY2025 Q1).
Headline figures
Quarter ended March 31, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $2.93M
- Net loss
- $13.27M
- compared with a net loss of $17.2M a year earlier
- Diluted EPS
- -$0.18
- compared with -$0.62 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
or
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (
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.
Large accelerated filer | ☐ | 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
Number of shares of the registrant’s common stock, $0.0001 par value per share, outstanding on May 5, 2025:
References to Xilio
Unless otherwise stated, all references to “us,” “our,” “we,” “Xilio,” “Xilio Therapeutics,” “the Company” and similar references in this Quarterly Report on Form 10-Q refer to Xilio Therapeutics, Inc. and its consolidated subsidiaries. Xilio Therapeutics and its associated logos are registered trademarks of Xilio Therapeutics, Inc. Other brands, names and trademarks contained in this Quarterly Report on Form 10-Q are the property of their respective owners.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “aim,” “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would,” or the negative of these words or other comparable terminology, although not all forward-looking statements contain these identifying words.
The forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
| ● | our ability to secure sufficient additional capital in the near term or implement other strategies needed to alleviate our current doubt about our ability to continue as a going concern; |
| ● | our estimates regarding expenses, future revenue and capital requirements and our expectations regarding our ability to fund our operating expenses and capital expenditure requirements with our cash and cash equivalents; |
| ● | the initiation, timing, progress and results of our research and development programs, including preclinical studies and clinical trials; |
| ● | the potential advantages and benefits of our current and future product candidates, including our beliefs regarding the potential benefits of our current and future product candidates in combination with other agents; |
| ● | our strategic plans to research, develop and, if approved, subsequently commercialize any product candidates we may develop; |
| ● | our ability to identify additional products, product candidates or technologies with significant potential that are consistent with our research, development and commercial objectives; |
| ● | our manufacturing capabilities and strategy, including our reliance on third parties to manufacture our current or future product candidates; |
| ● | our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates; |
| ● | the timing of and our ability to submit investigational new drug applications or biologic license applications for, and, if cleared or approved, maintain such regulatory applications or approvals for our product candidates; |
| ● | our commercialization and marketing capabilities and strategy related to our product candidates, if approved; |
| ● | the rate and degree of market acceptance of our product candidates, if approved; |
| ● | our estimates regarding the addressable patient population and potential market opportunity for our current and future product candidates; |
| ● | developments relating to or impacting our competitors and our industry, including the impact of current or future government laws and regulations on us, third parties with whom we do business and our industry; |
2
| ● | the impact of current or future government laws and regulations on us or third parties with whom we do business and our industry; |
| ● | our competitive position and expectations regarding developments and projections relating to our current or future competitors and any competing therapies that are or become available; |
| ● | our ability to establish and maintain collaborations and strategic partnerships and realize the expected benefits of such arrangements, including our collaboration agreement with AbbVie Group Holdings Limited, or AbbVie, our license agreement with Gilead Sciences, Inc., or Gilead, and our clinical collaboration with F. Hoffmann-La Roche Ltd; |
| ● | our expectations regarding milestones, option-related fees and other contingent payments under our collaboration agreement with AbbVie and our license agreement with Gilead; |
| ● | our expectations regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act, or JOBS Act; and |
| ● | the impact of general economic conditions, including inflation and the imposition of new or revised global trade tariffs. |
Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly those described in the “Risk Factor Summary” and “Risk Factors” section in Part II, Item 1A of this Quarterly Report on Form 10-Q, that could cause actual results or events to differ materially from the forward-looking statements that we make. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make or enter into.
You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results, performance or achievements may be materially different from what we expect. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.
3
Risk Factor Summary
Our business is subject to numerous risks that, if realized, could materially and adversely affect our business, financial condition, results of operations and future growth prospects. These risks are discussed more fully in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. These risks include, but are not limited to, the following:
| ● | Our recurring losses from operations raise substantial doubt regarding our ability to continue as a going concern. If we are unable to raise sufficient additional capital in the near term, we will need to implement additional cost reduction strategies, which could include delaying, limiting, reducing or eliminating both internal and external costs related to our operations and research and development programs. |
| ● | If we fail to regain compliance with the continued listing requirements of The Nasdaq Stock Market, our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted. |
| ● | Our business is highly dependent on the success of our current product candidates, which are in the early stages of development and will require significant additional preclinical and clinical development before we can seek regulatory approval for and commercially launch a product. |
| ● | Our approach to the discovery and development of product candidates based on our technological approaches is unproven, and we do not know whether we will be able to develop any products of commercial value. |
| ● | Preclinical development is uncertain. Our preclinical programs may experience delays or may never advance to clinical trials, which would adversely affect our ability to obtain regulatory approvals or commercialize these programs on a timely basis or at all, which would have an adverse effect on our business. |
| ● | We may encounter substantial delays in the commencement or completion, or termination or suspension, of our clinical trials, which could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospects. |
| ● | Our product candidates may cause undesirable or unexpectedly severe side effects that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any. |
| ● | Interim top-line and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data. |
| ● | We expect to develop certain of our product candidates in combination with third-party drugs and we will have limited or no control over the safety, supply, regulatory status or regulatory approval of such drugs. |
| ● | Manufacturing biologics is complex, and we may experience manufacturing problems that result in delays in our development or commercialization programs. |
| ● | We face risk related to our reliance on our current and any future third-party contract development and manufacturing organizations, or CDMOs. For example, the CDMO on which we rely may not continue to meet regulatory requirements, may have limited capacity and may experience interruptions in supply, any of which could adversely affect our development and commercialization plans for our product candidates. |
| ● | We expect to rely on third parties to conduct, supervise and monitor IND-enabling studies and clinical trials, and if these third parties perform in an unsatisfactory manner, it may harm our business, reputation and results of operations. |
4
| ● | We have entered into, and may in the future seek to enter into, collaborations, licenses, or similar arrangements with third parties for the research, development and commercialization of certain of our current or future product candidates. If any such arrangements are not successful, we may not be able to capitalize on the market potential of those product candidates. |
| ● | Certain of our research and development and manufacturing activities take place in China through WuXi Biologics (Hong Kong) Limited, or WuXi Biologics. A significant disruption in our ability to rely on WuXi Biologics could materially adversely affect our business, financial condition and results of operations. |
| ● | We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do. |
| ● | If we are unable to obtain and maintain patent protection for any product candidates we develop or for other proprietary technologies we may develop, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize product candidates and technology similar or identical to our product candidates and technology, and our ability to successfully commercialize any product candidates we may develop, and our technology may be adversely affected. |
| ● | We rely on in-license agreements for patent rights with respect to our product candidates and may in the future acquire or in-license additional third-party intellectual property rights on which we may similarly rely. We face risks with respect to such reliance, including the risk that we could lose these rights that are important to our business if we fail to comply with our obligations under these licenses or that we may be unable to acquire or in-license third-party intellectual property that may be necessary or important to our business operations. |
| ● | Even if we complete the necessary preclinical studies and clinical trials, the regulatory approval process is expensive, time consuming and uncertain and may prevent us from obtaining approvals for the commercialization of some or all of our product candidates. As a result, we cannot predict when or if, and in which territories, we will obtain marketing approval to commercialize a product candidate. |
| ● | The price of our common stock has been and, in the future, could be subject to volatility related or unrelated to our operations, and purchasers of our common stock could suffer a decline in value. |
Availability of Other Information About Xilio Therapeutics, Inc.
Investors and others should note that we communicate with our investors and the public using our company website (www.xiliotx.com), including but not limited to investor presentations and scientific presentations, filings with the U.S. Securities and Exchange Commission, press releases, public conference calls and webcasts. You can also connect with us on LinkedIn. The information that we post on these channels and websites could be deemed to be material information. As a result, we encourage investors, the media and others interested in our company to review the information that we post on these channels, including our investor relations website, on a regular basis. This list of channels may be updated from time to time on our investor relations website (ir.xiliotx.com) and may include other social media channels than the ones described above. The contents of our website or these channels, or any other website that may be accessed from our website or these channels, shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.
5
TABLE OF CONTENTS
6
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
XILIO THERAPEUTICS, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
(Unaudited)
|
| March 31, |
| December 31, | ||
| | 2025 | | 2024 | ||
ASSETS |
| |
|
| |
|
Current assets |
| |
|
| |
|
Cash and cash equivalents | | $ | | | $ | |
Prepaid expenses and other current assets | |
| | |
| |
Total current assets | |
| | |
| |
Restricted cash | |
| | |
| |
Property and equipment, net | |
| | |
| |
Operating lease right-of-use asset | |
| | |
| |
Total assets | | $ | | | $ | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
|
| |
|
|
Current liabilities | |
|
| |
|
|
Accounts payable | | $ | | | $ | |
Accrued expenses | |
| | |
| |
Deferred revenue, current portion | | | | | | |
Operating lease liability, current portion | |
| | |
| |
Total current liabilities | |
| | |
| |
Deferred revenue, net of current portion | | | | | | |
Operating lease liability, net of current portion | |
| | |
| |
Total liabilities | |
| | |
| |
Commitments and contingencies (Note 6) | |
|
| |
|
|
Stockholders’ equity | |
|
| |
|
|
Preferred stock, $ | | | | | ||
Common stock, $ | |
| | |
| |
Additional paid-in capital | |
| | |
| |
Accumulated deficit | |
| ( | |
| ( |
Total stockholders’ equity | |
| | |
| |
Total liabilities and stockholders’ equity | | $ | | | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
XILIO THERAPEUTICS, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share data)
(Unaudited)
| | Three Months Ended March 31, | ||||
| | 2025 |
| 2024 | ||
Revenue |
| |
|
| |
|
| $ | | | $ | — | |
Total revenue | |
| | |
| — |
Operating expenses |
| |
|
| | |
Research and development | | $ | | | $ | |
General and administrative | |
| | |
| |
Restructuring | | | — | | | |
Total operating expenses | |
| | |
| |
Loss from operations | |
| ( | |
| ( |
Other income, net | |
|
| |
|
|
Other income, net | |
| | |
| |
Total other income, net | |
| | |
| |
Net loss and comprehensive loss | | $ | ( | | $ | ( |
Net loss per share, basic and diluted | | $ | ( | | $ | ( |
Weighted average common shares outstanding, basic and diluted | |
| | |
| |
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
XILIO THERAPEUTICS, INC.
Condensed Consolidated Statements of Stockholders’ Equity
For the three months ended March 31, 2025 and 2024
(In thousands, except share data)
(Unaudited)
|
|
|
| | |
| | |
| | |
| | |
| | | | | | | | | | | | | Total | |
| | Common Stock | | Additional | | Accumulated | | Stockholders’ | ||||||
|
| Shares |
| Amount |
| Paid-In Capital |
| Deficit |
| Equity | ||||
Balance at December 31, 2024 | | | | $ | | | $ | | | $ | ( | | $ | |
Issuance of common stock in connection with the AbbVie stock purchase agreement, net of issuance costs | | |
| | — |
| | |
| | — |
| | |
Issuance of common stock in connection with at-the-market offerings, net of issuance costs |
| |
| | — |
| | |
| | — |
| | |
Vesting of restricted stock units |
| |
| | — |
| | — |
| | — |
| | — |
Exercise of stock options |
| | |
| — | |
| | |
| — | |
| |
Stock-based compensation expense |
| — |
| | — |
| | |
| | — |
| | |
Net loss |
| — |
| | — |
| | — |
| | ( |
| | ( |
Balance at March 31, 2025 |
| | | $ | | | $ | | | $ | ( | | $ | |
|
|
|
| | |
| | |
| | |
| | |
| | | | | | | | | | | | | Total | |
| | Common Stock | | Additional | | Accumulated | | Stockholders’ | ||||||
|
| Shares |
| Amount |
| Paid-In Capital |
| Deficit |
| Equity | ||||
Balance at December 31, 2023 | | | | $ | | | $ | | | $ | ( | | $ | |
Issuance of common stock in connection with the Gilead stock purchase agreement, net of issuance costs | | |
| | — |
| | |
| | — |
| | |
Vesting of restricted common stock |
| |
| | — |
| | — |
| | — |
| | — |
Stock-based compensation expense |
| — |
| | — |
| | |
| | — |
| | |
Net loss |
| — |
| | — |
| | — |
| | ( |
| | ( |
Balance at March 31, 2024 |
| | | $ | | | $ | | | $ | ( | | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
9
XILIO THERAPEUTICS, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| | Three Months Ended March 31, | ||||
|
| 2025 |
| 2024 | ||
Cash flows from operating activities: | | | | | | |
Net loss |
| $ | ( |
| $ | ( |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
| |
|
| |
|
Depreciation and amortization |
| | |
| | |
Stock-based compensation expense |
| | |
| | |
Changes in operating assets and liabilities: |
| | |
| | |
License agreement receivable | | | — | | | ( |
Prepaid and other assets |
| | |
| | ( |
Operating lease right-of-use asset |
| | |
| | |
Accounts payable |
| | ( |
| | ( |
Accrued expenses and other liabilities |
| | ( |
| | ( |
Deferred revenue | | | | | | |
Operating lease liability |
| | ( |
| | ( |
Net cash provided by (used in) operating activities |
| | |
| | ( |
Cash flows from investing activities: |
| |
|
| |
|
Purchases of property and equipment |
| | ( |
| | — |
Net cash used in investing activities |
| | ( |
| | — |
Cash flows from financing activities: |
| |
|
| |
|
Repayments of debt principal | | | — | | | ( |
Payments of finance lease |
| | — |
| | ( |
Proceeds from exercise of stock options |
| | |
| | — |
Proceeds from issuance of common stock in connection with the Gilead stock purchase agreement, net of issuance costs | | | — |
| | |
Proceeds from issuance of common stock in connection with the AbbVie stock purchase agreement, net of issuance costs | | | | | | — |
Proceeds from issuance of common stock in connection with at-the-market offerings, net of issuance costs | | | |
| | — |
Net cash provided by financing activities |
| | |
| | |
Increase (decrease) in cash, cash equivalents and restricted cash |
| | |
| | ( |
Cash, cash equivalents and restricted cash, beginning of period |
| | |
| | |
Cash, cash equivalents and restricted cash, end of period |
| $ | |
| $ | |
Supplemental cash flow disclosure: |
| |
|
| |
|
Cash paid for interest |
| $ | — |
| $ | |
Supplemental disclosure of non-cash activities: |
| | |
| |
|
Capital expenditures included in accounts payable or accrued expenses | | $ | | | $ | |
Reconciliation to amounts within the consolidated balance sheets: | | | | | | |
Cash and cash equivalents | | $ | | | $ | |
Restricted cash | | | | | | |
Cash, cash equivalents and restricted cash, end of period | | $ | | | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
10
XILIO THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements
(Dollars in thousands, unless otherwise stated)
(Unaudited)
1. Description of Business, Liquidity and Going Concern
Description of Business
Xilio Therapeutics, Inc. (“Xilio” or the “Company”) is a clinical-stage biotechnology company dedicated to discovering and developing tumor-activated immuno-oncology (“I-O”) therapies with the goal of significantly improving outcomes for people living with cancer without the systemic side effects of current I-O treatments. The Company was incorporated in Delaware in June 2020, and its headquarters are located in Waltham, Massachusetts.
Liquidity and Going Concern
Since its inception, the Company has devoted substantially all of its financial resources and efforts to research and development activities. As of March 31, 2025, the Company had an accumulated deficit of $
To continue to fund the operations of the Company, management has developed plans, which in the near term primarily consist of raising additional capital through one or more of the following: additional equity or debt financings; additional collaborations, partnerships or licensing transactions; or other sources. However, there can be no assurance that the Company will be able to complete any such transaction on acceptable terms or otherwise, and the Company may be unable to obtain sufficient additional capital. If the Company is not able to secure sufficient additional capital in the near term, the Company will need to implement additional cost reduction strategies, which could include delaying, limiting, further reducing or eliminating both internal and external costs related to its operations and research and development programs.
The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.
11
2. Summary of Significant Accounting Policies
Basis of Presentation
The Company’s unaudited interim condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”), and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASUs”) of the Financial Accounting Standards Board (“FASB”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2024 and notes thereto, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 11, 2025. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited financial statements. In the opinion of the Company’s management, the unaudited interim condensed consolidated financial statements contain all adjustments which are necessary to present fairly the Company’s financial position as of March 31, 2025 and the results of its operations for the three months ended March 31, 2025 and 2024 and cash flows for the three months ended March 31, 2025 and 2024. Such adjustments are of a normal and recurring nature. The results for the three months ended March 31, 2025 are not necessarily indicative of the results for the year ending December 31, 2025 or for any future period.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: Xilio Development, Inc. (“Xilio Development”), a Delaware corporation, and Xilio Securities Corporation, a Massachusetts security corporation. All intercompany accounts and transactions have been eliminated in consolidation.
Significant Accounting Policies
The significant accounting policies used in preparation of the unaudited condensed consolidated financial statements are described in Note 2, “Summary of Significant Accounting Policies” of the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
Use of Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and judgments that may affect the reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the date of the financial statements and the related reporting of revenue and expenses during the reporting period. Management considers many factors in selecting appropriate financial accounting policies and controls and in developing the estimates and assumptions that are used in the preparation of these condensed consolidated financial statements. Factors that may affect estimates include expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. Significant estimates of accounting reflected in these condensed consolidated financial statements include, but are not limited to, estimates related to revenue recognition, accrued expenses, the valuation of stock-based compensation, including stock options and restricted stock units, useful life of long-lived assets and income taxes. Actual results could differ from those estimates.
12
Concentrations of Credit Risk
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company holds all cash and cash equivalents at accredited financial institutions. Bank accounts in the United States are generally insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. Substantially all of the Company’s cash and cash equivalents are FDIC insured, including funds held through an insured cash sweep program. The Company has not experienced any losses in its cash and cash equivalents and does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.
Segments
The Company has
All of the Company’s collaboration and license revenue is generated in the United States and all of the Company’s long-lived assets are held in the United States.
Recent Accounting Pronouncements Not Yet Adopted
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. The Company is currently evaluating the potential impact of adopting this new guidance on its condensed consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), and in January 2025, the FASB issued ASU No. 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”). ASU 2024-03 requires additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific types of expenses included in the expense captions presented in the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for public companies for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the potential impact of adopting this new guidance on its condensed consolidated financial statements and related disclosures.
13
3. Property and Equipment, Net
Property and equipment, net consists of the following as of March 31, 2025 and December 31, 2024:
|
| March 31, |
| December 31, | ||
| | 2025 | | 2024 | ||
Laboratory equipment | | $ | | | $ | |
Computers and software | |
| — | |
| |
Furniture and fixtures | |
| | |
| |
Leasehold improvements | |
| | |
| |
Total property and equipment | | | | | | |
Less: accumulated depreciation | |
| ( | |
| ( |
Property and equipment, net | | $ | | | $ | |
The Company recognized depreciation and amortization expense related to property and equipment of $
4. Accrued Expenses
Accrued expenses consist of the following as of March 31, 2025 and December 31, 2024:
|
| March 31, |
| December 31, | ||
| | 2025 | | 2024 | ||
External research and development | | $ | | | $ | |
Personnel-related | |
| | |
| |
Professional and consulting fees | |
| | |
| |
Other | | | | | | |
Total accrued expenses | | $ | | | $ | |
5. Collaboration and License Agreements
Collaboration, License and Option Agreement with AbbVie
In February 2025, Xilio Development entered into a collaboration, license and option agreement (the “Collaboration Agreement”) with AbbVie Group Holdings (“AbbVie”) for up to
In connection with the Collaboration Program, Xilio Development is responsible for conducting all preclinical development through lead generation (“Collaboration Program Services”). For the Initial Option Program, AbbVie’s option right is exercisable beginning on the effective date of the Collaboration Agreement, and for each Additional Option Program, AbbVie’s option right is exercisable following delivery of written notice of nomination of such Additional Option Program. During the
14
Unless AbbVie elects to extend preclinical development through the next stage and pays the applicable option extension fee, AbbVie’s option right terminates within a specified time period following completion of each stage of preclinical development. Upon exercising its option for an Option Program, AbbVie will be responsible for any remaining preclinical development, if applicable, and all clinical development, regulatory and commercialization activities with respect to licensed products under the applicable Option Program.
In addition, on an Option Program-by-Option Program basis, prior to the initiation of specified activities related to lead optimization and selection for the initial target for such Option Program, AbbVie has a one-time right to substitute the initial target with the backup target agreed upon by the parties at the time of Option Program initiation, subject to the payment by AbbVie of a one-time substitution fee with respect to such substituted target and the other terms of the Collaboration Agreement.
In connection with the execution of the Collaboration Agreement, in February 2025, the Company also entered into a stock purchase agreement with AbbVie Inc. pursuant to which the Company issued and sold
As of March 31, 2025, the Company has received $
The Company considered the criteria of ASC 606, Revenue from Contracts with Customers (“ASC 606”) for combining contracts and determined the Collaboration Agreement and the stock purchase agreement should be combined into a single contract because they were negotiated and entered into in contemplation of one another. The Company accounted for the common stock issued to AbbVie Inc. based on the fair market value of the common stock on the date of issuance. The fair market value of the common stock issued to AbbVie Inc. was $
The Company determined that the Collaboration Agreement represents a contract with a customer within the scope of ASC 606 and identified the following promises under the Collaboration Agreement: (i) the exclusive license granted to AbbVie related to the Collaboration Program, (ii) the Collaboration Program Services and (iii) the Option Program Services for the Initial Option Program. In addition, the Company identified several customer options that were evaluated to determine if such options represented material rights, each of which would be considered a performance obligation at contract inception only if the option provides a material right to AbbVie that it would not receive without entering into that contract.
The Company determined that the exclusive license and development services related to the Collaboration Program Services were not capable of being distinct on the basis that the services to be provided by Xilio Development are specialized in nature, specifically with respect to its specialized expertise in developing masked antibody-based immunotherapies and the Company’s proprietary platform for tumor-activated biologics. Accordingly, the Company concluded that these promises should be a combined performance obligation consisting of the exclusive license and the development services for the Collaboration Program Services. As such, the Company identified the following performance obligations at contract inception: (i) the performance obligation consisting of the exclusive license and the Collaboration Program Services (the “Collaboration Program Performance Obligation”); (ii) the Option Program Services for the Initial Option Program (the “Initial Option Program Performance Obligation”); (iii) a material right to receive an exclusive license to the Initial Option Program; (iv) a material right to receive additional services related to the Initial Option Program; and (v) a material right related to AbbVie’s one-time right to substitute the initial target with the backup target
15
for the Initial Option Program.
For purposes of ASC 606, the transaction price at the outset of the arrangement was determined to be $
The Company allocated the transaction price to the performance obligations on a relative selling price basis as follows: (i) $
Revenue associated with the Collaboration Program Performance Obligation and the Initial Option Program Performance Obligation are recognized as the underlying services are provided as control is transferred over time. The Company measures progress based on the amount of costs incurred relative to the total costs expected to fulfill the combined performance obligation. In management’s judgment, this input method is the best measure of progress towards satisfying the combined performance obligation and reflects a faithful depiction of the transfer of goods and services. Revenue associated with the material rights will be recognized upon expiry if the option is not exercised. If the material right is exercised, the Company will evaluate the performance obligations underlying the option exercised and recognize the amount allocated to the material right and any additional consideration over the appropriate recognition period associated with the underlying performance obligations.
During the three months ended March 31, 2025, the Company recognized collaboration revenue of $
16
License Agreement with Gilead Sciences, Inc.
In March 2024, Xilio Development entered into a license agreement with Gilead Sciences, Inc. (“Gilead”), pursuant to which it granted Gilead an exclusive global license to develop and commercialize XTX301, the Company’s tumor-activated IL-12 product candidate, and specified other molecules directed to IL-12. Xilio Development is responsible for conducting clinical development for XTX301 in the ongoing Phase 1 clinical trial through an initial planned Phase 2 dose expansion clinical trial. Following the delivery by Xilio Development of a specified clinical data package for XTX301 related to the Phase 1 clinical trial and planned Phase 2 clinical trial, Gilead can elect to transition responsibilities for the development and commercialization of XTX301 to Gilead, subject to the terms of the license agreement and payment by Gilead of a $
In connection with the execution of the license agreement, in March 2024, the Company also entered into a stock purchase agreement with Gilead. Under the stock purchase agreement, Gilead purchased $
As of March 31, 2025, the Company has received $
The Company considered the ASC 606 criteria for combining contracts and determined the license agreement and the stock purchase agreement should be combined into a single contract because they were negotiated and entered into in contemplation of one another. The Company concluded the initial private placement and the additional private placements do not represent freestanding financial instruments as such instruments are not legally detachable due to contractual transfer restrictions. The Company accounted for the common stock issued to Gilead in the initial private placement based on the fair market value of the common stock on the date of issuance. The fair market value of the common stock issued to Gilead in the initial private placement was $
The Company determined that the license agreement represents a contract with a customer within the scope of ASC 606 and identified
For purposes of ASC 606, the transaction price of the license agreement at the outset of the arrangement was determined to be $
17
transaction price at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur and may adjust the transaction price as necessary. Sales-based royalties, including milestone payments based on the level of sales, were also excluded from the transaction price, as the license is deemed to be the predominant item to which the royalties relate. The Company plans to recognize such revenue at the later of (i) when the related sales occur or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).
Revenue associated with the combined performance obligation is recognized as services are provided as control is transferred over time. The Company measures progress based on the amount of costs incurred relative to the total costs expected to fulfill the combined performance obligation. In management’s judgment, this input method is the best measure of progress towards satisfying the combined performance obligation and reflects a faithful depiction of the transfer of goods and services.
During the three months ended March 31, 2025, the Company recognized collaboration and revenue of $
Summary of Contract Assets and Liabilities
The following table presents changes in the balances of the Company's contract liabilities:
| | | | | | | | ||
| | Gilead | | AbbVie | | Total | |||
Deferred revenue as of December 31, 2024 | | $ | | | $ | — | | $ | |
Additions | |
| — | | | | | | |
Collaboration and license revenue recognized | | | ( | | | ( | | | ( |
Deferred revenue as of March 31, 2025 | | $ | | | $ | | | $ | |
Clinical Trial Collaboration with F. Hoffmann-La Roche Ltd
In July 2023, the Company and F. Hoffmann-La Roche Ltd (“Roche”) entered into a clinical trial collaboration pursuant to a clinical supply agreement to evaluate vilastobart in combination with atezolizumab (Tecentriq®) in a Phase 1/2 clinical trial consisting of Phase 1 dose escalation assessing the combination in patients with advanced solid tumors and Phase 2 assessing the combination in patients with microsatellite stable colorectal cancer.
Under the clinical supply agreement, the Company is eligible to receive specified cost-sharing payments from Roche, and each company will supply its respective anti-cancer agent to support the Phase 1/2 clinical trial. The Company is responsible for conducting the Phase 1/2 clinical trial and retains global development and commercialization rights to vilastobart.
The Company concluded that the cost-sharing payments under the clinical supply agreement are not in the scope of ASC 606 because the Company does not consider performing research and development services for reimbursement to be part of its ongoing major or central operations. Therefore, the Company applied a reasonable, rational, and consistently applied accounting policy election to record the cost-sharing payments under the clinical supply agreement as a reduction of research and development expenses in the condensed consolidated statements of operations and comprehensive loss for the period in which a study development event is achieved. The Company recognized a reduction of research and development expense of $
18
6. Commitments and Contingencies
The Company has an operating lease for its headquarters and a finance lease for certain lab equipment. In August 2019, the Company entered into a facility lease agreement with a landlord providing funding for tenant improvements and occupancy of approximately
7. Preferred Stock and Common Stock
Undesignated Preferred Stock
As of March 31, 2025 and December 31, 2024, the Company’s certificate of incorporation, as amended, authorizes the Company to issue up to
Common Stock
As of March 31, 2025 and December 31, 2024, the Company is authorized to issue up to
Private Placement
In March 2024, the Company entered into a securities purchase agreement with certain existing accredited investors pursuant to which the Company issued and sold an aggregate of
“At-The-Market” Offering Program
In November 2022, the Company filed a universal shelf registration statement on Form S-3 with the SEC to register for sale up to $
19
Agreement, and the Company entered into a new sales agreement with Leerink Partners, LLC (the “Leerink Sales Agreement”), under which the Company may issue and sell shares of its common stock from time to time at an aggregate offering price of up to $
Shares Reserved for Future Issuance
The Company has reserved for future issuances the following shares of common stock underlying the securities issued below as of March 31, 2025 and December 31, 2024:
| | March 31, | | December 31, |
| | 2025 | | 2024 |
Stock options and unvested restricted stock units |
| |
| |
Employee stock purchase plan |
| |
| |
Prefunded warrants | | | | |
Warrants |
| |
| |
Total shares reserved for future issuance |
| |
| |
8. Stock-Based Compensation
Equity Incentive Plans
2020 Stock Incentive Plan
Under the 2020 Stock Incentive Plan (as amended, the “2020 Plan”), the Company was authorized to issue shares of common stock to the Company’s employees, officers, directors, consultants and advisors in the form of options, restricted stock awards or other stock-based awards.
2021 Stock Incentive Plan
In September 2021, the Company’s board of directors and stockholders adopted the 2021 Stock Incentive Plan (the “2021 Plan”), which became effective immediately prior to the Company’s initial public offering of common stock (“IPO”) in October 2021. Upon effectiveness of the 2021 Plan, the Company ceased granting awards under the 2020 Plan. The 2021 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards. The Company initially reserved
2022 Inducement Plan
In 2022, the Company’s board of directors adopted the 2022 Inducement Stock Incentive Plan pursuant to Nasdaq Rule 5635(c)(4) (the “2022 Inducement Plan”). In accordance with Rule 5635(c)(4), stock-based incentive awards under the 2022 Inducement Plan may only be made to a newly hired employee who has not previously been a member of the Company’s board of directors, or an employee who is being rehired following a bona fide period of non-employment by the Company as a material inducement to the employee’s entering into employment with the Company. The Company initially reserved
20
2021 Employee Stock Purchase Plan
In 2021, the Company’s board of directors and stockholders adopted the 2021 Employee Stock Purchase Plan (the “2021 ESPP”), which became effective immediately prior to the IPO in October 2021. The Company initially reserved
Stock-Based Compensation Expense
During the three months ended March 31, 2025 and 2024, the Company recorded compensation expense related to stock options, restricted stock units and restricted common stock for employees and non-employees and share purchases under the 2021 ESPP for employees, which was allocated as follows in the condensed consolidated statements of operations and comprehensive loss:
| | Three Months Ended March 31, | | ||||
|
| 2025 |
| 2024 |
| ||
Research and development expense | | $ | | | $ | | |
General and administrative expense | |
| | | | | |
Total stock-based compensation expense | | $ | | | $ | | |
Stock Options
A summary of stock option activity under the Company’s 2020 Plan, 2021 Plan and 2022 Inducement Plan is as follows:
| | |
| | |
| Weighted |
| | |
| | | | | | | Average | | | |
| | | | | | | Remaining | | Aggregate | |
| | | | Weighted | | Contractual | | Intrinsic | ||
| | Number of | | Average | | Term | | Value (1) | ||
|
| Stock Options |
| Exercise Price |
| (In years) |
| (In thousands) | ||
Outstanding as of December 31, 2024 |
| | | $ | |
| | $ | | |
Granted |
| | | $ | |
|
| |
|
|
Exercised |
| ( | | $ | |
|
| |
|
|
Forfeited |
| ( | | $ | |
| | |
|
|
Outstanding as of March 31, 2025 |
| | | $ | |
| | $ | | |
Exercisable as of March 31, 2025 |
| | | $ | |
| | $ | | |
| (1) | The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock as of the end of the period. |
Using the Black-Scholes option pricing model, the weighted average fair value of options granted to employees and directors during the three months ended March 31, 2025 and 2024 was $
21
| | Three Months Ended March 31, | | |||||
| | 2025 | |
| 2024 | | ||
Risk-free interest rate | | | | % | |
| | % |
Expected dividend yield | | | | % | |
| | % |
Expected term (in years) | | | | |
| | ||
Expected volatility | | | % | |
| | % | |
As of March 31, 2025, the Company had unrecognized stock-based compensation expense of $
Restricted Stock Units
In January 2024, the Company awarded
A summary of the Company’s restricted stock unit activity and related information is as follows:
|
| Number |
| Weighted | |
| | of Shares | | Average | |
| | of Restricted | | Grant Date | |
|
| Stock Units |
| Fair Value | |
Unvested as of December 31, 2024 | | |
| $ | |
Granted | | — | | $ | — |
Vested | | ( | | $ | |
Forfeited | | — | | $ | — |
Unvested as of March 31, 2025 |
| |
| $ | |
For each of the three months ended March 31, 2025 and 2024, the Company recognized less than $
9. Net Loss Per Share
The Company calculates basic net loss per share by dividing net loss by the weighted average number of shares of common stock outstanding. The weighted average number of shares of common stock used in the basic and diluted net loss per share calculation includes the prefunded warrants issued in connection with the Company’s private placements with certain existing investors and Gilead, as the prefunded warrants are exercisable at any time for nominal cash consideration. As of March 31, 2025,
22
The following table sets forth the outstanding shares of common stock equivalents, presented based on amounts outstanding at each period end, that were excluded from the calculation of diluted net loss per share for the periods indicated because including them would have been anti-dilutive:
|
| Three Months Ended | ||
| | March 31, | ||
| | 2025 | | 2024 |
Unvested restricted common stock |
| — |
| |
Unvested restricted stock units |
| |
| |
Outstanding stock options |
| |
| |
Warrants |
| |
| |
Unvested employee stock purchase plan shares | | | | |
Total common stock equivalents |
| |
| |
23
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2024.
Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the section entitled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are a clinical-stage biotechnology company discovering and developing tumor-activated, or masked, immuno-oncology, or I-O, therapies with the goal of significantly improving outcomes for people living with cancer without the systemic side effects of current I-O treatments. We are leveraging our proprietary platform to advance a pipeline of novel, tumor-activated I-O molecules that are designed to optimize the therapeutic index by localizing anti-tumor activity within the tumor microenvironment, including masked antibodies, bispecifics, cytokines and immune cell engagers. Current I-O therapies have curative potential for patients with cancer. However, their potential is significantly curtailed by systemic toxicity that results from activity of the therapeutic molecule outside the tumor microenvironment. Our molecules are engineered to localize activity within the tumor microenvironment with minimal systemic effects, resulting in the potential to achieve enhanced anti-tumor activity and increasing the population of patients who may be eligible to receive our medicines. To date, we have presented data across our clinical-stage programs showing clinical validation for our tumor-activation platform. Our most advanced clinical-stage product candidates are vilastobart, an Fc-enhanced, tumor-activated, anti-CTLA-4 monoclonal antibody, or mAb, and XTX301, a tumor-activated, engineered interleukin 12, or IL-12, therapy. We are currently advancing clinical development for vilastobart in combination with atezolizumab (Tecentriq®) in a Phase 2 clinical trial in patients with metastatic microsatellite stable colorectal cancer, or MSS CRC, under a co-funded clinical trial collaboration with F. Hoffmann-La Roche Ltd, or Roche. In January 2025, we announced initial data from the ongoing Phase 2 clinical trial, and we plan to report additional data from the Phase 2 clinical trial, including additional response assessments and further follow-up on the previously reported data, at the 2025 American Society of Clinical Oncology Annual Meeting. XTX301 is currently advancing in clinical development in a Phase 1 clinical trial in patients with advance solid tumors under our exclusive license agreement with Gilead Sciences, Inc., or Gilead. In addition to our clinical-stage product candidates, we are leveraging our proprietary tumor-activation platform to advance multiple preclinical programs for a masked PD-1/IL-2 bispecific and masked T cell engager molecules.
Recent Developments
Collaboration, License and Option Agreement with AbbVie Group Holdings Limited
On February 10, 2025, our wholly owned subsidiary Xilio Development, Inc., or Xilio Development, entered into a collaboration, license and option agreement with AbbVie Group Holdings Limited, or AbbVie, for up to four programs leveraging our proprietary tumor-activation technology and platform, consisting of (i) an exclusive option for (a) an initial program to discover, develop and commercialize masked T cell engager molecules for an agreed upon initial target and backup target, which we refer to as the initial option program, and (b) subject to the terms of the agreement, up to two additional programs to discover, develop, and commercialize masked T cell engager molecules for an initial target and backup target determined at the time of program initiation, each of which we refer to as an additional option program and (ii) an exclusive license for a program to develop and commercialize a masked antibody-based immunotherapy, which we refer to as the collaboration program. We refer to the initial option program and the additional option programs, collectively, as the option programs.
Under the agreement, we granted AbbVie an option to obtain an exclusive global license to exploit products discovered and developed under the initial option program. During the three-year period following the effective date of the agreement,
24
AbbVie has the right to initiate up to two additional option programs by (a) selecting an initial target and backup target for each such additional option program (excluding the target known as PSMA) and any other target for which we have completed specified activities prior to lead selection) and (b) paying us an additional program nomination fee for each additional option program. In addition, on an option program-by-option program basis, prior to the initiation of specified activities related to lead optimization and selection for the initial target for such option program, AbbVie has a one-time right to substitute the initial target with the backup target agreed upon by the parties at the time of option program initiation, subject to the payment by AbbVie of a one-time substitution fee with respect to such substituted target and the other terms of the agreement.
For the initial option program, AbbVie’s option right is exercisable beginning on the effective date of the agreement, and for each additional option program, AbbVie’s option right is exercisable following delivery of written notice of nomination of such additional option program. For each option program, prior to option exercise, we will be responsible for conducting preclinical discovery and development up to the completion of investigational new drug application enabling studies, subject to AbbVie paying us option extension fees upon completion of specified stages of preclinical discovery and development. Unless AbbVie elects to extend preclinical development through the next stage and pays the applicable option extension fee, AbbVie’s option right terminates within a specified time period following completion of each stage of preclinical development. Upon exercising its option for an option program, AbbVie will be responsible for any remaining preclinical development, if applicable, and all clinical development, regulatory and commercialization activities with respect to licensed products under the applicable option program.
In connection with the collaboration program, we granted AbbVie an exclusive global license to exploit products discovered and developed under the collaboration program. We are responsible for conducting all preclinical development through lead generation, and AbbVie is responsible for all further development and commercialization activities for any licensed products generated under the collaboration program.
Under the agreement, we have received $52.0 million in total upfront payments, consisting of a cash payment of $42.0 million and an equity investment of $10.0 million in our common stock at a purchase price of $2.30 per share. In addition, we will be eligible to receive up to approximately $2.1 billion in additional contingent payments, consisting of (i) up to $305.0 million in aggregate program nomination fees, preclinical development option extension fees and option fees for the option programs and (ii) up to $1.8 billion in aggregate development, regulatory and sales-based milestones for all option programs and the collaboration program. In addition, we are eligible to receive tiered royalties ranging in the high single digits on annual global net product sales for the option program and tiered royalties ranging in the mid-single digits on annual global net product sales for the collaboration program.
Subject to the terms, conditions and specified exceptions set forth in the agreement, until the agreement is terminated or expires with respect to an option program or the collaboration program, we have agreed to work exclusively with AbbVie with respect to the target for (i) each option program and (ii) the collaboration program. In addition, we have agreed to work exclusively with AbbVie with respect to the backup target for each option program until the expiration of the applicable target substitution period. Unless earlier terminated in accordance with its terms, the agreement will expire upon expiration of the last royalty term for the last licensed product. AbbVie may terminate the agreement for convenience upon specified time periods. On an option program-by-option program basis, if AbbVie elects not to pay the applicable option extension fee following completion of each stage of preclinical development, or if AbbVie elects not to exercise its option right and pay the option exercise fee for the applicable option program, then the agreement will automatically terminate with respect to such option program. Subject to the terms and specified exceptions set forth in the agreement, either party may terminate the agreement for the other party’s uncured material breach or insolvency.
Stock Purchase Agreement and Investor Rights Agreement with AbbVie Inc.
In connection with the execution of the collaboration, license and option agreement, on February 10, 2025, we entered into a stock purchase agreement with AbbVie Inc. pursuant to which we issued and sold 4,347,826 of our shares of common stock to AbbVie Inc. in a private placement at a purchase price of $2.30 per share for an aggregate purchase price of $10.0 million. The stock purchase agreement contains customary terms and conditions, including closing conditions, mutual representations, warranties and covenants for each of us and AbbVie Inc. In addition, pursuant to the terms of an investor rights agreement entered into by and between us and AbbVie Inc. in connection with the stock purchase agreement, AbbVie
25
Inc. agreed to certain transfer and standstill restrictions. In addition, AbbVie Inc. is entitled to certain registration rights with respect to the shares issued pursuant to the stock purchase agreement following termination of the transfer restrictions. We and AbbVie Inc. each granted the other party customary indemnification rights in connection with the registration of the shares issued pursuant to the stock purchase agreement.
Liquidity and Going Concern Overview
To date, we have financed our operations primarily from proceeds raised through private placements of preferred units, convertible preferred stock, common stock and prefunded warrants; a debt financing; our initial public offering, or IPO, of common stock in October 2021; upfront payments under our collaboration and license agreements with AbbVie and Gilead; and sales of common stock through at-the-market, or ATM, offerings. We have not generated any revenue from product sales and do not expect to generate any revenue from product sales for at least the next several years, if at all. All of our programs are in early clinical or preclinical development. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates, if approved. Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve profitability. Even if we are able to generate revenue from product sales, we may not become profitable.
Since inception, we have incurred significant operating losses, including net losses of $13.3 million and $17.2 million for the three months ended March 31, 2025 and 2024, respectively, and a net loss of $58.2 million for the year ended December 31, 2024. As of March 31, 2025, we had an accumulated deficit of $397.0 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future, particularly to the extent we:
| ● | continue to advance our current research programs and conduct additional research programs; |
| ● | advance our current product candidates and any future product candidates we may develop into preclinical and clinical development; |
| ● | seek marketing approvals for product candidates that successfully complete clinical trials, if any; |
| ● | obtain, expand, maintain, defend and enforce our intellectual property; |
| ● | hire additional research, clinical, regulatory, quality, manufacturing and general and administrative personnel; |
| ● | establish a commercial and distribution infrastructure to commercialize products for which we may obtain marketing approval, if any; |
| ● | continue to discover, validate and develop additional product candidates; |
| ● | continue to manufacture increasing quantities of our current or future product candidates for use in preclinical studies, clinical trials and for any potential commercialization; |
| ● | acquire or in-license other product candidates, technologies or intellectual property; and |
| ● | incur additional costs associated with current and future research, development and commercialization efforts and operations as a public company. |
As a result, we will need substantial additional capital to support our continuing operations and pursue our strategy. As of March 31, 2025, we had cash and cash equivalents of $89.1 million. Based on our current operating plans, we anticipate that our existing cash and cash equivalents as of March 31, 2025 will be sufficient to enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2026. Since these amounts are not expected to be sufficient to fund our operations for at least twelve months from the date of issuance of the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, there is substantial doubt about our ability
26
to continue as a going concern. Our management has developed plans to fund our operations, which in the near term primarily consist of raising additional capital through one or more of the following: additional equity or debt financings; additional collaborations, partnerships or licensing transactions; or other sources. However, there can be no assurance that we will be able to complete any such transaction on acceptable terms or otherwise, and we may be unable to obtain sufficient additional capital. If we are not able to secure sufficient additional capital in the near term, we will need to implement additional cost reduction strategies, which could include delaying, limiting, further reducing or eliminating both internal and external costs related to our operations and research and development programs. For more information, refer to “—Liquidity and Capital Resources—Capital Requirements and Going Concern” below and Note 1 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Financial Operations Overview
Revenue
We have not generated any revenue from the sale of products since inception and do not expect to generate any revenue from the sale of products for at least the next several years, if at all. If our development efforts for our current or future product candidates are successful and result in regulatory approval, we may generate revenue in the future from product sales. For the foreseeable future, we expect substantially all of our revenue, if any, would be generated from our collaboration and license agreements with AbbVie and Gilead. For more information on our collaboration, license and option agreement with AbbVie and our license agreement with Gilead, please see Note 5 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our discovery efforts, research activities and development and testing of our programs and product candidates. These expenses include:
| ● | personnel-related expenses, including salaries, bonuses, benefits and stock-based compensation expense for employees engaged in research and development functions; |
| ● | costs incurred with third-party contract development and manufacturing organizations, or CDMOs, to acquire, develop and manufacture materials for both preclinical studies and current or future clinical trials; |
| ● | costs of funding research performed by third parties that conduct research and development and preclinical activities on our behalf; |
| ● | costs incurred with third-party contract research organizations, or CROs, and other third parties in connection with the conduct of our current or future clinical trials; |
| ● | costs of sponsored research agreements and outside consultants, including their fees and related expenses; |
| ● | costs incurred to maintain compliance with regulatory requirements; |
| ● | fees for maintaining licenses and other amounts due under our third-party licensing agreements; |
| ● | expenses incurred for the procurement of materials, laboratory supplies and non-capital equipment used in the research and development process; and |
| ● | depreciation, amortization and other direct and allocated expenses, including rent, maintenance of facilities and other operating costs, incurred as a result of our research and development activities. |
27
We expense research and development costs as incurred. We recognize external development costs based on an evaluation of the progress to completion of specific deliverables using information provided to us by our vendors. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our condensed consolidated balance sheets as prepaid expenses or accrued research and development expenses. We record cost-sharing payments under our clinical trial collaboration with Roche as a reduction of research and development costs upon the achievement of each study development event specified in the clinical supply agreement. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are capitalized as assets, even when there is no alternative future use for the research and development. The capitalized amounts are expensed as the related goods are delivered or the services are performed.
We use our personnel and infrastructure resources for our discovery efforts, including the advancement of our platform technology, developing programs and product candidates and managing external research efforts. A significant portion of our research and development costs have been, and will continue to be, external costs. We track these external costs, such as fees paid to CDMOs, CROs, preclinical study vendors and other third parties in connection with our manufacturing and manufacturing process development, clinical trials, preclinical studies and other research activities by program. Due to the number of ongoing programs and our ability to use resources across several projects, personnel-related expenses and indirect or shared operating costs incurred for our research and development programs are not recorded or maintained on a program-by-program basis.
Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will remain approximately the same or will continue to increase for the foreseeable future as we advance our programs and our current or future product candidates into and through the development phase. We expect our discovery research efforts and our related personnel costs to remain consistent with historical levels. In addition, as we progress our most advanced product candidates in clinical development, we may incur additional expenses related to milestone and royalty payments payable to third parties with whom we have entered into, or may enter into license, acquisition, option or other agreements to acquire the rights to future products and product candidates. In the event we are unable to raise sufficient additional capital in the near term to fund our operations, we will be required to adopt cost reduction strategies that seek to maintain our ability to continue the development of our most advanced product candidates in clinical development while otherwise reducing our overall research and development expenses.
At this time, we cannot reasonably estimate or know the nature, timing and projected costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates or programs. This is due to the numerous risks and uncertainties associated with drug development, including the uncertainty of:
| ● | the scope, timing, costs and progress of preclinical and clinical development activities; |
| ● | the number and scope of preclinical and clinical programs we decide to pursue; |
| ● | our ability to implement and maintain cost reduction strategies, as well as the timing of such cost reductions; |
| ● | our ability to maintain our current research and development programs; |
| ● | our ability to establish an appropriate safety profile for our product candidates with IND-enabling studies; |
| ● | our ability to hire and retain key research and development personnel; |
| ● | the costs associated with the development of any additional product candidates we acquire or develop through collaborations, partnerships, licenses or similar transactions; |
| ● | our successful enrollment in and completion of clinical trials; |
28
| ● | our ability to successfully complete clinical trials with safety, potency and purity profiles that are satisfactory to the U.S. Food and Drug Administration, or the FDA, or any comparable foreign regulatory authority; |
| ● | our receipt of regulatory approvals from applicable regulatory authorities; |
| ● | our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize, our product candidates; |
| ● | our ability to commercialize products, if and when approved, whether alone or in collaboration with others; |
| ● | the continued acceptable safety profiles of the product candidates following approval, if any; |
| ● | our ability to establish and maintain agreements with third-party manufacturers for clinical supply for our clinical trials and commercial manufacturing, if any of our product candidates are approved; |
| ● | the terms and timing of any collaboration, license or other arrangement, including the terms and timing of any milestone payments thereunder, if any; |
| ● | our ability to obtain and maintain patent, trade secret and other intellectual property protection and regulatory exclusivity for our product candidates if and when approved; and |
| ● | general economic conditions, including inflation and the imposition of new or revised global trade tariffs. |
A change in any of these variables with respect to the development of any of our product candidates would significantly change the costs, timing and viability associated with the development of that product candidate. We may never succeed in obtaining regulatory approval for any product candidate we may develop.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel-related costs, including salaries, bonuses, benefits, recruiting and stock-based compensation, for personnel in our executive, finance, legal, business development, human resources and other administrative functions. General and administrative expenses also include legal fees relating to corporate matters; professional and consulting fees for accounting, auditing, tax, human resources and administrative consulting services; board of directors’ fees; insurance costs; and facility-related expenses, which include depreciation costs and other allocated expenses for rent, maintenance of facilities and other general administrative costs. These costs relate to the operation of the business and are in support of but separate from the research and development function and our individual development programs. Costs to secure and defend our intellectual property are expensed as incurred and are classified as general and administrative expenses.
We anticipate that our general and administrative expenses will remain consistent with historical levels as we maintain our infrastructure to support our research and development activities. We also expect to continue to incur significant expenses associated with operating as a public company, including increased costs for accounting, audit, legal, regulatory and tax-related services attributable to maintaining compliance with exchange listing standards and U.S. Securities and Exchange Commission, or SEC, requirements, directors’ and officers’ liability insurance costs and investor and public relations costs. We also expect to continue to incur additional expenses related to intellectual property as we file patent applications to protect intellectual property arising from our research and development activities. In the event we are unable to obtain sufficient additional capital in the near term, we will need to implement cost reduction strategies that seek to reduce our general and administrative expenses while maintaining sufficient infrastructure to support our planned research and development activities and operations as a public company.
29
Restructuring
In connection with the March 2024 strategic portfolio reprioritization and restructuring, we undertook efforts to reduce our expenses and streamline our operations, including a reduction in headcount of 15 employees, representing approximately 21% of our workforce immediately prior to the workforce reduction. Restructuring expense consists of costs directly incurred as a result of restructuring initiatives, and includes employee severance payments, benefits continuation, outplacement services and related expenses.
Other Income, Net
Other income, net consists primarily of interest income earned from our cash and cash equivalents, interest expense principally on the note payable under our former debt arrangement with Pacific Western Bank, or PacWest, and amortization of the debt discount related to debt issuance costs.
Results of Operations
Comparison of the three months ended March 31, 2025 and 2024
The following table summarizes our results of operations for the three months ended March 31, 2025 and 2024 (in thousands):
| | Three Months Ended |
| | | ||||
| | March 31, | | | | ||||
|
| 2025 |
| 2024 |
| Change | |||
Revenue |
| |
|
| |
| | | |
Collaboration and license revenue | | $ | 2,930 | | $ | — | | $ | 2,930 |
Total revenue | |
| 2,930 | |
| — | | | 2,930 |
Operating expenses | |
| | |
| | |
| |
Research and development | | $ | 8,266 | | $ | 10,400 | | $ | (2,134) |
General and administrative | |
| 8,515 | |
| 6,139 | |
| 2,376 |
Restructuring | | | — | | | 948 | | | (948) |
Total operating expenses | |
| 16,781 | |
| 17,487 | |
| (706) |
Loss from operations | |
| (13,851) | |
| (17,487) | |
| 3,636 |
Other income, net | |
|
| |
|
| |
|
|
Other income, net | |
| 586 | |
| 284 | |
| 302 |
Total other income, net | |
| 586 | |
| 284 | |
| 302 |
Net loss | | $ | (13,265) | | $ | (17,203) | | $ | 3,938 |
Collaboration and License Revenue
We recognized $2.9 million in collaboration and license revenue for the three months ended March 31, 2025 under the collaboration, license and option agreement and stock purchase agreement with AbbVie and the license agreement and stock purchase agreement with Gilead. We did not recognize any collaboration and license revenue for the three months ended March 31, 2024 under our agreements with AbbVie and Gilead, as we entered into those agreements in February 2025 and March 2024, respectively.
30
Research and Development Expenses
The following table summarizes our research and development expenses for the three months ended March 31, 2025 and 2024 (in thousands):
| | Three Months Ended |
| | | ||||
| | March 31, | | | | ||||
|
| 2025 |
| 2024 |
| Change | |||
vilastobart | | $ | (193) | | $ | (523) | | $ | 330 |
XTX301 | | | 979 | | | 1,215 | | | (236) |
XTX501 | | | 469 | | | — | | | 469 |
XTX202 | | | 52 | | | 3,164 | | | (3,112) |
Other early programs and indirect research and development | | | 2,375 | | | 1,698 | | | 677 |
Personnel-related | | | 4,584 | | | 4,846 | | | (262) |
Total research and development expenses | | $ | 8,266 | | $ | 10,400 | | $ | (2,134) |
Research and development expenses decreased by $2.1 million from $10.4 million for the three months ended March 31, 2024 to $8.3 million for the three months ended March 31, 2025. The changes in research and development expenses were primarily due to the following:
| ● | vilastobart costs, which include $2.0 million of cost-sharing payments earned under our Roche clinical collaboration during both the three months ended March 31, 2025 and 2024, and which were recorded as a reduction in research and development expenses, increased by $0.3 million, primarily driven by an increase in clinical development activities related to our ongoing Phase 1/2 clinical trial evaluating vilastobart in combination with atezolizumab; |
| ● | XTX301 costs decreased by $0.2 million, primarily driven by a $0.1 million decrease in manufacturing activities and a $0.1 million decrease in clinical development activities related to our ongoing Phase 1 clinical trial; |
| ● | XTX501 costs, which were not separately tracked during the three months ended March 31, 2024 as we had not begun performing IND-enabling studies, increased by $0.5 million primarily due to manufacturing activities related to IND-enabling studies; |
| ● | XTX202 costs decreased by $3.1 million, primarily driven by a decrease in clinical development activities as a result of discontinuing further investment in XTX202 as a monotherapy; |
| ● | other early programs and indirect research and development costs increased by $0.7 million, primarily driven by an increase in external expenses related to preclinical research and development activities; and |
| ● | personnel-related costs decreased by $0.3 million, primarily driven by a $0.2 million decrease in salaries, bonuses and benefits due to lower research and development headcount and a $0.1 million decrease in stock-based compensation. |
31
General and Administrative Expenses
The following table summarizes our general and administrative expenses for the three months ended March 31, 2025 and 2024 (in thousands):
| | Three Months Ended |
| | | ||||
| | March 31, | | | | ||||
|
| 2025 |
| 2024 |
| Change | |||
Personnel-related | | $ | 4,444 | | $ | 3,575 | | $ | 869 |
Professional and consulting fees | | | 3,238 | | | 1,662 | | | 1,576 |
Facility-related and other general and administrative expenses | | | 833 | | | 902 | | | (69) |
Total general and administrative expenses | | $ | 8,515 | | $ | 6,139 | | $ | 2,376 |
General and administrative expenses increased by $2.4 million from $6.1 million for the three months ended March 31, 2024 to $8.5 million for the three months ended March 31, 2025. The changes in general and administrative expenses were primarily due to the following:
| ● | personnel-related costs increased by $0.9 million, primarily driven by a $0.5 million increase in salaries, bonuses and benefits due to higher general and administrative headcount and a $0.5 million increase in recruiting and other personnel-related costs, partially offset by a $0.2 million decrease in stock-based compensation; |
| ● | professional and consulting fees increased by $1.6 million, primarily driven by an increase in legal fees and other professional costs; and |
| ● | facility-related and other general and administrative expenses decreased by $0.1 million, primarily driven by a decrease in costs related to directors’ and officers’ liability insurance. |
Restructuring
We did not recognize any restructuring expenses for the three months ended March 31, 2025. We recognized $0.9 million in restructuring expenses for the three months ended March 31, 2024. The restructuring expenses were associated with our workforce reduction in March 2024 and consisted of employee severance, benefits continuation and outplacement service costs.
Other Income, Net
Other income, net, increased by $0.3 million from $0.3 million for the three months ended March 31, 2024 to $0.6 million for the three months ended March 31, 2025. The increase in other income, net, was primarily due to an increase in interest income earned on our cash and cash equivalents due to a higher average cash balance.
Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have incurred significant operating losses and negative cash flows from operations. We have not yet commercialized any of our product candidates, which are in preclinical or early clinical development, and we do not expect to generate revenue from sales of any products for several years, if at all. To date, we have financed our operations primarily from proceeds raised through private placements of preferred units, convertible preferred stock, common stock and prefunded warrants; a debt financing; our IPO; our collaboration and license agreements with AbbVie and Gilead; and sales of common stock through ATM offerings. Through March 31, 2025, we have received an aggregate of $491.8 million in gross proceeds from such transactions, including $224.5 million in gross proceeds from the sale and issuance of preferred units and convertible preferred stock, $10.0 million in gross proceeds from our debt financing with PacWest, $129.9 million in gross proceeds from our IPO, $72.0 million in upfront cash payments under our collaboration and license agreements with AbbVie and Gilead, $46.3 million in gross proceeds from the sale and issuance of common stock and
32
prefunded warrants to certain existing accredited investors, Gilead and AbbVie in private placements and $9.1 million in gross proceeds from the sale and issuance of common stock through our ATM offerings. As of March 31, 2025, we had cash and cash equivalents of $89.1 million.
In November 2022, we filed a universal shelf registration statement on Form S-3 with the SEC to register for sale up to $250.0 million of our common stock, preferred stock, debt securities, units and warrants, which we could issue and sell from time to time in one or more offerings, which became effective on November 18, 2022 (333-268264), or the Prior S-3 Shelf. In November 2022, we entered into a sales agreement, or the Cowen Sales Agreement, with Cowen and Company LLC under which we could issue and sell shares of our common stock, from time to time, having an aggregate offering price of up to $75.0 million under a sales agreement prospectus filed as part of the Prior S-3 Shelf. During the year ended December 31, 2024, we issued and sold 7,000,000 shares of our common stock pursuant to the Cowen Sales Agreement at a price of $1.00 per share for aggregate gross proceeds of $7.0 million. During the three months ended March 31, 2025, we issued and sold an additional 1,550,000 shares of our common stock pursuant to the Cowen Sales Agreement at a weighted average price of $1.3348 per share for aggregate gross proceeds of approximately $2.1 million. In March 2025, we filed a universal shelf registration statement on Form S-3 with the SEC to register for sale up to $250.0 million of our common stock, preferred stock, debt securities, units and warrants, which we may issue and sell from time to time in one or more offerings, which became effective on May 8, 2025 (333-285703), or the New S-3 Shelf. In March 2025, we terminated the Cowen Sales Agreement and we entered into a new sales agreement with Leerink Partners, LLC, or the Leerink Sales Agreement, under which we may issue and sell shares of our common stock from time to time at an aggregate offering price of up to $50.0 million. Prior to the effectiveness of the New S-3 Shelf, the offering of shares under the Leerink Sales Agreement was registered under the Prior S-3 Shelf. In connection with the effectiveness of the New S-3 Shelf, the registration of such offering under the Prior S-3 Shelf was terminated and such offering was registered under the New S-3 Shelf.
Cash Flows
The following table provides information regarding our cash flows for each period presented (in thousands):
| | Three Months Ended | ||||
| | March 31, | ||||
|
| 2025 |
| 2024 | ||
Net cash provided by (used in): | |
| | |
| |
Operating activities | | $ | 28,978 | | $ | (10,502) |
Investing activities | |
| (22) | |
| — |
Financing activities | |
| 4,832 | |
| 954 |
Net increase (decrease) in cash, cash equivalents and restricted cash | | $ | 33,788 | | $ | (9,548) |
Operating Activities
Our cash flows from operating activities are greatly influenced by our use of cash for operating expenses and working capital requirements to support our business. We have historically experienced negative cash flows from operating activities as we invested in research and development of our product candidates, including preclinical studies, clinical trials, manufacturing and manufacturing process development. The cash used in operating activities resulted primarily from our net losses adjusted for non-cash charges, which are generally due to stock-based compensation, depreciation and amortization, as well as changes in components of operating assets and liabilities, which are generally due to increased expenses and timing of vendor payments.
During the three months ended March 31, 2025, net cash provided by operating activities of $29.0 million was primarily driven by changes in operating assets and liabilities of $40.2 million, which includes the $49.1 million recorded as deferred revenue in connection with our collaboration, license and option agreement and stock purchase agreement with AbbVie, and net non-cash expenses of $2.0 million, partially offset by our net loss of $13.3 million.
33
During the three months ended March 31, 2024, net cash used in operating activities of $10.5 million was primarily driven by our net loss of $17.2 million, partially offset by changes in operating assets and liabilities of $4.4 million and net non-cash expenses of $2.3 million.
Investing Activities
During the three months ended March 31, 2025 and 2024, net cash used in investing activities consisted of purchases of property and equipment.
Financing Activities
During the three months ended March 31, 2025, net cash provided by financing activities of $4.8 million primarily consisted of proceeds from the sale and issuance of common stock to AbbVie in a private placement and proceeds from the sale and issuance of common stock through ATM offerings.
During the three months ended March 31, 2024, net cash provided by financing activities of $1.0 million consisted of proceeds from the sale and issuance of common stock to Gilead in a private placement, partially offset by repayments of debt principal under our loan agreement with PacWest and payments on our finance lease for certain lab equipment.
Capital Requirements and Going Concern
We expect our future capital requirements to increase substantially over time in connection with our ongoing research and development activities, particularly as we advance our current and planned clinical development of our product candidates and maintain the research efforts and preclinical activities associated with our other existing programs and discovery platform. In addition, we expect to continue to incur additional costs associated with operating as a public company. As a result, we expect to incur substantial operating losses and negative operating cash flows for the foreseeable future.
Inflation generally affects us by increasing our cost of labor and certain services. We do not believe that inflation had a material effect on our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. However, the United States has recently experienced historically high levels of inflation. If the inflation rate continues to increase it may affect our expenses, such as employee compensation and research and development charges due to, for example, increases in the costs of labor and supplies. Additionally, the biotechnology industry is subject to a competitive wage environment that may also increase our operating costs in the future.
As of March 31, 2025, we had cash and cash equivalents of $89.1 million. Based on our current operating plans, we anticipate that our existing cash and cash equivalents as of March 31, 2025 will be sufficient to enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2026. However, we have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we anticipate. In addition, since these amounts are not expected to be sufficient to fund our operations for at least twelve months from the date of issuance of the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, there is substantial doubt about our ability to continue as a going concern. Our management has developed plans to fund our operations, which in the near term primarily consist of raising additional capital through one or more of the following: additional equity or debt financings; additional collaborations partnerships or licensing transactions; or other sources. However, there can be no assurance that we will be able to complete any such transaction on acceptable terms or otherwise, and we may be unable to obtain sufficient additional capital. If we are not able to secure sufficient additional capital in the near term, we will need to implement additional cost reduction strategies, which could include delaying, limiting, further reducing or eliminating both internal and external costs related to our operations and research and development programs. The accompanying condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business for the foreseeable future. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.
34
Because of the numerous risks and uncertainties associated with product development, and because the extent to which we may enter into additional collaborations with third parties for the development of our product candidates is unknown, we may incorrectly estimate the timing and amounts of increased capital outlays and operating expenses associated with advancing the research and development of our product candidates.
Our future capital requirements, both short-term and long-term, will depend on many factors, including, but not limited to:
| ● | the scope, progress, results and costs of research and development for our current and future product candidates, including our current and planned clinical trials for our clinical-stage product candidates, vilastobart and XTX301, and ongoing preclinical development for our current and future product candidates; |
| ● | our ability to implement and maintain cost reduction strategies, as well as the timing of such cost reductions; |
| ● | the scope, prioritization and number of our research and development programs; |
| ● | the scope, costs, timing and outcome of regulatory review of our product candidates; |
| ● | the costs of securing manufacturing materials for use in preclinical studies, clinical trials and, for any product candidates for which we receive regulatory approval, if any, commercial supply; |
| ● | the costs and timing of future commercialization activities for any of our product candidates for which we receive regulatory approval; |
| ● | the amount and timing of revenue, if any, received from commercial sales of any product candidates for which we receive regulatory approval; |
| ● | the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property and proprietary rights and defending any intellectual property-related claims; |
| ● | the extent to which we may acquire or in-license other products, product candidates, technologies or intellectual property, as well as the terms of any such arrangements; |
| ● | our ability to maintain our collaboration and license agreements with AbbVie and Gilead; |
| ● | the timing and amount of milestones, option-related fees and other contingent payments under our collaboration, license and option agreement with AbbVie for tumor-activated immunotherapies and our license agreement with Gilead for XTX301, as well as the scope, costs and timing of our development obligations under these agreements; |
| ● | our ability to maintain our clinical trial collaboration with Roche to further develop vilastobart in combination with atezolizumab, including the timing and amount of cost-sharing payments under the collaboration; |
| ● | general economic conditions, including inflation and the imposition of new or revised global trade tariffs; |
| ● | the costs of maintaining our operations and continuing to operate as a public company; and |
| ● | whether we are able to overcome the substantial doubt about our ability to continue as a going concern. |
Identifying potential product candidates and conducting preclinical studies and clinical trials is a time consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain regulatory approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for several years, if ever. Accordingly, we will need to obtain substantial additional capital to achieve our business objectives.
35
Our expectation with respect to our ability to fund our currently planned operations is based on estimates that are subject to various risks and uncertainties. Our operating plan may change as a result of many factors currently unknown to management and there can be no assurance that our current operating plan will be achieved in the time frame anticipated by us, and we may exhaust our available capital resources sooner than we expect.
Adequate additional capital may not be available to us on acceptable terms, or at all. Market volatility resulting from adverse changes in domestic and international fiscal, monetary and other policies and political relations, regional or global conflicts, uncertainty around global economic conditions, instability in the financial markets, current or future pandemics or other factors could also adversely impact our ability to access capital as and when needed. To the extent that we raise additional capital through the sale of equity or securities convertible into or exchangeable for equity, the ownership interest of our existing stockholders may be diluted, and the terms of such securities may include liquidation or other preferences that adversely affect the rights of our existing stockholders. Additional debt and preferred equity, if available, may also involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends and may require that we issue additional warrants, which could potentially dilute the ownership interest of our existing stockholders.
Contractual Obligations
During the three months ended March 31, 2025, there have been no material changes to our contractual obligations as reported in our Annual Report on Form 10-K for the year ended December 31, 2024.
Critical Accounting Policies and Use of Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements, as well as the reported revenue and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions. Except as described in Note 2, Summary of Significant Accounting Policies, to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, there have been no changes to our critical accounting policies appearing in our Annual Report on Form 10-K for the year ended December 31, 2024.
Emerging Growth Company and Smaller Reporting Company Status
As an emerging growth company, or EGC, under the Jumpstart Our Business Startups Act of 2012, or JOBS Act, we may delay the adoption of certain accounting standards until such time as those standards apply to private companies. Other exemptions and reduced reporting requirements under the JOBS Act for EGCs include presentation of only two years of audited financial statements in a registration statement for an IPO, an exemption from the requirement to provide an auditor’s report on internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, an exemption from any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation, and less extensive disclosure about our executive compensation arrangements.
In addition, the JOBS Act provides that an EGC can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an EGC to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we can adopt the new or revised standard at the time private companies adopt the new or revised standard and may do so until such time that we either (1) irrevocably elect to “opt out” of such extended transition period or (2) no longer qualify as an emerging growth company. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
36
We are also a “smaller reporting company,” as defined in the Securities Exchange Act of 1934, as amended, or the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an EGC, in which case we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Our chief executive officer (our principal executive officer) and our chief financial and operating officer (our principal financial officer) evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2025. Based upon such evaluation, our principal executive officer and principal financial officer have concluded that, as of March 31, 2025, our disclosure controls and procedures were effective at a reasonable assurance level.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
37
PART II—OTHER INFORMATION
Item 1A. Risk Factors
The following information sets forth risk factors that could cause our actual results to differ materially from those contained in forward-looking statements we have made in this Quarterly Report on Form 10-Q and those we may make from time to time. You should carefully consider the risks described below, in addition to the other information contained in this Quarterly Report on Form 10-Q and our other public filings. Our business, financial condition or results of operations could be harmed by any of these risks. The risks and uncertainties described below are not the only ones we face. Additional risks not presently known to us or other factors not perceived by us to present significant risks to our business at this time also may impair our business operations.
Risks Related to Our Limited Operating History, Financial Position and Capital Requirements
Our recurring losses from operations raise substantial doubt regarding our ability to continue as a going concern. If we are unable to raise sufficient additional capital in the near term, we will need to implement additional cost reduction strategies, which could include delaying, limiting, reducing or eliminating both internal and external costs related to our operations and research and development programs.
As of March 31, 2025, we had cash and cash equivalents of $89.1 million. Based on our current operating plans, we anticipate that our cash and cash equivalents as of March 31, 2025 will be sufficient to enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2026. However, since these amounts are not expected to be sufficient to fund our operations for at least twelve months from the date of issuance of the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, there is substantial doubt about our ability to continue as a going concern. Our future capital requirements and the period for which we expect our existing resources to support our operations may vary from what we expect. Our management has developed plans to continue to fund our operations, which in the near term primarily consist of raising additional capital through one or more of the following: additional equity or debt financings; additional collaborations, partnerships or licensing transactions; or other sources. However, there can be no assurance that we will be able to complete any such transaction on acceptable terms or otherwise, and we may be unable to obtain sufficient additional capital in the near term. If we are not able to secure sufficient additional capital, we will need to implement additional cost reduction strategies, which could include delaying, limiting, further reducing or eliminating both internal and external costs related to our operations and research and development programs. If we are unsuccessful in our efforts in the near term to raise additional capital or in the future to engage in one or more other strategic alternatives, we could be required to liquidate, dissolve or otherwise wind down our operations. Furthermore, our cash forecasts are based on assumptions that may prove to be wrong, and we could use our available capital resources earlier than we currently expect. Please see Note 1 to our consolidated financial statements appearing elsewhere in our Quarterly Report on Form 10-Q for additional information on our assessment.
We expect to continue to incur operating losses in connection with our ongoing research and development activities, particularly as we advance our product candidates through clinical trials, maintain the infrastructure necessary to support these activities and incur costs associated with operating as a public company. We do not expect to generate any revenue from the sale of products for a number of years, if at all, and any such revenue will not be realized unless and until we obtain marketing approval for and successfully launch and commercialize a product candidate. If we obtain marketing approval for any current or future product candidates that we develop, we expect to incur significant commercialization expenses related to product sales, marketing, distribution and manufacturing. Some of these expenses may be incurred in advance of marketing approval and could be substantial.
Our future capital requirements, both short-term and long-term, will depend on many factors, including:
| ● | our ability to implement and maintain further cost reduction strategies, as well as the timing of such cost reductions; |
| ● | the scope, progress, results and costs of research and development for our current and future product candidates, including our ongoing and planned clinical trials for our clinical-stage product candidates; |
38
| ● | the scope, prioritization and number of our research and development programs; |
| ● | the progress of the development efforts of parties with whom we have entered or may in the future enter into collaboration agreements; |
| ● | the timing and amount of payments we may receive or are obligated to pay under our collaboration agreements and license agreements; |
| ● | the scope, costs, timing and outcome of regulatory review of our product candidates; |
| ● | the costs of expanding manufacturing capacity through third-party manufacturers and securing manufacturing materials for use in preclinical studies, clinical trials and, for any product candidates for which we receive regulatory approval, if any, use as commercial supply; |
| ● | the costs and timing of future commercialization activities for any of our product candidates for which we receive regulatory approval; |
| ● | the amount and timing of revenue, if any, received from commercial sales of any product candidates for which we receive regulatory approval; |
| ● | the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property and proprietary rights and defending any intellectual property-related claims; |
| ● | the extent to which we may acquire or in-license other products, product candidates, technologies or intellectual property, as well as the terms of any such arrangements; |
| ● | our ability to maintain our collaboration and license agreements with AbbVie and Gilead; |
| ● | the timing and amount of milestones, option-related fees and other contingent payments under our collaboration, license and option agreement with AbbVie for tumor-activated immunotherapies and our license agreement with Gilead for XTX301, as well as the scope, costs and timing of our development obligations under these agreements; |
| ● | our ability to maintain our clinical trial collaboration with Roche to further develop vilastobart in combination with atezolizumab, including the timing and amount of cost-sharing payments under the collaboration; |
| ● | general economic conditions, including inflation and the imposition of new or revised global trade tariffs; |
| ● | the costs of maintaining our operations and continuing to operate as a public company; and |
| ● | whether we are able to overcome the substantial doubt about our ability to continue as a going concern. |
We will require additional capital to sustain our operations. We currently do not have any committed external sources of funds and adequate additional capital may not be available to us on acceptable terms, or at all. In addition, our ability to raise additional capital may be adversely impacted by potential worsening economic conditions, both inside and outside the United States, including without limitation heightened inflation, capital market volatility, interest rate and currency rate fluctuations, any potential economic slowdown or recession, future pandemics, geopolitical tensions, including trade wars or civil or political unrest, or wars or other armed conflicts. We can give no assurance that we will be able to secure additional capital to support our operations, or if such funds are available to us, that such additional funding will be sufficient to meet our needs. These factors raise substantial doubt about our ability to continue as a going concern, and our failure to raise capital, on attractive terms or at all, would have a material adverse effect on our business, results of operations and financial condition.
39
Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to product candidates or our technology.
Unless and until we can generate a substantial amount of product revenue, we expect to seek additional capital through a combination of public or private equity offerings, debt, collaborations, licensing arrangements or other sources. Our issuance of additional securities, whether equity or debt, or the possibility of such issuance, may cause the market price of our common stock to decline, and our stockholders may not agree with our plans for additional capital or the terms of such capital. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders’ ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing stockholders. For example, when we issue shares of common stock upon the exercise of our outstanding prefunded warrants, or if we issue additional shares of our common stock in one or more “at-the-market,” or ATM, offerings, our existing stockholders will suffer dilution. In addition, as a condition to providing additional funds to us, Gilead and AbbVie received, and future investors may receive, rights superior to those of existing stockholders. To the extent that we incur additional indebtedness, we would become obligated to make payments to repay the loan balance with interest. The incurrence of any additional indebtedness would result in additional payment obligations and is likely to involve restrictive covenants limiting our flexibility in conducting future business activities, and, in the event of insolvency, would be repaid before holders of our equity securities received any distribution of our corporate assets. Additionally, in raising funds through our collaborations and licensing arrangements with third parties, we have had to, and may in the future need to, relinquish valuable rights, partially or fully, to our technologies, future revenue streams, research programs or product candidates and grant licenses on terms unfavorable to us. In addition, securing additional capital would require a substantial amount of time and attention from our management and may divert a disproportionate amount of their attention away from day-to-day activities, which may adversely affect our management’s ability to oversee the development of our product candidates.
If we fail to regain compliance with the continued listing requirements of Nasdaq, our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted.
On April 4, 2025, we received a deficiency letter from the Listing Qualifications Department, or the Nasdaq Staff, of the Nasdaq Stock Market LLC, or Nasdaq, notifying us that, for the last 30 consecutive business days, the bid price for our common stock had closed below $1.00 per share, which is the minimum bid price required to maintain continued listing on the Nasdaq Global Select Market, referred to as the minimum bid price requirement. In accordance with Nasdaq Listing Rules, we have an initial period of 180 calendar days, or until October 1, 2025, to regain compliance with the minimum bid price requirement. If, at any time before October 1, 2025, the closing bid price for our common stock is at least $1.00 per share for a minimum of 10 consecutive business days, the Nasdaq Staff will provide written notification to us that we are in compliance with the minimum bid price requirement, unless the Nasdaq Staff exercises its discretion to extend this 10-day period pursuant to the Nasdaq Listing Rules.
If we do not regain compliance with the minimum bid price requirement by October 1, 2025, we may be eligible for an additional 180 calendar day compliance period. To qualify, we would need to transfer the listing of our common stock to the Nasdaq Capital Market, provided that we meet the continued listing requirement for the market value of publicly held shares and all other initial listing standards, with the exception of the minimum bid price requirement. To effect such a transfer, we would also need to pay an application fee to Nasdaq and would need to provide written notice to the Nasdaq Staff of our intention to cure the deficiency during the additional compliance period by effecting a reverse stock split, if necessary.
If it appears to the Nasdaq Staff that we will not be able to cure the deficiency during the second compliance period or if we do not meet the other listing standards, the Nasdaq Staff will provide us with notice that our common stock may be delisted. At that time, we may appeal the Nasdaq Staff’s delisting determination to a Nasdaq Listing Qualifications Panel. We expect that our common stock would remain listed pending the panel’s decision. However, there can be no assurance that, even if we appeal the Nasdaq Staff’s delisting determination to the panel, such appeal would be successful.
40
We intend to monitor the closing bid price of our common stock and may, if appropriate, consider available options to regain compliance with the minimum bid price requirement, which could include seeking to effect a reverse stock split. However, there can be no assurance that we will be able to regain compliance with the minimum bid price requirement, secure a second period of 180 days to regain compliance, or maintain compliance with any of the other Nasdaq continued listing requirements.
If we are unable to comply with applicable Nasdaq listing standards, shares of our common stock would be subject to delisting, which could have a material adverse effect on the market for, and liquidity and price of, our common stock and would adversely affect our ability to raise capital on terms acceptable to us, or at all. Delisting from Nasdaq could also have other negative results, including, without limitation, the potential loss of confidence by investors, customers and employees and fewer business development opportunities. Any delisting of our common stock from Nasdaq would also make it more difficult for our stockholders to sell their shares of our common stock in the public market.
We have incurred significant operating losses since our inception and expect to incur significant losses for the foreseeable future.
We have incurred significant operating losses since our inception and have not yet generated any revenue from the sale of products. If our product candidates are not successfully developed and approved, we may never generate any revenue from product sales. Our net losses were $13.3 million and $17.2 million for the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025, we had an accumulated deficit of $397.0 million. To date, we have financed our operations primarily from proceeds raised through private placements of preferred units, convertible preferred stock, common stock and prefunded warrants; a debt financing; our initial public offering, or IPO, of common stock in October 2021; upfront payments under our collaboration and license agreements with AbbVie and Gilead; and sales of common stock in “at-the-market” offerings. We have devoted substantially all of our financial resources and efforts to research and development. We are still in the early stages of development of our tumor-activated, or masked, product candidates, and we have not completed clinical development for our clinical-stage product candidates, vilastobart (anti-CTLA-4) and XTX301 (IL-12). We expect to continue to incur significant expenses and operating losses for the foreseeable future, particularly to the extent we:
| ● | continue to advance our current research programs and conduct additional research programs; |
| ● | advance our current product candidates and any future product candidates we may develop into preclinical and clinical development; |
| ● | seek marketing approvals for any product candidates that successfully complete clinical trials; |
| ● | obtain, expand, maintain, defend and enforce our intellectual property; |
| ● | hire additional research, clinical, regulatory, quality, manufacturing and general and administrative personnel; |
| ● | establish a commercial and distribution infrastructure to commercialize any products for which we may obtain marketing approval; |
| ● | continue to discover, validate and develop additional product candidates; |
| ● | continue to expand manufacturing capacity through third-party manufacturers and manufacture increasing quantities of our current or future product candidates for use in preclinical studies, clinical trials and for any potential commercialization; |
| ● | acquire or in-license other product candidates, technologies or intellectual property; and |
| ● | incur additional costs associated with current and future research, development and commercialization efforts and operations as a public company. |
41
Even if we successfully complete clinical trials and obtain regulatory approval for one or more of our product candidates, our product candidates may not be commercially successful. In addition, we will continue to incur substantial research and development and other expenditures to develop and market additional product candidates. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. We may not achieve profitability soon after generating product sales, if ever. If we are unable to generate revenue, we will not become profitable and may be unable to continue operations without continued funding.
We have no products approved for commercial sale and have not generated any revenue from product sales. We may never generate any revenue from product sales or become profitable and, if we achieve profitability, we may not be able to sustain it.
To date, we have not generated any revenue from product sales. We do not expect to generate any revenue from the sale of products for a number of years, and we may never generate revenue from the sale of products. Our ability to generate revenue from product sales depends on a number of factors, including our ability to:
| ● | successfully complete our ongoing and planned preclinical studies and clinical trials for any current or future product candidates; |
| ● | successfully receive U.S. Food and Drug Administration, or FDA, clearance for any investigational new drug application, or IND, for any current or future product candidates; |
| ● | successfully initiate and complete clinical trials for our clinical-stage product candidates and any other current or future product candidates, including all safety and efficacy studies necessary to obtain U.S. and foreign regulatory approval for our product candidates; |
| ● | establish and maintain clinical and commercial manufacturing capabilities or make arrangements with third-party manufacturers for clinical supply and commercial manufacturing; |
| ● | launch commercial sales of our products, if and when approved, whether alone or in collaboration with others; |
| ● | obtain and maintain acceptance of the products, if and when approved, by patients, the medical community and third-party payors; |
| ● | effectively compete with other therapies; |
| ● | obtain and maintain healthcare coverage and adequate reimbursement for our products, if and when approved; |
| ● | maintain a continued acceptable safety profile of our products following approval; and |
| ● | enforce and defend intellectual property rights and claims. |
Because of the numerous risks and uncertainties associated with biopharmaceutical product development, we are unable to accurately predict the timing or amount of expenses we may incur in connection with these activities prior to generating revenue from product sales. In addition, we may never succeed in these activities, and, even if we do, we may never generate revenues that are significant enough to achieve profitability. Even 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 depress the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our product candidates or even continue our operations. A decline in the value of our company could also cause our stockholders to lose all or part of their investment.
42
Our limited operating history may make it difficult for an investor to evaluate the success of our business to date and to assess our future viability.
We are a clinical-stage biotechnology company with a limited operating history upon which investors can evaluate our business and prospects. Since inception, we have devoted substantially all of our financial resources and efforts to performing research and development activities. Our approach to the discovery and development of tumor-activated product candidates using our proprietary platform technology is unproven, and we do not know whether we will be able to develop any approved products of commercial value. In addition, each of our product candidates is either in early clinical or preclinical development, and all of our other development programs are still in discovery stages. We have not yet demonstrated an ability to successfully complete any late-stage clinical trials, obtain regulatory approvals, manufacture a commercial-scale product, or arrange for a third party to do so on our behalf, or conduct the sales and marketing activities necessary for successful product commercialization. Consequently, any predictions made about our future success or viability may not be as accurate as they could be if we had a history of successfully developing and commercializing biopharmaceutical products.
Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.
We have incurred substantial losses during our history. As of December 31, 2024, we had federal and state net operating loss, or NOL, carryforwards of $245.5 million and $217.5 million, respectively. We do not anticipate generating revenue from sales of products for the foreseeable future, if ever, and we do not know whether or when we will generate taxable income necessary to utilize our NOLs.
In general, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, and corresponding provisions of state law, if a corporation undergoes an “ownership change” (generally defined as a greater than 50 percentage point change (by value) in the ownership of its equity by certain stockholders over a three-year period), the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income is subject to limitations. In the second quarter of 2024, we had an ownership change as defined by Sections 382 and 383 of the Code. As a result, if we earn net taxable income, our ability to use our pre-change NOL carryforwards and other pre-change tax attributes to offset such taxable income may be subject to limitations, which could result in increased future tax liability to us and could have an adverse effect on our future results of operations.
There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs, or other unforeseen reasons, our existing NOLs could expire or otherwise become unavailable to offset future income tax liabilities. As described below in “Risks Related to Ownership of Our Common Stock—Changes in tax laws or in their implementation or interpretation may adversely affect our business and financial condition,” the Tax Cuts and Jobs Act of 2017, or the Tax Act, as amended by the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, includes changes to U.S. federal tax rates and the rules governing NOL carryforwards that may significantly impact our ability to utilize our NOLs to offset taxable income in the future. In addition, state NOLs generated in one state cannot be used to offset income generated in another state. For these reasons, even if we attain profitability, we may be unable to use a material portion of our NOLs and other tax attributes.
Risks Related to the Discovery and Development of Our Product Candidates
Our business is highly dependent on the success of our current product candidates, which are in the early stages of development and will require significant additional preclinical and clinical development before we can seek regulatory approval for and commercially launch a product.
Our business and future success is highly dependent on our ability to obtain regulatory approval for, and if approved, successfully launch and commercialize, our current product candidates, including our clinical-stage, tumor-activated product candidates: vilastobart and XTX301. We are currently evaluating vilastobart in combination with atezolizumab (Tecentriq®) in Phase 1C combination dose escalation in patients with advanced solid tumors and in a Phase 2 clinical trial evaluating the combination in patients with metastatic microsatellite stable colorectal cancer, or MSS CRC. We are currently evaluating XTX301 in a Phase 1 clinical trial. We also have a portfolio of programs that are in even earlier stages of preclinical development and may never advance to clinical-stage development, including XTX501, our masked PD-
43
1/IL-2 bispecific, which is designed to selectively stimulate PD-1 positive antigen-experienced T cells and enhance their function and is currently advancing in initial IND-enabling activities, and our preclinical programs for masked T cell engagers targeting prostate-specific membrane antigen, or PSMA, claudin 18.2, or CLDN18.2, and six-transmembrane epithelial antigen of prostate 1, or STEAP1.
Commencing clinical trials in the United States is subject to acceptance by the FDA of an IND and finalizing the trial design based on discussions with the FDA and other regulatory authorities. In the event that the FDA requires us to complete additional preclinical studies, or we are required to satisfy other FDA requests prior to commencing clinical trials, the start of our clinical trials may be delayed. Even after we receive and incorporate guidance from these regulatory authorities, the FDA or other regulatory authorities could disagree that we have satisfied their requirements to commence any clinical trial or change their position on the acceptability of our trial design or the clinical endpoints selected, which may require us to complete additional preclinical studies or clinical trials or impose stricter approval conditions than we currently expect. There are equivalent processes and risks applicable to clinical trial applications in other countries, including countries in the European Union, or EU.
To date, we have only had limited interactions with the FDA regarding our clinical development plans. We may experience issues surrounding preliminary trial execution, such as delays in FDA acceptance of any future INDs, revisions in trial design and finalization of trial protocols, difficulties with patient recruitment and enrollment, quality and provision of clinical supplies, or early safety signals.
We are not permitted to market any biological product in the United States until we receive approval of a Biologics License Application, or BLA, from the FDA. We have not previously submitted a BLA to the FDA, or similar marketing application to comparable foreign regulatory authorities. A BLA must include extensive preclinical and clinical data and supporting information to establish that the product candidate is safe, pure and potent for each desired indication. A BLA must also include significant information regarding the chemistry, manufacturing and controls for the product, and the manufacturing facilities must complete a successful pre-license inspection.
FDA approval of a BLA is not guaranteed, and the review and approval process is expensive, uncertain and may take several years. The FDA also has substantial discretion in the approval process. The number and types of preclinical studies and clinical trials that will be required for BLA approval varies depending on the product candidate, the disease or the condition that the product candidate is designed to treat and the regulations applicable to any particular product candidate. Despite the time and expense associated with preclinical studies and clinical trials, failure can occur at any stage.
The FDA may also require a panel of experts, referred to as an Advisory Committee, to deliberate on the adequacy of the safety and efficacy data to support approval. The opinion of the Advisory Committee, although not binding, may have a significant impact on our ability to obtain approval of any product candidate that we develop based on the completed clinical trials.
Generally, public concern regarding the safety of biopharmaceutical products could delay or limit our ability to obtain regulatory approval, result in the inclusion of unfavorable information in our labeling or require us to undertake other activities that may entail additional costs. We have not obtained FDA approval for any product. This lack of experience may impede our ability to obtain FDA approval in a timely manner, if at all, for any current or future product candidates.
The success of our business, including our ability to finance our company and generate any revenue in the future, will primarily depend on the successful development, regulatory approval and commercialization of our current and any future product candidates, which may never occur. However, given our early stage of development, it will be years before we are able to demonstrate the safety and efficacy of a treatment sufficient to warrant approval for commercialization, and we may never be able to do so. If we are unable to develop, or obtain regulatory approval for, or, if approved, successfully commercialize our current or any future product candidates, we may not be able to generate sufficient revenue to continue our business.
44
Preclinical development is uncertain. Our preclinical programs may experience delays or may never advance to clinical trials, which would adversely affect our ability to obtain regulatory approvals or commercialize these programs on a timely basis or at all, which would have an adverse effect on our business.
All our product candidates are still in the early clinical stage or preclinical stage of development, and their risk of failure is high. Before we can commence clinical trials for a product candidate, we must complete extensive preclinical testing and studies that support our planned INDs in the United States, or similar applications in other jurisdictions. We cannot be certain of the timely completion or outcome of our preclinical testing and studies, and we cannot predict if the FDA or other regulatory authorities will accept our proposed clinical programs or if the outcome of our preclinical testing and studies will ultimately support the further development of our programs. As a result, we cannot be sure that we will be able to submit INDs or similar applications for our current or future preclinical programs on the timelines we expect, if at all, and we cannot be sure that submission of INDs or similar applications will result in the FDA or other regulatory authorities allowing clinical trials to begin.
Preclinical studies and clinical trials are expensive, time-consuming and difficult to design and implement, and involve uncertain outcomes. Furthermore, results of earlier preclinical studies and clinical trials may not be predictive of results of future preclinical studies or clinical trials.
The risk of failure for our current and any future product candidates is high. It is impossible to predict when or if any of our product candidates will successfully complete preclinical studies or clinical trials evaluating their safety and effectiveness in humans or will ultimately receive regulatory approval. To obtain the requisite regulatory approvals to market and sell any of our product candidates, we must demonstrate through extensive preclinical studies and clinical trials that our product candidates are safe and effective in humans for use in each target indication. Preclinical and clinical testing is expensive and can take many years to complete, and the outcome is inherently uncertain. Failure can occur at any time during the preclinical or clinical trial process. The outcome of preclinical testing and early clinical trials may not be predictive of the results of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. In particular, while we have conducted certain preclinical studies for each of our clinical stage product candidates, we do not know whether these product candidates will perform in our clinical trials as they have performed in these prior preclinical studies. Similarly, there can be no assurance that early, interim or preliminary clinical data or results will be predictive of or replicated in future clinical data or results, including without limitation, the Phase 2 data for vilastobart in combination with atezolizumab and the Phase 1 data for XTX301 reported to date. Many companies in the biopharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials after achieving positive results in early-stage development and we cannot be certain that we will not face similar setbacks. These setbacks have been caused by, among other things, preclinical findings made while clinical trials were underway, or safety or efficacy observations made in preclinical studies and clinical trials, including previously unreported adverse events, or AEs. 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 products.
In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in clinical trial procedures set forth in protocols, differences in the size and type of the patient populations, adherence to the dosing regimen and other clinical trial protocols, and the rate of dropout among clinical trial participants. If we fail to produce positive results in our planned and ongoing preclinical studies or clinical trials, or if we experience material changes in clinical data or results from those we have previously reported, the development timeline and regulatory approval and commercialization prospects for our product candidates, and, correspondingly, our business, financial condition and results of operations would be materially and adversely affected.
We may encounter substantial delays in the commencement or completion, or termination or suspension, of our clinical trials, which could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospects.
Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct extensive clinical trials to demonstrate the safety and efficacy of the product candidate for its intended indications. We
45
cannot guarantee that any clinical trials, including our Phase 2 clinical trial evaluating vilastobart in combination with atezolizumab or our Phase 1 clinical trial evaluating XTX301 as a monotherapy, will be conducted as planned or completed on schedule, if at all. For example, in the first quarter of 2024, we announced plans to discontinue further investment in XTX202, our tumor-activated IL-2, as a monotherapy. We may experience numerous unforeseen events leading up to, during or as a result of clinical trials that could delay or prevent the initiation or completion of a clinical trial or our ability to receive marketing approval or commercialize our product candidates, including:
| ● | we may be unable to generate sufficient preclinical, toxicology, or other in vivo or in vitro data to obtain regulatory authorizations to commence a clinical trial; |
| ● | we may experience issues in reaching a consensus with regulatory authorities on trial design; |
| ● | regulators or institutional review boards, or IRBs, or ethics committees may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site; |
| ● | we may experience delays in reaching, or fail to reach, agreement on acceptable terms with prospective trial sites and prospective contract research organizations, or CROs, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; |
| ● | clinical trial sites may deviate from a trial protocol or drop out of a trial or fail to conduct the trial in accordance with regulatory requirements; |
| ● | the number of subjects required for clinical trials of our product candidates may be larger than we anticipate, or subjects may fail to enroll or remain in clinical trials at the rate we expect; |
| ● | subjects that enroll in our studies may misrepresent their eligibility or may otherwise not comply with the clinical trial protocol, resulting in the need to drop the subject from the trial, increase the needed enrollment size for the clinical trial or extend its duration; |
| ● | subjects may choose an alternative treatment for the indication for which we are developing our product candidates, or participate in competing clinical trials; |
| ● | subjects may experience severe or unexpected treatment-related adverse effects; |
| ● | clinical trials of our product candidates may produce unfavorable, inconclusive, or clinically insignificant results; |
| ● | we may decide to, or regulators, or IRBs, or ethics committees may require us to, make changes to a clinical trial protocol or conduct additional preclinical studies or clinical trials, or we may decide to abandon product development programs; |
| ● | we may need to add new or additional clinical trial sites; |
| ● | our third-party contractors, including those manufacturing our product candidates or conducting clinical trials on our behalf, may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; |
| ● | we may experience manufacturing delays, and any changes to manufacturing processes or third-party contractors that may be necessary or desired could result in other delays; |
| ● | we or our third-party contractors may experience delays due to complications resulting from the impact of public health crises, including epidemics and pandemics, or geopolitical tensions; |
46
| ● | the cost of preclinical testing and studies and clinical trials of any product candidates may be greater than we anticipate or greater than our available financial resources; |
| ● | the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate or we may not be able to obtain sufficient quantities of combination therapies for use in current or future clinical trials; |
| ● | reports may arise from preclinical or clinical testing of other cancer therapies that raise safety or efficacy concerns about our product candidates; and |
| ● | regulators may revise the requirements for approving our product candidates, or such requirements may not be as we anticipate. |
If we are required to conduct additional clinical trials or other testing of our product candidates beyond the clinical trials and testing that we contemplate, if we are unable to successfully complete clinical trials or other testing of our product candidates, if the results of these clinical trials or tests are unfavorable or are only modestly favorable or if there are safety concerns associated with any of product candidates, we may:
| ● | incur additional unplanned costs; |
| ● | be required to suspend or terminate ongoing clinical trials; |
| ● | be delayed in obtaining marketing approval, if at all; |
| ● | obtain approval for indications or patient populations that are not as broad as intended or desired; |
| ● | obtain approval with labeling that includes significant use or distribution restrictions or safety warnings; |
| ● | be subject to additional post-marketing testing or other requirements; |
| ● | be required to perform additional clinical trials to support approval; |
| ● | have regulatory authorities withdraw, or suspend, their approval of the drug or impose restrictions on its distribution in the form of a modified risk evaluation and mitigation strategy, or REMS; |
| ● | be subject to the addition of labeling statements, such as warnings or contraindications; |
| ● | have the product removed from the market after obtaining marketing approval; |
| ● | be subject to lawsuits; or |
| ● | experience damage to our reputation. |
Conducting clinical trials in foreign countries, as we may do for our product candidates, presents additional risks that may delay completion of our clinical trials. These risks include the failure of enrolled patients in foreign countries to adhere to clinical protocols as a result of differences in healthcare services or cultural customs, managing additional administrative burdens associated with foreign regulatory schemes, as well as political and economic risks relevant to such foreign countries.
Moreover, 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
47
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 trial. 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 authorities, as the case may be, and may ultimately lead to the denial of marketing approval of one or more of our product candidates.
In addition to the factors above, we may make formulation or manufacturing changes to our product candidates, in which case we may need to conduct additional preclinical studies or clinical trials to bridge our modified product candidates to earlier versions, which may be costly, time consuming and may not be successful at all.
Our failure to successfully initiate and complete clinical trials of our product candidates and to demonstrate the efficacy and safety necessary to obtain regulatory approval to market any of our product candidates would significantly harm our business. We cannot guarantee that our clinical trials will begin as planned or be completed on schedule, if at all, or that we will not need to restructure our clinical trials. Significant preclinical study or clinical trial delays could also shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our product candidates, which may harm our business and results of operations. In addition, many of the factors that cause, or lead to, delays of clinical trials may ultimately lead to the denial of regulatory approval of our product candidates.
If we experience delays or difficulties in the enrollment of patients in clinical trials, our clinical development activities could be delayed or otherwise adversely affected.
We may experience difficulties in patient enrollment in our clinical trials for a variety of reasons. The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the study until its conclusion. The enrollment of patients depends on many factors, including:
| ● | 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 for the indications we are investigating; |
| ● | the severity of the disease under investigation; |
| ● | the patient eligibility and the inclusion and exclusion criteria defined in the protocol; |
| ● | AEs in our clinical trials and in third-party clinical trials of agents similar to our product candidates; |
| ● | the size and health of the patient population required for analysis of the trial’s primary endpoints; |
| ● | the proximity of patients to trial sites; |
| ● | the design of the trial; |
| ● | our ability to recruit clinical trial investigators with the appropriate competencies and experience; |
| ● | our ability to obtain and maintain patient consents; |
| ● | our ability to monitor patients adequately during and after treatment; |
| ● | the risk that patients enrolled in clinical trials will drop out of the trials before completion; and |
| ● | factors we may not be able to control that may limit the availability of patients, principal investigators or staff or clinical sites, such as public health crises, including epidemics and pandemics. |
48
In addition, our clinical trials will compete with other clinical trials for product candidates that are in the same therapeutic areas as our product candidates, and this competition will reduce the number and types of patients available to us, because some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors. Since the number of qualified clinical investigators is limited, we expect to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who are available for our clinical trials at such clinical trial site.
Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays or might 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, slow down or halt our product candidate development and approval process and jeopardize our ability to seek and obtain the marketing approval required to commence product sales and generate revenue, which would cause the value of our company to decline and limit our ability to obtain sufficient additional capital.
Our product candidates may cause undesirable or unexpectedly severe side effects that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.
Undesirable or unexpectedly severe side effects caused by our product candidates could cause us to interrupt, delay or halt preclinical studies or could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or comparable foreign regulatory authorities. Traditional cytokine therapies and checkpoint inhibitors have long been associated with severe toxicities, which can be life-threatening or fatal, that have resulted in the need to dose-reduce, dose-interrupt and discontinue many patients from treatment. As has been the case with traditional immuno-oncology, or I-O, treatments for cancer, it is possible that there may be severe side effects associated with the use of our current or future product candidates. Results of our clinical trials could reveal a high and unacceptable severity and prevalence of these or other side effects. In such an event, our clinical trials could be suspended or terminated, and the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny approval of our product candidates for any or all targeted indications. Treatment-related side effects could also affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly.
In addition, clinical trials rely on a sample of the potential patient population. With a limited number of patients and limited duration of exposure, rare and severe side effects of our product candidates may only be uncovered when a significantly larger number of patients is exposed to the product candidate. If our product candidates receive marketing approval and we or others identify undesirable side effects caused by such product candidates after such approval, a number of potentially significant negative consequences could result, including:
| ● | regulatory authorities may require the addition of labeling statements, such as a “black box” warning or a contraindication; |
| ● | we may be required to create a medication guide outlining the risks of such side effects for distribution to patients; |
| ● | regulatory authorities may require a REMS plan to mitigate risks, which could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools; |
| ● | we may be required to change the way such product candidates are distributed or administered, conduct additional clinical trials or change the labeling of the product candidates; |
| ● | we may be subject to regulatory investigations and government enforcement actions; |
| ● | regulatory authorities may withdraw or limit their approval of such product candidates; |
| ● | we may decide to remove such product candidates from the marketplace; |
49
| ● | we could be sued and held liable for injury caused to individuals exposed to or taking our product candidates; and |
| ● | we may suffer reputational harm. |
Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly harm our business, results of operations and prospects.
Interim top-line and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.
From time to time, we may publish interim top-line or preliminary data from our clinical trials. For example, we most recently reported initial data from our Phase 2 clinical trial for vilastobart in combination with atezolizumab in January 2025, and we plan to report additional Phase 2 data in the middle of 2025, and we most recently reported safety data from our Phase 1 clinical trial for XTX301 in December 2024. Preliminary and 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 become available. Preliminary or “top-line” data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data previously published. As a result, interim and preliminary data should be viewed with caution until the final data are available. Adverse differences between preliminary or interim data and final data could significantly harm our business prospects.
We expect to develop certain of our product candidates in combination with third-party drugs and we will have limited or no control over the safety, supply, regulatory status or regulatory approval of such third-party drugs.
We intend to develop our clinical-stage product candidates, and likely other future product candidates, in combination with third-party cancer drugs, which may be either approved or unapproved. For example, we are currently evaluating vilastobart in combination with atezolizumab (Tecentriq®) in Phase 1 combination dose escalation in patients with advanced solid tumors and in a Phase 2 clinical trial evaluating the combination in patients with MSS CRC. Our ability to develop and ultimately commercialize our current product candidates, and any future product candidates, used in combination with third-party drugs will depend on our ability to access such drugs on commercially reasonable terms for clinical trials and their availability for use with our commercialized product, if approved. We cannot be certain that current or potential future commercial relationships will provide us with a steady supply of such drugs on commercially reasonable terms or at all. Any failure to maintain or enter into new successful commercial relationships, or the expense of purchasing such third-party drugs in the market, may delay our development timelines, increase our costs and jeopardize our ability to develop our current product candidates and any future product candidates as commercially viable therapies. If any of these occur, our business, financial condition, operating results or prospects may be materially harmed.
Moreover, the development of product candidates for use in combination with another product or product candidate may present challenges that are not faced for single agent product candidates. For example, our plans to evaluate current or future product candidates in combination with other agents may result in AEs based on the combination therapy that may negatively impact the reported safety profile of the monotherapy in clinical trials. In addition, the FDA or comparable foreign regulatory authorities may require us to use more complex clinical trial designs in order to evaluate the contribution of each product and product candidate to any observed effects. It is possible that the results of such trials could show that any positive previous trial results are attributable to the third-party drug and not our product candidate. Developments related to the third-party drug may also impact our clinical trials for the combination therapy as well as our commercial prospects should we receive regulatory approval. Such developments may include changes to the third-party drug’s safety or efficacy profile, changes to the availability of the third-party drug, quality, and manufacturing and supply issues with respect to the third-party drug.
If we are able to obtain marketing approval, the FDA or comparable foreign regulatory authorities may require that products used in conjunction with each other be cross labeled for combined use. To the extent that we do not have rights to the third-party drug, this may require us to work with such third party to satisfy such a requirement. We would also continue to be subject to the risks that the FDA or comparable foreign regulatory authorities could revoke approval of the third-party drug used in combination with our product candidate or that safety, efficacy, manufacturing or supply issues
50
could arise with such drug. Similarly, if the third-party drugs we use in combination with our product candidates are replaced as the standard of care for the indications we choose for any of our product candidates, the FDA or comparable foreign regulatory authorities may require us to conduct additional clinical trials. The occurrence of any of these risks could result in our own products, if approved, being removed from the market or being less successful commercially.
We may not be successful in our efforts to use our platform technology to enable the development of a pipeline of tumor-activated product candidates.
A key element of our strategy is to use our novel platform technology to engineer and develop tumor-activated molecules with the potential to trigger anti-tumor immunity with minimal systemic toxicity in order to advance a pipeline of product candidates. We may not be able to continue to identify and develop novel I-O therapies. Even if we are successful in continuing to advance our pipeline, the potential product candidates that we identify may not be suitable for clinical development. For example, potential product candidates may be shown to have harmful side effects or other characteristics that indicate that they are unlikely to or will not be drugs that will receive marketing approval and achieve market acceptance. If we do not successfully develop and commercialize product candidates based upon our platform approach or take longer to do so than anticipated, we will not or may not be able to obtain drug revenues in future periods, which likely would result in significant harm to our financial position and adversely affect our stock price.
We may not be successful in our efforts to identify or discover additional product candidates.
Although we intend to explore other therapeutic opportunities in addition to the product candidates that we are currently developing, we may fail to identify or discover viable new product candidates for clinical development for a number of reasons. If we fail to identify additional potential product candidates, our business could be materially harmed.
Research programs to pursue the development of our existing and planned product candidates for additional indications and to identify new product candidates and disease targets require substantial technical, financial and human resources whether or not they are ultimately successful. We may in the future rely on third parties for certain research, and we will not have complete control over their performance and ability to successfully develop product candidates. Our research programs may initially show promise in identifying potential indications and/or product candidates, yet fail to yield results for clinical development for a number of reasons, including:
| ● | the research methodology used may not be successful in identifying potential indications and/or product candidates; |
| ● | potential product candidates may, after further study, be shown to have harmful adverse effects or other characteristics that indicate they are unlikely to be effective drugs; and |
| ● | it may take greater human and financial resources than we will possess to identify and advance additional therapeutic opportunities for our product candidates or to develop suitable potential product candidates through internal research programs, thereby limiting our ability to develop, diversify and expand our product portfolio. |
Accordingly, there can be no assurance that we will ever be able to identify additional therapeutic opportunities for our current product candidates or to develop suitable additional product candidates through internal research programs, which could materially adversely affect our future growth and prospects.
Our approach to the discovery and development of product candidates based on our technological approaches is unproven, and we do not know whether we will be able to develop any products of commercial value.
The success of our business depends primarily upon our ability to discover, develop and commercialize products based on our technological approaches. While we have had favorable preclinical and early clinical results related to our clinical-stage product candidates, vilastobart and XTX301, we have not yet succeeded and may not succeed in demonstrating efficacy and safety for any product candidates in current or future clinical trials or in obtaining marketing approval thereafter. We rely on matrix metalloproteases, or MMPs, to activate our molecules within the tumor microenvironment. If MMP activity in human tumors is not sufficient to cleave the masking protein domain, the potential efficacy of our
51
product candidates would be limited. We have no assurance that our product candidates will successfully progress through clinical development and ultimately marketing approval. We have invested substantially all of our efforts and financial resources in developing our initial product candidates and our future success is highly dependent on the outcome of our ongoing clinical trials and the successful development of our technology and product candidates.
In addition, the clinical trial requirements of the FDA and other regulatory agencies and the criteria these regulators use to determine the safety and efficacy of a product candidate may vary according to the type, complexity, novelty and intended use and market of the potential products. The regulatory approval process for novel product candidates can be more expensive and take longer than for other, better known or extensively studied pharmaceutical or other product candidates. As a result, we may face a greater regulatory burden to initiate clinical trials or to obtain regulatory approval of our product candidates as compared to product candidates based on more established technology. In addition, any product candidates for which we may be able to obtain marketing approval may be subject to extensive post-approval regulatory requirements, including requirements pertaining to manufacturing, distribution and promotion. We may need to devote significant time and resources to comply with these requirements.
We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.
We have chosen to initially develop each of our clinical-stage product candidates for the treatment of various solid tumor types. Nevertheless, our development efforts will be limited to a small number of cancer types, and we may forego or delay pursuit of opportunities in other cancer types that may prove to have greater potential. Likewise, we may forego or delay the pursuit of opportunities with other potential product candidates that may prove to have greater commercial potential.
In addition, our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any viable product candidates. Similarly, if we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other similar arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to the product candidate.
We may become exposed to costly and damaging liability claims, either when testing our product candidates in the clinic or following commercial sale, and any product liability insurance we may obtain may not cover all damages from such claims.
We are exposed to potential product liability risks that are inherent in the research, development, manufacturing, marketing and use of biopharmaceutical products. The use of product candidates by us in clinical trials, and any sale of approved products in the future, may expose us to liability claims. For example, we may be sued if our product candidates cause or are perceived to cause injury or are found to be otherwise unsuitable during clinical trials, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties. Claims could also be asserted under state consumer protection acts.
Although the clinical trial process is designed to identify and assess potential side effects, it is always possible that a drug, even after regulatory approval, may exhibit unforeseen side effects. If any of our product candidates were to cause adverse side effects during clinical trials or after approval thereof, we may be exposed to substantial liabilities. Physicians and patients may not comply with any warnings that identify known potential adverse effects and patients who should not use our product candidates. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit or cease the development or commercialization of our product candidates or
52
any products for which we may have received marketing approval. Even a successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:
| ● | delay or termination of clinical trials; |
| ● | decreased demand for any product candidates or products that we may develop; |
| ● | injury to our reputation and significant negative media and social media attention; |
| ● | withdrawal of clinical trial participants or difficulties in recruiting new trial participants; |
| ● | initiation of investigations by regulators; |
| ● | costs to defend or settle 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; |
| ● | significant negative financial impact; and |
| ● | the inability to commercialize any of our product candidates, if approved. |
Although we will seek to procure and maintain sufficient product liability insurance coverage, our current insurance coverage and any insurance coverage we obtain in the future may not be adequate to cover all liabilities that we may incur. We may need to increase our insurance coverage each time we commence a clinical trial and if we successfully commercialize any product candidate. As the expense of insurance coverage is increasing, we may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. If a successful product liability claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, our assets may not be sufficient to cover such claims and our business operations could be materially harmed.
Risks Relating to Manufacturing and Supply
Manufacturing biologics is complex, and we may experience manufacturing problems that result in delays in our development or commercialization programs.
The manufacturing of biologics is complex and difficult and we may experience production issues or interruptions in supply for our product candidates, including variability of raw material, consumable or starting material quality, cell line viability, productivity or stability issues, shortages of any kind, shipping, distribution, storage and supply chain failures, media contamination, equipment malfunctions or failures, operator errors, facility contamination, labor problems, quality system and regulatory inspection failures, adverse impacts from current or future trade sanctions, tariffs or similar actions, natural disasters, disruption in utility services, terrorist activities, or acts of god that are beyond our control or the control of our third-party contract development and manufacturing organizations, or CDMOs.
Given the nature of biologics manufacturing, there is a risk of contamination during manufacturing. Any contamination could materially harm our ability to produce product candidates on schedule and could harm our results of operations and cause reputational damage. In the event that raw materials required in our manufacturing process need to be derived from biologic sources, they may be difficult to procure and may be subject to contamination or recall.
Problems with the manufacturing process, even minor deviations from the normal process, could result in product defects, out-of-specification analytical results or manufacturing failures that result in lot failures, product recalls, product liability
53
claims, insufficient inventory or potentially delay progression of our preclinical or clinical development of any product candidates we may develop. If we successfully develop product candidates, we may encounter problems achieving adequate quantities and quality that meet FDA, European Medicines Agency, or EMA, or other comparable applicable foreign standards or specifications with consistent and acceptable production yields and costs. The ability to scale our manufacturing and maintain the manufacturing process at the same levels of quality and efficiency that we are currently manufacturing is yet to be tested. If we or our third-party CDMO is unable to scale our manufacturing and meet the same levels of quality and efficiency, or provide sufficient manufacturing campaign slots to generate materials, we may not be able to supply the required number of doses for clinical trials or commercial supply. A material shortage, contamination event or manufacturing failure in the manufacture of any product candidate we may develop or other adverse impact or disruption in the commercial manufacturing or the production of clinical material could materially harm our development timelines and our business, financial condition, results of operations and prospects.
We face risks related to our reliance on our current and any future CDMOs. For example, we and our CDMO are subject to significant regulation with respect to manufacturing our products. The manufacturing facilities of the CDMO on which we rely may not continue to meet regulatory requirements, may have limited capacity or may experience interruptions in supply, any of which could adversely affect our development and commercialization plans for our product candidates. All entities involved in the preparation and storage of therapeutics for clinical trials or commercial sale, including any CDMOs of any product candidates we may develop, are subject to extensive regulation. Components of a finished therapeutic product approved for commercial sale or used in clinical trials must be manufactured in accordance with current Good Manufacturing Practices, or cGMP. These regulations govern manufacturing processes and procedures (including record keeping) and the implementation and operation of quality systems to control and assure the quality of investigational products and products approved for sale. Poor control of production processes can lead to the introduction of adventitious agents or other contaminants or to inadvertent changes in the properties or stability of our product candidates that may not be detectable in final product testing. We, in partnership with our CDMO, must supply all necessary documentation in support of an IND for clinical product, and later in support of a BLA for any potential commercial product, on a timely basis and must adhere to the FDA’s and EMA’s current Good Laboratory Practices and cGMP regulations enforced through the applicable regulatory authority’s facilities inspection program. Our facilities and quality systems and the facilities and quality systems of our CDMO must pass a pre-approval inspection, or PAI, to confirm validity of the information presented in the BLA and to confirm the capability of the facility to manufacture our product in compliance with the applicable regulations. The PAI is a condition of regulatory approval of any product candidates we may develop or any of our other potential products. If our or our CDMO’s quality systems or facilities involved with the preparation of our product candidates do not pass the PAI, FDA approval of such product candidates will not be granted.
In addition, the regulatory authorities may, at any time, conduct a routine or for-cause inspection of a manufacturing facility involved with the preparation of our product candidates, which inspection is related to other products manufactured at the site or the associated quality systems, for compliance with the regulations applicable to the activities being conducted. The regulatory authorities also may, at any time following approval of a product for sale, inspect our facilities or the manufacturing facilities of our CDMOs. If any such inspection identifies a failure to comply with applicable regulations, or if a violation of our product specifications or applicable regulations occurs independent of such an inspection, we or the relevant regulatory authority may require remedial measures that may be costly and/or time-consuming for us or a third party to implement and that may include the temporary or permanent suspension of a clinical trial or commercial sales, the temporary or permanent closure of a facility, or other remedial measures that may delay or disrupt the manufacture or release of our product candidates or other potential products. Any such remedial measures imposed upon us or third parties with whom we contract could materially harm our business.
If we or any CDMO with which we contract for manufacturing and supply fails to maintain regulatory compliance, the FDA can impose regulatory sanctions including, among other things, a clinical hold, refusal to approve a pending application for a new drug product or biologic product, revocation of a pre-existing approval, or an import alert. As a result, our business, financial condition and results of operations may be materially harmed.
Currently, we depend on WuXi Biologics (Hong Kong) Limited, or WuXi Biologics, for developing the manufacturing processes required to supply our product candidates. We cannot ensure that this manufacturer will remain in business or have sufficient capacity or supply to meet our needs. Our use of a single manufacturer exposes us to several risks, including price increases or manufacturing delays beyond our control. WuXi Biologics is based in and has significant operations in
54
China, where our product candidates are manufactured, which subjects us to additional risks including those related to U.S. export control laws, potential sanctions or other trade restrictions imposed by the U.S. government. Moreover, reliance on third-party manufacturers generally entails risks to which we would not be subject if we manufactured the product candidates ourselves, including:
| ● | the inability to negotiate manufacturing agreements with third parties under commercially reasonable terms or at all, particularly if they are affiliated with our competitors; |
| ● | reduced control as a result of using third-party manufacturers for all aspects of manufacturing activities, particularly if they are under contract with our competitors; |
| ● | termination or nonrenewal of manufacturing agreements with third parties in a manner or at a time that is costly or damaging to us; |
| ● | disruptions to the operations of our third-party manufacturers or suppliers caused by conditions unrelated to our business or operations, including geopolitical tensions or restrictions, such as export controls or sanctions, or the bankruptcy of the manufacturer or supplier; |
| ● | the inability to import or obtain components or materials from alternate sources at acceptable prices or with acceptable quality in a timely manner; and |
| ● | substantial delays or difficulties related to the establishment of replacement manufacturers who meet regulatory requirements. |
Any of these events could lead to clinical trial delays or failure to obtain regulatory approval or impact our ability to successfully commercialize future products. Some of these events could be the basis for FDA action, including injunction, recall, seizure, import alert, or total or partial suspension of production.
Additionally, if supply from one approved manufacturer is interrupted, such as could be the case with our current CDMO, WuXi Biologics, there could be a significant disruption in supply. While we believe there are alternate manufacturers who can provide the manufacturing processes required to develop and manufacture our product candidates, if we have to switch to a replacement manufacturer, the manufacture and delivery of our product candidates could be interrupted for an extended period, which could adversely affect our business. Furthermore, an alternative manufacturer must be able to demonstrate successful technology transfer of the manufacturing process and associated assays, and, to do so, may need to modify the manufacturing process required to develop our product candidates, and the alternative manufacturer would need to be qualified through additional regulatory filings, all of which could result in further delay and significant costs. The regulatory agencies may also require additional studies or trials if a new manufacturer is relied upon for clinical or commercial production. Switching manufacturers may involve substantial costs and is likely to result in a delay in our desired clinical and commercial timelines.
These factors could cause the delay of clinical trials, regulatory submissions, required approvals or commercialization of our product candidates, cause us to incur higher costs and prevent us from commercializing our products successfully. Furthermore, if our suppliers fail to meet contractual requirements, and we are unable to secure one or more replacement suppliers capable of production at a substantially equivalent cost, our clinical trials may be delayed, or we could lose potential revenue or market share with respect to any product that has received marketing approval.
Certain of our research and development and manufacturing activities take place in China through WuXi Biologics. A significant disruption in our ability to rely on WuXi Biologics could materially adversely affect our business, financial condition and results of operations.
We have relied on WuXi Biologics in China to manufacture and supply certain raw materials used in our product candidates, and we expect to continue to use WuXi Biologics as our CDMO for such purposes. A natural disaster, epidemic or pandemic, such as the COVID-19 pandemic, trade war, political unrest, economic conditions, changes in legislation,
55
including the passage of the People’s Republic of China Biosecurity law, which became effective on April 15, 2021, and subsequent legislation that China or the United States may adopt in the future, or other events in China could disrupt our ability to continue to rely upon CROs, CDMOs, collaborators, manufacturers or other third parties with whom we conduct business now or in the future. Any disruption in China or the United States that significantly impacts such third parties, including services provided by CROs for our research and development programs, or our manufacturers’ ability to produce and export raw or manufactured materials in adequate quantities to meet our needs, could impair our ability to operate our business on a day-to-day basis and impede, delay, limit or prevent the research, development or commercialization of our current and future products or product candidates. In addition, for any activities conducted in China, we are exposed to the possibility of product supply disruption and increased costs in the event of changes in the policies of the U.S. or Chinese governments, political unrest or unstable economic or geopolitical conditions, including sanctions in China or against certain Chinese companies; changes in U.S. export laws or the imposition by the United States of trade barriers; sanctions; limitations on uses of U.S. government executive agency contract, grant or loan funds; or other restrictions on doing business with certain Chinese companies, including WuXi Biologics, which could have a material adverse effect on our business. Additionally, we may be exposed to fluctuations in the value of the local currency in China for goods and services. Our costs for any of these services or activities could also increase as a result of future appreciation of the local currency in China or increased labor costs if the demand for skilled laborers increases and/or the availability of skilled labor declines in China.
If we or any CDMOs and suppliers we engage fail to comply with environmental, health, and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.
We and any CDMOs and suppliers we engage are subject to numerous federal, state and local environmental, health, and safety laws, regulations and permitting requirements, including those governing laboratory procedures; the generation, handling, use, storage, treatment and disposal of biological or hazardous and regulated materials and wastes; the emission and discharge of hazardous materials into the ground, air and water; and employee health and safety. Our operations involve the use of hazardous and flammable materials, including chemicals and biological and radioactive materials. Our operations also produce hazardous waste. 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. Under certain environmental laws, we could be held responsible for costs relating to any contamination at third-party facilities. We also could incur significant costs associated with civil or criminal fines and penalties.
Compliance with applicable environmental laws and regulations may be expensive, and current or future environmental laws and regulations may impair our research and product development efforts. In addition, we cannot entirely eliminate the risk of accidental injury or contamination from these materials or wastes. Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not carry specific biological or hazardous waste insurance coverage, and our property, casualty and general liability insurance policies specifically exclude coverage for damages and fines arising from biological or hazardous waste exposure or contamination. Accordingly, in the event of contamination or injury, we could be held liable for damages or be penalized with fines in an amount exceeding our resources, and our clinical trials or regulatory approvals could be suspended, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws, regulations and permitting requirements. These current or future laws, regulations and permitting requirements may impair our research, development or production efforts. Failure to comply with these laws, regulations and permitting requirements also may result in substantial fines, penalties or other sanctions or business disruption, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
Any third-party CDMOs and suppliers we engage will also be subject to these and other environmental, health and safety laws and regulations. Liabilities they incur pursuant to these laws and regulations could result in significant costs or an
56
interruption in operations, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
Risks Related to our Dependence on Third Parties
We expect to rely on third parties to conduct, supervise and monitor IND-enabling studies and clinical trials, and if these third parties perform in an unsatisfactory manner, it may harm our business, reputation and results of operations.
We expect to rely on CROs and research and clinical trial sites to ensure our IND-enabling studies and clinical trials are conducted properly and on time, and we expect to rely in the future on CROs for additional research programs. While we will have agreements governing their activities, we will have limited influence over their actual performance. We will control only certain aspects of our CROs’ activities. Nevertheless, we will be responsible for ensuring that each of these studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on the CROs does not relieve us of our regulatory responsibilities.
We and our CROs will be required to comply with the FDA’s Good Clinical Practices, or GCPs, for conducting, recording and reporting the results of IND-enabling studies and clinical trials to assure that the data and reported results are credible and accurate and that the rights, integrity and confidentiality of clinical trial participants are protected. The FDA enforces these GCPs through periodic inspections of study sponsors, principal investigators and clinical trial sites. If we or our CROs fail to comply with applicable GCPs, the preclinical and clinical data generated in our studies may be deemed unreliable and the FDA may require us to perform additional studies before approving any marketing applications. Upon inspection, the FDA may determine that our studies did not comply with GCPs.
Our CROs are not our employees, and we are therefore unable to directly monitor whether or not they devote sufficient time and resources to our clinical and nonclinical programs. These CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other drug development activities that could harm our competitive position. If our CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our protocols or regulatory requirements, or for any other reasons, our studies may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize any product candidates we may develop. As a result, our financial results and commercial prospects would be harmed, our costs could increase, and our ability to generate revenues could be delayed.
We have entered into, and may in the future seek to enter into, licenses, collaborations or similar arrangements with third parties for the research, development and commercialization of certain of our current or future product candidates. If any such arrangements are not successful, we may not be able to capitalize on the market potential of those product candidates.
In March 2024, our wholly-owned subsidiary, Xilio Development, Inc., or Xilio Development, entered into a license agreement with Gilead, pursuant to which Gilead was granted an exclusive global license to develop and commercialize XTX301, our tumor activated IL-12, and other specified molecules directed toward IL-12. In February 2025, Xilio Development entered into a collaboration, license and option agreement with AbbVie, pursuant to which AbbVie was granted (i) an exclusive option for (a) an initial program to discover, develop and commercialize masked T cell engager molecules for an agreed upon initial target and backup target and (b) subject to the terms of the agreement, up to two additional programs to discover, develop, and commercialize masked T cell engager molecules for an initial target and backup target determined at the time of program initiation and (ii) an exclusive license to develop and commercialize a masked antibody-based immunotherapy. We may in the future seek third-party collaborators or licensors for the research, development and commercialization of other current or future product candidates. With respect to our agreements with Gilead and AbbVie, and what we expect will be the case with any future collaboration agreements we enter into, we have and would likely have limited control over whether such collaborators pursue the development of our product candidates or the amount and timing of resources that our collaborators dedicate to the development or commercialization of our product candidates that we seek to develop with them. For example, under the license agreement with Gilead, if Gilead exercises its right to transition responsibilities for the development and commercialization of XTX301 and the rest of our IL-12 program, it will have sole decision-making authority with respect to the continued development and future
57
commercialization of our IL-12 program and may elect to prioritize other assets that it believes are more competitive, or it may exercise its right to terminate the license and return the licensed IL-12 program assets to us. Similarly, subject to limited exceptions, AbbVie has sole decision-making authority with respect to the development and commercialization of the masked antibody-based immunotherapy program. With respect to any T cell engager program for which AbbVie exercises its option, AbbVie will have sole decision-making authority with respect to the continued development and future commercialization of such option program and may elect to prioritize other assets that it believes are more competitive, or it may exercise its right to terminate the license and return the licensed T cell engager program assets to us. As a result, there can be no assurances that any of the programs covered by our existing or future collaborations or licenses will be developed further or reach commercialization. Further, our ability to generate revenues from these existing and future arrangements will depend on our collaborators’ abilities to successfully perform the functions assigned to them in these arrangements. We cannot predict the success of any collaboration that we enter into.
Collaborations, licenses or similar arrangements involving our research programs or any product candidates currently pose, and will continue to pose, numerous risks to us, including the following:
| ● | collaborators or licensors have significant discretion in determining the efforts and resources that they will apply to these arrangements; |
| ● | collaborators or licensors may 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 such third party’s strategic focus or available funding or external factors such as an acquisition that diverts resources or creates competing priorities; |
| ● | collaborators or licensors may delay programs, preclinical studies or clinical trials, provide insufficient funding for programs, preclinical studies or clinical trials, stop a preclinical study or 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 or licensors 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; |
| ● | collaborators or licenses may be acquired by a third party having competitive products or different priorities; |
| ● | collaborators or licensors with marketing and distribution rights to one or more product candidates may not commit sufficient resources to the marketing and distribution of such product candidate(s); |
| ● | collaborators or licensors may not properly obtain, maintain, enforce or defend our intellectual property or proprietary rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our proprietary information or expose us to potential litigation; |
| ● | disputes may arise between the collaborators or licensors and us that result in the delay or termination of the research, development, or commercialization of our product candidates or any of our product candidates or that result in costly litigation or arbitration that diverts management attention and resources or that jeopardize or invalidate our intellectual property or proprietary information; |
| ● | we may lose certain valuable rights under certain circumstances, including if we undergo a change of control; |
| ● | collaborations or licenses 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; and |
58
| ● | collaborations or license agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all. If a present or future collaborator or licensor of ours were to be involved in a business combination, the continued pursuit and emphasis on our product development or commercialization program under such collaboration could be delayed, diminished or terminated. |
If our current or future collaborations, licenses or similar transactions do not result in the successful development and commercialization of product candidates, including if one of our current or future collaborators or licensors terminates its agreement with us, we may not receive any future payments for which we might otherwise be eligible under such agreement or we may incur significant costs in re-establishing the development and manufacturing of such product candidates. If we do not receive the funding we expect under these agreements, our development of product candidates could be delayed, and we may need additional resources to develop such product candidates. In addition, if one of our collaborators terminates its agreement with us, we may find it more difficult to find a suitable replacement collaborator or licensor or for us to attract new collaborators or licensors, and our development programs may be delayed or the perception of us in the business and financial communities could be adversely affected. All of the risks relating to product development, regulatory approval and commercialization described in this Quarterly Report on Form 10-Q apply to the activities of our collaborators or licensors.
These relationships, or those like them, may require us to incur non-recurring and other charges, increase our near- and long-term expenditures, issue securities that dilute our existing stockholders, or disrupt our management and business. In addition, we could face significant competition in seeking appropriate collaborators, and the negotiation process is time-consuming and complex. Our ability to reach a definitive collaboration or license agreement with future partners will depend, among other things, upon our assessment of the resources and expertise of such third-party collaborator or licensor and the terms and conditions of the proposed collaboration or license. Further, if we license rights for use in any product candidates we or our collaborators may develop, we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them with our existing operations and company culture.
If we are not able to establish collaborations on commercially reasonable terms, we may have to alter our development and commercialization plans.
Our product development and research programs and the potential commercialization of any product candidates we may develop will require substantial additional cash to fund expenses. For some of the product candidates we may develop, we have decided and may in the future decide to collaborate with other pharmaceutical and biotechnology companies for the development and potential commercialization of those product candidates.
We face significant competition in seeking appropriate collaborators. 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, the EMA or similar regulatory authorities outside the United States, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge, and industry and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us.
Collaborations are complex and time-consuming to negotiate and document. 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.
We may not be able to negotiate future collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of the product candidates for which we are seeking to collaborate, reduce or delay its development program or one or more of our other development programs, delay their potential commercialization, reduce the scope of any sales or marketing activities, or increase our own expenditures on the development of the applicable product candidate.
59
Risks Related to Commercialization
We have never commercialized a product candidate and we may lack the necessary expertise, personnel and resources to successfully commercialize any products that receive regulatory approval, either on our own or together with collaborators.
We have never commercialized a product candidate. We currently have no sales force or marketing or distribution capabilities. To achieve commercial success of our product candidates, if any are approved, we will have to develop our own sales, marketing and supply capabilities or outsource these activities to one or more third parties. Factors that may affect our ability to commercialize our product candidates on our own include our ability to recruit and retain adequate numbers of effective sales and marketing personnel and obtain access to or persuade adequate numbers of physicians to prescribe our product candidates, as well as any unforeseen costs we may incur in connection with creating an independent sales and marketing organization. Developing a sales and marketing organization requires significant investment and substantial amount of time and attention from our management and may divert a disproportionate amount of their attention away from day-to-day activities, which could delay the launch of our product candidates. We may not be able to build an effective sales and marketing organization in the United States, the EU or other key global markets. To the extent we need to rely upon one or more third parties, we may have little or no control over the marketing and sales efforts of those third parties and our revenue from product sales may be lower than if we had commercialized our product candidates ourselves. We will also face competition in any search for third parties to assist us with sales and marketing efforts for our product candidates. If we are unable to build our own distribution and marketing capabilities or to find suitable partners for the commercialization of our product candidates, we may have difficulties generating revenue from them.
We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.
The development and commercialization of new products is highly competitive. We face competition with respect to our current product candidates and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future, from major pharmaceutical, specialty pharmaceutical and biotechnology companies among others. We compete in the segments of the pharmaceutical, biotechnology and other related markets that develop immunotherapies for the treatment of cancer. There are other companies working to develop immunotherapies for the treatment of cancer including divisions of pharmaceutical and biotechnology companies of various sizes. Some of these competitive therapies are based on scientific approaches that are the same as or similar to our approach, and others are based on entirely different approaches. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization.
We are developing our most advanced clinical-stage, tumor-activated product candidates for the treatment of cancer and have not completed clinical development or received marketing approval for either vilastobart or XTX301. There are already a variety of available therapies marketed for cancer and some of the currently approved therapies are branded and subject to patent protection, and others are available on a generic basis. Many of these approved therapies are well-established and widely accepted by physicians, patients and third-party payors. Insurers and other third-party payors may also encourage the use of generic products. We expect that if our product candidates are approved, they will be priced at a significant premium over competitive generic products. This may make it difficult for us to achieve our business strategy of using our product candidates in combination with existing therapies or replacing existing therapies with our product candidates. Competition may further increase with advances in the commercial applicability of technologies and greater availability of capital for investment in these industries.
Vilastobart, if approved, may face competition from other anti-CTLA-4 based therapies. For example, Yervoy (ipilimumab), an anti-CTLA-4, is approved to treat melanoma, renal cell carcinoma and certain cancers of the large intestine, and Imjudo (tremelimumab) is approved as a combination therapy to treat unresectable hepatocellular carcinoma. In addition, we are aware that several companies have anti-CTLA-4 programs in development, including Adagene, Inc., Agenus Inc., AstraZeneca plc, BioAtla, Inc., Chugai Pharmaceutical Co. Ltd., CytomX Therapeutics, Inc., MacroGenics, Inc. and OncoC4, Inc.
60
With respect to XTX301, currently there are no IL-12 therapies approved for the treatment of cancer. However, we are aware of several other companies that have modified IL-12 delivery programs in development, including Cullinan Management Inc., Dragonfly Therapeutics, Inc., ImmunityBio, Inc., Mural Oncology, Inc., PDS Biotechnology Corporation, Philogen S.p.A., Sonnet BioTherapeutics, Werewolf Therapeutics, Inc., Xencor Inc. and Zymeworks Inc.
With respect to our most advanced research-stage product candidate, XTX501, currently, there are no bispecific PD-1 targeted IL-2 therapies approved for the treatment of cancer. However, if we continue to advance development of XTX501, we are aware of several other companies that have modified PD-1 targeted IL-2 bispecific antibodies in development, including Anaveon AG, Bright Peak Therapeutics, Inc., Innovent Biologics, Inc., Regeneron Pharmaceuticals, Inc. and Roche.
With respect to our masked T cell engager programs, currently there are no T cell engager therapies targeting PSMA, CLDN18.2 or STEAP1 approved for the treatment of cancer. We are aware of several other companies that have masked T cell engager programs in development for PSMA, including Janux Therapeutics, Inc. and Vir Biotechnology, Inc. To our knowledge, there are no companies currently developing masked T cell engager programs for CLDN18.2 or STEAP1. However, we are aware of several companies developing non-masked T cell engager programs for CLDN18.2, including Amgen Inc., Innovent Biologics, Inc., Transcenta Holding Ltd. and Zai Lab Limited, and for STEAP1, including Amgen Inc., Nutcracker Therapeutics and Xencor Inc.
Our competitors may succeed in developing, acquiring or licensing, on an exclusive basis, products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. We also compete with these organizations in establishing clinical trial sites and patient registration for clinical trials, as well as in recruiting and retaining qualified scientific and management personnel, which could negatively affect our level of expertise and our ability to execute our business plan.
Many of our competitors, either alone or with their collaborators, have significantly greater financial resources and expertise in research and development, manufacturing, preclinical and clinical testing, obtaining regulatory approvals and reimbursement and marketing approved products than we do. Established pharmaceutical companies may invest heavily to accelerate discovery and development of novel product candidates or to in-license novel product candidates that could make our product candidates less competitive or obsolete. Smaller or early-stage companies may also prove to be significant competitors, including through collaborative arrangements with large and established companies. In addition, any new product that competes with an approved product must demonstrate compelling advantages in efficacy, convenience, tolerability and safety in order to overcome price competition and to be commercially successful. The availability of competing products could limit the demand and the price we are able to charge for product candidates we commercialize, if any. The inability to compete with existing or subsequently introduced products would harm our business, financial condition and results of operations.
If we do not achieve our projected development and commercialization goals in the timeframes we announce and expect, the commercialization of any of our product candidates may be delayed, and our business could be harmed.
For planning purposes, we sometimes estimate the timing of the accomplishment of various scientific, clinical, regulatory and other product development objectives. These milestones may include our expectations regarding the commencement or completion of scientific studies and clinical trials, the submission of regulatory filings or commercialization objectives. From time to time, we may publicly announce the expected timing of some of these milestones, such as the release of clinical trial data, the completion of an ongoing clinical trial, the initiation of other clinical trials, receipt of regulatory approval or the commercial launch of a product. The achievement of many of these milestones may be outside of our control. All of these milestones are based on a variety of assumptions which may cause the timing of achievement of the milestones to vary considerably from our estimates, including:
| ● | our available capital resources or capital constraints we experience; |
| ● | the rate of progress, costs and results of our clinical trials and research and development activities, including the extent of scheduling conflicts with participating clinicians and collaborators; |
61
| ● | our ability to identify and enroll patients who meet clinical trial eligibility criteria; |
| ● | our receipt of approvals by the FDA, EMA and comparable regulatory authorities in other jurisdictions, and the timing thereof; |
| ● | other actions, decisions or rules issued by regulators; |
| ● | our ability to access sufficient, reliable and affordable supplies of materials used in the manufacture of our product candidates; |
| ● | our ability to manufacture and supply clinical trial materials to our clinical trial sites on a timely basis; |
| ● | the efforts of our collaborators with respect to the development of our product candidates or the potential commercialization of any of our product candidates, if approved; and |
| ● | the securing of, costs related to, and timing issues associated with, commercial product manufacturing as well as sales and marketing activities. |
If we fail to achieve announced milestones in the timeframes we expect, the commercialization of any of our product candidates may be delayed, and our business, results of operations, financial condition and prospects may be adversely affected.
If approved, our product candidates that are licensed and regulated as biological products, or biologics, may face competition from biosimilars approved through an abbreviated regulatory pathway.
The Biologics Price Competition and Innovation Act of 2009, or BPCIA, was enacted as part of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively the ACA, to establish an abbreviated pathway for the approval of biosimilar and interchangeable with an FDA-licensed reference biologic product. The regulatory pathway establishes legal authority for the FDA to review and approve biosimilar biologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity to an approved biologic.
Under the BPCIA, reference biological product is granted 12 years of non-patent data exclusivity from the time of first licensure of the product, and the FDA will not accept an application for a biosimilar or interchangeable product based on the reference biological product until four years after the date of first licensure of the reference product. In addition, the licensure of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. During this 12-year period of exclusivity, another company may still develop and receive licensure of a competing biologic, so long as their BLA does not rely on the reference product or sponsor’s data or submit the application as a biosimilar application.
We believe that any of the product candidates we develop that is licensed in the United States as a biological product under a BLA should qualify for the 12-year period of exclusivity. However, there is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider the subject product candidate to be a reference product for competing products, potentially creating the opportunity for biosimilar competition sooner than anticipated. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of the reference products in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing. The approval of a biosimilar of our product candidates could have a material adverse impact on our business due to increased competition and pricing pressure.
If competitors are able to obtain regulatory approval for biosimilars referencing our product candidates, our product candidates may become subject to competition from such biosimilars, with the attendant competitive pressure and consequences.
62
The sizes of the potential markets for our product candidates are difficult to estimate and, if any of our assumptions are inaccurate, the actual markets for our product candidates may be smaller than our estimates.
The potential market opportunities for our product candidates are difficult to estimate and, if our product candidates are approved, will ultimately depend on, among other things, the indications for which our product candidates are approved for sale, any products with which our product candidates are co-administered, the success of competing therapies and therapeutic approaches, acceptance by the medical community, patient access, product pricing, reimbursement and our ability to create meaningful value propositions for patients, prescribers and payors. Our estimates of the potential market opportunities for our product candidates are predicated on many assumptions, which may include industry knowledge and publications, third-party research reports and other surveys. Although we believe that our internal assumptions are reasonable, these assumptions involve the exercise of significant judgment on the part of our management, are inherently uncertain, and their reasonableness has not been assessed by an independent source. If any of the assumptions prove to be inaccurate, the actual markets for our product candidates could be smaller than our estimates of the potential market opportunities.
The successful commercialization of our product candidates will depend in part on the extent to which we obtain and maintain favorable insurance coverage, adequate reimbursement levels and cost-effective pricing policies with third-party payors.
The availability and adequacy of coverage and reimbursement by third-party payors, including governmental healthcare programs such as Medicare and Medicaid, managed care organizations, and private health insurers, are essential for most patients to be able to afford prescription medications such as our product candidates, if approved. Our ability to achieve acceptable levels of coverage and reimbursement for products by third-party payors will have an effect on our ability to successfully commercialize our product candidates. We cannot be sure that coverage and reimbursement in the United States, the EU or elsewhere will be available for our product candidates, if approved, or any product that we may develop, and any reimbursement that may become available may be decreased or eliminated in the future.
Third-party payors increasingly are challenging prices charged for pharmaceutical products and services, and many third-party payors may refuse to provide coverage and reimbursement for particular drugs or biologics when an equivalent generic drug, biosimilar or a less expensive therapy is available. It is possible that a third-party payor may consider our product candidates as substitutable and only offer to reimburse patients for the less expensive product. Even if we show improved efficacy or improved convenience of administration with our product candidates, pricing of existing third-party therapeutics may limit the amount we will be able to charge for our product candidates. These payors may deny or revoke the reimbursement status of a given product or establish prices for new or existing marketed products at levels that are too low to enable us to realize an appropriate return on our investment in our product candidates, if approved. Even if our product candidates are approved and we obtain coverage for our product candidates by a third-party payor, such products may not be considered cost-effective and/or the resulting reimbursement payment rates may be insufficient or may require co-payments that patients find unacceptably high. Interim reimbursement levels for new medicines, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Net prices for medicines may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of medicines from countries where they may be sold at lower prices than in the United States. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize our product candidates, if approved, and may not be able to obtain a satisfactory financial return on our product candidates.
There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. The regulations that govern marketing approvals, pricing and reimbursement for new medicines vary widely from country to country. In the United States, third-party payors play an important role in determining the extent to which new drugs and biologics will be covered. The Medicare and Medicaid programs increasingly are used as models in the United States for how third-party payors develop their coverage and reimbursement policies for drugs and biologics. Some third-party payors may require pre-approval of coverage for new or innovative devices or drug therapies before they will reimburse healthcare providers who use such therapies. We cannot predict at this time what third-party payors will decide with respect to the coverage and reimbursement for our product candidates, if approved.
63
No uniform policy for coverage and reimbursement for products exists among third-party payors in the United States and coverage and reimbursement for products can therefore differ significantly from payor to payor and coverage and reimbursement by one payor does not guarantee coverage and reimbursement by another payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our product candidates to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. Our ability to demonstrate to these third-party payors that any of our approved product candidates creates a meaningful value proposition for patients, prescribers and payors will be important to gaining market access and reimbursement and there is no guarantee that we will be successful in doing so. Furthermore, rules and regulations regarding reimbursement change frequently, in some cases on short notice, and we believe that changes in these rules and regulations are likely.
Even if a product candidate we develop receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, hospitals, cancer treatment centers, third-party payors and others in the medical community necessary for commercial success.
If any product candidate we develop receives marketing approval, whether as a single agent or in combination with other therapies, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, hospitals, cancer treatment centers, third-party payors, and others in the medical community. For example, cancer treatments like chemotherapy, radiation therapy and certain existing immunotherapies are well established in the medical community, and doctors may continue to rely on these therapies. If the product candidates we develop do not achieve an adequate level of acceptance, we may not generate significant product revenues and we may not become profitable.
The degree of market acceptance of any product, if approved for commercial sale, will depend on a number of factors, including:
| ● | the product’s efficacy, safety and potential advantages compared to alternative treatments; |
| ● | the prevalence and severity of any side effects; |
| ● | the product’s convenience and ease of administration compared to alternative treatments; |
| ● | the clinical indications for which the product is approved; |
| ● | the willingness of the target patient population to try a novel treatment and of physicians to prescribe such treatments; |
| ● | the recommendations with respect to the product in guidelines published by scientific organizations; |
| ● | the ability to obtain sufficient third-party insurance coverage and adequate reimbursement, including, if applicable, with respect to the use of the product as a combination therapy; |
| ● | the strength of marketing, sales and distribution support; |
| ● | the effectiveness of our sales and marketing efforts; |
| ● | the approval of other new products for the same indications; and |
| ● | our ability to offer the product for sale at competitive prices. |
If we obtain marketing approval for a product but such product does not achieve an adequate level of market acceptance, we may not generate or derive significant revenue from that product and our business, financial condition and results of operations may be adversely affected.
64
Risks Related to Our Intellectual Property
If we are unable to obtain and maintain patent protection for any product candidates we develop or for other proprietary technologies we may develop, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize product candidates and technology similar or identical to our product candidates and technology, and our ability to successfully commercialize any product candidates we may develop, and our technology may be adversely affected.
Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries with respect to our product candidates, their respective components, formulations, combination therapies, methods used to manufacture them and methods of treatment and development that are important to our business. If we do not adequately protect our intellectual property rights, competitors may be able to erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability. To protect our proprietary position, we file patent applications in the United States and abroad related to our product candidates that are important to our business; we also license and may in the future license or purchase additional patents and patent applications filed by others. If we are unable to secure or maintain patent protection with respect to our product candidates and any proprietary products and technology we develop, our business, financial condition, results of operations and prospects could be materially harmed.
We cannot provide any assurances that any of our patents have, or that any of our pending patent applications that mature into issued patents will include, claims with a scope sufficient to protect our current and future product candidates or otherwise provide any competitive advantage. Specifically, our patents and pending patent applications, if issued, may not provide us with any meaningful protection or prevent competitors from designing around our patent claims to circumvent our patents by developing similar or alternative technologies or therapeutics in a non-infringing manner. For example, a third party may develop a competitive therapy that provides benefits similar to one or more of our product candidates but that uses a different masking moiety that falls outside the scope of our patent protection. If the patent protection provided by the patents and patent applications we hold or have licensed with respect to our product candidates is not sufficiently broad to impede such competition, our ability to successfully commercialize our product candidates could be negatively affected, which would harm our business.
The degree of patent protection we require to successfully compete in the marketplace may be unavailable or severely limited in some cases and may not adequately protect our rights or permit us to gain or keep any competitive advantage. The U.S. Patent and Trademark Office, or 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. Our or our licensor’s failure to comply with all such provisions during the patent process could result in abandonment or lapse of a patent or patent application that we own or license, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market and compete with us earlier than would otherwise have been the case. Moreover, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. In addition, to the extent that we license intellectual property in the future, we cannot guarantee that those licenses will remain in force.
Patent positions of life sciences companies can be uncertain and involve complex factual and legal questions and have in recent years been the subject of much litigation. No consistent policy governing the scope of claims allowable in the field of engineered therapeutic proteins has emerged in the United States. The scope of patent protection in jurisdictions outside of the United States is also uncertain. Changes in either the patent laws or their interpretation in any jurisdiction that we seek patent protection may diminish our ability to protect our inventions, maintain and enforce our intellectual property rights; and, more generally, may affect the value of our intellectual property, including the narrowing of the scope of our patents and any that we may license. Under the Leahy-Smith America Invents Act enacted in 2011, or the AIA, the United States moved to a first-to-file system in early 2013 (whereby, assuming the other requirements for patentability are met, the first to file a patent application is entitled to the patent), from the previous system under which the first to make a claimed invention was entitled to the patent. Publications of discoveries in the scientific and academic literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we were the first to file for patent protection on the inventions claimed in our patents or pending patent applications. Furthermore, for U.S.
65
applications in which all claims are entitled to a priority date before March 16, 2013, an interference proceeding can be provoked by a third-party or instituted by the USPTO to determine who was the first to invent any of the subject matter covered by the patent claims of our applications. We cannot be certain that we are the first to invent the inventions covered by pending patent applications and, if we are not, we may be subject to priority disputes. We may be required to disclaim part or all of the term of certain patents or all of the term of certain patent applications.
The patent prosecution process is complex, expensive, time-consuming and inconsistent across jurisdictions. We may not be able to file, prosecute, maintain, enforce, or license all necessary or desirable patent rights at a commercially reasonable cost or in a timely manner. In addition, we may not pursue or obtain patent protection in all relevant markets. It is possible that we will fail to identify important patentable aspects of our research and development efforts in time to obtain appropriate or any patent protection. While we enter into non-disclosure and confidentiality agreements with parties who have access to confidential or patentable aspects of our research and development efforts, including for example, our employees, external academic scientific collaborators, CROs, CDMOs, consultants, advisors and other third parties, any of these parties may breach the agreements and disclose our confidential or proprietary information before a patent application is filed, thereby endangering our ability to seek patent protection.
The issuance, scope, validity, enforceability, and commercial value of our patent rights are highly uncertain. Pending patent applications cannot be enforced against third parties 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 any patent applications that we may license in the future will result in patents being issued. Further, the scope of the invention claimed in a patent application can be significantly reduced before the patent is issued, and this scope can be reinterpreted after issuance. Even if patent applications we currently own or that we may license in the future issue as patents, they may not issue in a form that will provide us with adequate protection to prevent competitors or other third parties from competing with us, or otherwise provide us with a competitive advantage. Any patents that eventually issue may be challenged, narrowed or invalidated by third parties. Consequently, we do not know whether any of our product candidates will be protectable or remain protected by valid and enforceable patent rights. Our competitors or other third parties may be able to evade our patent rights by developing new products that are similar to our product candidates, biosimilars of our product candidates, or alternative technologies or products in a non-infringing manner.
The issuance or grant of a patent is not irrefutable as to its inventorship, scope, validity or enforceability, and our patents may be challenged in the courts or patent offices in the United States and abroad. There may be prior art of which we are not aware that may affect the validity or enforceability of a patent claim. There also may be prior art of which we are aware, but which we do not believe affects the validity or enforceability of a claim, which may, nonetheless, ultimately be found to affect the validity or enforceability of a claim. We may in the future, become subject to a third-party pre-issuance submission of prior art, pre- or post-issuance opposition, derivation, revocation, re-examination, post-grant and inter partes review, or interference proceeding and other similar proceedings challenging our patent rights or the patent rights of others in the USPTO or other foreign patent office. An unfavorable determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us.
Furthermore, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed. Various extensions may be available; however, the life of a patent, and the protection it affords, is limited. 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. Moreover, third parties may have certain ownership interest in some of our owned and in-licensed patents and patent applications. If we are unable to obtain an exclusive license to any such third-party co-owners’ interest in such patents or patent applications, such co-owners may be able to license their rights to other third parties, including our competitors, and our competitors could market competing products and technology. In addition, we or our licensors may need the cooperation of any such co-owners of our owned and in-licensed patents in order to enforce such patents against third parties, and such cooperation may not be provided to us or our licensors. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations and prospects.
66
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Some of our patent applications have been granted or may be granted or allowed in the future. We cannot be certain that an allowed patent application will become an issued patent. There may be events that can cause the allowance of a patent application to be withdrawn. For example, after a patent application has been allowed, but prior to being issued, material that could be relevant to patentability may be identified. In such circumstances, the sponsor may pull the application from allowance in order for the USPTO to review the application in view of the new material. We cannot be certain that the USPTO will re-allow the application in view of the new material. Further, periodic maintenance and annuity fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process and following the issuance of a patent. Recently, the USPTO implemented new fee rules including Continuing Application Fee, which would increase our cost for obtaining and maintaining patent protection in the U.S. and potentially limit our ability of seeking additional patents in our existing patent families especially those early filed platform families that have been pending for close to or more than six years. We rely on our outside counsel and other professionals or our licensing partners to pay these fees due to the USPTO and non-U.S. government patent agencies and to help us comply with other procedural, documentary and other similar requirements and we are also dependent on our licensors to take the necessary action to comply with these requirements with respect to our licensed intellectual property. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect on our business.
Issued patents covering our product candidates or technology could be found invalid or unenforceable if challenged in court or the USPTO.
Despite the measures we take to obtain and maintain patent and other intellectual property rights with respect to our product candidates, our intellectual property rights could be challenged or invalidated. If we or one of our licensors initiate legal proceedings against a third party to enforce a patent covering one of our product candidates or our technology, the defendant could counterclaim that the patent covering our product candidate or technology, as applicable, is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace, and there are numerous grounds upon which a third party can assert invalidity or unenforceability of a patent. Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, inter partes review, post-grant review and equivalent proceedings in foreign jurisdictions (such as opposition proceedings). Such proceedings could result in revocation or amendment to our patents in such a way that they no longer cover our product candidates or technology. The outcome following legal assertions of invalidity and 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, our patent counsel and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, or if we are otherwise unable to adequately protect our rights, we would lose at least part, and perhaps all, of the patent protection on our product candidates or technology. Such a loss of patent protection could have a material adverse impact on our business and our ability to commercialize or license our technology and product candidates.
Changes to patent law in the United States and in foreign jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our products.
As is the case with other biotechnology companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involve both technological and legal complexity, and is therefore costly, time-consuming and inherently uncertain. In addition, the United States continues to adapt to wide-ranging patent reform legislation that became effective starting in 2012. Moreover, recent U.S. Supreme
67
Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty regarding 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 new legislation and decisions by 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 our existing patents and patents that we might obtain in the future. For example, the U.S. Supreme Court, in the case Amgen v. Sanofi, held that broad functional antibody claims are invalid for lack of enablement. In addition, in Juno v. Kite, the Federal Circuit held claims reciting broad antibody genus based on function invalid for lack of written description. Recently, the Federal Circuit issued precedential decisions in In re Cellect and Allergan v. MSN that could shorten or eliminate an extended patent term awarded under patent term adjustment in certain patent family members if challenged on the basis of obviousness-type double patenting. While we do not believe that any of the patents owned or licensed by us will be found invalid based on these decisions, we cannot predict how future decisions by the courts, Congress or the USPTO may impact the value of our patents. Similarly, changes in the patent laws of other jurisdictions could adversely affect our ability to obtain and effectively enforce our patent rights, which would have a material adverse effect on our business and financial condition.
We have limited foreign intellectual property rights and may not be able to protect our intellectual property rights throughout the world.
We have obtained allowed patents in the United States that we consider to be important for certain of our product candidates, however, we may have less robust intellectual property rights outside the United States, and, in particular, we may not be able to pursue generic coverage of our product candidates outside of the United States. Filing, prosecuting and defending patents on product candidates 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 products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. Most of our patent portfolio is at the very early stage. We will need to decide whether and in which jurisdictions to pursue protection for the various inventions in our portfolio prior to applicable deadlines.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. 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 at risk of being invalidated or interpreted narrowly and our patent applications 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.
In addition, many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. Many countries also 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 or any of our licensors is 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 and financial condition may be adversely affected.
68
We rely on in-license agreements for patent rights with respect to our product candidates and may in the future acquire or in-license additional third-party intellectual property rights on which we may similarly rely. We face risks with respect to such reliance, including the risk that we could lose these rights that are important to our business if we fail to comply with our obligations under these licenses or that we may be unable to acquire or in-license third-party intellectual property that may be necessary or important to our business operations.
We rely on third-party license agreements pursuant to which we have non-exclusive and exclusive rights to technology that is incorporated into our development programs and product candidates. For example, under our license agreement with City of Hope, we have exclusively in-licensed certain patent rights that cover our anti-CTLA-4 antibody. We also have a license agreement with WuXi Biologics pursuant to which we received an exclusive worldwide license to specified mAbs and patent rights and know-how controlled by WuXi Biologics, including certain patent rights related to our anti-CTLA-4 mAb program. These license agreements impose diligence, milestone payment, royalty payment and other obligations on us.
Moreover, the growth of our business may depend in part on our ability to acquire, in-license or use additional third-party intellectual property rights. The licensing and acquisition of third-party intellectual property rights is a competitive area, and a number of more established companies are also pursuing strategies to license or acquire third-party intellectual property rights that we may consider attractive. These established companies may have a competitive advantage over us due to their size, cash 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. Licenses to additional third-party intellectual property, technology, processes, and materials that may be required for the development and commercialization of our product candidates or technology may not be available at all or on commercially reasonable terms. In that event, we may be required to expend significant time and resources to redesign our product candidates or manufacturing processes, 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 our future product candidates or technologies, which could materially harm our business, financial condition, results of operations and growth prospects.
In addition, while we cannot currently determine the amount of the royalty obligations we would be required to pay on sales of future products, if any, in the event we do in-license third-party intellectual property rights, the amounts may be significant. The amount of our future royalty obligations will depend on the technology and intellectual property we use in products that we successfully develop and commercialize, if any. Therefore, even if we successfully develop and commercialize products, we may be unable to achieve or maintain profitability.
Under our agreement with City of Hope, we are responsible for the achievement of certain diligence milestones, and our failure to timely achieve such milestones could result in City of Hope’s termination of the agreement or conversion of our exclusive licenses under the licensed patents to non-exclusive licenses. If City of Hope terminates the agreement or converts our licenses to non-exclusive licenses as a result of our failure to meet these diligence milestones, then our ability to commercialize products comprising our anti-CTLA-4 antibody may be impaired or we may face increased competition in the commercialization of anti-CTLA-4 antibody products. Furthermore, our agreement with City of Hope is subject to, and we expect our future license agreements may also be subject to, a reservation of rights by one or more third parties, including the licensor.
Disputes may arise regarding intellectual property subject to our current or any future license agreements, including:
| ● | the scope of rights granted under the license agreement and other interpretation-related issues; |
| ● | the amount and timing of payments owed under the license agreements; |
| ● | our or our licensor’s ability to defend intellectual property and to enforce intellectual property rights against third parties; |
| ● | the extent to which our technology, product candidates and processes infringe, misappropriate or otherwise violate any intellectual property of the licensor that is not subject to the licensing agreement; |
69
| ● | the sublicensing of patent and other rights under the license agreement; |
| ● | our diligence obligations under the license agreement and what activities satisfy those diligence obligations; |
| ● | the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and any partners of ours; and |
| ● | the priority of invention of patented technology. |
If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates. We are generally also subject to all of the same risks described in this Quarterly Report on Form 10-Q with respect to protection of intellectual property that we license as we are for intellectual property that we own. If we or our licensors fail to adequately obtain or protect this intellectual property, our ability to commercialize products could suffer.
Our current and any potential future licensors might conclude that we have materially breached our license agreements and might therefore terminate the relevant license agreements, thereby removing our ability to develop and commercialize products and technology covered by such license agreements. If any of our current or future inbound license agreements 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 that are covered by such license agreements and underlying patents, which might be identical or similar to our products or product candidates. This could have a material adverse effect on our competitive position, business, financial conditions, results of operations and growth prospects. Our business also would suffer if any current or future licensors fail to abide by the terms of the license or fail to enforce licensed patents against infringing third parties, if the licensed patents or other rights are found to be invalid or unenforceable, or if we are unable to enter into necessary licenses on acceptable terms. Moreover, our licensors may own or control intellectual property that has not been licensed to us and, as a result, we may be subject to claims, regardless of their merit, that we are infringing or otherwise violating the licensor’s rights.
Any licensor of ours may have relied on third-party consultants or collaborators or on funds from third parties, such as the United States government, such that such licensor is not the sole and exclusive owners of the patents we in-licensed. If other third parties have ownership rights or other rights to our in-licensed patents, they may be able to license such patents to our competitors, and our competitors could market competing products and technology. This could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and prospects.
If our efforts to protect the proprietary nature of the intellectual property related to our technologies and product candidates are not adequate, we may not be able to compete effectively in our market.
Biotechnology and pharmaceutical companies generally, and we in particular, compete in a crowded competitive space characterized by rapidly evolving technologies and aggressive development of intellectual property.
We rely upon a combination of patents, confidentiality agreements, trade secret protection and license agreements to protect the intellectual property related to our technologies and our product candidates. Any disclosure to or misappropriation by third parties of our confidential proprietary information could enable competitors to quickly duplicate or surpass our technological achievements and product candidates, thus eroding our competitive position in our market. We, or any future partners, collaborators, or licensees, may fail to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection on them. Therefore, we may miss potential opportunities to strengthen our patent position.
It is possible that defects of form in the preparation or filing of our patents or patent applications may exist, or may arise in the future, for example with respect to proper priority claims, inventorship, claim scope, or requests for patent term adjustments. If we or our partners, collaborators, licensees or licensors fail to establish, maintain or protect such patents and other intellectual property rights, such rights may be reduced or eliminated. If our partners, collaborators, licensees or licensors are not fully cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised. If there are material defects in the form, preparation, prosecution, or
70
enforcement of our patents or patent applications, such patents may be invalid and/or unenforceable, and such applications may never result in valid, enforceable patents. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business.
The strength of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can be uncertain. We cannot be certain that the claims in any of our issued patents will be considered valid by courts in the United States or foreign countries. Third parties may challenge the validity, enforceability or scope thereof. No assurance can be given that if challenged, our patents would be declared by a court to be valid or enforceable or that even if found valid and enforceable, a competitor’s technology or product would be found by a court to infringe our patents. Various post-grant review proceedings, such as inter partes review, post-grant review and derivation proceedings, are available and may be pursued by any interested third party in the USPTO to challenge the patentability of claims issued in patents to us or our licensors. No assurance can be given as to the outcome of any such post-grant review proceedings. If the breadth or strength of protection provided by the patents and patent applications we hold with respect to our product candidates or technology is threatened, it could dissuade companies from collaborating with us to develop, and threaten our ability to commercialize, our product candidates. Further, if we encounter delays in our clinical trials, the period of time during which we could market our product candidates under patent protection would be reduced.
We may analyze patents or patent applications of our competitors that we believe are relevant to our activities, and consider that we are free to operate in relation to our product candidates, but our competitors may achieve issued claims, including in patents we consider to be unrelated, which block our efforts or may potentially result in our product candidates or our activities infringing such claims. On the other hand, the possibility exists that others will develop products which have the same effect as our products on an independent basis which do not infringe our patents or other intellectual property rights, or will design around the claims of patents that we have had issued that cover our products.
Recent or future patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. For example, the AIA implemented in March 2013, moved the United States from a “first to invent” to a “first-to-file” system. Under a “first-to-file” system, assuming the other requirements for patentability are met, the first inventor to file a patent application generally will be entitled to a patent on the invention regardless of whether another inventor had made the invention earlier. The AIA includes a number of other significant changes to U.S. patent law, including provisions that affect the way patent applications are prosecuted, redefine prior art and establish a USPTO-administered post-grant review system that has affected patent litigation. The AIA and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition.
The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage. For example:
| ● | others may be able to make or use polypeptides or nucleic acids that are similar to our product candidates or components of our product candidates but that are not covered by the claims of our patents; |
| ● | the active biological ingredients in our current product candidates will eventually become commercially available in biosimilar drug products, and no patent protection may be available with regard to formulation or method of use; |
| ● | we or our licensors, as the case may be, may fail to meet our obligations to the U.S. government in regard to any patents and patent applications funded by U.S. government grants, leading to the loss of patent rights; |
| ● | we or our licensors, as the case may be, might not have been the first to file patent applications for these inventions; |
| ● | others may independently develop similar or alternative technologies or duplicate any of our technologies; |
71
| ● | it is possible that our pending patent applications will not result in issued patents; |
| ● | it is possible that there are prior public disclosures that could invalidate our or our licensors’ patents, as the case may be, or parts of our or their patents; |
| ● | it is possible that others may circumvent our owned or in-licensed patents; |
| ● | it is possible that there are unpublished applications or patent applications maintained in secrecy that may later issue with claims covering our products or technology similar to ours; |
| ● | the laws of foreign countries may not protect our or our licensors’, as the case may be, proprietary rights to the same extent as the laws of the United States; |
| ● | the claims of our owned or in-licensed issued patents or patent applications, if and when issued, may not cover our product candidates or technology; |
| ● | our owned or in-licensed issued patents may not provide us with any competitive advantages, may be narrowed in scope, or be held invalid or unenforceable as a result of legal challenges by third parties; |
| ● | the inventors of our owned or in-licensed patents or patent applications may become involved with competitors, develop products or processes which design around our patents, or become hostile to us or the patents or patent applications on which they are named as inventors; |
| ● | it is possible that our owned or in-licensed patents or patent applications omit individual(s) that should be listed as inventor(s) or include individual(s) that should not be listed as inventor(s), which may cause these patents or patents issuing from these patent applications to be held invalid or unenforceable; |
| ● | we have engaged in scientific collaborations in the past and will continue to do so in the future, and such collaborators may develop adjacent or competing products to ours that are outside the scope of our patents; |
| ● | we may not develop additional proprietary technologies for which we can obtain patent protection; |
| ● | it is possible that product candidates or technology we develop may be covered by third parties’ patents or other exclusive rights; or |
| ● | the patents of others may have an adverse effect on our business. |
Our proprietary position depends upon patents that are manufacturing, formulation or method-of-use patents, which may not prevent a competitor or other third party from designing around or using the same product candidate for another use.
Composition of matter patents for biological and pharmaceutical products are generally considered to be the strongest form of intellectual property protection for those types of products, as such patents provide protection without regard to any method of making or method of use. We cannot be certain, however, that the claims in our pending patent applications, including those claims covering the composition of matter of our product candidates, will be considered patentable by the USPTO or by patent offices in foreign countries, or that the claims in any of our patents that have issued or may issue will be considered valid and enforceable by courts in the United States or foreign countries. Furthermore, in some cases, we may not be able to obtain issued claims covering compositions of matter relating to our product candidates, and instead may need to rely on secondary intellectual property, including patents or patent applications with claims covering formulations, methods of use and/or methods of manufacture. Method of use patents protect a specified method of using a product, such as a method of treating a particular medical indication. This type of patent may only be enforced against a competitor through indirect infringement, i.e., inducement or contributory infringement, which is more difficult to prove than direct infringement. A competitor may be able to circumvent this type of patent by skinny labelling. Furthermore,
72
this type of patent does not prevent a competitor from making and marketing a product that is identical to our product for an indication that is outside the scope of the patented method. Moreover, even if competitors do not actively promote their products for our targeted indications, physicians may prescribe these products “off-label” for those uses that are covered by our method of use patents. Although off-label prescriptions may infringe or contribute to the infringement of method of use patents, the practice is common and such infringement is difficult to prevent by enforcing patent rights or otherwise.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition to the protection afforded by patents, we seek to rely on trade secret protection, confidentiality agreements, and license and other agreements to protect proprietary know-how that is not patentable, processes for which patents are difficult to enforce and any other elements of our product discovery and development processes that involve proprietary know-how, information, or technology that is not covered by patents. For example, significant elements of our product candidates, including aspects of sample preparation, methods of manufacturing, cell culturing conditions and related processes are based on unpatented trade secrets that are not publicly disclosed. It is our policy to require our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors to execute confidentiality agreements upon the commencement of employment or consulting relationships with us. These agreements provide that all confidential information concerning our business or financial affairs developed or made known to the individual or entity during the course of the party’s relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances. In the case of employees, the agreements provide that all inventions conceived by the individual, and which are related to our current or planned business or research and development or made during normal working hours, on our premises or using our equipment or proprietary information, are our exclusive property. In addition, we take other appropriate precautions, such as physical and technological security measures, to guard against misappropriation of our proprietary technology by third parties. We have also adopted policies and conduct training that provides guidance on our expectations, and our advice for best practices, in protecting our trade secrets. However, we cannot provide assurance that these agreements and policies will not be breached by our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors and that our trade secrets and other proprietary and confidential information will not be disclosed to publicly or to competitors. We cannot be certain that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques.
Furthermore, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. As a result, we may encounter significant problems in protecting and defending our trade secrets and other confidential proprietary know-how, information, or technology both in the United States and abroad. If we are unable to prevent unauthorized material disclosure of our trade secrets and other confidential information to third parties, we will not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, operating results and financial condition.
If we choose to go to court to stop a third party from using any of our trade secrets, we may incur substantial costs. These lawsuits may consume our time and other resources even if we are successful.
Third-party claims of intellectual property infringement or violations may prevent or delay our discovery and development efforts.
Our commercial success depends in part on our avoiding infringement of the patents and violation of other proprietary rights of third parties. There is a substantial amount of litigation involving patents and other intellectual property rights in the biotechnology and pharmaceutical industries, as well as administrative proceedings for challenging patents, including interference, reexamination, and post-grant review proceedings before the USPTO or oppositions and other comparable proceedings in foreign jurisdictions. We may be exposed to, or threatened with, future litigation or other adversarial proceedings by third parties having patent or other intellectual property rights alleging that our product candidates and/or proprietary technologies infringe their intellectual property rights. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing our product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may give rise to claims of infringement of the patent rights of others. Moreover, it is not always clear to industry participants, including us, which patents may ultimately issue because many patent filings cover various types of drugs,
73
products or their methods of use or manufacture. Thus, because of the large number of patents issued and patent applications filed in our fields, there may be a risk that third parties may allege they have patent rights encompassing our product candidates, technologies or methods.
If a third party claims that we infringe its intellectual property rights, we may face a number of issues, including, but not limited to:
| ● | infringement and other intellectual property claims, which, regardless of merit, may be expensive and time-consuming to litigate and may divert our management’s attention from our core business; |
| ● | substantial damages for infringement, which we may have to pay if a court decides that the product candidate or technology at issue infringes on or violates the third party’s rights, and, if the court finds that the infringement was willful, we could be ordered to pay treble damages and the patent owner’s attorneys’ fees; |
| ● | a court prohibiting us from developing, manufacturing, marketing or selling our product candidates, or from using our proprietary technologies, unless the third party licenses its product rights to us, which it is not required to do; |
| ● | if a license is available from a third party, we may have to pay substantial royalties, upfront fees and other amounts and/or grant cross-licenses to intellectual property rights for our products; and |
| ● | redesigning our product candidates or processes so they do not infringe third-party intellectual property rights, which may not be possible or may require substantial monetary expenditures and time. |
Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise the funds necessary to continue our operations or could otherwise have a material adverse effect on our business, results of operations, financial condition and prospects.
Third parties may assert that we are employing their proprietary technology without authorization. Generally, conducting preclinical and clinical trials and other development activities in the United States is not considered an act of infringement. If any of our product candidates is approved by the FDA, a third party may then seek to enforce its patent by filing a patent infringement lawsuit against us. While we do not believe that any claims that could otherwise have a materially adverse effect on the commercialization of our product candidates are valid and enforceable, we may be incorrect in this belief, or we may not be able to prove it in litigation. In this regard, patents issued in the United States by law enjoy a presumption of validity that can be rebutted only with evidence that is “clear and convincing,” a heightened standard of proof. There may be issued third-party patents of which we are currently unaware with claims to compositions, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. Patent applications can take many years to issue.
We cannot guarantee that any of our patent searches or analyses, including the identification of relevant patents or patent applications, the scope of pending or issued patent claims, or the expiration of relevant patents are complete, nor can we be certain that we have identified each and every third-party patent and pending application in the United States and abroad that is relevant to or necessary to commercialization of our product candidates in any jurisdiction. There may be currently pending patent applications which may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. Moreover, we may fail to identify relevant third-party patents or incorrectly interpret the relevance, scope, or expiration of a third-party patent or incorrectly conclude that a patent is invalid, not enforceable, exhausted, or not infringed by our activities. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of our product candidates, constructs or molecules used in or formed during the manufacturing process, or any final product itself, the holders of any such patents may be able to block our ability to commercialize the product candidate unless we obtained a license under the applicable patents, or until such patents expire or they are finally determined to be held invalid or unenforceable. Similarly, if any third-party patent were held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, including combination therapy or patient selection methods, the holders of any such patent may be able to block our ability to develop and commercialize the product candidate unless
74
we obtained a license or until such patent expires or is finally determined to be held invalid or unenforceable. In either case, such a license may not be available on commercially reasonable terms or at all. If we are unable to obtain a necessary license to a third-party patent on commercially reasonable terms, or at all, our ability to commercialize our product candidates may be impaired or delayed, which could in turn significantly harm our business. Even if we obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.
Parties making claims against us may seek and obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize our product candidates. Defense of these claims, regardless of their merit, could involve substantial litigation expense and would be a substantial diversion of resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign our infringing products, which may be impossible or require substantial time and monetary expenditure. We cannot predict whether any such license would be available on commercially reasonable terms or at all. Furthermore, even in the absence of litigation, we may need or may choose to obtain licenses from third parties to advance our research or allow commercialization of our product candidates. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further develop and commercialize our product candidates, which could harm our business significantly.
We may not be successful in obtaining or maintaining necessary rights to product components and processes for our development pipeline through acquisitions and in-licenses.
Currently, we have certain intellectual property rights under patents and patent applications that we own or have rights to under our inbound license agreements related to our product candidates. Our development of additional product candidates may require the use of proprietary rights held by third parties, and the growth of our business will likely depend in part on our ability to acquire, in-license or use these proprietary rights.
Our product candidates may also require specific formulations to work effectively and efficiently, and rights to such formulation technology may be held by others. Similarly, efficient production or delivery of our product candidates may also require specific compositions or methods, and the rights to these may be owned by third parties. Moreover, the specific components, such as linkers and antibody fragments, that will be used with our product candidates may be covered by the intellectual property rights of others. We may be unable to acquire or in-license any compositions, methods of use, formulations, processes or other third-party intellectual property rights from third parties that we identify as necessary or important to our business operations. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all, which would harm our business. We may need to cease use of the compositions or methods covered by such third-party intellectual property rights and may need to seek to develop alternative approaches that do not infringe on such intellectual property rights which may entail additional costs and development delays, even if we were able to develop such alternatives, which may not be feasible. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. In that event, we may be required to expend significant time and resources to develop or license replacement technology.
Additionally, we may collaborate with or sponsor research at academic institutions to accelerate our preclinical research or development under written agreements with these institutions. In certain cases, these institutions may provide us with an option to negotiate a license to any of the institution’s rights in technology resulting from the collaboration or sponsorship. Regardless of such option, we may be unable to negotiate a license within the specified timeframe or under terms that are acceptable to us. If we are unable to do so, the institution may offer the intellectual property rights to others, potentially blocking our ability to pursue our program. If we are unable to successfully obtain rights to required third-party intellectual property or to maintain the existing intellectual property rights we have, we may have to abandon development of such program and our business and financial condition could suffer.
The licensing and acquisition of third-party intellectual property rights is a competitive area, and companies, which may be more established, or have greater resources than we do, may also be pursuing strategies to license or acquire third-party intellectual property rights that we may consider necessary or attractive in order to commercialize our product candidates.
75
More established companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities.
We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time-consuming and unsuccessful.
Competitors may infringe our patents or the patents of our licensors. To counter infringement or unauthorized use, we may be required to file lawsuits with infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that one or more of our patents is not valid or is unenforceable or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated, held unenforceable, or interpreted narrowly and could put our patent applications at risk of not issuing. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign our infringing products, which may be impossible or require substantial time and monetary expenditure.
Third parties may initiate post-grant proceedings and the Patent Trial and Appeal Board of the USPTO may institute such proceedings to determine the validity or priority of inventions with respect to our patents or patent applications or those of our licensors. An unfavorable outcome could result in a loss of our current patent rights and 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, or at all. Litigation or post-grant proceedings may result in a decision adverse to our interests and, even if we are successful, may result in substantial costs and distract our management and other employees. We may not be able to prevent, alone or with our licensors, infringement of our patents or misappropriation of our trade secrets or confidential information, particularly in countries where the laws may not protect those rights as fully as in the United States.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.
We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.
We generally enter into confidentiality and intellectual property assignment agreements with our employees, consultants, and contractors. These agreements generally provide that inventions conceived by the party in the course of rendering services to us will be our exclusive property. However, those agreements may not be honored and may not effectively assign intellectual property rights to us. Moreover, there may be some circumstances, where we are unable to negotiate for such ownership rights. Disputes regarding ownership or inventorship of intellectual property can also arise in other contexts, such as collaborations and sponsored research. If we are subject to a dispute challenging our rights in or to patents or other intellectual property, such a dispute could be expensive and time consuming. If we were unsuccessful, we could lose valuable rights in intellectual property that we regard as our own.
We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed confidential information of our competitors or are in breach of non-competition or non-solicitation agreements with our competitors.
Many of our employees, consultants and advisers were previously employed at other pharmaceutical companies, including our competitors or potential competitors, in some cases until recently. Some of these employees, consultants, advisers, and members of management executed proprietary rights, non-disclosure and non-competition agreements in connection with such previous employment. Although we take steps to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants, advisers,
76
and members of management have inadvertently or otherwise used or disclosed trade secrets or other confidential information of these former employers or competitors. In addition, we may in the future be subject to claims that we caused an employee to breach the terms of his or her non-competition or non-solicitation agreement. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against these claims, litigation could result in substantial costs and could be a distraction to management. If our defense to those claims fails, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Any litigation or the threat thereof may adversely affect our ability to hire employees. A loss of key personnel or their work product could hamper or prevent our ability to commercialize product candidates, which could have an adverse effect on our business, results of operations and financial condition.
In the future, we may in-license intellectual property that may have been discovered through government funded programs and thus may be subject to federal regulations 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.
Any of the intellectual property rights that we have licensed or may license in the future and that have been generated through the use of U.S. government funding are subject to certain federal regulations. As a result, the U.S. government may have certain rights to intellectual property embodied in our product candidates pursuant to the Bayh-Dole Act of 1980, or the Bayh-Dole Act. These U.S. government rights in certain inventions developed under a government-funded program include a non-exclusive, non-transferable, irrevocable worldwide license to use inventions for any governmental purpose, generally referred to as “march-in rights.” To our knowledge, none of our current product candidates are subject to march-in rights. However, intellectual property rights that we license in the future could be subject to such limitations. The U.S. government also has the right to take title to such intellectual property rights if we, or the applicable licensor, fail to disclose the invention to the government and fail 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 or the applicable licensor to expend substantial resources. We cannot be certain that our current or future licensors will comply with the disclosure or reporting requirements of the Bayh-Dole Act at all times or be able to rectify any lapse in compliance with these requirements.
In addition, the U.S. government requires that any products embodying the subject invention or produced using the subject invention be manufactured substantially in the United States. The manufacturing preference requirement can be waived if the owner 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. manufacturers may limit our ability to contract with non-U.S. product manufacturers for products covered by such intellectual property. To the extent any of our current or future intellectual property is generated through the use of U.S. government funding, the provisions of the Bayh-Dole Act may similarly apply.
If we do not obtain patent term extension for any of our current or future product candidates, our business may be materially harmed.
Depending upon the timing, duration and specifics of any FDA marketing approval of any of our current or future product candidates, one or more of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act. The Hatch-Waxman Act permits a patent extension term of up to five years as compensation for 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, only one patent may be extended for each marketing approval and only those claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended. However, we may not be granted an extension because of, for example, failing to exercise due diligence during the testing phase or regulatory review process, 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 term of any such extension is less than we request, our competitors may obtain approval of competing products following our patent expiration, and our business, financial condition, results of operations, and prospects could be materially harmed.
77
If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our marks of interest and our business may be adversely affected.
Our trademarks or trade names may be challenged, infringed, circumvented, declared generic or determined to be infringing on other marks. We rely on both registration and common law protection for our trademarks. We may not be able to protect our rights to these trademarks and trade names or may be forced to stop using these names, which we need for name recognition by potential partners or customers in our markets of interest. During the trademark registration process, we may receive Office Actions from the USPTO objecting to the registration of our trademark. Although we would be given an opportunity to respond to those objections, we may be unable to overcome such rejections. In addition, in the USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and/or to seek the cancellation of registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive such proceedings. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively and our business may be adversely affected.
Numerous factors may limit any potential competitive advantage provided by our intellectual property rights.
The degree of future protection afforded by our intellectual property rights, whether owned or in-licensed, is uncertain because intellectual property rights have limitations, and may not adequately protect our business, provide a barrier to entry against our competitors or potential competitors, or permit us to maintain our competitive advantage. Moreover, if a third party has intellectual property rights that cover the practice of our technology, we may not be able to fully exercise or extract value from our intellectual property rights. The factors that may limit any potential competitive advantage provided by our intellectual property rights include:
| ● | pending patent applications that we own or license may not lead to issued patents; |
| ● | patents, should they issue, that we own or license, may not provide us with any competitive advantages, or may be challenged and held invalid or unenforceable; |
| ● | others may be able to develop and/or practice technology that is similar to our technology or aspects of our technology but that is not covered by the claims of any of our owned or in-licensed patents, should any such patents issue; |
| ● | third parties may compete with us in jurisdictions where we do not pursue and obtain patent protection; |
| ● | we (or our licensors) might not have been the first to make the inventions covered by a pending patent application that we own or license; |
| ● | we (or our licensors) might not have been the first to file patent applications covering a particular invention; |
| ● | others may independently develop similar or alternative technologies without infringing our intellectual property rights; |
| ● | we may not be able to obtain and/or maintain necessary licenses on reasonable terms or at all; |
| ● | third parties may assert an ownership interest in our intellectual property and, if successful, such disputes may preclude us from exercising exclusive rights, or any rights at all, over that intellectual property; |
| ● | we may not be able to maintain the confidentiality of our trade secrets or other proprietary information; |
| ● | we may not develop or in-license additional proprietary technologies that are patentable; and |
| ● | the patents of others may have an adverse effect on our business. |
78
Should any of these events occur, they could significantly harm our business and results of operation.
Risks Related to Regulatory Approval and Other Legal Compliance Matters
Even if we complete the necessary preclinical studies and clinical trials, the regulatory approval process is expensive, time consuming and uncertain and may prevent us from obtaining approvals for the commercialization of some or all of our product candidates. As a result, we cannot predict when or if, and in which territories, we will obtain marketing approval to commercialize a product candidate.
The research, testing, manufacturing, labeling, approval, selling, marketing, promotion and distribution of drug and biologic products are subject to extensive regulation by the FDA and comparable foreign regulatory authorities. We are not permitted to market our product candidates in the United States or in other countries until we receive approval of a BLA from the FDA or marketing approval from applicable regulatory authorities outside the United States. Our product candidates are in various stages of development and are subject to the risks of failure inherent in development. We have not submitted an application for or received marketing approval for any of our product candidates in the United States or in any other jurisdiction. We have no experience as a company in filing and supporting the applications necessary to gain marketing approvals and expect to rely on third-party CROs to assist us in this process.
The process of obtaining marketing approvals, both in the United States and abroad, is lengthy, expensive and uncertain. It may take many years, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved. Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information, including manufacturing information, to regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy. The FDA or other regulatory authorities may determine that our product candidates are not safe and effective, 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.
Further, the FDA may determine that we must provide additional evidence and data before approving a BLA for our product candidates. For example, the FDA reviews an application to determine whether there is “substantial evidence” to support a finding of effectiveness for the proposed product for its intended use(s). The FDA has interpreted this evidentiary standard to generally require at least two adequate and well-controlled clinical trials to establish effectiveness of a new product. Under certain circumstances, however, the FDA has indicated that a single trial with certain characteristics and additional confirmatory evidence may satisfy this standard. The FDA issued draft guidance in September 2023 that outlines considerations for relying on confirmatory evidence in lieu of a second clinical trial to demonstrate effectiveness. In the event that we submit a BLA on the basis of one clinical trial and confirmatory evidence, the FDA could determine that such information is not sufficient to support approval of the application and the agency could require us to conduct an additional trial in support of the BLA.
Further, under the Pediatric Research Equity Act, or PREA, a BLA or supplement to a BLA for certain biological products must contain data to assess the safety and effectiveness of the biological product in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective, unless the sponsor receives a deferral or waiver from the FDA. A deferral may be granted for several reasons, including a finding that the product or therapeutic candidate is ready for approval for use in adults before pediatric trials are complete or that additional safety or effectiveness data needs to be collected before the pediatric trials begin. The applicable legislation in the EU also requires sponsors to either conduct clinical trials in a pediatric population in accordance with a Pediatric Investigation Plan approved by the Pediatric Committee of the EMA or to obtain a waiver or deferral from the conduct of these studies by this Committee. For any of our product candidates for which we are seeking regulatory approval in the United States or the EU, we cannot guarantee that we will be able to obtain a waiver or alternatively complete any required studies and other requirements in a timely manner, or at all, which could result in associated reputational harm and subject us to enforcement action.
In addition, changes in marketing approval policies during the development period, changes in or the enactment or promulgation of additional statutes, regulations or guidance or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application. Regulatory authorities have substantial
79
discretion in the approval process and varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate. Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.
Moreover, we may be required to report some of these relationships to the FDA or comparable foreign regulatory authorities. The FDA, or a 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.
For example, in December 2022, with the passage of Food and Drug Omnibus Reform Act, or FDORA, Congress required sponsors to develop and submit a diversity action plan for each Phase 3 clinical trial or any other “pivotal study” of a new drug or biological product. These plans are meant to encourage the enrollment of more diverse patient populations in late-stage clinical trials of FDA-regulated products. In June 2024, as mandated by FDORA, the FDA issued draft guidance outlining the general requirements for diversity action plans, or DAPs. Unlike most guidance documents issued by the FDA, the DAP guidance, when finalized, will have the force of law, because FDORA specifically dictates that the form and manner for submission of DAPs are specified in FDA guidance.
Further, in January 2022, the new Clinical Trials Regulation (EU) No 536/2014 became effective in the EU and replaced the prior Clinical Trials Directive 2001/20/EC. This regulation aims at simplifying and streamlining the authorization, conduct and transparency of clinical trials in the EU. Under the coordinated procedure for the approval of clinical trials, the sponsor of a clinical trial to be conducted in more than one EU Member State will only be required to submit a single application for approval. The submission will be made through the Clinical Trials Information System, a clinical trials portal overseen by the EMA and available to clinical trial sponsors, competent authorities of the EU Member States and the public.
Accordingly, any delay in obtaining or failure to obtain required approvals could negatively affect our ability or that of any future collaborators to generate revenue from the particular product candidate, which likely would result in significant harm to our financial position and adversely impact our stock price.
Disruptions at the FDA and other government agencies from funding cuts, personnel losses, regulatory reform, government shutdowns or other developments could hinder their ability to provide guidance or otherwise prevent new products and services from being developed or commercialized in a timely manner, which could negatively impact our business.
The FDA plays an important role in the development of our product candidates by providing guidance on our clinical and preclinical development programs and reviewing our regulatory submissions. If these oversight and review activities are disrupted, then correspondingly our ability to develop and secure timely approval of our product candidates could be impacted in a negative manner. For example, the loss of FDA leadership and personnel could lead to disruptions and delays in FDA guidance, review, and approval of our product candidates. While the FDA’s review of marketing applications and other activities for new drugs and biologics is largely funded through the user fee program established under the Prescription Drug User Fee Act, it remains unclear how the reduction in force and budget cuts will impact this program and the ability of the FDA to provide guidance and review our product candidates in a timely manner. There is also substantial uncertainty as to how regulatory reform measures being implemented by the new presidential administration across the government will impact the FDA and other federal agencies with jurisdiction over our activities. In addition, government funding of the SEC and other government agencies on which our operations may rely is subject to the political process, which is inherently fluid and unpredictable.
For example, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC, and other government employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review
80
and process our regulatory submissions and the ability of the SEC to timely review our public filings, to the extent such review is necessary, and our ability to access the public markets.
At the same time, disruptions at the FDA and other government agencies may result from public health events similar to the COVID-19 pandemic. During the pandemic, a number of companies announced receipt of complete response letters due to the FDA’s inability to complete required inspections for their applications. In the event of a similar public health emergency in the future, the FDA may not be able to continue its current pace and review timelines could be extended. Regulatory authorities outside the United States facing similar circumstances may adopt similar restrictions or other policy measures in response to a similar public health emergency and may also experience delays in their regulatory activities.
Accordingly, if any of the foregoing developments and others impact the ability of the FDA to provide us with guidance regarding our clinical development programs or delay the FDA’s review and processing of our regulatory submissions, including INDs or BLAs, our business would be negatively impacted. Further, any future government shutdown could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.
Failure to obtain marketing approval in foreign jurisdictions would prevent our product candidates from being marketed abroad. Any approval we may be granted for our product candidates in the United States would not assure approval of our product candidates in foreign jurisdictions and any of our product candidates that may be approved for marketing in a foreign jurisdiction will be subject to risks associated with foreign operations.
In order to market and sell our products in the EU and other foreign jurisdictions, we must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval may differ substantially from that required to obtain FDA approval. The marketing approval process outside the United States generally includes all of the risks associated with obtaining FDA approval. We may not obtain approvals from regulatory authorities outside the United States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. We may file for marketing approvals but not receive necessary approvals to commercialize our products in any market.
In many countries outside the United States, a product candidate must also be approved for reimbursement before it can be sold in that country. In some cases, the price that we intend to charge for our products, if approved, is also subject to approval. Obtaining non-U.S. regulatory approvals and compliance with non-U.S. regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our product candidates in certain countries. In addition, if we fail to obtain the non-U.S. approvals required to market our product candidates outside the United States or if we fail to comply with applicable non-U.S. regulatory requirements, our target markets will be reduced and our ability to realize the full market potential of our product candidates will be harmed and our business, financial condition, results of operations and prospects may be adversely affected.
Additionally, we could face heightened risks with respect to obtaining marketing authorization in the United Kingdom, or the U.K., as a result of the withdrawal of the U.K. from the EU, commonly referred to as Brexit. The U.K. is no longer part of the European Single Market and EU Customs Union.
As of January 1, 2025, the Medicines and Healthcare Products Regulatory Agency, or MHRA, is responsible for approving all medicinal products destined for the U.K. market (i.e., Great Britain and Northern Ireland). At the same time, a new international recognition procedure, or IRP, will apply, which intends to facilitate approval of pharmaceutical products in the U.K. The IRP is open to applicants that have already received an authorization for the same product from one of the MHRA’s specified Reference Regulators. The Reference Regulators notably include EMA and regulators in the EU/European Economic Area, or EEA, member states for approvals in the EU centralized procedure and mutual recognition procedure as well as the FDA for product approvals granted in the United States. However, the concrete functioning of the IRP is currently unclear. Any delay in obtaining, or an inability to obtain, any marketing approvals may force us or our collaborators to restrict or delay efforts to seek regulatory approval in the U.K. for our product candidates, which could significantly and materially harm our business.
81
In addition, foreign regulatory authorities may change their approval policies and new regulations may be enacted. For instance, the EU pharmaceutical legislation is currently undergoing a complete review process, in the context of the Pharmaceutical Strategy for Europe initiative, launched by the European Commission in November 2020. The European Commission’s proposal for revision of several legislative instruments related to medicinal products (potentially reducing the duration of regulatory data protection, revising the eligibility for expedited pathways, etc.) was published on April 26, 2023. The proposed revisions remain to be agreed and adopted by the European Parliament and European Council and the proposals may therefore be substantially revised before adoption, which is not anticipated before early 2026. The revisions may however have a significant impact on the pharmaceutical industry and our business in the long term.
Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of Brexit or otherwise, may force us to restrict or delay efforts to seek regulatory approval in the United Kingdom for our product candidates, which could significantly and materially harm our business. We expect that we will be subject to additional risks in commercializing any of our product candidates that receive marketing approval outside the United States, including tariffs, trade barriers and regulatory requirements; economic weakness, including inflation, or political instability in particular foreign economies and markets; compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country; and workforce uncertainty in countries where labor unrest is more common than in the United States.
We may not be able to obtain orphan drug designation or orphan drug exclusivity for our product candidates and, even if we do, that exclusivity may not prevent the FDA or the EMA 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. Generally, a product with orphan drug designation only becomes entitled to orphan drug exclusivity if it receives the first marketing approval for the indication for which it has such designation, in which case the FDA or the EMA will be precluded from approving another marketing application for the same product for that indication for the applicable exclusivity period. The applicable exclusivity period is seven years in the United States and ten years in the EU. The European exclusivity period can be reduced to six years if a product no longer meets the criteria for orphan drug designation or if the product is sufficiently profitable so that market exclusivity is no longer justified.
We may seek orphan drug designations for our product candidates and may be unable to obtain such designations. Even if we do secure such designations and orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different products can be approved for the same condition. Further, the FDA can subsequently approve the same drug for the same condition if the FDA concludes that the later product is clinically superior in that it is shown to be safer, to be more effective or to make a major contribution to patient care. Finally, orphan drug exclusivity may be lost if the FDA or the EMA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the product to meet the needs of patients with the rare disease or condition.
The FDA may further reevaluate the Orphan Drug Act and its regulations and policies. This may be particularly true in light of a decision from the Court of Appeals for the 11th Circuit in September 2021 finding that, for the purpose of determining the scope of exclusivity, the term “same disease or condition” means the designated “rare disease or condition” and could not be interpreted by the FDA to mean the “indication or use.” Thus, the court concluded, orphan drug exclusivity applies to the entire designated disease or condition rather than the “indication or use.” Although there have been legislative proposals to overrule this decision, they have not been enacted into law. On January 23, 2023, the FDA announced that, in matters beyond the scope of that court order, the FDA will continue to apply its existing regulations tying orphan-drug exclusivity to the uses or indications for which the orphan drug was approved. We do not know if, when, or how the FDA may change the orphan drug regulations and policies in the future, and it is uncertain how any changes might affect our business. Depending on what changes the FDA may make to its orphan drug regulations and policies, our business could be adversely impacted.
82
Any product candidate for which we obtain marketing approval is subject to ongoing regulation and could be subject to restrictions or withdrawal from the market, and we may be subject to substantial penalties if we fail to comply with regulatory requirements, when and if any of our product candidates are approved.
Any product candidate for which we obtain marketing approval will be subject to continual requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, registration and listing requirements, cGMP requirements relating to quality control and manufacturing, quality assurance and corresponding maintenance of records and documents, and requirements regarding the distribution of samples to physicians and recordkeeping. In addition, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to the conditions of approval or contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the medicine, including the requirement to implement a risk evaluation and mitigation strategy. Accordingly, if we receive marketing approval for one or more of our product candidates, we will continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production, product surveillance and quality control. If we fail to comply with these requirements, we could have the marketing approvals for our products withdrawn by regulatory authorities and our ability to market any products could be limited, which could adversely affect our ability to achieve or sustain profitability.
Failure to comply with regulatory requirements, may yield various results, including:
| ● | restrictions on such products, manufacturers or manufacturing processes; |
| ● | restrictions on the labeling or marketing of a product; |
| ● | restrictions on distribution or use of a product; |
| ● | requirements to conduct post-marketing studies or clinical trials; |
| ● | warning letters or untitled letters; |
| ● | withdrawal of the products from the market; |
| ● | refusal to approve pending applications or supplements to approved applications that we submit; |
| ● | recall of products; |
| ● | damage to relationships with collaborators; |
| ● | unfavorable press coverage and damage to our reputation; |
| ● | fines, restitution or disgorgement of profits or revenues; |
| ● | suspension or withdrawal of marketing approvals; |
| ● | refusal to permit the import or export of our products; |
| ● | product seizure; |
| ● | injunctions or the imposition of civil or criminal penalties; and |
| ● | litigation involving patients using our products. |
83
Non-compliance with EU requirements regarding safety monitoring or pharmacovigilance, and with requirements related to the development of products for the pediatric population, can also result in significant financial penalties. Similarly, failure to comply with the EU’s requirements regarding the protection of personal information can also lead to significant penalties and sanctions. Further, the marketing and promotion of authorized drugs, including industry-sponsored continuing medical education and advertising directed toward the prescribers of drugs and/or the general public, are strictly regulated in the EU notably under Directive 2001/83EC, as amended, and are also subject to EU Member State laws. Direct-to-consumer advertising of prescription medicines is prohibited across the EU.
Accordingly, assuming we, or our collaborators, receive marketing approval for one or more of our product candidates, we, and our collaborators, and our and their contract manufacturers will continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production, product surveillance and quality control. If we, and our collaborators, are not able to comply with post-approval regulatory requirements, our or our collaborators’ ability to market any future products could be limited, which could adversely affect our ability to achieve or sustain profitability. Further, the cost of compliance with post-approval regulations may have a negative effect on our operating results and financial condition.
Any regulatory approval to market any of our products candidates for which we obtain approval will be limited by indication. If we fail to comply or are found to be in violation of FDA regulations restricting the promotion of any of our product candidates for unapproved uses, we could be subject to criminal penalties, substantial fines or other sanctions and damage awards.
The regulations relating to the promotion of products for unapproved uses are complex and subject to substantial interpretation by the FDA, EMA, MHRA and other government agencies. In September 2021, the FDA published final regulations which describe the types of evidence that the agency will consider in determining the intended use of a drug product. Physicians may nevertheless prescribe products off-label to their patients in a manner that is inconsistent with the approved label. Prior to the approval of any of our product candidates, we intend to implement compliance and training programs designed to ensure that any future sales and marketing practices comply with applicable regulations. Notwithstanding these programs, the FDA or other government agencies may allege or find that our practices constitute prohibited promotion of our products for unapproved uses. We also cannot be sure that our employees will comply with company policies and applicable regulations regarding the promotion of products for unapproved uses.
Notwithstanding the regulatory restrictions on off-label promotion, the FDA and other regulatory authorities allow companies to engage in truthful, non-misleading, and non-promotional scientific communications concerning their products in certain circumstances. For example, in January 2025, the FDA published final guidance outlining its policies governing the distribution of scientific information to healthcare providers about unapproved uses of approved products. The final guidance calls for such communications to be truthful, non-misleading, and scientifically sound and to include all information necessary for healthcare providers to interpret the strengths and weaknesses and validity and utility of the information about the unapproved use of the approved product. If a company engages in such communications consistent with the guidance’s recommendations, the FDA indicated that it will not treat such communications as evidence of unlawful promotion of a new intended use for the approved product. We will need to carefully navigate the FDA’s various regulations, guidance and policies, along with recently enacted legislation, to ensure compliance with restrictions governing promotion of our products.
In recent years, a significant number of pharmaceutical and biotechnology companies have been the target of inquiries and investigations by various federal and state regulatory, investigative, prosecutorial and administrative entities in connection with the promotion of products for unapproved uses and other sales practices, including the Department of Justice and various U.S. Attorneys’ Offices, the Office of Inspector General of the Department of Health and Human Services, the FDA, the Federal Trade Commission, or the FTC, and various state Attorneys General offices. These investigations have alleged violations of various federal and state laws and regulations, including claims asserting antitrust violations, violations of the FDCA, the False Claims Act, the Prescription Drug Marketing Act and anti-kickback laws and other alleged violations in connection with the promotion of products for unapproved uses, pricing and Medicare and/or Medicaid reimbursement. Many of these investigations originate as “qui tam” actions under the False Claims Act. Under the False Claims Act, any individual can bring a claim on behalf of the government alleging that a person or entity has presented a false claim or caused a false claim to be submitted to the government for payment. The person bringing a qui
84
tam suit is entitled to a share of any recovery or settlement. Qui tam suits, also commonly referred to as “whistleblower suits,” are often brought by current or former employees. In a qui tam suit, the government must decide whether to intervene and prosecute the case. If it declines, the individual may pursue the case alone.
If the FDA or any other governmental agency initiates an enforcement action against us or if we are the subject of a qui tam suit and it is determined that we violated prohibitions relating to the promotion of products for unapproved uses, we could be subject to substantial civil or criminal fines or damage awards and other sanctions such as consent decrees and corporate integrity agreements pursuant to which our activities would be subject to ongoing scrutiny and monitoring to ensure compliance with applicable laws and regulations. Any such fines, awards or other sanctions would have an adverse effect on our revenue, business, financial prospects and reputation.
We may seek certain designations for our product candidates, including Breakthrough Therapy, Fast Track and Priority Review designations in the United States and PRIME Designation in the EU, but we might not receive such designations, and even if we do, such designations may not lead to a faster development or regulatory review or approval process.
We may seek certain designations for one or more of our product candidates that could expedite review and approval by the FDA. A Breakthrough Therapy product is defined as a product that is intended, alone or in combination with one or more other products, to treat a serious condition, and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For products that have been designated as Breakthrough Therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens.
The FDA may also designate a product for Fast Track review if it is intended, whether alone or in combination with one or more other products, for the treatment of a serious or life-threatening disease or condition, and it demonstrates the potential to address unmet medical needs for such a disease or condition. For Fast Track products, sponsors may have greater interactions with the FDA and the FDA may initiate review of sections of a Fast Track product’s application before the application is complete. This rolling review may be available if the FDA determines, after preliminary evaluation of clinical data submitted by the sponsor, that a Fast Track product may be effective.
We may also seek a priority review designation for one or more of our product candidates. If the FDA determines that a product candidate is intended to treat a serious condition and, if approved, offers a significant improvement in safety or effectiveness, the FDA may designate the product candidate for priority review. Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment-limiting product reaction, documented enhancement of patient compliance that may lead to improvement in serious outcomes, and evidence of safety and effectiveness in a new subpopulation. A priority review designation means that the goal for the FDA to review an application is six months, rather than the standard review period of ten months.
These designations are within the discretion of the FDA. Accordingly, even if we believe that one of our product candidates meets the criteria for these designations, the FDA may disagree and instead determine not to make such designation. Further, even if we receive a designation, the receipt of such designation for a product candidate may not result in a faster development or regulatory review or approval process compared to products considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of our product candidates qualifies for these designations, the FDA may later decide that the product candidates no longer meet the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.
In the EU, we may seek PRIME designation for some of our product candidates in the future. PRIME is a voluntary program aimed at enhancing the EMA’s role to reinforce scientific and regulatory support in order to optimize development and enable accelerated assessment of new medicines that are of major public health interest with the potential to address unmet medical needs. The program focuses on medicines that target conditions for which there exists no satisfactory method of treatment in the EU or even if such a method exists, it may offer a major therapeutic advantage over existing treatments. PRIME is limited to medicines under development and not authorized in the EU and the applicant intends to
85
apply for an initial marketing authorization application through the centralized procedure. To be accepted for PRIME, a product candidate must meet the eligibility criteria in respect of its major public health interest and therapeutic innovation based on information that is capable of substantiating the claims. The benefits of a PRIME designation include the appointment of a CHMP rapporteur to provide continued support and help to build knowledge ahead of a marketing authorization application, early dialogue and scientific advice at key development milestones, and the potential to qualify products for accelerated review, meaning reduction in the review time for an opinion on approvability to be issued earlier in the application process. PRIME enables an applicant to request parallel EMA scientific advice and health technology assessment advice to facilitate timely market access. Even if we receive PRIME designation for any of our product candidates, the designation may not result in a materially faster development process, review or approval compared to conventional EMA procedures. Further, obtaining PRIME designation does not assure or increase the likelihood of EMA’s grant of a marketing authorization.
Accelerated approval by the FDA, even if granted for any of our current or future product candidates, may not lead to a faster development or regulatory review or approval process and it does not increase the likelihood that our product candidates will receive marketing approval.
We may seek approval of any of our current and future product candidates using the FDA’s accelerated approval pathway. A product may be eligible for accelerated approval if it treats a serious or life-threatening condition, generally provides a meaningful advantage over available therapies, and demonstrates an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit. The FDA or other applicable regulatory agency makes the determination regarding whether a surrogate endpoint is reasonably likely to predict long-term clinical benefit.
Prior to seeking such accelerated approval, we will seek feedback from the FDA and otherwise evaluate our ability to seek and receive such accelerated approval. As a condition of approval, the FDA requires that a sponsor of a product receiving accelerated approval perform an adequate and well-controlled post-marketing confirmatory clinical trial or trials. These confirmatory trials must be completed with due diligence and we may be required to evaluate different or additional endpoints in these post-marketing confirmatory trials. These confirmatory trials may require enrollment of more patients than we currently anticipate and will result in additional costs, which may be greater than the estimated costs we currently anticipate. In addition, the FDA currently requires as a condition for accelerated approval preapproval of promotional materials, which could adversely impact the timing of the commercial launch of the product.
There can be no assurance that the FDA will agree with any proposed surrogate endpoints or that we will decide to pursue or submit a BLA for accelerated approval or any other form of expedited development, review or approval for any of our current or future product candidates. Similarly, there can be no assurance that, after feedback from FDA, 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, there can be no assurance that such submission or application will be accepted or that any expedited review or approval will be granted on a timely basis, or at all.
The FDA may withdraw approval of a product candidate approved under the accelerated approval pathway if, for example, the trial required to verify the predicted clinical benefit of our product candidate fails to verify such benefit or does not demonstrate sufficient clinical benefit to justify the risks associated with the drug. The FDA may also withdraw approval if other evidence demonstrates that our product candidate is not shown to be safe or effective under the conditions of use, we fail to conduct any required post approval trial of our product candidate with due diligence or we disseminate false or misleading promotional materials relating to our product candidate. A failure to obtain accelerated approval or any other form of expedited development, review or approval for our product candidates, or withdrawal of a product candidate, would result in a longer time period for commercialization of such product candidate, could increase the cost of development of such product candidate and could harm our competitive position in the marketplace.
Further, there can be no assurance that we will satisfy all FDA requirements, including new provisions that govern accelerated approval. For example, with the passage of FDORA in December 2022, Congress modified certain provisions governing accelerated approval of drug and biologic products. Specifically, the new legislation authorized the FDA to require a sponsor to have its confirmatory clinical trial underway before accelerated approval is awarded and to submit progress reports on its post-approval studies to the FDA every six months until the study is completed. Moreover, FDORA
86
established expedited procedures authorizing FDA to withdraw an accelerated approval if certain conditions are met, including where a required confirmatory trial fails to verify and describe the product’s predicted clinical benefit or where evidence demonstrates the product is not shown to be safe or effective under the conditions of use. The FDA may also use such procedures to withdraw an accelerated approval if a sponsor fails to conduct any required post-approval study of the product with due diligence, including with respect to “conditions specified by the Secretary.” The new procedures include the provision of due notice and an explanation for a proposed withdrawal, and opportunities for a meeting with the FDA commissioner or the FDA commissioner’s designee and a written appeal, among other things. We will need to fully comply with these and other requirements in connection with the development and approval of any product candidate that qualifies for accelerated approval.
More recently, in March 2023, the FDA issued draft guidance that outlines its current thinking and approach to accelerated approval. The FDA indicated that the accelerated approval pathway is commonly used for approval of oncology drugs due to the serious and life-threatening nature of cancer. Although single-arm trials have been commonly used to support accelerated approval, a randomized controlled trial is the preferred approach as it provides a more robust efficacy and safety assessment and allows for direct comparisons to an available therapy. To that end, the FDA outlined considerations for designing, conducting, and analyzing data for trials intended to support accelerated approvals of oncology therapeutics. Subsequently, in December 2024 and January 2025, the FDA issued additional draft guidance relating to accelerated approval. The guidance describes the FDA’s views on what it means to conduct a confirmatory trial with due diligence and how the agency plans to interpret whether such a study needs to be underway at the time of approval. While the guidance is currently only in draft form and will ultimately not be legally binding even when finalized, sponsors typically observe the FDA’s guidance closely to ensure that their investigational products qualify for accelerated approval.
In the EU, a “conditional” marketing authorization may be granted in cases where all the required safety and efficacy data are not yet available. A conditional marketing authorization is subject to conditions to be fulfilled for generating missing data or ensuring increased safety measures. A conditional marketing authorization is valid for one year and has to be renewed annually until fulfillment of all relevant conditions. Once the applicable pending studies are provided, a conditional marketing authorization can become a “standard” marketing authorization. However, if the conditions are not fulfilled within the timeframe set by the EMA, the marketing authorization will cease to be renewed.
Current and future legislation may increase the difficulty and cost for us to obtain reimbursement for any of our candidate products that do receive marketing approval.
In the United States and foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any product candidates for which we obtain marketing approval. We expect that current laws, 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 may receive for any approved products. If reimbursement of our products is unavailable or limited in scope, our business could be materially harmed.
In March 2010, President Obama signed into law the ACA. In addition, other legislative changes have been proposed and adopted since the ACA was enacted. In August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. These changes included aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which went into effect in April 2013 and will remain in effect through 2031 under the CARES Act. The American Taxpayer Relief Act of 2012, 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 and otherwise affect the prices we may obtain for any of our product candidates for which we may obtain regulatory approval or the frequency with which any such product candidate is prescribed or used.
Since enactment of the ACA, there have been, and continue to be, numerous legal challenges and Congressional actions to repeal and replace provisions of the law. For example, with enactment of the Tax Act, which was signed by President
87
Trump on December 22, 2017, Congress repealed the “individual mandate.” The repeal of this provision, which requires most Americans to carry a minimal level of health insurance, became effective in 2019. Further, on June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA. Litigation and legislation over the ACA are likely to continue, with unpredictable and uncertain results.
During the first Trump presidential administration, Congress and administration sought to overturn the ACA and related measures. Shortly after taking office in January 2025, President Trump revoked numerous executive orders issued by President Biden, including at least two executive orders, E.O. 14009, Strengthening Medicaid and the Affordable Care Act, and E.O. 14070, Continuing to Strengthen Americans’ Access to Affordable, Quality Health Coverage, which were designed to further implement the ACA. We anticipate similar efforts to undermine the ACA, and the accompanying uncertainty, for the foreseeable future.
In the EU, on December 13, 2021, Regulation No 2021/2282 on Health Technology Assessment, or HTA, amending Directive 2011/24/EU, was adopted. While the Regulation entered into force in January 2022, it will only begin to apply from January 2025 onwards, with preparatory and implementation-related steps to take place in the interim. Once applicable, it will have a phased implementation depending on the concerned products. The Regulation intends to boost cooperation among EU member states in assessing health technologies, including new medicinal products as well as certain high-risk medical devices, and provide the basis for cooperation at the EU level for joint clinical assessments in these areas. It will permit EU member states to use common HTA tools, methodologies, and procedures across the EU, working together in four main areas, including joint clinical assessment of the innovative health technologies with the highest potential impact for patients, joint scientific consultations whereby developers can seek advice from HTA authorities, identification of emerging health technologies to identify promising technologies early, and continuing voluntary cooperation in other areas. Individual EU member states will continue to be responsible for assessing non-clinical (e.g., economic, social, ethical) aspects of health technology, and making decisions on pricing and reimbursement.
We expect that these healthcare reforms, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies and additional downward pressure on the price that we receive for any approved product and/or the level of reimbursement physicians receive for administering any approved product we might bring to market. Reductions in reimbursement levels may negatively impact the prices we receive or the frequency with which our products are prescribed or administered. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. Accordingly, such reforms, if enacted, could have an adverse effect on anticipated revenue from product candidates that we may successfully develop and for which we may obtain marketing approval and may affect our overall financial condition and ability to develop or commercialize product candidates.
Current and future legislative efforts may limit the prices for our products, if and when they are licensed for marketing, and that could materially impact our ability to generate revenues.
The prices of prescription pharmaceuticals have also been the subject of considerable discussion in the United States. There have been several U.S. congressional inquiries, as well as proposed and enacted state and federal legislation designed to, among other things, bring more transparency to pharmaceutical pricing, review the relationship between pricing and manufacturer patient programs, and reduce the costs of pharmaceuticals under Medicare and Medicaid.
In addition, in October 2020, HHS and the FDA published a final rule allowing states and other entities to develop a Section 804 Importation Program, or SIP, to import certain prescription drugs from Canada into the United States. That regulation was challenged in a lawsuit by the Pharmaceutical Research and Manufacturers of America, or PhRMA, but the case was dismissed by a federal district court in February 2023 after the court found that PhRMA did not have standing to sue HHS. Seven states (Colorado, Florida, Maine, New Hampshire, New Mexico, Texas and Vermont) have passed laws allowing for the importation of drugs from Canada. North Dakota and Virginia have passed legislation establishing working groups to examine the impact of a state importation program. As of May 2024, five states (Colorado, Florida, Maine, New Hampshire and New Mexico) had submitted Section 804 Importation Program proposals to the FDA, and on January 5, 2023, the FDA approved Florida’s plan for Canadian drug importation. Florida now has authority to import certain drugs from Canada for a period of two years once certain conditions are met, but it will first need to submit a pre-
88
import request for each drug selected for importation, which must be approved by the FDA. Florida will also need to relabel the drugs and perform quality testing of the products to meet FDA standards.
Further, on November 20, 2020, HHS finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The implementation of the rule has been delayed by the Biden administration until January 1, 2026 by the Infrastructure Investment and Jobs Act. The final rule would eliminate the current safe harbor for Medicare drug rebates and create new safe harbors for beneficiary point-of-sale discounts and pharmacy benefit manager service fees. It originally was set to go into effect on January 1, 2022, but with the passage of the Inflation Reduction Act of 2022, or the IRA, has been delayed by Congress to January 1, 2032.
On August 16, 2022, the IRA was signed into law by President Biden. The new legislation has implications for Medicare Part D, which is a program available to individuals who are entitled to Medicare Part A or enrolled in Medicare Part B, to give them the option of paying a monthly premium for outpatient prescription drug coverage. Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare (beginning in 2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (first due in 2023); and replaces the Part D coverage gap discount program with a new discounting program (beginning in 2025). The IRA permits the Secretary of the Department of HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial years.
Specifically, with respect to price negotiations, Congress authorized Medicare to negotiate lower prices for certain costly single-source drug and biologic products that do not have competing generics or biosimilars and are reimbursed under Medicare Part B and Part D. CMS may negotiate prices for ten high-cost drugs paid for by Medicare Part D starting in 2026, followed by 15 Part D drugs in 2027, 15 Part B or Part D drugs in 2028, and 20 Part B or Part D drugs in 2029 and beyond. This provision applies to drug products that have been approved for at least 9 years and biologics that have been licensed for 13 years, but it does not apply to drugs and biologics that have been approved for a single rare disease or condition. Nonetheless, since CMS may establish a maximum price for these products in price negotiations, we would be fully at risk of government action if our products are the subject of Medicare price negotiations. Moreover, given the risk that could be the case, these provisions of the IRA may also further heighten the risk that we would not be able to achieve the expected return on our drug products or full value of our patents protecting our products if prices are set after such products have been on the market for nine years. Further, the legislation subjects drug manufacturers to civil monetary penalties and a potential excise tax for failing to comply with the legislation by offering a price that is not equal to or less than the negotiated “maximum fair price” under the law or for taking price increases that exceed inflation. The legislation also requires manufacturers to pay rebates for drugs in Medicare Part D whose price increases exceed inflation. The new law also caps Medicare out-of-pocket drug costs at an estimated $4,000 a year in 2024 and, thereafter beginning in 2025, at $2,000 a year.
The first cycle of negotiations for the Medicare Drug Price Negotiation Program commenced in the summer of 2023. On August 15, 2024, the HHS published the results of the first Medicare drug price negotiations for ten selected drugs that treat a range of conditions, including diabetes, chronic kidney disease, and rheumatoid arthritis. The prices of these ten drugs will become effective January 1, 2026. On January 17, 2025, CMS announced its selection of 15 additional drugs covered by Part D for the second cycle of negotiations. Thereafter, following the change in U.S. presidential administrations, CMS issued a public statement on January 29, 2025, declaring that lowering the cost of prescription drugs is a top priority of the new presidential administration and CMS is committed to considering opportunities to bring greater transparency in the negotiation program. The second cycle of negotiations with participating drug companies will occur during 2025, and any negotiated prices for this second set of drugs will be effective starting January 1, 2027.
In addition, the IRA potentially raises legal risks with respect to individuals participating in a Medicare Part D prescription drug plan who may experience a gap in coverage if they required coverage above their initial annual coverage limit before they reached the higher threshold, or “catastrophic period” of the plan. Individuals requiring services exceeding the initial annual coverage limit and below the catastrophic period must pay 100% of the cost of their prescriptions until they reach the catastrophic period. Among other things, the IRA contains many provisions aimed at reducing this financial burden on individuals by reducing the co-insurance and co-payment costs, expanding eligibility for lower income subsidy plans, and price caps on annual out-of-pocket expenses, each of which could have potential pricing and reporting implications.
89
We expect that current or future litigation involving provisions of the IRA will have unpredictable and uncertain results on the implementation and impact of the IRA on biotechnology industry generally, as well as our business and current or future products. For example, on June 6, 2023, Merck & Co., or Merck, filed a lawsuit against the HHS and CMS asserting that, among other things, the IRA’s Drug Price Negotiation Program for Medicare constitutes an uncompensated taking in violation of the Fifth Amendment of the Constitution. Subsequently, a number of other parties, including the U.S. Chamber of Commerce, Bristol Myers Squibb Company, the PhRMA, Astellas, Novo Nordisk, Janssen Pharmaceuticals, Novartis, AstraZeneca and Boehringer Ingelheim, also filed lawsuits in various courts with similar constitutional claims against the HHS and CMS. There have been various decisions by the courts considering these cases since they were filed. The HHS has generally won the substantive disputes in these cases, and various federal district court judges have expressed skepticism regarding the merits of the legal arguments being pursued by the pharmaceutical industry. Certain of these cases are now on appeal, and oral arguments took place on October 30, 2024. We expect that litigation involving these and other provisions of the IRA will continue, with unpredictable and uncertain results.
Accordingly, while it is currently unclear how the IRA will be effectuated, we cannot predict with certainty what impact any federal or state health reforms will have on us, but such changes could impose new or more stringent regulatory requirements on our activities or result in reduced reimbursement for our products, any of which could adversely affect our business, results of operations and financial condition.
At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional healthcare organizations and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. These measures could reduce the ultimate demand for our products, once approved, or put pressure on our product pricing. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures. This may be increasingly true with respect to products approved pursuant to the accelerated approval pathway. State Medicaid programs and other payers are developing strategies and implementing significant coverage barriers, or refusing to cover these products outright, arguing that accelerated approval drugs have insufficient or limited evidence despite meeting the FDA’s standards for accelerated approval.
Finally, outside the United States, in some nations, including those of the EU, the pricing of prescription pharmaceuticals is subject to governmental control and access. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we or our collaborators may be required to conduct a clinical trial that compares the cost-effectiveness of our product to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be materially harmed.
We may be subject to certain healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm, fines, disgorgement, exclusion from participation in government healthcare programs, curtailment or restricting of our operations, and diminished future profits and earnings, if any.
Healthcare providers, third-party payors and others will play a primary role in the recommendation and prescription of any products for which we obtain marketing approval. Our current and future arrangements with healthcare providers and third-party payors will 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 any products for which we obtain marketing approval. Potentially applicable U.S. federal and state healthcare laws and regulations include the following:
| ● | Anti-Kickback Statute. 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 either the referral of an individual for, or the purchase, order or |
90
| recommendation of, any good or service, for which payment may be made under federal healthcare programs such as Medicare and Medicaid. |
| ● | False Claims Laws. The federal false claims laws and civil monetary penalties laws, including the civil False Claims Act and the Civil Monetary Penalty Law, impose criminal and civil penalties, including those from civil whistleblower or qui tam actions against individuals or entities for knowingly presenting, or causing to be presented to the 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. |
| ● | HIPAA. The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for, among other things, executing or attempting to execute a scheme to defraud any healthcare benefit program. |
| ● | HIPAA and HITECH. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or the HITECH Act, also imposes obligations on certain types of individuals and entities, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information. |
| ● | False Statements Statute. The federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services. |
| ● | Transparency Requirements. The federal Physician Payments Sunshine Act requires certain manufacturers of 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 report annually to the Department of Health and Human Services information related to payments and other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors), other healthcare providers, and ownership and investment interests by physicians and their immediate family members. As of January 1, 2022, applicable manufacturers are also required to report such information regarding its payments and other transfers of value to physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists and certified nurse midwives during the previous year. |
| ● | Analogous State and Foreign Laws. Analogous state laws and regulations, such as state anti-kickback and false claims laws, and transparency 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, and some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, in addition to requiring manufacturers to report information related to payments to physicians and other healthcare providers or marketing expenditures. Many state laws also 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. Foreign laws also govern the privacy and security of health information in many circumstances. |
The provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of medicinal products is prohibited in the EU. Payments made to physicians in certain EU Member States must be publicly disclosed. Moreover, agreements with physicians often must be the subject of prior notification and approval by the physician’s employer, his or her competent professional organization and/or the regulatory authorities of the individual EU Member States. These requirements are provided in the national laws, industry codes or professional codes of conduct applicable in the EU Member States. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines or imprisonment.
Efforts to ensure that our business arrangements with third parties, and our business generally, will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable
91
fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion of products from government funded healthcare programs, such as Medicare and Medicaid, disgorgement, contractual damages, and reputational harm, any of which could substantially disrupt our operations. If any of the physicians or other providers or entities with whom we expect to do business is found not to be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.
We are subject to stringent privacy laws, information security laws, regulations, policies and contractual obligations related to data privacy and security and changes in such laws, regulations, policies, contractual obligations and failure to comply with such requirements could subject us to significant fines and penalties, which may have a material adverse effect on our business, financial condition or results of operations.
We are subject to data privacy and protection laws and regulations that apply to the collection, transmission, storage and use of personally identifiable information, which among other things, impose certain requirements relating to the privacy, security and transmission of personal information, including comprehensive regulatory systems in the United States, EU and United Kingdom. The legislative and regulatory landscape for privacy and data protection continues to evolve in jurisdictions worldwide, and there has been an increasing focus on privacy and data protection issues with the potential to affect our business. Failure to comply with any of these laws and regulations could result in enforcement action against us, including fines, claims for damages by affected individuals, damage to our reputation and loss of goodwill, any of which could have a material adverse effect on our business, financial condition, results of operations or prospects.
There are numerous U.S. federal and state laws and regulations related to the privacy and security of personal information. In particular, regulations promulgated pursuant to HIPAA establish privacy and security standards that limit the use and disclosure of individually identifiable health information, or protected health information, and require the implementation of administrative, physical and technological safeguards to protect the privacy of protected health information and ensure the confidentiality, integrity and availability of electronic protected health information. Determining whether protected health information has been handled in compliance with applicable privacy standards and our contractual obligations can be complex and may be subject to changing interpretation. These obligations may be applicable to some or all of our business activities now or in the future.
If we are unable to properly protect the privacy and security of protected health information, we could be found to have breached our contracts. Further, if we fail to comply with applicable privacy laws, including applicable HIPAA privacy and security standards, we could face civil and criminal penalties. HHS enforcement activity can result in financial liability and reputational harm, and responses to such enforcement activity can consume significant internal resources. In addition, state attorneys general are authorized to bring civil actions seeking either injunctions or damages in response to violations that threaten the privacy of state residents. We cannot be sure how these regulations will be interpreted, enforced or applied to our operations. In addition to the risks associated with enforcement activities and potential contractual liabilities, our ongoing efforts to comply with evolving laws and regulations at the federal and state level may be costly and require ongoing modifications to our policies, procedures and systems.
There are a broad variety of data protection laws that are applicable to our activities, and a wide range of enforcement agencies at both the state and federal levels that can review companies for privacy and data security concerns based on general consumer protection laws. The Federal Trade Commission, or FTC, and state attorneys general all are aggressive in reviewing privacy and data security protections for consumers. In addition, new laws have been enacted or are considered at both the federal and state levels. As a result, we will need to seek to ensure our business practices comply with evolving rules and guidance at the federal and state level related to privacy and data security in order to mitigate our risk for any potential enforcement action, which may be costly. In addition, if we are subject to an enforcement action and settlement order, we may be required to adhere to very specific privacy and data security practices or pay fines and adhere to specified compliance requirements, all of which could be costly and adversely impact our business.
For example, the FTC has been particularly focused on the unpermitted processing of health and genetic data through its recent enforcement actions and is expanding the types of privacy violations that it interprets to be “unfair” under Section 5 of the FTC Act, as well as the types of activities it views to trigger the Health Breach Notification Rule, which the FTC
92
also has the authority to enforce, and is in the process of developing rules related to commercial surveillance and data security.
Similarly, in 2018, California passed into law the California Consumer Privacy Act, or the CCPA, which took effect on January 1, 2020 and imposed many requirements on businesses that process the personal information of California residents. Many of the CCPA’s requirements are similar to those found in the General Data Protection Regulation, or the GDPR, including requiring businesses to provide notice to data subjects regarding the information collected about them and how such information is used and shared, and providing data subjects the right to request access to such personal information and, in certain cases, request the erasure of such personal information. The CCPA also affords California residents the right to opt-out of “sales” of their personal information. The CCPA contains significant penalties for companies that violate its requirements. In addition, the California Privacy Rights Act, or the CPRA, went into effect on January 1, 2023 and significantly expanded the CCPA to incorporate additional GDPR-like provisions including requiring that the use, retention, and sharing of personal information of California residents be reasonably necessary and proportionate to the purposes of collection or processing, granting additional protections for sensitive personal information, and requiring greater disclosures related to notice to residents regarding retention of information. The CPRA also created the California Privacy Protection Agency, a new enforcement agency whose sole responsibility is to enforce the CPRA.
In addition to California, at least 18 other states have passed comprehensive privacy laws similar to the CCPA and CPRA. These laws are either in effect now or will go into effect in the future. Like the CCPA and CPRA, these laws create obligations related to the processing of personal information, as well as special obligations for the processing of “sensitive” data (which includes health data in some cases). Some of the provisions of these laws may apply to our business activities. There are also states that are specifically regulating health information that may affect our business. For example, Washington state recently passed a health privacy law that will regulate the collection and sharing of health information, and the law also has a private right of action, which further increases the relevant compliance risk. Connecticut and Nevada have also passed similar laws regulating consumer health data. Other states, including New York, will be considering similar laws. These laws may impact our business activities, including our identification of research subjects, relationships with business partners and ultimately the marketing and distribution of our products.
Plaintiffs’ lawyers are also increasingly using privacy-related statutes at both the state and federal level to bring lawsuits against companies for their data-related practices. In particular, there have been a significant number of cases filed against companies for their use of pixels and other web trackers. These cases often allege violations of the California Invasion of Privacy Act and other state laws regulating wiretapping, as well as the federal Video Privacy Protection Act. The rise in these types of lawsuits creates potential risk for our business.
Similar to the laws in the United States, there are significant privacy and data security laws that apply in Europe and other countries. The collection, use, disclosure, transfer, or other processing of personal data, including personal health data, regarding individuals who are located in the European Economic Area, or the EEA, and the processing of personal data that takes place in the EEA, is regulated by the GDPR, which went into effect in May 2018 and which imposes obligations on companies that operate in our industry with respect to the processing of personal data and the cross-border transfer of such data. The GDPR imposes onerous accountability obligations requiring data controllers and processors to maintain a record of their data processing and policies. If our or our partners’ or service providers’ privacy or data security measures fail to comply with the GDPR requirements, we may be subject to litigation, regulatory investigations, enforcement notices requiring us to change the way we use personal data and/or fines of up to 20 million Euros or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher, as well as compensation claims by affected individuals, negative publicity, reputational harm and a potential loss of business and goodwill.
The GDPR places restrictions on the cross-border transfer of personal data from the EU to countries that have not been found by the European Commission, or EC, to offer adequate data protection legislation, such as the United States. There are ongoing concerns about the ability of companies to transfer personal data from the EU to other countries. In July 2020, the Court of Justice of the European Union, or the CJEU, invalidated the EU-U.S. Privacy Shield, one of the mechanisms used to legitimize the transfer of personal data from the EEA to the United States. The CJEU decision also drew into question the long-term viability of an alternative means of data transfer, the standard contractual clauses, for transfers of personal data from the EEA to the United States. While we were not self-certified under the Privacy Shield, this CJEU decision may lead to increased scrutiny on data transfers from the EEA to the United States generally and increase our
93
costs of compliance with data privacy legislation, as well as our costs of negotiating appropriate privacy and security agreements with our vendors and business partners.
Additionally, in October 2022, President Biden signed an executive order to implement the EU-U.S. Data Privacy Framework, which would serve as a replacement to the EU-U.S. Privacy Shield. The EU initiated the process to adopt an adequacy decision for the EU-U.S. Data Privacy Framework in December 2022 and the European Commission adopted the adequacy decision on July 10, 2023. The adequacy decision will permit U.S. companies who self-certify to the EU-U.S. Data Privacy Framework to rely on it as a valid data transfer mechanism for data transfers from the EU to the United States. However, some privacy advocacy groups have already suggested that they will be challenging the EU-U.S. Data Privacy Framework. If these challenges are successful, they may not only impact the EU-U.S. Data Privacy Framework, but also further limit the viability of the standard contractual clauses and other data transfer mechanisms. The uncertainty around this issue has the potential to impact our business at the international level.
Furthermore, while the Data Protection Act of 2018 in the United Kingdom that “implements” and complements the GDPR has achieved Royal Assent on May 23, 2018 and is now effective in the United Kingdom, it is still unclear whether transfer of data from the EEA to the United Kingdom will remain lawful under GDPR. The Trade and Cooperation Agreement provides for a transitional period during which the United Kingdom will be treated like a EU member state in relation to processing and transfers of personal data for four months from January 1, 2021. This may be extended by two further months. After such period, the United Kingdom will be a “third country” under the GDPR unless the European Commission adopts an adequacy decision in respect of transfers of personal data to the United Kingdom. The United Kingdom has already determined that it considers all of the EU 27 and EEA member states to be adequate for the purposes of data protection, ensuring that data flows from the United Kingdom to the EU/EEA remain unaffected.
Beyond GDPR, there are privacy and data security laws in a growing number of countries around the world. While many loosely follow GDPR as a model, other laws contain different or conflicting provisions. These laws will impact our ability to conduct our business activities, including both our clinical trials and the sale and distribution of commercial products, through increased compliance costs, costs associated with contracting and potential enforcement actions.
While we continue to address the implications of the recent changes to data privacy regulations, data privacy remains an evolving landscape at both the domestic and international level, with new regulations coming into effect and continued legal challenges, and our efforts to comply with the evolving data protection rules may be unsuccessful. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our practices. We must devote significant resources to understanding and complying with this changing landscape. Failure to comply with laws regarding data protection would expose us to risk of enforcement actions taken by data protection authorities in the EEA and elsewhere and carries with it the potential for significant penalties if we are found to be non-compliant. Similarly, failure to comply with federal and state laws in the United States regarding privacy and security of personal information could expose us to penalties under such laws. Any such failure to comply with data protection and privacy laws could result in government-imposed fines or orders requiring that we change our practices, claims for damages or other liabilities, regulatory investigations and enforcement action, litigation and significant costs for remediation, any of which could adversely affect our business. Even if we are not determined to have violated these laws, government investigations into these issues typically require the expenditure of significant resources and generate negative publicity, which could harm our business, financial condition, results of operations or prospects.
We are subject to U.S. and certain foreign export control, import, sanctions, anti-corruption, and anti-money laundering laws and regulations with respect to our operations and non-compliance with such laws can subject us to criminal and/or civil liability and harm our business.
We are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations, various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Control, the U.S. Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, and other state and national anti-bribery and anti-money laundering laws in countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, third-party intermediaries, joint venture partners and collaborators from authorizing, promising, offering or providing, directly or indirectly, improper payments
94
or benefits to recipients in the public or private sector. We may have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities and other organizations. In addition, we may engage third-party intermediaries to promote our clinical research activities abroad and/or to obtain necessary permits, licenses, and other regulatory approvals. We can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners and agents, even if we do not explicitly authorize or have actual knowledge of such activities.
Noncompliance with the laws and regulations described above could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment from contracting with certain persons, the loss of export privileges, reputational harm, adverse media coverage and other collateral consequences. If any subpoenas, investigations or other enforcement actions are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operations and financial condition could be materially harmed. In addition, responding to any such action will likely result in a materially significant diversion of management’s attention and resources and significant defense and compliance costs and other professional fees. In certain cases, enforcement authorities may even cause us to appoint an independent compliance monitor which can result in added costs and administrative burdens.
Changes in U.S. and international trade policies and the imposition of tariffs, or threat of tariffs, particularly with respect to China, may adversely impact our business and operating results.
The new presidential administration has imposed or threatened to impose a series of tariffs on goods imported to the U.S. from non-U.S. countries. The imposition of new tariffs or increases in existing tariffs on goods imported from countries where our suppliers or other third party vendors operate or rely upon third parties to provide certain goods or components of goods necessary for the research and development of our product candidates, could result in increased costs, including without limitation for raw materials, components, animal testing, assays or finished goods used in the research or development of our product candidates.
On April 2, 2025, an executive order issued by the new presidential administration announced a “baseline” reciprocal tariff of 10% on all U.S. trading partners effective April 5, 2025, and higher individualized reciprocal tariffs on 57 countries (with certain product exemptions for pharmaceutical-related imports, among others), including China. To date, we have relied upon third party suppliers and vendors located in China for a significant amount of goods or components of goods necessary for the research and development of our product candidates. Earlier the administration imposed a 25% tariff on Canada and Mexico for goods not covered by the United States-Mexico-Canada Agreement, or the USMCA, and tariffs equaling 20% on China. In response, several countries, including China, have threatened retaliatory measures and imposed retaliatory tariffs that would impact goods or components of goods historically imported by us. Prior to when the country-specific reciprocal tariffs were scheduled to take effect, the U.S. delayed the effective date of such tariffs for all countries except China. As of April 16, 2025, the 10% baseline reciprocal tariff on all countries remains in effect, in addition to the tariffs on China (which were a minimum of 145%) and Canada and Mexico (which were 25% for goods that are not covered by the USMCA). The extent and duration of increased tariffs or retaliatory tariffs, and the resulting impact on general economic conditions and on our business, are uncertain and depend on various factors, such as negotiations between the U.S. and affected countries, the responses of other countries or regions, exemptions or exclusions that may be granted, availability and cost of alternative sources of supply.
Separately, on April 16, 2025, the U.S. Department of Commerce announced an investigation under Section 232 of the Trade Expansion Act of 1962 into imports of pharmaceuticals and pharmaceutical ingredients, including finished drug products, medical countermeasures, critical inputs such as active pharmaceutical ingredients, and key starting materials, and derivative products of those items. The investigation will examine the impact of these imports on U.S. national security culminating in a decision by President Trump whether to take action to remedy any identified threats, including by imposing additional tariffs. The statute provides that the U.S. Department of Commerce report must be completed within 270 days of initiation and that President Trump must decide whether to act within 90 days of receiving the report.
The U.S. government has also recently made statements and taken certain actions that may lead to potential changes to U.S. and international trade policies, including imposing several rounds of tariffs and export control restrictions affecting
95
certain products manufactured in China, and most recently, proposing legislation that, if enacted would restrict trade with certain Chinese companies that provide biopharmaceutical research, development, and manufacturing services. Recently both China and the United States have each imposed tariffs indicating the potential from further trade barriers. In addition, the U.S. Commerce Department has significantly expanded export controls for goods and technology destined for China, including adding numerous Chinese entities to its “entity list” and “unverified list” and imposing expanded restrictions on certain end users and end uses in China or by entities based in China, which require U.S. exporters to pursue export licenses that might not be approved, or to complete more procedures and diligence review before exporting goods to such entities. It is unknown whether and to what extent new tariffs, export controls, trade restrictions, or other new laws or regulations will be adopted, or the effect that any such actions would have on us or our industry. Sustained uncertainty about, or the further escalation of, trade and political tensions between the United States and China could result in a disadvantageous research and manufacturing environment in China, particularly for U.S. based companies, including retaliatory restrictions that hinder or potentially inhibit our ability to rely on CDMOs and other service providers that operate in China. For example, proposed legislation has been introduced in Congress that could prohibit, among other things, the use of U.S. government executive agency contract, grant, or loan funding to procure or obtain, or enter into, extend or renew contracts involving the use of certain equipment or services produced or provided by certain Chinese companies, including our current CDMO, WuXi Biologics, which could cause us to reevaluate our relationship with our current CDMO.
In addition to our CDMO, WuXi Biologics, some of our other suppliers, vendors and service providers are located in China or other countries, or rely on third parties located in China or other countries, impacted by tariffs imposed or threatened to be imposed by the U.S. Trade tensions and conflicts between the United States and China have been escalating in recent years and, as such, we are exposed to the possibility of supply disruptions and increased costs and expenses in the event of changes to the laws, rules, regulations and policies of the governments of the United States or China, or due to geopolitical unrest and unstable economic conditions. Certain Chinese biotechnology companies may become subject to trade restrictions, sanctions, other regulatory requirements or proposed legislation by the U.S. government, which could restrict or even prohibit our ability to work with such entities, thereby potentially disrupting their supply of material to us. For example, in February 2024, U.S. lawmakers called for investigations into and the imposition of possible trade sanctions against certain Chinese biotechnology companies including WuXi AppTec and WuXi Biologics, or collectively WuXi, over alleged ties to the Chinese military. Escalating tensions between the United States and China may prevent or hinder the export of materials or technical information between us and our CDMO and third parties, such as pharmaceutical partners. Additionally, third parties may voluntarily require compliance or supply chain requirements that go above and beyond potential legislation to address perceived risk of “pass through,” which would make it difficult for us to operate our business.
In addition, in September 2024, the U.S. House of Representatives passed the BIOSECURE Act (H.R. 8333). This bill named the following as biotechnology companies of concern: BGI, MGI, Complete Genomics, WuXi AppTec and WuXi Biologics. The U.S. Senate advanced a substantially similar bill (S. 3558) but it did not pass. The Senate bill named the following as biotechnology companies of concern: BGI, MGI, Complete Genomics, WuXi AppTec and any subsidiary, parent affiliate, or successor of such entities. If this legislation had been enacted into law, it could have potentially restricted the ability of U.S. biotechnology companies like ours to purchase services or products from, or otherwise collaborate with, specifically named Chinese biotechnology companies, including WuXi, and it would have authorized the U.S. government to impose such restrictions on entities' transactions with additional Chinese biotechnology companies as a condition of U.S. government contract, grant and loan funding. We anticipate these or similar bills will be considered during the 119th Congress. If such bills are passed and become law, they could restrict the ability of companies like ours to contract with certain Chinese biotechnology companies of concern without losing the ability to contract with, or otherwise receive funding from, the U.S. government. Such disruptions could have adverse effects on the development of our product candidates and our business operations.
Any unfavorable government policies on international trade, such as export controls, capital controls or tariffs, may increase the cost of manufacturing our product candidates and platform materials, affect the demand for our drug products (if and once approved), the competitive position of our product candidates, and import or export of raw materials and finished product candidate used in our and our collaborators’ preclinical studies and clinical trials, particularly with respect to any product candidates and materials that we import from China, including pursuant to our manufacturing service arrangements with WuXi. If we are unable to obtain goods or components of goods necessary for the research and development of our product candidates, including without limitation, raw materials, components,
96
animal testing, assays or finished goods, in sufficient quantity and in a timely manner due to disruptions in the global supply chain caused by macroeconomic events and conditions, the research, development, testing and clinical trials of our product candidates may be delayed or infeasible, and regulatory approval or commercial launch of any resulting product may be delayed or not obtained, which could significantly harm our business.
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 harm 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. From time to time and in the future, our operations may involve the use of hazardous and flammable materials, including chemicals and biological materials, and may also produce hazardous waste products. Even if we contract with third parties for the disposal of these materials and waste products, we cannot completely eliminate the risk of contamination or injury resulting from these materials. In the event of contamination or injury resulting from the use or disposal of our 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 for failure to comply with such laws and regulations.
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, however 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 addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. Current or future environmental laws and regulations may impair our research, development or production efforts. In addition, failure to comply with these laws and regulations may result in substantial fines, penalties or other sanctions.
Our employees, independent contractors, CROs, consultants, commercial partners, vendors and principal investigators may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements.
We are exposed to the risk of fraud or other misconduct by our employees, independent contractors, CROs, consultants, commercial partners, vendors and our principal investigators. Misconduct by these parties could include intentional failures to comply with FDA regulations or the regulations applicable in the EU and other jurisdictions, provide accurate information to the FDA, the EC and other regulatory authorities, comply with healthcare fraud and abuse laws and regulations in the United States and abroad, report financial information or data accurately, or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements.
Such misconduct also could involve the improper use of information obtained in the course of clinical trials or interactions with the FDA or other regulatory authorities, which could result in regulatory sanctions and cause serious harm to our reputation. Even with appropriate policies and procedures, it is not always possible to identify and deter misconduct, and the precautions we take to detect and prevent such activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from government investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, financial condition, results of operations and prospects, including the imposition of significant fines or other sanctions.
97
Risks Related to Our Business Operations, Employee Matters and Managing Growth
Our future success depends on our ability to retain key employees, consultants and advisors and to attract, retain and motivate qualified personnel.
We are highly dependent on the management, research and development, clinical, financial and business development expertise of our executive officers, as well as the other members of our scientific and clinical teams. Although we have employment agreements that outline the terms of employment with each of our executive officers, each of them may terminate their employment with us at any time. As such, these employment agreements do not guarantee our retention of our executive officers for any period of time. In addition, the cost of directors’ and officers’ liability insurance, or D&O insurance, is subject to change, which could result in D&O insurance becoming significantly more expensive for us to maintain or require us to accept coverage terms or policy limits that are less favorable. Accordingly, there is no guarantee that we will be able to maintain D&O insurance at a reasonable cost or in an amount adequate to satisfy any liability that may arise. An inability to secure and maintain D&O insurance may make it difficult for us to retain and attract talented and skilled directors and officers to serve our company, which could adversely affect our business. We do not maintain “key person” insurance for any of our employees.
Recruiting and retaining qualified scientific and clinical personnel and, if we are successful in obtaining marketing approval for our product candidates, sales and marketing personnel, is and will be critical to our success. The loss of the services of our executive officers or other key employees could impede, delay or prevent the achievement of our research, development and commercialization objectives and seriously harm our ability to successfully implement our business strategy. Furthermore, replacing executive officers and other key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval for and commercialize products in the life sciences industry, and specifically our product candidates. We are based in Massachusetts, a state that is home to many other biopharmaceutical companies as well as many academic and research institutions, resulting in fierce competition for qualified personnel. Furthermore, to the extent we hire personnel from competitors, we may be subject to allegations that they have been improperly solicited or that they have divulged proprietary or other confidential information, or that their former employers own their research output. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. Additionally, the biotechnology industry generally has continued to experience a competitive wage environment, which is likely to further exacerbate the foregoing risks and may impact our ability to retain our executive officers or other key employees. If we are unable to continue to attract and retain high quality personnel, our ability to pursue our growth strategy will be limited and could adversely affect our business, prospects, financial condition and results of operations.
We depend on our information technology systems and those of our third-party service providers, and any failure of these systems could harm our business. Security breaches, loss of data, inability to access systems, and other disruptions could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability or competitive or reputational harm, which could adversely affect our business, results of operations and financial condition.
We collect and maintain information in digital and other forms that is necessary to conduct our business, and we are increasingly dependent on information technology systems and infrastructure to operate our business. In the ordinary course of our business, we collect, store and transmit large amounts of confidential information, including intellectual property, proprietary business information and personal information. It is critical that we do so in a secure manner to maintain the privacy, security, confidentiality, availability and integrity of such confidential information. Our internal information technology systems and infrastructure, and those of our contractors, consultants, vendors, service providers and other third parties on which we rely, are vulnerable to damage or unauthorized access or use resulting from computer viruses, malware, natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the Internet, denial or degradation of service attacks, ransomware, hacking, phishing and other social
98
engineering attacks, attachments to emails, intentional or accidental actions or inactions by persons inside our organization or by persons with access to systems inside our organization.
The risk of a security breach or disruption or data loss, particularly through cyber-attacks or cyber intrusion, including by computer hackers, supply chain attacks, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Additionally, attackers may use artificial intelligence and machine learning to launch more automated, targeted and coordinated attacks against targets. In addition, the prevalent use of mobile devices that access confidential information increases the risk of lost or stolen devices, security incidents and data security breaches, which could lead to the loss of confidential information or other intellectual property. We also may face increased risks of a security breach or disruption due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities. The costs to us to mitigate network security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and while we have implemented security measures to protect our data security and information technology systems, our efforts to address these problems may not be successful, and these problems could result in unexpected interruptions, delays, cessation of service, negative publicity and other harm to our business and our competitive position. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our product development programs.
Any security compromise affecting us, our partners, our service providers or our industry, whether real or perceived, could harm our reputation, erode confidence in the effectiveness of our security measures and lead to regulatory scrutiny. If such an event were to occur and cause interruptions in our operations or result in the unauthorized acquisition of or access to personally identifiable information or individually identifiable health information (violating certain privacy laws, as applicable, such as HIPAA, CCPA, HITECH and GDPR), it could result in a material disruption of our discovery and development programs and our business operations, whether due to a loss of our trade secrets or other similar disruptions. Some of the federal, state and foreign government requirements include obligations of companies to notify individuals of security breaches involving particular personally identifiable information, which could result from breaches experienced by us or by our vendors, contractors, or organizations with which we have formed strategic relationships. Notifications and follow-up actions related to a security breach could impact our reputation, cause us to incur significant costs, including legal expenses and remediation costs. For example, the loss 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 lost data. We would also be exposed to a risk of loss, governmental investigations or enforcement, or litigation and potential liability, any of which could materially adversely affect our business, results of operations and financial condition. While we do maintain cyber liability insurance, our insurance coverages may not be sufficient in type or amount to cover us against any such losses, claims, or liabilities related to security breaches, cyber-attacks, cyber intrusion, or other related breaches or disruptions.
A variety of risks associated with marketing our product candidates internationally, if approved, could materially adversely affect our business.
We also plan to 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, including conducting marketing and sales activities, in international jurisdictions if we obtain the necessary approvals, including:
| ● | regulatory requirements in foreign countries that differ from those in the United States; |
| ● | unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements; |
| ● | economic weakness, including inflation, or political instability in particular foreign economies and markets; |
| ● | compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; |
| ● | foreign taxes, including withholding of payroll taxes; |
99
| ● | foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country; |
| ● | complexities associated with managing multiple payor reimbursement regimes, government payors or patient self-pay systems; |
| ● | 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 other 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; |
| ● | production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and |
| ● | business interruptions resulting from geopolitical actions, including war, armed conflicts and terrorism or natural disasters, including pandemics or other outbreaks of infectious disease, earthquakes, typhoons, floods and fires. |
Any of these factors, along with other risks associated with international operations, could materially adversely affect our future international expansion and operations and, consequently, our results of operations.
We may engage in strategic transactions that could impact our liquidity, increase our expenses and present significant distractions to our management.
From time to time, we may consider strategic transactions, such as acquisitions of companies, asset purchases and out-licensing or in-licensing of intellectual property, products or technologies. Additional potential transactions that we may consider in the future include a variety of business arrangements, including spin-offs, strategic partnerships, joint ventures, restructurings, divestitures, business combinations and investments. Any future transactions could increase our near and long-term expenditures, result in potentially dilutive issuances of our equity securities, including our common stock, or the incurrence of debt, contingent liabilities, amortization expenses or acquired in-process research and development expenses, any of which could affect our financial condition, liquidity and results of operations. Future acquisitions may also require us to obtain sufficient additional capital, which may not be available on favorable terms or at all. These transactions may not be successful and may require significant time and attention of management. In addition, the integration of any business that we may acquire in the future may disrupt our existing business and may be a complex, risky and costly endeavor for which we may never realize any or all potential benefits of the acquisition. Accordingly, although there can be no assurance that we will undertake or successfully complete any additional transactions of the nature described above, any additional transactions that we do complete could have a material adverse effect on our business, results of operations, financial condition and prospects.
Our operations or those of the third parties upon whom we depend might be affected by the occurrence of a catastrophic event, such as a terrorist attack, war or other armed conflict, geopolitical tensions or trade wars, pandemic or natural disaster.
We depend on our employees, consultants, CDMOs, CROs, as well as regulatory agencies and other parties, for the continued operation of our business. While we maintain disaster recovery plans, they might not adequately protect us. Despite any precautions that we or any third parties on whom we depend take for catastrophic events, including terrorist attacks, wars or other armed conflicts, geopolitical tensions or trade wars, pandemics or natural disasters, these events could result in significant disruptions to our research and development, manufacturing, preclinical studies, clinical trials, and, ultimately, if approved, the commercialization of our products. Long-term disruptions in the infrastructure caused by these types of events, such as natural disasters, which are increasing in frequency due to the impacts of climate change,
100
the outbreak of wars or other armed conflicts, the escalation of hostilities, geopolitical tensions or trade wars, acts of terrorism or “acts of God,” particularly involving geographies in which we or third parties on whom we depend have offices, manufacturing or clinical trial sites, could adversely affect our businesses. Although we carry business interruption insurance policies and typically have provisions in our contracts that protect us in certain events, our coverage might not include or be adequate to compensate us for all losses that may occur. Any catastrophic event affecting us, our CDMOs, our CROs, regulatory agencies or other parties with which we are engaged could have a material adverse effect on our operations and financial performance.
Risks Related to Ownership of Our Common Stock and Our Status as a Public Company
Our common stock may be subject to a low trading volume and volatile market price related or unrelated to our operations and purchasers of our common stock could have difficulty selling their shares or could suffer a decline in value.
The trading volume and market price of our common stock has been, and may continue to be, subject to significant fluctuations in response to numerous factors, many of which are beyond our control. The stock market in general and the market for biotechnology and pharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may not be able to sell their common stock at or above the price paid for the shares. The trading volume and market price for our common stock may be influenced by many factors, including:
| ● | the results from our preclinical studies and clinical trials; |
| ● | the commencement, enrollment or results of any current or future clinical trials we may conduct, or changes in the development status of our product candidates; |
| ● | adverse results from, delays in initiating or completing, or termination of clinical trials; |
| ● | unanticipated serious safety concerns related to the use of our product candidates; |
| ● | clinical trial results from, or regulatory developments regarding, a competitor’s product candidate; |
| ● | adverse regulatory decisions, including failure to receive regulatory approval of our product candidates; |
| ● | regulatory or legal developments in the United States and foreign countries; |
| ● | any delay in our regulatory filings for our product candidates and any adverse development or perceived adverse development with respect to the applicable regulatory authority’s review of such filings, including without limitation the FDA’s issuance of a “refusal to file” letter or a request for additional information; |
| ● | the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC, and announcements relating to acquisitions, strategic transactions, licenses, joint ventures, collaborations, capital commitments, intellectual property, litigation or other disputes impacting us or our business; |
| ● | lower than expected market acceptance of our product candidates, if approved; |
| ● | adverse developments concerning our manufacturers; |
| ● | our inability to obtain adequate product supply for any product candidate, or approved product or inability to do so at acceptable prices; |
101
| ● | variations in the level of expenses related to our preclinical and clinical development programs, including relating to the timing of invoices from, and other billing practices of, our CROs and clinical trial sites; |
| ● | variations in the level of expenses related to our commercialization activities, if any product candidates are approved; |
| ● | the clinical results of our competitors or potential competitors; |
| ● | introduction of new products or services by our competitors; |
| ● | changes in financial estimates by us or by any securities analysts who might cover our common stock; |
| ● | conditions or trends in our industry; |
| ● | our cash position; |
| ● | sales of our common stock by us or our stockholders in the future; |
| ● | adoption of new, or changes to current accounting standards; |
| ● | ineffectiveness of our internal controls; |
| ● | changes in the market valuations of similar companies; |
| ● | stock market price and volume fluctuations of comparable companies and, in particular, those that operate in the biotechnology and pharmaceutical industry; |
| ● | publication of research reports about us or our industry or positive or negative recommendations or withdrawal of research coverage by securities analysts; |
| ● | announcements by us or our competitors of significant acquisitions, strategic partnerships or divestitures; |
| ● | announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us; |
| ● | changes in the structure of healthcare payment systems; |
| ● | investors’ general perception of our company and our business; |
| ● | overall performance of the equity markets; |
| ● | potential inclusion or exclusion of our common stock in exchange, industry, or other tracking indices; |
| ● | disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies and product candidates; |
| ● | significant lawsuits, including patent or stockholder litigation; |
| ● | proposed changes to healthcare laws, intellectual property laws or pharmaceutical pricing in the United States or foreign jurisdictions, or speculation regarding such changes; |
| ● | future sales of our common stock by our officers, directors and significant stockholders; |
102
| ● | recruitment or departure of key personnel; |
| ● | public health epidemics or pandemics, such as the COVID-19 pandemic, and any recession, depression, or other sustained adverse market event or economic impact resulting from such epidemics or pandemics; |
| ● | general political, economic, industry and market conditions; and |
| ● | other events or factors described in this “Risk Factors” section, many of which are beyond our control. |
In addition, in the past, stockholders have initiated class action lawsuits against pharmaceutical and biotechnology companies following periods of volatility in the market prices of these companies’ stock. This risk is especially relevant for us, because biopharmaceutical companies have experienced significant stock price volatility in recent years. Such litigation, if instituted against us, could cause us to incur substantial costs and divert management’s attention and resources from our business.
If securities or industry analysts do not publish research or reports about our company, or if they issue unfavorable or inaccurate research regarding our business, or if they publish negative evaluations of our stock, the price and trading volume of our stock could decline.
The trading market for our common stock relies, in part, on the research and reports that securities or industry analysts publish about us or our business. A limited number of securities and industry analysts currently publish research on our company. There can be no assurance that existing analysts will continue to cover us or that new analysts will begin to cover us. There is also no assurance that any covering analyst will provide favorable coverage. Although we have obtained analyst coverage, if one or more of the analysts covering our business downgrade their evaluations of our stock or publish inaccurate or unfavorable research about our business, or provides more favorable relative recommendations about our competitors, the price of our stock could decline. In the past, analysts have ceased to cover our stock and others may cease to do so in the future. As a result, we could lose visibility in the market for our stock, which in turn could cause our stock price and trading volume to decline.
Unstable global economic and political conditions, including economic uncertainty tied to interest rates and heightened inflation, credit and financial market instability, and uncertainty related to ongoing geopolitical conflicts, could adversely affect our business, financial condition, stock price and ability to raise capital.
Unstable global economic and political conditions, including economic uncertainty tied to interest rates and heightened inflation, credit and financial market instability, and uncertainty related to ongoing geopolitical conflicts, could adversely affect our business, financial condition, stock price and ability to raise capital. The global economy, in particular the financial markets, have recently experienced significant disruption and volatility, including without limitation, as a result of heightened inflation, capital market volatility, interest rate and currency rate fluctuations, volatility in commodity prices, decline in consumer confidence and economic growth, supply chain disruptions, banking disruptions, and uncertainty resulting from geopolitical events, including trade wars, civil and political unrest, wars and other armed conflicts. In addition, market volatility, high levels of inflation and high interest rates may increase our cost of financing or restrict our access to potential sources of future capital. Furthermore, our stock price may further decline due in part to the volatility of the stock market and any general economic downturn. If the disruption and volatility persist or deepen, we may be unable to raise sufficient additional capital on acceptable terms, or at all. If we are unable to raise sufficient additional capital, our business, financial condition, stock price and results of operations could be adversely affected, and we will need to implement cost reduction strategies, which could include delaying, reducing or altogether terminating both internal and external costs related to our operations and research and development programs. In addition, political developments impacting government spending and international trade, including changes in trade agreements, trade disputes, tariffs and investment restrictions, such as the ongoing trade dispute between the United States and China, may negatively impact markets and cause weaker macroeconomic conditions. These global economic and political factors could also strain certain of our suppliers and manufacturers, including our primary CDMO, possibly resulting in supply disruptions or increased raw material or manufacturing costs, or adversely impacting their ability to manufacture clinical trial materials for our product candidates. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic and geopolitical climate and financial market conditions could adversely impact our business.
103
Our principal stockholders and management own a significant percentage of our common stock and exert significant control over matters subject to stockholder approval.
As of March 31, 2025, our executive officers, directors, holders of 5% or more of our common stock and their respective affiliates beneficially owned shares in the aggregate representing a majority of our outstanding common stock. As a result of their share ownership, these stockholders, if they act together, would have the ability to influence our management and policies and would be able to significantly affect the outcome of matters requiring stockholder approval, such as elections of directors, amendments of our organizational documents or approvals of any merger, sale of assets or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that our stockholders may feel are in their best interest.
Some of these persons or entities may have interests different than our unaffiliated stockholders, or they may want us to pursue strategies that deviate from the interests of other stockholders. In addition, this concentration of ownership might adversely affect the market price of our common stock by:
| ● | delaying, deferring or preventing a change of control of us; |
| ● | entrench our management and board of directors; |
| ● | impeding a merger, consolidation, takeover or other business combination involving us; or |
| ● | discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us. |
We have broad discretion regarding use of our cash and cash equivalents, and we may not use them effectively.
Our management has broad discretion in the application of our cash and cash equivalents and could use such funds in ways that do not improve our results of operations or enhance the value of our common stock. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, cause the price of our common stock to decline and delay the development of our product candidates. Pending their use, we may invest these funds in a manner that does not produce income or that loses value.
We do not intend to pay dividends on our common stock so any returns will be limited to the value of our 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 determination to pay dividends in the future will be at the sole discretion of our board of directors. In addition, the terms of any future debt agreements may preclude us from paying dividends. Any return to stockholders will therefore be limited in the foreseeable future to the appreciation of their stock.
We are an “emerging growth company” and a “smaller reporting company” and the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies may make our common stock less attractive to investors.
We are an “emerging growth company,” or EGC, as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. We may remain an EGC until December 31, 2026, although if the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of any June 30 before that time or if we have annual gross revenues of $1.235 billion or more in any fiscal year, we would cease to be an EGC as of December 31 of the applicable year. We also would cease to be an EGC if we issue more than $1.0 billion of non-convertible debt over a three-year period. For so long
104
as we remain an EGC, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not EGCs. These exemptions include:
| ● | being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of financial Condition and Results of Operations” disclosure; |
| ● | not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting; |
| ● | not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements; |
| ● | reduced disclosure obligations regarding executive compensation; and |
| ● | exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. |
Even after we no longer qualify as an emerging growth company, we may continue to qualify as a smaller reporting company, which would allow us to take advantage of many of the same exemptions from disclosure requirements, including reduced disclosure obligations regarding executive compensation. In addition, if we are a smaller reporting company with less than $100 million in annual revenue, we would not be required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404.
We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
In addition, the JOBS Act permits an EGC to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we can adopt the new or revised standard at the time private companies adopt the new or revised standard and may do so until such time that we either (1) irrevocably elect to “opt out” of such extended transition period or (2) no longer qualify as an EGC or a smaller reporting company. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.
We have incurred and will continue to incur substantial costs as a result of operating as a public company, and our management has devoted and will continue to be required to devote substantial time to new compliance initiatives and corporate governance practices.
As a public company, we have incurred and will continue to incur substantial legal, accounting and other expenses. The Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, Nasdaq listing requirements, and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will continue to increase our legal and financial compliance costs and will make some activities more time-consuming and costly.
We evaluate developments in these rules and regulations as they are promulgated and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over
105
time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to continue to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If notwithstanding our efforts to comply with new laws, regulations and standards, we fail to comply, regulatory authorities may initiate legal proceedings against us and our business may be materially adversely effected.
Pursuant to Section 404, we are required to furnish a report by our management on our internal control over financial reporting. However, while we remain an EGC or a smaller reporting company with less than $100 million in annual revenue, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To comply with Section 404, we are engaged in 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, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. If we identify one or more material weaknesses in our internal control over financial reporting, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common stock.
Effective internal control over financial reporting is necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, is designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also subject us to regulatory scrutiny and sanctions, impair our ability to raise revenue and cause investors to lose confidence in our reported financial information, which could harm our business and have a negative effect on the trading price of our common stock and adversely affect our results of operations and financial condition.
We are required to disclose changes made in our internal controls and procedures on a quarterly basis and our management is required to assess the effectiveness of these controls annually. However, for as long as we are an EGC or a smaller reporting company with less than $100 million in annual revenue, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404. An independent assessment of the effectiveness of our internal control over financial reporting could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal control over financial reporting could lead to financial statement restatements and require us to incur the expense of remediation, which could have a negative effect on the trading price of our common stock and adversely affect our results of operations and financial condition.
Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
As a public company, we are subject to certain reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to management, recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal control over financial reporting, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control
106
system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. 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 or insufficient disclosures due to error or fraud may occur and not be detected.
Changes in tax laws or in their implementation or interpretation may adversely affect our business and financial condition.
Changes in tax law may adversely affect our business or financial condition. The Tax Act, enacted on December 22, 2017, as amended by the CARES Act, enacted on March 27, 2020, significantly revises the Code. The Tax Act contains, among other things, significant changes to corporate taxation, including a reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21% and the limitation of the deduction for net operating losses to 80% of current-year taxable income for losses arising in taxable years beginning after December 31, 2017 (though any such net operating losses may be carried forward indefinitely). In addition, beginning in 2022, the Tax Act eliminates the option to deduct research and development expenditures currently and requires corporations to capitalize and amortize them over five years or fifteen years (for expenditures attributable to foreign research).
In addition to the CARES Act, as part of Congress’s response to the COVID-19 pandemic, economic relief legislation was enacted in 2020 and 2021 containing tax provisions. The IRA was also signed into law in August 2022. The IRA introduced new tax provisions, including a 1% excise tax imposed on certain stock repurchases by publicly traded corporations. The 1% excise tax generally applies to any acquisition by the publicly traded corporation (or certain of its affiliates) of stock of the publicly traded corporation in exchange for money or other property (other than stock of the corporation itself), subject to a de minimis exception. Thus, the excise tax could apply to certain transactions that are not traditional stock repurchases. Regulatory guidance under the Tax Act, the CARES Act, the IRA, and such additional legislation is and continues to be forthcoming. Such guidance could ultimately increase or lessen the impact of these laws on our business and financial condition. In addition, it is uncertain if and to what extent various states will conform to the Tax Act, the CARES Act, the IRA, and additional tax legislation.
Provisions in our corporate charter documents and under Delaware law could make an acquisition of our company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current directors and members of management.
Provisions in our restated certificate of incorporation and our second amended and restated bylaws may discourage, delay or prevent a merger, acquisition or other change in control of our company that stockholders may consider favorable, including transactions in which our stockholders might otherwise receive a premium for their shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because 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. Among other things, these provisions:
| ● | establish a classified board of directors such that only one of three classes of directors is elected each year; |
| ● | allow the authorized number of our directors to be changed only by resolution of our board of directors; |
| ● | limit the manner in which stockholders can remove directors from our board of directors; |
| ● | establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors; |
| ● | require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent; |
107
| ● | limit who may call stockholder meetings; |
| ● | authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors; and |
| ● | require the approval of the holders of at least two-thirds of the votes that all our stockholders would be entitled to cast to amend or repeal specified provisions of our certificate of incorporation or bylaws. |
In addition, these provisions would apply even if we were to receive an offer that some stockholders may consider beneficial. Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, or the DGCL, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
Our restated certificate of incorporation designates the Court of Chancery of the State of Delaware and the federal district courts of the United States of America as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers and employees and increase the costs to our stockholders of bringing such claims.
Our restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware does not have jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law:
| ● | any derivative action or proceeding brought on our behalf; |
| ● | any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or stockholders to our company or our stockholders; |
| ● | any action asserting a claim arising pursuant to any provision of the DGCL or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware; or |
| ● | any action asserting a claim arising pursuant to any provision of our certificate of incorporation or bylaws (in each case, as they may be amended from time to time) or governed by the internal affairs doctrine. |
The choice of forum provisions will not apply to suits brought to enforce a duty or liability created by the Exchange Act. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions, and investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any claims arising under the Securities Act. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our restated certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.
These exclusive forum provisions may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with us or our directors, officers or employees, and increase the costs to such stockholders of bringing such a claim, either of which may discourage such lawsuits against us and our directors, officers and employees. If a court were to find that either exclusive forum provision contained in our restated certificate of
108
incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving such action in other jurisdictions, all of which could materially adversely affect our business, financial condition and operating results.
Item 5. Other Information
(c)
Director and Officer Trading Arrangements
None of our directors or officers
109
Item 6. Exhibits
EXHIBIT INDEX
Exhibit Number | | Description |
3.1 | | |
3.2 | | |
10.1*++ | | |
10.2*++ | | Common Stock Purchase Agreement, dated February 10, 2025, between the Registrant and AbbVie Inc. |
10.3*++ | | Investor Rights Agreement, dated February 10, 2025, between the Registrant and AbbVie Inc. |
31.1* | | |
31.2* | | |
32.1+ | | |
101.INS* | | XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
101.SCH* | | Inline XBRL Taxonomy Extension Schema Document |
101.CAL* | | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* | | Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* | | Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE* | | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 | | Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101) |
* | Filed herewith. |
+ | The certifications attached as Exhibit 32.1 are being furnished solely to accompany this Quarterly Report on Form 10-Q and will not be deemed to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference into such filing. |
++ | Portions of this exhibit have been omitted pursuant to Item 601 of Regulation S-K promulgated under the Securities Act because the information is not material and is a type of information that the Registrant treats as private or confidential. |
110
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 thereunto duly authorized.
| XILIO THERAPEUTICS, INC. | |
| | |
Date: May 8, 2025 | By: | /s/ René Russo |
| | René Russo, Pharm.D. |
| | President and Chief Executive Officer |
| | (Principal Executive Officer) |
| | |
Date: May 8, 2025 | By: | /s/ Christopher Frankenfield |
| | Christopher Frankenfield |
| | Chief Financial Officer and Chief Operating Officer |
| | (Principal Financial Officer) |
111
Exhibit 10.1
Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Double asterisks denote omissions.
Collaboration, License and Option Agreement
By and among
Xilio Development, Inc.
and
AbbVie Group Holdings Limited
Dated as of February 10, 2025
TABLE OF CONTENTS
1 | ||
| | |
ARTICLE 2 COLLABORATION TARGET PROGRAM AND OPTION TARGET PROGRAMS | 27 | |
| | |
27 | ||
27 | ||
28 | ||
30 | ||
30 | ||
30 | ||
30 | ||
Information Reports and License Option Exercise Data Package | 30 | |
31 | ||
31 | ||
31 | ||
31 | ||
31 | ||
32 | ||
32 | ||
| | |
32 | ||
| | |
32 | ||
33 | ||
35 | ||
35 | ||
36 | ||
37 | ||
37 | ||
37 | ||
37 | ||
| | |
39 | ||
| | |
39 | ||
39 | ||
39 | ||
39 | ||
40 | ||
40 | ||
40 | ||
41 | ||
41 | ||
i
TABLE OF CONTENTS
41 | ||
| | |
41 | ||
42 | ||
44 | ||
44 | ||
44 | ||
| | |
45 | ||
| | |
45 | ||
45 | ||
45 | ||
45 | ||
45 | ||
46 | ||
46 | ||
47 | ||
50 | ||
52 | ||
52 | ||
Royalty Payments for Agreements with Compulsory Sublicensees | 52 | |
52 | ||
53 | ||
53 | ||
53 | ||
54 | ||
54 | ||
55 | ||
55 | ||
55 | ||
| | |
55 | ||
| | |
55 | ||
57 | ||
60 | ||
62 | ||
63 | ||
63 | ||
64 | ||
64 | ||
| | |
65 | ||
| | |
ii
TABLE OF CONTENTS
65 | ||
66 | ||
67 | ||
68 | ||
68 | ||
| | |
69 | ||
| | |
69 | ||
Representations and Warranties of Xilio as of the Effective Date | 69 | |
71 | ||
72 | ||
73 | ||
73 | ||
| | |
74 | ||
| | |
74 | ||
74 | ||
74 | ||
77 | ||
77 | ||
| | |
78 | ||
| | |
78 | ||
78 | ||
79 | ||
79 | ||
80 | ||
81 | ||
84 | ||
84 | ||
84 | ||
| | |
85 | ||
| | |
85 | ||
85 | ||
86 | ||
87 | ||
87 | ||
87 | ||
88 | ||
iii
TABLE OF CONTENTS
89 | ||
89 | ||
89 | ||
90 | ||
90 | ||
90 | ||
90 | ||
90 | ||
91 | ||
91 | ||
91 | ||
91 | ||
91 |
iv
TABLE OF CONTENTS
Schedules
Schedule 1.65: Collaboration Licensed Patents
Schedule 1.88: Corporate Names
Schedule 1.123: FTE Rates
Schedule 1.194: Option Licensed Patents
Schedule 2.2.1: Collaboration Research Plan
Schedule 2.2.2: First Option Research Plan
Schedule 2.10: Permitted Entities
Schedule 7.2.2: Jurisdictions
Schedule 9.2.1: Existing Patents
Schedule 9.3.10: Third Party Agreements
Schedule 12.5.2: [**]
Exhibits
Exhibit A: Stock Purchase Agreement
Exhibit B: Investor Rights Agreement
v
COLLABORATION, LICENSE AND OPTION AGREEMENT
This Collaboration, License and Option Agreement (this “Agreement”) is made and entered into as of February 10, 2025 (the “Effective Date”) by and between Xilio Development, Inc., a Delaware corporation (“Xilio”), on the one hand and AbbVie Group Holdings Limited, a corporation organized under the laws of Bermuda (“AbbVie”) on the other hand, and, solely for purposes of Section 9.1 (Mutual Representations and Warranties), Section 9.2 (Representations and Warranties of Xilio as of the Effective Date), Section 9.3 (Additional Representations and Warranties of Xilio), Section 9.4 (Additional Covenants of Xilio), Section 9.6 (Disclaimer of Warranties), Section 12.3 (Assignment) and Section 12.19 (Guarantee), Xilio Therapeutics, Inc., a Delaware corporation (“Xilio Parent”). Xilio and AbbVie are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”
RECITALS
WHEREAS, Xilio Controls (as defined below) certain intellectual property rights with respect to the Xilio Platform Technology (as defined below) in the Territory (as defined below); and
WHEREAS, Xilio wishes to grant to AbbVie, and AbbVie wishes to accept, an exclusive license to Exploit (as defined below) Collaboration Licensed Therapeutics (as defined below) and an exclusive option to receive other exclusive licenses to Exploit Option Licensed Products (as defined below), in each case, under such intellectual property rights in the Field (as defined below) in the Territory, in accordance with the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and the mutual promises and conditions set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, do hereby agree as follows:
DEFINITIONS
Unless otherwise specifically provided herein, the following terms shall have the following meanings:
1.1.“AbbVie” has the meaning set forth in the preamble hereto.
1.2.“[**]” means any Antibody [**] that is (a) Controlled by AbbVie and (b) provided by AbbVie to Xilio for use under and in accordance with this Agreement, including [**]. For clarity, [**].
1.3.“AbbVie Collaboration License” has the meaning set forth in Section 3.1 (License for Collaboration Target Program).
1.4.“AbbVie Cure Period” has the meaning set forth in Section 11.2.1(b)(2) (Termination; Material Breach by AbbVie).
1.5.“AbbVie Default Notice” has the meaning set forth in Section 11.2.1(b)(1) (Termination; Material Breach by AbbVie).
1.6.“AbbVie Derivative Patent” means any Patent Controlled by AbbVie or its Affiliates that claims Information invented solely by or on behalf of AbbVie in the exercise of AbbVie’s rights under Section [**].
1.7.“AbbVie Grantback Know-How” means, as used in connection with a Grantback Product and any related Grantback License provided in Section 11.7.2 (Transition of Option Licensed Products; Grantback License), all Information that is [**].
1.8.“AbbVie Grantback Patents” means, as used in connection with a Grantback Product and any related Grantback License provided in Section 11.7.2 (Transition of Option Licensed Products; Grantback License), all Patents that are Controlled by AbbVie or any of its Affiliates that claim AbbVie Grantback Know-How; provided that “AbbVie Grantback Patents” do not include any Patents to the extent claiming [**].
1.9.“AbbVie Indemnitees” has the meaning set forth in Section 10.2 (Indemnity; Indemnification of AbbVie).
1.10.“AbbVie Option License” has the meaning set forth in Section 3.2.1 (Options and Licenses for Option Target Programs; General).
1.11.“AbbVie Proprietary Materials” means any Antibody or other Materials that AbbVie may provide to Xilio from time to time for the conduct of activities under such Research Plan, that, in each case, are, or the Exploitation of which is, in whole or in part, [**]. For clarity, AbbVie Proprietary Materials include [**].
1.12. “Accounting Standards” means, with respect to a Party or its Affiliates or its or their (sub)licensees, United States generally accepted accounting principles, consistently applied.
1.13.“Acquisition” means, with respect to a Party, a merger, consolidation, acquisition (whether of all of the stock or all or substantially all of the assets of a Person or any operating or business division of a Person) or similar transaction by or with such Party (or any controlling Affiliate), other than a Change in Control of such Party.
1.14.“Additional Information” means any Information not included in an Information Report or License Option Exercise Data Package and is otherwise related to such Information Report or License Option Exercise Data Package [**].
1.15.“Additional Option Research Plan” has the meaning set forth in Section 2.2.3 (Research Plans; Additional Option Target Programs).
1.16.“Additional Option Target Program” has the meaning set forth in Section 2.2.3 (Research Plans; Additional Option Target Programs).
2
1.17.“Additional Option Target Program Fee” has the meaning set forth in Section 6.5 (Additional Option Target Program Fee).
1.18.“Additional Option Target Program Notice” has the meaning set forth in Section 2.2.3 (Research Plans; Additional Option Target Programs).
1.19.“ADR” has the meaning set forth in Section 12.5.1 (Dispute Resolution; General).
1.20.“Adverse Event and Safety Data Exchange Agreement” has the meaning set forth in Section 4.7.3 (Regulatory Activities; Adverse Event Reporting).
1.21.“Adverse Ruling” has the meaning set forth in Section 11.2.1(a) (Termination; Material Breach by Xilio).
1.22.“Affiliate” means, with respect to a Party, any Person that, directly or indirectly, through one (1) or more intermediaries, controls, is controlled by or is under common control with such Party. For purposes of this definition, “control” and, with correlative meanings, the terms “controlled by” and “under common control with” means: (a) the possession, directly or indirectly, of the power to direct the management or policies of a Person, 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 fifty percent (50%) of the voting securities or other ownership interest of a Person (or, with respect to a limited partnership or other similar entity, its general partner or controlling entity).
1.23.“Agreement” has the meaning set forth in the preamble hereto.
1.24.“[**]” has the meaning set forth in Section [**].
1.25.“Alliance Managers” has the meaning set forth in Section 5.4 (Collaboration Management; Alliance Managers).
1.26.“Antibody” means a molecule comprising (a) one (1) or more immunoglobulin variable domains containing one (1) or more antigen binding sites, (b) CDR sequences, fragments, variants, modifications or derivatives of such immunoglobulin variable domains or other antigen binding sites that are capable of binding an antigen or (c) the nucleic acid comprising a sequence of nucleotides encoding (or complementing to a nucleic acid encoding) the foregoing molecules in ((a) or (b)).
1.27.“Antitrust Clearance Date” means, with respect to each Antitrust Consent Option, the date all Antitrust Consents with respect to such Antitrust Consent Option have been obtained on terms satisfactory to AbbVie.
1.28.“Antitrust Consent Option” has the meaning set forth in Section 3.2.4(b) (Options and Licenses for Option Target Programs; Antitrust Consents).
1.29.“Antitrust Consents” has the meaning set forth in Section 3.2.4(a) (Options and Licenses for Option Target Programs; Antitrust Consents).
3
1.30.“Antitrust Laws” means the Sherman Antitrust Act of 1890, the Clayton Antitrust Act of 1914, the HSR Act and the Federal Trade Commission Act of 1914, each as amended, and all other Applicable Law, whether federal, state or foreign, that is designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade, lessening of competition or abuse of dominance through merger or acquisition or any structured collaboration.
1.31.“Antitrust/FDI Review Period” means [**] after the date AbbVie provided Xilio the Option Exercise Notice for the applicable Antitrust Consent Option.
1.32.“Applicable Law” means applicable laws, rules and regulations, including any rules, regulations, regulatory guidelines or other requirements of Regulatory Authorities, that may be in effect from time to time.
1.33.“Applicable Option Expiration Date” means, with respect to each Option Target Program, the Stage 1 License Option Expiration Date; provided, however, that if AbbVie sends Xilio an Option Extension Notice after receiving the Complete Stage 1 Information Report, then the Stage 2 License Option Expiration Date; provided, further, that if AbbVie sends Xilio an Option Extension Notice after receiving the Complete Stage 2 Information Report, then the Stage 3 License Option Expiration Date; provided, further, that if AbbVie sends Xilio an Option Extension Notice after receiving the Complete Stage 3 Information Report, then the Final License Option Expiration Date, as applicable.
1.34.“Arising IP” has the meaning set forth in Section 7.1.1 (Ownership of Intellectual Property; Ownership of Arising IP).
1.35.“Audit Expert” has the meaning set forth in Section 6.18.2 (Audit; Dispute).
1.36.“Backup Option Target” means, with respect to each Option Target Program, each Target that is designated by AbbVie as a backup Target for an Option Target in accordance with this Agreement. For clarity, the Initial Backup Option Target is deemed a Backup Option Target.
1.37.“Base Net Sales” has the meaning set forth in Section 6.9.3(b) (Royalties; Royalty Reductions).
1.38.“Biosimilar Application” has the meaning set forth in Section 7.3.7 (Enforcement of Patents; Biosimilar Litigation).
1.39.“Biosimilar Launch Quarter” has the meaning set forth in Section 6.9.3(b) (Royalties; Royalty Reductions).
1.40.“Biosimilar Product” means, on a country-by-country basis, with respect to a Licensed Product, a biologic product [**] that is determined by the applicable Regulatory Authority in or for a country to be biosimilar to or otherwise interchangeable with such Licensed Product as set forth in at 42 U.S.C. § 262(k)(4) in the United States or other Applicable Law in other jurisdictions. For clarity, a product licensed or Manufactured by AbbVie or any of its
4
Affiliates or Sublicensees under the same BLA for a Licensed Product will constitute a Licensed Product and will not constitute a Biosimilar Product.
1.41.“BLA” has the meaning set forth in Section 1.100 (definition of “Drug Approval Application”).
1.42.“Board of Directors” has the meaning set forth in Section 1.53 (definition of “Change in Control”).
1.43.“BPCI Act” means the Biologics Price Competition and Innovation Act of 2009, as may be amended from time to time, together with any rules, regulations and requirements promulgated thereunder (including all additions, supplements, extensions and modifications thereto).
1.44.“Bring-Down Date” has the meaning set forth in Section 3.2.5(a) (License Option Effective Date; Procedures for License Options).
1.45.“Bring-Down Disclosure Schedule” has the meaning set forth in Section 9.3 (Additional Representations and Warranties of Xilio).
1.46.“Business Day” means a day other than a Saturday or Sunday on which banking institutions in Chicago, Illinois and Boston, Massachusetts are open for business.
1.47.“Calendar Quarter” means each successive period of three (3) calendar months commencing on January 1, April 1, July 1 or October 1, except that the first Calendar Quarter of the Term shall commence on the Effective Date and end on the day immediately prior to the first to occur of January 1, April 1, July 1 and October 1 after the Effective Date and the last Calendar Quarter shall end on the last day of the Term.
1.48.“Calendar Year” means each successive period of twelve (12) calendar months commencing on January 1 and ending on December 31, except that the first Calendar Year of the Term shall commence on the Effective Date and end on December 31 of the year in which the Effective Date occurs and the last Calendar Year of the Term shall commence on January 1 of the year in which the Term ends and end on the last day of the Term.
1.49.“[**]” means [**].
1.50.“CDA” has the meaning set forth in Section 8.1.1 (Confidentiality Obligations; Confidential Information).
1.51.“CDR” means complementarity-determining regions.
1.52.“[**]” means [**].
1.53.“Change in Control” means, with respect to a Party, that any of the following occurs after the Effective Date:
5
1.53.1.any “person” or “group” (as such terms are defined below) acquires or becomes the “beneficial owner” (as defined below), directly or indirectly, of (a) shares of capital stock or other interests (including partnership interests) of such Party (or any controlling Affiliate of such Party) then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of the directors, managers or similar supervisory positions (“Voting Stock”) of such Party (or any controlling Affiliate of such Party) representing fifty percent (50%) or more of the total voting power of all outstanding classes of Voting Stock of such Party (or any controlling Affiliate of such Party) or (b) the power to elect a majority of the members of the Party’s (or any such Party’s controlling Affiliate’s) board of directors or similar governing body (“Board of Directors”); the Parties acknowledge that in the case of certain entities organized under the laws of certain countries or other jurisdictions outside of the United States, the maximum percentage ownership permitted by law for a foreign investor may be less than fifty percent (50%), and that in such case such lower percentage shall be substituted in the preceding sentence, provided that such foreign investor has the power to direct the management or policies of such entity; or
1.53.2.such Party (or any controlling Affiliate of such Party) enters into a merger, consolidation or similar transaction with another Person (whether or not such Party (or any controlling Affiliate of such Party) is the surviving entity) and as a result of such merger, consolidation or similar transaction (a) the members of the Board of Directors of such Party (or any controlling Affiliate of such Party) immediately prior to such transaction constitute less than a majority of the members of the Board of Directors of such Party (or any controlling Affiliate of such Party) or such surviving Person immediately following such transaction or (b) the Persons that beneficially owned, directly or indirectly, the shares of Voting Stock of such Party (or any controlling Affiliate of such Party) immediately prior to such transaction cease to beneficially own, directly or indirectly, shares of Voting Stock of such Party (or any controlling Affiliate of such Party) representing at least a majority of the total voting power of all outstanding classes of Voting Stock of the surviving Person in substantially the same proportions as their ownership of Voting Stock of such Party (or any controlling Affiliate of such Party) immediately prior to such transaction; or
1.53.3.such Party (or any controlling Affiliate of such Party) sells, leases, exclusively licenses, transfers or otherwise disposes of to any Third Party, in one (1) or more related transactions, properties or assets representing all or substantially all of such Party’s (or any such Party’s controlling Affiliate’s) consolidated total assets to which this Agreement relates; or
1.53.4.the holders of capital stock of such Party (or any controlling Affiliate of such Party) approve a plan or proposal for the liquidation or dissolution of such Party (or any controlling Affiliate of such Party).
For the purpose of this definition of “Change in Control”, (a) “person” and “group” have the meanings given such terms under Section 13(d) and 14(d) of the United States Securities Exchange Act of 1934 and the term “group” includes any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under such Act; (b) a “beneficial owner” shall be determined in accordance with Rule 13d-3 under such Act; and (c) the terms
6
“beneficially owned” and “beneficially own” shall have meanings correlative to that of “beneficial owner.”
1.54.“Clinical Studies” means any tests and studies in human subjects that are required or permitted by Applicable Law to obtain or maintain any Regulatory Approval for, or to support the pricing, reimbursement or use of, a Licensed Product, including tests or studies that are intended to expand the Product Labeling for a Licensed Product.
1.55.“CMC Activities” means, with respect to a Licensed Therapeutic or Licensed Product, all Manufacturing activities (including the generation of all CMC Data) necessary to support the Development or Commercialization of such Licensed Therapeutic or Licensed Product, as applicable, at the applicable stage of Development, including formulation, process development, process qualification and validation, scale-up, analytic development, product characterization, stability testing, quality assurance and quality control.
1.56.“CMC Data” means the chemistry, manufacturing and controls data for each Licensed Therapeutic or Licensed Product, as applicable, required by Applicable Law to be included or referenced in, or that otherwise supports, an application for Regulatory Approval for the applicable Licensed Product.
1.57.“[**]” means [**].
1.58.“[**]” means [**].
1.59.“[**]” means [**].
1.60.“[**]” means [**].
1.61.“Collaboration Handover Date” means the date of completion of all Development activities allocated to Xilio under the Collaboration Research Plan for the Collaboration Target.
1.62.“Collaboration Licensed IP” means the Collaboration Licensed Patents and Collaboration Licensed Know-How.
1.63.“Collaboration Licensed Know-How” means all Information (including Xilio Platform Know-How and Xilio’s interest in any Joint Know-How) that is (a) Controlled by Xilio or any of its Affiliates as of the Effective Date or at any time during the Term, (b) is not generally known and (c) [**] to Exploit the Collaboration Licensed Therapeutics or Collaboration Licensed Products in the Field in the Territory.
1.64.“Collaboration Licensed Materials” means all Materials that are Controlled by Xilio or any of its Affiliates as of the Effective Date or at any time during the Term and that [**] to Exploit the Collaboration Licensed Therapeutics or Collaboration Licensed Products in the Field in the Territory.
1.65.“Collaboration Licensed Patents” means all Patents that are (a) Controlled by Xilio or any of its Affiliates as of the Effective Date or at any time during the Term
7
(including Xilio Platform Patents and Xilio’s interest in any Joint Patents) and (b) [**] to Exploit the Collaboration Licensed Therapeutics or Collaboration Licensed Products in the Field in the Territory. All Collaboration Licensed Patents existing as of the Effective Date are set forth on Schedule 1.65 (Collaboration Licensed Patents).
1.66.“Collaboration Licensed Platform Know-How” means all Collaboration Licensed Know-How that (a) [**] and (b) is not Collaboration Product Know-How.
1.67.“Collaboration Licensed Platform Patent” means all Collaboration Licensed Patents that (a) [**] and (b) are not Collaboration Product Patents.
1.68.“Collaboration Licensed Product” means any product containing a Collaboration Licensed Therapeutic, [**].
1.69.“Collaboration Licensed Target Information” has the meaning set forth in Section 8.1.1 (Confidentiality Obligations; Confidential Information).
1.70.“Collaboration Licensed Therapeutics” means (a) [**] and (b) any backups, follow-ons, modifications, enhancements, improvements, derivatives or optimizations of or to the [**] described in clause (a), in each case ((a) and (b)), that are (i) [**].
1.71.“Collaboration Product Know-How” means all Collaboration Licensed Know-How that [**] (a) a Collaboration Licensed Therapeutic or Collaboration Licensed Product, (b) [**], (c) [**] or (d) the Exploitation of a therapeutic or product containing a Macromolecule described in the foregoing clause ((a), (b) or (c)) in the Field in the Territory.
1.72.“Collaboration Product Patents” means all Collaboration Licensed Patents that [**] (a) a Collaboration Licensed Therapeutic or Collaboration Licensed Product, (b) [**] (c) [**] or (d) the Exploitation of a therapeutic or product containing a molecule described in the foregoing clauses (a), (b) or (c) in the Field in the Territory.
1.73.“Collaboration Research Plan” has the meaning set forth in Section 2.2.1 (Research Plans; Collaboration Target Program).
1.74.“Collaboration Research Term” means the period commencing on the Effective Date and ending upon the earlier of (a) the completion by Xilio of all of the activities under the Collaboration Research Plan, (b) the date on which the Agreement is terminated with respect to the Collaboration Target Program and (c) [**] of the Effective Date.
1.75.“Collaboration Target” has the meaning set forth in Section 2.3.1 (Target Selection and Target Substitution; Collaboration Target Program).
1.76.“Collaboration Target Program” means the program for the conduct of Development activities with respect to the Collaboration Licensed Therapeutics and Collaboration Licensed Products pursuant to the Collaboration Research Plan.
1.77.“Combination Product” means a Licensed Product that is comprised of or contains one (1) or more (a) Licensed Therapeutics as an active ingredient together with (b) one
8
(1) or more other active ingredients (such other active ingredients, “Other Active Ingredients”), whether in the same or different formulations, and is sold either as a fixed dose or sold for a single invoice price as separate doses in a single package or that are otherwise co-packaged and sold for a single invoice price.
1.78.“Commercialization” means any and all activities directed to the preparation for sale of, offering for sale of or sale of a Licensed Product, including activities related to marketing, promoting, distributing, importing and exporting such Licensed Product, and interacting with Regulatory Authorities regarding any of the foregoing, but excluding any activities directed to Manufacturing or Development. When used as a verb, “Commercialize” means to engage in Commercialization and “Commercialized” has a corresponding meaning.
1.79.“Commercially Reasonable Efforts” means, (a) with respect to the performance of Development or Commercialization activities with respect to a Licensed Therapeutic or Licensed Product by AbbVie, [**] or (b) with respect to the performance of the Development activities by Xilio, [**].
1.80.“Competing Product” means, [**].
1.81.“Complete” means, with respect to an Information Report or any License Option Exercise Data Package, the earliest of (a) AbbVie providing a written notice to Xilio stating that AbbVie deems the applicable Information Report or License Option Exercise Data Package to be complete, (b) (i) [**] after AbbVie received the initial copy of the applicable Information Report or (ii) [**] after AbbVie received the initial copy of the License Option Exercise Data Package, as applicable, and (c) the date on which Xilio has provided all Additional Information in accordance with Section 2.8 (Information Reports and License Option Exercise Data Package).
1.82.“Component” means, with respect to a Licensed Therapeutic, [**].
1.83.“Compulsory Sublicensee” means any Third Party to whom AbbVie is required to grant a compulsory license by a court or a Governmental Authority under Applicable Law permitting such Third Party to Commercialize a Licensed Product.
1.84.“Confidential Information” has the meaning set forth in Section 8.1.1 (Confidentiality Obligations; Confidential Information).
1.85.“Control” means, with respect to any item of Information, Regulatory Documentation, Material, Patent or other intellectual property right, possession of the right, whether directly or indirectly and whether by ownership (sole or joint), license or otherwise (other than by operation of the license and other grants in Section 3.1 (License for Collaboration Target Program) or Section 3.2 (Options and Licenses for Option Target Programs)), to grant a license, sublicense or other right (including the right to reference Regulatory Documentation) to or under such Information, Regulatory Documentation, Material, Patent or other intellectual property right as provided for herein without violating the terms of any agreement with any Third Party; provided [**]. Notwithstanding the foregoing, in the event of a Change in Control of a Party, such Party shall not be deemed to Control: (a) any Information, Regulatory Documentation, Material, Patent or other intellectual property right owned or licensed by the acquirer of such Party immediately prior to the closing of such Change in Control and (b) any Information, Regulatory Documentation,
9
Material, Patent or other intellectual property right that the acquirer of such Party subsequently develops without accessing or practicing the Licensed Product Know-How, Licensed Product Patents, Joint Know-How or any Confidential Information of the other Party (or any Confidential Information of both Parties), in each case ((a) and (b)), except to the extent that such Information, Regulatory Documentation, Material, Patent or other intellectual property right (i) is actually used by such Party or its Affiliates, or the acquirer of such Party, to Exploit a Licensed Therapeutic or Licensed Product following the closing of such Change in Control or (ii) was Controlled by such Party or its Affiliates prior to the closing of such Change in Control.
1.86.“[**]” has the meaning set forth in Section [**].
1.87.“[**]” has the meaning set forth in Section [**].
1.88.“Corporate Names” means the Trademarks and logos identified on Schedule 1.88 (Corporate Names) and such other replacement corporate names and logos as Xilio may use from time to time.
1.89.“Data Security and Privacy Laws” mean all Applicable Laws relating to the privacy, Processing and security of Personal Data.
1.90.“[**]” has the meaning set forth in Section [**].
1.91.“[**]” has the meaning set forth in Section [**].
1.92.“Defense Proceeding” has the meaning set forth in Section 7.2.1 (Prosecution and Maintenance of Patents; Licensed Platform Patents).
1.93.“Development” means all activities related to research (including discovery), pre-clinical and other non-clinical testing, test method development and stability testing, toxicology, Clinical Studies, statistical analysis and report writing, the preparation and submission of INDs and Drug Approval Applications, regulatory affairs with respect to the foregoing and all other activities necessary or reasonably useful or otherwise requested or required by a Regulatory Authority as a condition or in support of obtaining or maintaining a Regulatory Approval, but excluding any activities directed to Manufacturing or Commercialization. When used as a verb, “Develop” means to engage in Development. For clarity, Development shall include any submissions and activities required in support thereof, including those required by Applicable Laws or a Regulatory Authority as a condition or in support of obtaining a pricing or reimbursement approval for an approved Licensed Product.
1.94.“Directed To” means, with respect to any Macromolecule [**].
1.95.“Disclosing Party” has the meaning set forth in Section 8.1.1 (Confidentiality Obligations; Confidential Information).
1.96.“Dispute” has the meaning set forth in Section 12.5 (Dispute Resolution).
1.97.“Distributor” means any Third Party appointed by AbbVie or any of its Affiliates or its or their respective Sublicensees to distribute, market and sell Licensed Product
10
with or without packaging rights, in one (1) or more countries or other jurisdictions in the Territory, in circumstances where such Third Party purchases its requirements of Licensed Product from AbbVie or its Affiliates or its or their respective Sublicensees but does not otherwise make any royalty or other payment to AbbVie or its Affiliates or its or their respective Sublicensees with respect to its intellectual property rights with respect to such Licensed Product.
1.98.“Divestiture” means, [**]. When used as a verb, “Divest” and “Divested” means to cause a Divestiture.
1.99.“Dollars” or “$” means United States Dollars.
1.100.“Drug Approval Application” means a Biologics License Application (a “BLA”) as defined in the PHSA, or any corresponding foreign application in the Territory, including, with respect to the European Union, a marketing authorization application filed with the EMA pursuant to the centralized approval procedure or with the applicable Regulatory Authority of a country in Europe with respect to the mutual recognition procedure or any other national approval (a “Marketing Authorization Application”).
1.101.“Effective Date” has the meaning set forth in the preamble hereto.
1.102.“[**]” means [**].
1.103.“EMA” means the European Medicines Agency and any successor agency(ies) or authority having substantially the same function.
1.104.“EU3” means any three (3) of the following countries: the United Kingdom, Germany, France, Italy and Spain.
1.105.“European Union” means the economic, scientific, and political organization of member states known as the European Union, as its membership may be altered from time to time, and any successor thereto.
1.106.“Excluded Entity” has the meaning set forth in Section 9.2.17(c) (Representations and Warranties of Xilio as of the Effective Date).
1.107.“Excluded Individual” has the meaning set forth in Section 9.2.17(c) (Representations and Warranties of Xilio as of the Effective Date).
1.108.“[**]” has the meaning set forth in Section [**].
1.109.“Existing Patents” means all Licensed Patents existing as of the Effective Date or as of the Bring-Down Date, as applicable.
1.110.“Exploit” means to make, have made, import, export, use, have used, sell, have sold or offer for sale, including to Develop, Commercialize, register, modify, enhance, improve, Manufacture, have Manufactured, hold or keep (whether for disposal or otherwise), formulate, optimize, transport, distribute, promote, market or otherwise dispose. “Exploitation” means the act of Exploiting a product.
11
1.111.“FDA” means the United States Food and Drug Administration and any successor agency(ies) or authority having substantially the same function.
1.112.“FDA’s Disqualified/Restricted List” has the meaning set forth in Section 9.2.17(e) (Representations and Warranties of Xilio as of the Effective Date).
1.113.“FFDCA” means the United States Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 301 et seq., as amended from time to time, together with any rules, regulations, and requirements promulgated thereunder (including all additions, supplements, extensions, and modifications thereto).
1.114.“Field” means any and all uses.
1.115.“Final License Option Expiration Date” means the [**] following delivery to AbbVie of a Complete License Option Exercise Data Package that contains all of the Information required to be therein, including any missing or related Information requested by AbbVie pursuant to Section 2.8 (Information Reports and License Option Exercise Data Package), as may be extended in accordance with Section 2.8 (Information Reports and License Option Exercise Data Package).
1.116.“[**]” has the meaning set forth in Section 3.9.4(c)(2) (Exclusivity; Exceptions).
1.117.“First Commercial Sale” means, with respect to a Licensed Product and a country or jurisdiction, the first sale for monetary value for use or consumption by the end user of such Licensed Product in such country or jurisdiction after all Regulatory Approvals for such Licensed Product has been obtained in such country or jurisdiction. Sales prior to receipt of all Regulatory Approvals (including with respect to countries where required, all Pricing Approvals) for a Licensed Product in a country, such as so-called “treatment IND sales,” “named patient sales,” “compassionate use sales,” and “off-label sales” shall not be construed as a First Commercial Sale for such Indication in such country, provided that such sales are at or below cost. For clarity, in countries where there is Pricing Approval, Licensed Product sales that are not subject to Pricing Approval shall not constitute a First Commercial Sale.
1.118.“First Option Research Plan” has the meaning set forth in Section 2.2.2 (Research Plans; First Option Target Program).
1.119.“First Option Target” means [**].
1.120.“First Option Target Program” means the Option Target Program with respect to the First Option Target, or if substituted according to Section 2.3.4 (Target Selection and Target Substitution; Target Substitution), the Initial Backup Option Target.
1.121.“FTE” means the equivalent of the work of one (1) employee full time for one (1) Calendar Year (consisting of at least [**] hours per Calendar Year) of work performing the applicable activities under this Agreement. No additional payment shall be made with respect to any individual who works more than [**] hours per Calendar Year and any individual who devotes less than [**] hours per Calendar Year (or such other number as may be agreed by the
12
JGC) shall be treated as an FTE on a pro rata basis based upon the actual number of hours worked divided by [**].
1.122.“FTE Costs” means, with respect to a Party for any period, the applicable FTE Rate multiplied by the applicable number of FTEs of such Party performing the applicable activities under a Research Plan during such period.
1.123.“FTE Rate” means the applicable FTE rate set forth on Schedule 1.123 (FTE Rates) [**].
1.124.“[**]” means [**].
1.125.“[**]” means [**].
1.126.“Future Xilio Platform License” has the meaning set forth in Section 7.5.4 (Third Party Licenses and Patents; Platform In-Licenses).
1.127.“[**]” means [**].
1.128.“GLP” means the current good laboratory practices applicable from time to time to Development activities with respect to a Licensed Product or any intermediate thereof pursuant to Applicable Law.
1.129.“Governmental Authority” means any multinational, federal, national, state, provincial, local or other entity, office, commission, bureau, agency, political subdivision, instrumentality, branch, department, authority, board, court, arbitral or other tribunal exercising executive, judicial, legislative, police, regulatory, administrative or taxing authority or functions of any nature pertaining to government.
1.130.“Grantback License” has the meaning set forth in Section 11.7.2 (Transition of Option Licensed Products; Grantback License).
1.131.“[**]” means any Option Licensed Product (a) that [**], (b) that [**], and (c) that, [**].
1.132.“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
1.133.“HSR Filing” has the meaning set forth in Section 3.2.4(b)(1) (Options and Licenses for Option Target Programs; Antitrust Consents).
1.134.“Included FTE Costs and Expenses” means the sum of (a) all costs and expenses for the employee performing any applicable activities hereunder, including [**], (b) a pro rata allocation of [**] and (c) other [**], in any case ((a), (b) or (c)), whether [**].
1.135.“IND” means an application filed with a Regulatory Authority for authorization to commence Clinical Studies, including (a) an Investigational New Drug Application as defined in the FFDCA or any successor application or procedure filed with the
13
FDA, (b) any equivalent of a United States Investigational New Drug Application in other countries or regulatory jurisdictions, (i.e., clinical trial application (CTA)) and (c) all supplements, amendments, variations, extensions and renewals thereof that may be filed with respect to the foregoing.
1.136.“Indemnification Claim Notice” has the meaning set forth in Section 10.3.1 (Indemnification Procedures; Notice of Claim).
1.137.“Indemnified Party” has the meaning set forth in Section 10.3.1 (Indemnification Procedures; Notice of Claim).
1.138.“Indemnifying Party” has the meaning set forth in Section 10.3.1 (Indemnification Procedures; Notice of Claim).
1.139.“Indication” means, with respect to a Licensed Product, a use to which such Licensed Product is intended to be put for the treatment, prevention or amelioration of a distinct recognized disease or condition, or of a manifestation of a recognized disease or condition, or for the relief of symptoms associated with a recognized disease or condition, in each case for any size patient population, which, (a) for a Clinical Study for such Licensed Product, will be the use of such Licensed Product for which such Clinical Study is intended to determine safety or effectiveness and (b) if the Drug Approval Application for such Licensed Product is approved in the United States, will be reflected in the “Indications and Usage” section of labeling pursuant to 21 C.F.R. § 201.57(c)(2) (or comparable labeling section under Applicable Laws) or, to the extent applicable, any comparable labeling section outside the United States, in each case ((a) and (b)), subject to the following: (i) [**] (ii) [**]; (iii) [**].
1.140.“Indirect Taxes” has the meaning set forth in Section 6.16.2 (Taxes; Indirect Taxes).
1.141.“Inflation Reduction Act” means P.L. 117-169 (Aug. 16, 2022), as codified at 42 U.S.C. § 1320f, 42 U.S.C. § 1395w-3a and 42 U.S.C. § 1395w-114a (inter alia), as it may be amended from time to time, together with any rules, regulations and requirements promulgated thereunder (including all additions, supplements, extensions, and modifications thereto).
1.142.“Information” means all information and data of a technical, scientific, business or other nature, including know-how, technology, inventions, means, methods, processes, practices, formulae, instructions, skills, techniques, procedures, experiences, ideas, technical assistance, designs, drawings, assembly procedures, computer programs, apparatuses, specifications, results, regulatory data, and other biological, chemical, pharmacological, toxicological, pharmaceutical, physical and analytical, pre-clinical, clinical, safety, manufacturing, and quality control data and information, including study designs and protocols, information regarding reagents (e.g., plasmids, proteins, cell lines, assays and compounds) and biological methodology; in each case (whether or not confidential, proprietary, patented or patentable, of commercial advantage or not) in written, electronic or any other form now known or hereafter developed.
14
1.143.“Information Report” means each of the Stage 1 Information Report, the Stage 2 Information Report, and Stage 3 Information Report, as applicable.
1.144.“Initial Backup Option Target” means [**].
1.145.“Initial Disclosure Schedules” has the meaning set forth in Section 9.2 (Representations and Warranties of Xilio as of the Effective Date).
1.146.“In-License Agreement” means any agreement between Xilio and a Third Party pursuant to which Xilio Controls any Collaboration Licensed IP or Option Licensed IP under which AbbVie is granted a sublicense or other right under this Agreement.
1.147.“Investor Rights Agreement” means the investor rights agreement attached as Exhibit B.
1.148.“Joint Governance Committee” or “JGC” has the meaning set forth in Section 5.1.1 (Joint Governance Committee; Formation).
1.149.“Joint IP” has the meaning set forth in Section 7.1.2 (Ownership of Intellectual Property; Ownership of Joint IP).
1.150.“Joint Know-How” has the meaning set forth in Section 7.1.2 (Ownership of Intellectual Property; Ownership of Joint IP).
1.151.“Joint Patents” has the meaning set forth in Section 7.1.2 (Ownership of Intellectual Property; Ownership of Joint IP).
1.152.“Knowledge” means, with respect to Xilio, [**]; provided that, [**].
1.153.“Large Biopharmaceutical Company” means any Person, including such Person’s Affiliates, that itself or through its Affiliate(s) Develops or Commercializes health care products intended for human use or consumption as its primary business that [**].
1.154.“License Option” has the meaning set forth in Section 3.2.1 (Options and Licenses for Option Target Programs; General).
1.155.“License Option Effective Date” has the meaning set forth in Section 3.2.5(b) (License Option Effective Date).
1.156.“License Option Exercise Data Package” means, with respect to each Option Target Program, (a) a data package containing all Information (to the extent not previously provided to AbbVie), findings, deliverables, analyses, results and copies of correspondence with Regulatory Authorities, in each case, arising from Xilio’s performance of the activities set forth in the Option Research Plan associated with such Option Target Program [**] and (b) a draft Bring-Down Disclosure Schedule as of the date of delivery of such data package.
15
1.157.“License Option Expiration Date” means the Stage 1 License Option Expiration Date, Stage 2 License Option Expiration Date or Stage 3 License Option Expiration Date, as applicable.
1.158.“License Option Period” has the meaning set forth in Section 3.2.3 (Options and Licenses for Option Target Programs; License Option Exercise).
1.159.“License Option Review Package” has the meaning set forth in Section 3.2.5(a) (License Option Effective Date; Procedures for License Options).
1.160.“Licensed Know-How” means, as applicable, any Collaboration Licensed Know-How or Option Licensed Know-How.
1.161.“Licensed Patent” means, as applicable, any Collaboration Licensed Patent and any Option Licensed Patent.
1.162.“Licensed Platform Know-How” means, as applicable, any Collaboration Licensed Platform Know-How and Option Licensed Platform Know-How.
1.163.“Licensed Platform Patent” means, as applicable, any Collaboration Licensed Platform Patent and Option Licensed Platform Patent.
1.164.“Licensed Product” means, as applicable, any Collaboration Licensed Product and any Option Licensed Product.
1.165.“Licensed Product Know-How” means, as applicable, the Collaboration Product Know-How and the Option Product Know-How.
1.166.“Licensed Product Patent” means any Collaboration Product Patent or Option Product Patent.
1.167.“Licensed Target” means the Collaboration Target or any Option Target for which AbbVie exercises its License Option.
1.168.“Licensed Target Information” has the meaning set forth in Section 8.1.1 (Confidentiality Obligations; Confidential Information).
1.169.“Licensed Therapeutics” means, as applicable, any Collaboration Licensed Therapeutic and any Option Licensed Therapeutic.
1.170.“[**]” means [**].
1.171.“Losses” has the meaning set forth in Section 10.1 (Indemnity; Indemnification of Xilio).
1.172.“Macromolecule” means [**].
1.173.“Make Available” and “Made Available” means, except where otherwise expressly required by this Agreement or the terms of the applicable agreement being provided,
16
providing or having provided to a Party a complete, unredacted and correct copy of any item required to be delivered directly or by making such item available without restrictions and freely downloadable and printable through a virtual data room to which such receiving Party has access (including each of such receiving Party’s employees and other representatives for whom such Party has reasonably requested access, in each case, subject to ARTICLE 8 (Confidentiality and Non-Disclosure)).
1.174.“Manufacture” and “Manufacturing” means all activities related to the synthesis, making, production, manufacture, processing, purifying, formulating, filling, finishing, packaging, labeling, shipping and holding of any Licensed Therapeutic, any Licensed Product or any precursor, component or intermediate thereof, including process development, CMC Activities, process qualification and validation, scale-up, pre-clinical, clinical and commercial production and analytic development, product characterization, stability testing, quality assurance and quality control, but excluding any activities directed to Commercialization or Development.
1.175.“Marketing Authorization Application” has the meaning set forth in Section 1.100 (definition of “Drug Approval Application”).
1.176.“[**]” means [**].
1.177.“Material” means any biological, chemical or other physical substance, including cells, cell lines, reagents, plasmids, proteins, assays, and compounds.
1.178.“Maximum Fair Price” has the meaning set forth in Section 1191(c)(3) of the Social Security Act.
1.179.“Medicare Price” means, with respect to a Licensed Product, the average negotiated price (as defined in Section 1860D-2(d) of the Social Security Act) under prescription drug plans or MA-PD plans for such Licensed Product during the plan year immediately prior to the Initial Price Applicability Year (as defined in Section 1191(b)(1) of the Social Security Act).
1.180.“Milestone Event” has the meaning set forth in Section 6.7 (Development and Regulatory Milestone Events).
1.181.“Milestone Payment” has the meaning set forth in Section 6.7 (Development and Regulatory Milestone Events).
1.182.“Mono Product” has the meaning set forth in Section 1.183 (definition of “Net Sales”).
1.183.“Net Sales” means, [**].
1.184.“Opt-In” means opting into the jurisdiction of Unified Patent Court, such as through withdrawal under Article 83(4) of the Agreement on a Unified Patent Court between the participating member states of the European Union (2013/C 175/01) of the Opt-Out of a Patent.
1.185.“Opt-Out” means opting out of the jurisdiction of Unified Patent Court, such as the opt-out of a Patent from the exclusive competence of the Unified Patent Court under
17
Article 83(3) of the Agreement on a Unified Patent Court between the participating member states of the European Union (2013/C 175/01).
1.186.“Option Exercise Date” has the meaning set forth in Section 3.2.3 (Options and Licenses for Option Target Programs; License Option Exercise).
1.187.“Option Exercise Notice” means a written notice from AbbVie to Xilio of AbbVie’s exercise of the License Option with respect to an Option Target Program.
1.188.“Option Exercise Payment” has the meaning set forth in Section 6.3 (Option Exercise Payment).
1.189.“Option Extension Notice” has the meaning set forth in Section 3.2.2 (Options and Licenses for Option Target Programs; License Option Extension).
1.190.“Option Extension Payment” has the meaning set forth in Section 6.4 (Option Extension Payments).
1.191.“Option Licensed IP” means the Option Licensed Patents and the Option Licensed Know-How.
1.192.“Option Licensed Know-How” means, with respect to each Option Target Program, all Information (including the Xilio Platform Know-How and Xilio’s interest in any Joint Know-How) that is Controlled by Xilio or any of its Affiliates as of the Effective Date or at any time during the Term, that is (a) not generally known and (b) [**] to Exploit the Option Licensed Therapeutics or Option Licensed Products associated with such Option Target Program in the Field in the Territory.
1.193.“Option Licensed Materials” means, with respect to each Option Target Program, all Materials that are Controlled by Xilio or any of its Affiliates as of the Effective Date or at any time during the Term that [**] to Exploit the applicable Option Licensed Therapeutics or Option Licensed Products in the Field in the Territory.
1.194.“Option Licensed Patents” means, with respect to each Option Target Program, all Patents that are (a) Controlled by Xilio or any of its Affiliates as of the Effective Date or at any time during the Term [**] and (b) [**] to Exploit the applicable Option Licensed Therapeutics or Option Licensed Products in the Field in the Territory. [**].
1.195.“Option Licensed Platform Know-How” means all Option Licensed Know-How that (a) [**] and (b) is not Option Product Know-How.
1.196.“Option Licensed Platform Patent” means all Option Licensed Patents that (a) [**] and (b) are not Option Product Patents.
1.197.“Option Licensed Product” means any product containing an Option Licensed Therapeutic, [**].
18
1.198.“Option Licensed Target Information” has the meaning set forth in Section 8.1.1 (Confidentiality Obligations; Confidential Information).
1.199.“Option Licensed Therapeutics” means, with respect to each Option Target Program and an Option Target, (a) [**] and (b) any backups, follow-ons, modifications, enhancements, improvements, derivatives or optimizations of or to the [**] described in clause (a), in each case ((a) and (b)), that are [**].
1.200.“Option Product Know-How” means all Option Licensed Know-How that [**] (a) an Option Licensed Therapeutic or Option Licensed Product, (b) [**], (c) [**] or (d) the Exploitation of a therapeutic or product containing a [**] described in the foregoing clause ((a), (b) or (c)) in the Field in the Territory.
1.201.“Option Product Patents” means all Option Licensed Patents that [**] (a) (i) an Option Licensed Therapeutic or Option Licensed Product, (ii) [**] or (iii) [**] or (b) the Exploitation of a therapeutic or product [**] in the Field in the Territory.
1.202.“Option Research Plan” means the First Option Research Plan and each Additional Option Research Plan.
1.203.“Option Research Term” means, with respect to each Option Target Program, the period commencing on [**] ending upon the earliest of [**] and [**] after the commencement of the applicable Option Research Term.
1.204.“Option Target” means each Target that is designated pursuant to Section 2.3 (Target Selection and Target Substitution) as the “Option Target” with respect to an Option Target Program, until and unless such Option Target has been substituted with the Backup Option Target associated with such Option Target Program in accordance with pursuant to Section 2.3.4 (Target Selection and Target Substitution; Target Substitution) or this Agreement is terminated with respect to such Option Target Program pursuant to Section 11.2 (Termination).
1.205.“Option Target Program” means a program for the conduct of Development activities with respect to any Option Target pursuant to an Option Research Plan. For clarity, each of the First Option Target Program and Additional Option Target Programs shall be deemed an Option Target Program.
1.206.“Option Target Substitution Period” has the meaning set forth in Section 2.3.4 (Target Selection and Target Substitution; Target Substitution).
1.207.“Other Active Ingredients” has the meaning set forth in Section 1.77 (definition of “Combination Product”).
1.208.“[**]” means [**].
1.209.“Out-of-Pocket Costs” means costs and expenses paid to Third Parties (or payable to Third Parties and accrued in accordance with the Accounting Standards consistently applied) by a Party (or its Affiliate) incurred in the conduct of any applicable activities under this Agreement, including costs for independent contractors engaged as permitted under this
19
Agreement; provided that Out-of-Pocket Costs shall not include costs for general overhead, postage, communications, photocopying, printing or internet expense, professional dues, operating supplies, printers, photocopiers, fax machines or other office equipment, laboratory equipment, computers or computer service charges or any costs that are subsumed within the definition of Included FTE Costs and Expenses.
1.210.“Owned Patents” has the meaning set forth in Section 9.3.5 (Additional Representations and Warranties of Xilio).
1.211.“Party” and “Parties” have the meaning set forth in the preamble hereto.
1.212.“Patents” means: (a) all national, regional and international patents and patent applications, including provisional patent applications; (b) all patent applications filed either from such patents, patent applications or provisional applications or from an application claiming priority from either of these, including divisionals, continuations, continuations-in-part, provisionals, converted provisionals and continued prosecution applications; (c) any and all patents that have issued or in the future issue from the foregoing patent applications ((a) and (b)), including utility models, petty patents, design patents and certificates of invention; (d) any and all extensions or restorations by existing or future extension or restoration mechanisms, including revalidations, reissues, re-examinations and extensions (including any supplementary protection certificates and the like) of the foregoing patents or patent applications ((a), (b) and (c)); and (e) any similar rights, including so-called pipeline protection or any importation, revalidation, confirmation or introduction patent or registration patent or patent of additions to any of such foregoing patent applications and patents.
1.213.“[**]” has the meaning set forth in Section [**].
1.214.“Person” means an individual, sole proprietorship, partnership, limited partnership, limited liability partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or other similar entity or organization, including a government or political subdivision, department or agency of a government.
1.215.“Personal Data” means (a) all information identifying, or in combination with other information, identifiable to an individual, including pseudonymized (key-coded) clinical data containing such information and (b) any other information that is governed, regulated or protected by one (1) or more Data Security and Privacy Laws.
1.216.“Phase 1 Clinical Trial” means a Clinical Study of a Licensed Product, the principal purpose of which is a preliminary determination of safety, tolerability, pharmacological activity or pharmacokinetics in healthy individuals or patients or similar clinical study prescribed by the Regulatory Authorities, including the trials referred to in 21 C.F.R. § 312.21(a), as amended.
1.217.“Phase 2 Clinical Trial” means a Clinical Study of a Licensed Product, the principal purpose of which is a determination of safety and efficacy in the target patient population, which is prospectively designed to generate sufficient data that may permit commencement of pivotal clinical trials or a similar clinical study prescribed by the Regulatory Authorities, from time
20
to time, pursuant to Applicable Law or otherwise, including the trials referred to in 21 C.F.R. § 312.21(b), as amended.
1.218.“Phase 3 Clinical Trial” means a Clinical Study of a Licensed Product on a sufficient number of subjects in an indicated patient population that is designed to, or does, establish that a Licensed Product is safe and efficacious for its intended use and to determine the benefit/risk relationship, warnings, precautions, and adverse reactions that are associated with such product in the dosage range to be prescribed, which trial is intended to, or does, support marketing approval of such Licensed Product, including all tests and studies that are required by the FDA from time to time, pursuant to Applicable Law or otherwise, including the trials referred to in 21 C.F.R. § 312.21(c), as amended.
1.219.“PHSA” means the United States Public Health Service Act, as amended from time to time.
1.220.“Pre-Existing Entities” has the meaning set forth in Section 3.9.4(c) (Exclusivity; Exceptions).
1.221.“[**]” means, [**].
1.222.“Price Applicability Period” has the meaning set forth in Section 1191(b)(2) of the Social Security Act.
1.223.“Pricing Approval” means, with respect to a Licensed Product, in any country where a Regulatory Authority or other Governmental Authority authorizes reimbursement for, or approves or determines pricing for, pharmaceutical products, receipt (or, if required to make such authorization, approval or determination effective, publication) of reimbursement authorization or pricing approval or determination (as the case may be) for such Licensed Product in such country.
1.224.“Privacy and Security Obligations” has the meaning set forth in Section 9.2.19 (Representations and Warranties of Xilio as of the Effective Date).
1.225.“Processing” (or its conjugates) means any operation or set of operations that is performed upon Personal Data, whether or not by automatic means, such as collection, recording, organization, storage, adaptation or alternation, retrieval, consultation, use, disclosure by transmission, dissemination or otherwise making available, alignment or combination, blocking, erasure or destruction.
1.226.“Product Infringement” has the meaning set forth in Section 7.3.1 (Enforcement of Patents; Notice).
1.227.“Product Labeling” means, with respect to a Licensed Product in a country or other jurisdiction in the Territory, (a) the Regulatory Authority-approved full prescribing information for such Licensed Product for such country or other jurisdiction, including any required patient information and (b) all labels and other written, printed or graphic matter upon a container, wrapper or any package insert utilized with or for such Licensed Product in such country or other jurisdiction.
21
1.228.“Product Trademark” means the Trademark(s) to be used by AbbVie or its Affiliates or its or their respective Sublicensees for the Development or Commercialization of Licensed Products in the Territory and any registrations thereof or any pending applications relating thereto in the Territory (excluding, in any event, any Trademarks that include any corporate name or logo of the Parties or their Affiliates).
1.229.“Proposed Target” has the meaning set forth in Section 2.3.5(b) (Designation of Option Targets for Additional Option Target Programs; Procedures).
1.230.“[**]” means [**].
1.231.“Purchase Agreement” means the stock purchase agreement attached as Exhibit A.
1.232.“Receiving Party” has the meaning set forth in Section 8.1.1 (Confidentiality Obligations; Confidential Information).
1.233.“Region” means each of the following regions of the world, including countries in such regions: [**].
1.234.“Registrational Clinical Trial” means a Clinical Study of a Licensed Product on a sufficient number of subjects that, prior to commencement of such Clinical Study, satisfies both of the following ((a) and (b)): (a) such trial is designed to adequately and is well-controlled to establish that such Licensed Product has an acceptable safety and efficacy profile for its intended use, and to determine warnings, precautions, and adverse reactions that are associated with such product in the dosage range to be prescribed, which Clinical Study is intended to support Regulatory Approval of such Licensed Product, or a similar Clinical Study prescribed by the FDA; and (b) such Clinical Study is designed to be a registration trial sufficient to support the filing of an application for a Regulatory Approval for such Licensed Product in the U.S., as evidenced by (i) an agreement with or statement from the FDA on a Special Protocol Assessment or equivalent or (ii) other written guidance or minutes issued by the FDA for such registration trial.
1.235.“Regulatory Approval” means, with respect to a country or other jurisdiction in the Territory, any and all approvals (including approvals of Drug Approval Applications), licenses, registrations or authorizations of any Regulatory Authority to commercially distribute, sell and market a Licensed Product in such country or other jurisdiction, including, where applicable, (a) commercially reasonable pricing or reimbursement approval in such country or other jurisdiction, (b) pre-approval marketing authorizations (including any prerequisite Manufacturing approval or authorization related thereto) and (c) approval of Product Labeling.
1.236.“Regulatory Authority” means any applicable supra-national, federal, national, regional, state, provincial or local governmental or regulatory authority, agency, department, bureau, commission, council or other entities (e.g., the FDA and EMA) regulating or otherwise exercising authority with respect to activities contemplated in this Agreement.
1.237.“Regulatory Documentation” means all (a) applications (including all INDs and Drug Approval Applications), registrations, licenses, authorizations, and approvals
22
(including Regulatory Approvals) and (b) correspondence, information packages and reports submitted to or received from Regulatory Authorities (including minutes and official contact reports relating to any communications with any Regulatory Authority) and all supporting documents with respect thereto, including all regulatory drug lists, advertising and promotion documents, adverse event files, and complaint files.
1.238.“Regulatory Exclusivity Period” means, with respect to a Licensed Product in any country or other jurisdiction in the Territory, a market protection, other than Patent-related protection, granted by a Regulatory Authority in such country or other jurisdiction that (a) confers an exclusive Commercialization period during which AbbVie or its Affiliates or Sublicensees have the exclusive right to market and sell such Licensed Product in such country or other jurisdiction or (b) prohibits a Person from (i) relying on safety or efficacy data generated by or on behalf of a Party with respect to such Licensed Product in an application for Regulatory Approval of a Biosimilar Product or (ii) otherwise submitting such an application or obtaining such Regulatory Approval, in each case (a) and (b), for all Indications approved by such Regulatory Authority.
1.239.“Research Plan” means, as applicable, the Collaboration Research Plan or each of the Option Research Plans.
1.240.“Research Term” means, as applicable, the Collaboration Research Term or each of the Option Research Terms.
1.241.“Royalty Claim” means, with respect to a Licensed Product in a country or other jurisdiction, a Valid Claim of [**], in each case, in such country or other jurisdiction that [**] of the Licensed Therapeutic contained in such Licensed Product in such country or other jurisdiction.
1.242.“Royalty Term” means, with respect to each Licensed Product and each country or other jurisdiction in the Territory, the period beginning on the First Commercial Sale of such Licensed Product in such country or other jurisdiction and ending on the latest to occur of: (a) the expiration, invalidation, irretrievable lapse, revocation, dedication to the public, disclaimer, cancellation or abandonment date of the last Royalty Claim [**] in such country or jurisdiction; (b) the expiration of the Regulatory Exclusivity Period in such country or jurisdiction for such Licensed Product; and (c) the [**] anniversary of First Commercial Sale of such Licensed Product in such country or jurisdiction; provided that [**] provided further that [**].
1.243.“Sales Milestone Event” has the meaning set forth in Section 6.8 (Sales Milestone Events).
1.244.“Sales Milestone Payment” has the meaning set forth in Section 6.8 (Sales Milestone Events).
1.245.“Securitization Transaction” has the meaning set forth in Section 12.3.2 (Assignment; Securitization Transaction).
1.246.“Selected Drug” means a drug selected under the Drug Price Negotiation Program, as described in Section 1192 of the Social Security Act.
23
1.247.“Senior Officer” means, (a) with respect to Xilio, its [**] and (b) with respect to AbbVie, [**].
1.248.“Settlement Sublicensee” means any Third Party to whom AbbVie or its Affiliates or Sublicensees grants a sublicense to settle or avoid litigation or any Patent dispute related to (a) the alleged infringement by a Third Party with respect to the Exploitation of a Licensed Product or a Biosimilar Product or (b) the alleged non-infringement, invalidity or unenforceability of, or challenge against, any Patents covering or claiming a Licensed Product.
1.249.“Stage 1 Activities” means, with respect to each Option Target Program, [**].
1.250.“Stage 1 Information Report” means, with respect to each Option Target Program, [**].
1.251.“Stage 1 License Option Expiration Date” means, with respect to each Option Target Program, the [**] following delivery to AbbVie of a Stage 1 Information Report that contains all of the Information (including Additional Information in accordance with Section 1.250(b) (definition of “Stage 1 Information Report”)) required to be therein.
1.252.“Stage 2 Activities” means, with respect to each Option Target Program, [**].
1.253.“Stage 2 Information Report” means, with respect to each Option Target Program, [**].
1.254.“Stage 2 License Option Expiration Date” means, with respect to each Option Target Program, the [**] following delivery to AbbVie of a Stage 2 Information Report that contains all of the Information (including Additional Information in accordance with Section 1.253(b) (definition of “Stage 2 Information Report”)) required to be therein.
1.255.“Stage 3 Activities” means, with respect to each Option Target Program, [**].
1.256.“Stage 3 Information Report” means, with respect to each Option Target Program, [**].
1.257.“Stage 3 License Option Expiration Date” means the [**] following delivery to AbbVie of a Stage 3 Information Report that contains all of the Information (including Additional Information in accordance with Section 1.256(b) (definition of “Stage 3 Information Report”)) required to be therein.
1.258.“Stage 4 Activities” means, with respect to each Option Target Program, those activities identified under the “Remaining IND-Enabling Activities” heading in the Option Research Plan associated with such Option Target Program[**].
1.259.“[**]” has the meaning set forth in [**].
24
1.260.“Sublicensee” means a Person, other than an Affiliate or a Distributor, that is granted a sublicense (or further right of reference) by AbbVie or its Affiliate under the grants in Section 3.1 (License for Collaboration Target Program).
1.261.“Substitute Option Target” has the meaning set forth in Section 2.3.4 (Target Selection and Target Substitution; Target Substitution).
1.262.“Substitution Fee” has the meaning set forth in Section 6.6 (Substitution Fee).
1.263.“Substitution Right” has the meaning set forth in Section 2.3.4 (Target Selection and Target Substitution; Target Substitution).
1.264.“Surviving Provisions” has the meaning set forth in Section 11.9.2 (Accrued Rights; Surviving Obligations; Surviving Provisions).
1.265.“Target” means (a) a specific biological molecule that is identified by a NCBI Gene ID or by its amino acid or nucleic acid sequence, (b) any naturally occurring mutant or allelic variant of a molecule disclosed in clause (a), including transcriptional and posttranscriptional isoforms (e.g., alternative splice variants), and post-translational modification variants (e.g., protein processing, maturation and glycosylation variants) and (c) truncated forms (including fragments thereof) which have a biological function substantially identical to that of any biological molecules disclosed in clause ((a) or (b)).
1.266.“[**]” means [**].
1.267.“Target Program” means, as applicable, the Collaboration Target Program or each Option Target Program.
1.268.“Term” has the meaning set forth in Section 11.1 (Term and Expiration).
1.269.“Terminated Products” means, for a Terminated Program, all Licensed Therapeutics and Licensed Products for the Collaboration Target or Option Target, as applicable, of such Terminated Program.
1.270.“Terminated Program” has the meaning set forth in Section 11.6.2 (Consequences of Termination; Termination in a Terminated Territory or for Terminated Programs).
1.271.“Terminated Territory” means each Region with respect to which this Agreement is terminated by Xilio pursuant to Section 11.2.1(b) (Material Breach; Material Breach by AbbVie) or by AbbVie pursuant to Section 11.2.2(a) (Termination; Termination by AbbVie), or, if this Agreement is terminated in its entirety, the entire Territory.
1.272.“Territory” means the entire world other than the Terminated Territory.
1.273.“Third Party” means any Person other than Xilio, AbbVie and their respective Affiliates.
25
1.274.“Third Party Claims” has the meaning set forth in Section 10.1 (Indemnity; Indemnification of Xilio).
1.275.“Third Party Infringement Claim” has the meaning set forth in Section 7.4.1 (Infringement Claims by Third Parties).
1.276.“Third Party Payments” has the meaning set forth in Section 6.9.4 (Royalties; Third Party Payments).
1.277.“Third Party Rights” has the meaning set forth in Section 7.5.1 (Third Party Licenses and Patents; Notice).
1.278.“Trademark” means any word, name, symbol, color, shape, designation or any combination thereof, including any trademark, service mark, trade name, brand name, sub-brand name, trade dress, product configuration, program name, delivery form name, certification mark, collective mark, logo, tagline, slogan, design or business symbol, that functions as an identifier of source or origin, whether or not registered and all statutory and common law rights therein and all registrations and applications therefor, together with all goodwill associated with, or symbolized by, any of the foregoing.
1.279.“Transferred Inventory” has the meaning set forth in Section 3.4.3 (Xilio Obligations).
1.280.“Transition Agreement” has the meaning set forth in Section 11.7.1 (Transition of Option Licensed Products; General).
1.281.“Unencumbered Target” means, unless otherwise agreed in writing by Xilio, a Target that is not PSMA and for which Xilio (a) [**] or (b) [**].
1.282.“[**]” means [**].
1.283.“United States” or “U.S.” means the United States of America and its territories and possessions (including the District of Columbia and Puerto Rico).
1.284.“Valid Claim” means a claim of (a) any issued and unexpired Patent whose validity, enforceability or patentability has not been affected by (i) irretrievable lapse, abandonment, revocation, cancellation, dedication to the public or disclaimer or (ii) a holding, finding or decision of invalidity, unenforceability or non-patentability by a court, governmental agency, national or regional patent office or other appropriate body that has competent jurisdiction, such holding, finding or decision being final and unappealable or unappealed within the time allowed for appeal or (b) a pending Patent application that is filed and prosecuted in good faith and no more than [**] have elapsed from its earliest priority date; provided that [**]. For clarity, a holding, finding or decision being final and unappealable or unappealed within the time allowed for appeal means a holding, finding or decision from which no appeal (other than a petition to the United States Supreme Court for a writ of certiorari or a similar appeal the consideration of which is subject to the discretion of the higher court) can be or has been taken.
26
1.285.“Voting Stock” has the meaning set forth in Section 1.53 (definition of “Change in Control”).
1.286.“Withholding Amount” has the meaning set forth in Section 6.16.1 (Taxes; Withholding Taxes).
1.287.“Withholding Party” has the meaning set forth in Section 6.16.1 (Taxes; Withholding Taxes).
1.288.“Working Group” has the meaning set forth in Section 5.3 (Collaboration Management; Working Groups).
1.289.“Xilio” has the meaning set forth in the preamble hereto.
1.290.“Xilio Cure Period” has the meaning set forth in Section 11.2.1(a) (Termination; Material Breach by Xilio).
1.291.“Xilio Default Notice” has the meaning set forth in Section 11.2.1(a) (Termination; Material Breach by Xilio).
1.292.“Xilio Indemnitees” has the meaning set forth in Section 10.1 (Indemnity; Indemnification of Xilio).
1.293.“Xilio Parent” has the meaning set forth in the preamble hereto.
1.294.“Xilio Platform IP” means all Xilio Platform Patents and Xilio Platform Know-How.
1.295.“Xilio Platform Know-How” means all Information [**] that [**] and (c) is not Licensed Product Know-How.
1.296.“Xilio Platform Patents” means all Patents [**] that [**] and (c) not Licensed Product Patents.
1.297.“Xilio Platform Technology” means [**].
COLLABORATION TARGET PROGRAM AND OPTION TARGET PROGRAMS
2.1.General. The Parties will collaborate with the goal of Developing one (1) or more Licensed Therapeutics and Licensed Products [**] under the Collaboration Target Program. The Parties will further collaborate with the goal of Developing additional Licensed Therapeutics and Licensed Products [**] under the First Option Target Program. The Parties may also collaborate to Develop additional Licensed Therapeutics and Licensed Products [**] under up to two (2) additional Option Target Programs.
27
2.2.1.Collaboration Target Program. With respect to the Collaboration Target Program, the Parties have agreed to a written plan attached hereto as Schedule 2.2.1 (Collaboration Research Plan) setting forth (a) detailed descriptions of the Development activities to be performed by or on behalf of Xilio during the Collaboration Research Term in furtherance of discovering and Developing Collaboration Licensed Therapeutics and Collaboration Licensed Products, (b) [**], (c) [**] and (d) [**] (such written plan, the “Collaboration Research Plan”).
2.2.2.First Option Target Program. With respect to the First Option Target Program, the Parties have agreed to a written plan attached hereto as Schedule 2.2.2 (First Option Research Plan) setting forth (a) detailed descriptions of the Development activities to be performed by Xilio during the applicable Option Research Term in furtherance of discovering and Developing Option Licensed Therapeutics and the Option Licensed Products associated with the First Option Target, (b) [**] and (c) [**] (such written plan, the “First Option Research Plan”).
2.2.3.Additional Option Target Programs. Subject to Section 2.3 (Target Selection and Target Substitution), AbbVie shall have the right, but not the obligation, to add up to two (2) additional Option Target Programs (each such additional Option Target Program, an “Additional Option Target Program”) by providing Xilio with written notice of its desire to add an Additional Option Target Program (such notice, the “Additional Option Target Program Notice”). [**] the Parties shall agree, in accordance with Section 5.1.2 (Joint Governance Committee; Responsibilities), upon a plan setting forth (a) detailed descriptions of the Development activities to be performed by Xilio during the applicable Option Research Term in furtherance of discovering and Developing Option Licensed Therapeutics and the Option Licensed Products associated with such Option Target, (b) [**] and (c) [**] (each, an “Additional Option Research Plan”). AbbVie shall pay to Xilio the Additional Option Target Program Fee in accordance with Section 6.5 (Additional Option Target Program Fee).
2.3.Target Selection and Target Substitution.
2.3.1.Collaboration Target Program. The Target for the Collaboration Target Program is [**] (“Collaboration Target”).
2.3.2.First Option Target Program. Subject to AbbVie’s Substitution Right set forth in Section 2.3.4 (Target Selection and Target Substitution; Target Substitution), the Option Target for the First Option Target Program is the First Option Target. The Backup Option Target for the First Option Target Program is the Initial Backup Option Target.
2.3.3.Additional Option Target Program. For each Additional Option Target Program, [**] designate an Option Target and a Backup Option Target on or before the third (3rd) anniversary of the Effective Date [**].
2.3.4.Target Substitution. On an Option Target Program-by-Option Target Program basis, (a) with respect to the First Option Target Program, during the time period following [**] and (b) with respect to any Additional Option Target Program, during the time period following [**] (each such time period in ((a) and (b)), “Option Target Substitution
28
Period”), AbbVie shall have a one (1)-time right in its sole discretion to substitute the initially designated Option Target for such Option Target Program with the Backup Option Target associated with such Option Target Program, by providing Xilio with a written notice to trigger substitution (each Backup Option Target that is substituted for the initially designated Option Target pursuant to this Section 2.3.4 (Target Selection and Target Substitution; Target Substitution), a “Substitute Option Target” and such substitution right for each Option Target Program, a “Substitution Right”).
(a)Upon Xilio’s receipt of a written notice from AbbVie exercising the Substitution Right for an Option Target Program within the applicable Option Target Substitution Period, the Parties, through the JGC, shall discuss and agree upon a new Option Research Plan for the applicable Substitute Option Target, and AbbVie shall pay to Xilio the Substitution Fee in accordance with Section 6.6 (Substitution Fee).
(b)After AbbVie’s exercise of its Substitution Right for an Option Target Program, the Substitute Option Target for such Option Target Program shall become the Option Target for such Option Target Program for all purposes hereunder (except that it cannot be further replaced), and this Agreement will terminate in all respects as to such replaced Option Target, and AbbVie will have no rights, and Xilio will have no obligations, with respect to such replaced Option Target on and after the date of AbbVie’s exercise of such Substitution Right for such Option Target Program. For clarity, an Option Research Plan, upon approval by the JGC for a Substitute Option Target, shall become, as applicable, a First Option Research Plan or an Additional Option Research Plan for all purposes hereunder.
(c)On an Option Target Program-by-Option Target Program basis, this Agreement will terminate with respect to any Backup Option Target that has not become a Substitute Option Target before the expiration of the Option Target Substitution Period for such Option Target Program, and AbbVie will have no rights, and Xilio will have no obligations, with respect to such Backup Option Target on and after such expiration date.
2.3.5.Designation of Option Targets for Additional Option Target Programs.
(a)General. [**].
(b)Procedures. Each of AbbVie’s Additional Option Target Program Notices to Xilio shall identify the Targets that AbbVie desires to become the Option Target and the Backup Option Target for such Additional Option Target Program (each such Target, a “Proposed Target”). The identity of such Proposed Targets shall be deemed the Confidential Information of AbbVie and shall only be disclosed to employees, directors, consultants, agents or advisors (including outside counsel) of Xilio who have a need to know such information in order to determine whether such Proposed Targets are Unencumbered Targets and are under an obligation of confidentiality no less restrictive than ARTICLE 8 (Confidentiality and Non-Disclosure). [**] Xilio shall either confirm that each Proposed Target is an Unencumbered Target or notify AbbVie that such Proposed Target is not an Unencumbered Target. If Xilio does not notify AbbVie that a Proposed Target is not an Unencumbered Target [**], then such Proposed
29
Target shall automatically be deemed an Unencumbered Target. If Xilio informs AbbVie that a Proposed Target is not an Unencumbered Target, then [**].
2.4.Conduct of Research Plans. With respect to each Collaboration Research Plan and Option Research Plan, except for [**], and subject to [**], during the applicable Research Term, Xilio shall perform all Development activities set forth in the applicable Research Plan by [**]. Each Party shall perform all of its Development activities under each Research Plan in good scientific manner and in compliance with all Applicable Law. Notwithstanding the foregoing, the Parties recognize the scientific uncertainty involved in pharmaceutical Development and agree that there is no guarantee that any stated objective in a Research Plan will be achievable.
2.5.Review and Amendment. The JGC shall review each Research Plan [**] for the purpose of considering appropriate amendments thereto, and either Party, through its representatives on the JGC, may propose amendments to a Research Plan at any time. No amendment to any Research Plan shall be effective unless and until approved by the JGC or pursuant to Section 5.2.4 (General Provisions Applicable to the JGC; Decision-Making), if applicable.
2.6.Xilio Obligations to Perform Activities.With respect to each Research Plan during the applicable Research Term, subject to Section 2.4 (Conduct of Research Plans), Xilio is required to conduct each specified activity therein [**] unless the conduct of an activity [**] set forth in the applicable Research Plan, provided that if [**]. If the performance of an activity [**] set forth in a applicable Research Plan.
2.7.[**] Progress Reports; Updates. [**] Xilio shall provide to the JGC a detailed report describing the Development activities conducted and results obtained under each Research Plan since the previous report (or, with respect to the first such report, since the beginning of the Research Term), and the Development activities anticipated to be conducted [**] with respect to the Collaboration Target or Option Target, as applicable.
2.8.Information Reports and License Option Exercise Data Package. With respect to each Option Target Program, Xilio shall deliver to AbbVie the applicable Information Reports and License Option Exercise Data Package according to the following:
2.8.1.Stage 1 Information Report [**] Stage 1 Activities included in an Option Research Plan [**];
2.8.2.Stage 2 Information Report [**] Stage 2 Activities included in an Option Research Plan [**];
2.8.3.Stage 3 Information Report [**] Stage 3 Activities included in an Option Research Plan [**]; and
2.8.4.License Option Exercise Data Package [**] Stage 4 Activities, included in an Option Research Plan and [**].
30
2.8.5.[**] AbbVie shall have the right to review such Information Report or License Option Exercise Data Package, as applicable [**]. Additionally, notwithstanding any provision to the contrary set forth in this Agreement, [**].
2.8.6.If an Option Research Term for an Option Target Program [**] under the applicable Option Research Plan for such Option Target Program, then [**] after the expiration of the applicable Option Research Term, Xilio shall [**].
2.9.Manufacturing. Xilio shall be responsible for [**]; provided that, (i) with respect to the Collaboration Target Program, [**] and (ii) with respect to the Option Licensed Therapeutics [**]. Additionally, on an Option Target Program-by-Option Target Program basis, to the extent set forth in the applicable Option Research Plan, [**].
2.10.Subcontracting. Xilio shall [**] except (a) to any [**] or (b) to the extent applicable, to [**] provided that [**].
2.11.Development Records. Xilio shall, and shall cause its Affiliates to, maintain, in good scientific manner, complete and accurate books and records pertaining to its Development activities under the Research Plans, in sufficient detail to verify compliance with its obligations under this Agreement and which books and records shall (a) be appropriate for Patent and regulatory purposes, (b) be kept and maintained in compliance with Applicable Law, (c) properly reflect all work done and results achieved in the performance of its activities hereunder and (d) not include or be commingled with records of activities outside the scope of this Agreement. Xilio shall, or shall cause its Affiliates, as applicable, to retain such books and records for [**] or for such longer period as may be required by Applicable Law. Upon AbbVie’s written request [**], Xilio shall provide AbbVie copies of the records Xilio has maintained pursuant to this Section 2.11 (Development Records) and AbbVie shall have the right, during normal business hours and upon reasonable advanced written notice, to inspect and copy all records maintained pursuant to this Section 2.11 (Development Records); provided that (i) AbbVie shall maintain any Confidential Information of Xilio in such records in confidence in accordance with ARTICLE 8 (Confidentiality and Non-Disclosure) and (ii) AbbVie shall not have the right to request copies of records or to exercise its inspection and copy right with respect to records relating to an Option Target after the end of the License Option Period for such Option Target if AbbVie does not exercise its License Option for such Option Target.
2.12.Expenses. Except as expressly set forth under this Agreement or otherwise agreed in writing by the Parties, Xilio shall be responsible for and shall bear all costs and expenses necessary to perform its obligations under each Research Plan and this ARTICLE 2 (Collaboration Target Program and Option Target Programs).
2.13.AbbVie Proprietary Materials. AbbVie shall provide to Xilio the AbbVie Proprietary Materials in the quantities and on the timeline set forth in the applicable Research Plan. AbbVie may provide to Xilio certain other AbbVie Proprietary Materials from time to time as set forth in a Research Plan or otherwise agreed by the Parties. Except for the licenses granted to Xilio pursuant to Section 3.5 (Grant of Rights to Xilio), AbbVie shall retain all rights, title and interests in and to the AbbVie Proprietary Materials. Xilio agrees that, except as expressly permitted under the applicable Research Plan or otherwise agreed by the Parties: (a) it shall not
31
use the AbbVie Proprietary Materials for any purpose other than for the conduct of the applicable Research Plan; (b) it shall not make or attempt to make any analogues, progeny, expression products, mutants, replicates, derivatives, modifications, enhancements or improvements to, or reverse engineer, the AbbVie Proprietary Materials except as necessary to perform activities under the applicable Research Plan; (c) it shall use the AbbVie Proprietary Materials in compliance with Applicable Law; (d) it shall not transfer any AbbVie Proprietary Materials to a Third Party [**] in connection with the conduct of the applicable Research Plan unless such transfer is expressly provided for in the applicable Research Plan; and (e) upon completion of the applicable Research Plan, or the expiration or earlier termination of this Agreement, in each case, with respect to a Licensed Therapeutic or Licensed Product, or if otherwise requested by AbbVie, Xilio shall, if and as instructed by AbbVie, either destroy or return all remaining AbbVie Proprietary Materials. Xilio shall use the same degree of care and efficiency with respect to such AbbVie Proprietary Materials in the conduct of each Research Plan as used by Xilio with respect to its own materials in the conduct of its own activities.
2.14.AbbVie Step-In Rights. If Xilio is in material breach of its obligations to perform the activities set forth in any Option Research Plan and fails to cure such breach following written notice from AbbVie [**] AbbVie itself may step-in and perform the outstanding activities under all remaining stages in such Option Research Plan (the “Step-In Right”) [**].
2.15.1.Collaboration Target Program. AbbVie shall lead all interactions with any Regulatory Authority regarding any Collaboration Licensed Therapeutic or Collaboration Licensed Product. [**].
2.15.2.Option Target Programs. During the Option Research Term for a given Option Target Program, Xilio shall [**] and AbbVie shall have the right to attend such meeting to the extent permitted under Applicable Law. In addition, [**] Xilio may engage in any other meeting, conference or discussion with FDA or other Regulatory Authority regarding any Option Licensed Product that is the subject of such Option Target Program, provided that [**]. Xilio shall provide AbbVie with copies of the minutes or summaries of any such meetings, conferences or discussions with FDA regarding any Option Licensed Product, to the extent provided by or to FDA. Following the License Option Effective Date for an Option Target Program, AbbVie will be responsible for any meeting, conference or discussion with any Regulatory Authority regarding any Option Licensed Therapeutic or Option Licensed Product that is the subject of such Option Target Program. [**].
GRANT OF RIGHTS; OPTION; EXCLUSIVITY
3.1.License for Collaboration Target Program. Xilio (on behalf of itself and its Affiliates) hereby grants to AbbVie and its Affiliates an exclusive (even as to Xilio and its Affiliates), sublicensable (through multiple tiers of Sublicensees), transferable (in accordance with Section 12.3 (Assignment)) license under the Collaboration Licensed IP to Exploit the
32
Collaboration Licensed Therapeutics and the Collaboration Licensed Products in the Field in the Territory (the “AbbVie Collaboration License”). [**].
3.2.Options and Licenses for Option Target Programs.
3.2.1.General. On an Option Target Program-by-Option Target Program basis, Xilio (on behalf of itself and its Affiliates) hereby grants to AbbVie, a fully paid-up, irrevocable and exclusive (even as to Xilio and its Affiliates), transferable (in accordance with Section 12.3 (Assignment)) option (each such option for an Option Target Program, a “License Option”) to obtain, and hereby upon the License Option Effective Date for such Option Target Program grants, an exclusive (even as to Xilio and its Affiliates), sublicensable (through multiple tiers of Sublicensees), transferable (in accordance with Section 12.3 (Assignment)) license under all Option Licensed IP associated with such Option Target Program to Exploit Option Licensed Therapeutics and the Option Licensed Products, [**] (each such license for an Option Target Program, an “AbbVie Option License”). [**]. Notwithstanding any provision to the contrary set forth in this Section 3.2.1 (Options and Licenses for Option Target Programs; General), Xilio hereby grants to AbbVie, (i) [**] a co-exclusive (with Xilio), sublicensable (solely to Affiliates and Third Party contractors conducting activities on behalf of AbbVie) license under all Option Licensed IP necessary or reasonably useful to Manufacture the Option Licensed Therapeutics and Option Licensed Products that are the subject of such Option Target Program; and (ii) [**].
3.2.2.License Option Extension. [**] with respect to an Option Target Program, AbbVie shall have until the then-current applicable License Option Expiration Date for such Option Target Program to provide a written notice to Xilio of its desire to extend the License Option Period for such Option Target Program (“Option Extension Notice”). If AbbVie does not extend the Applicable Option Expiration Date for a given Option Target Program pursuant to this Section 3.2.2 (Options and Licenses for Option Target Programs; License Option Extension), then such Option Target Program shall terminate in accordance with Section 11.6.2 (Termination in a Terminated Territory or for Terminated Programs), and the License Option for such Option Target Program will automatically terminate as of such expiration date. On an Option Target Program-by-Option Target Program basis, AbbVie shall pay Xilio the Option Extension Payment in accordance with Section 6.4 (Option Extension Payment) after providing an Option Extension Notice.
3.2.3.License Option Exercise. On an Option Target Program-by-Option Target Program basis, AbbVie shall have the right to exercise the License Option for an Option Target Program by giving Xilio an Option Exercise Notice (such date of delivery of the Option Exercise Notice, the “Option Exercise Date”) at any time during the time period commencing (a) with respect to the First Option Target Program, on the Effective Date and (b) with respect to any Additional Option Target Program, following AbbVie’s delivery of an Additional Option Target Program Notice to Xilio with respect to such Additional Option Target Program, and, in each case ((a) and (b)), ending on the Applicable Option Expiration Date for such Option Target Program (such time period, the “License Option Period”). Upon delivery by AbbVie of an Option Exercise Notice to Xilio for an Option Target Program, Section 6.3 (Option Exercise Payment) shall apply with respect to such Option Target Program.
3.2.4.Antitrust Consents.
33
(a)With respect to each License Option, if AbbVie [**] determines [**] that the expiration or termination of waiting periods, in each case, pursuant to applicable Antitrust Laws (the “Antitrust Consents”) are required before the licenses contemplated by such License Option may become effective, then AbbVie shall provide such Option Exercise Notice to Xilio [**].
(b)With respect to each License Option for which AbbVie determines that Antitrust Consents are required (each, an “Antitrust Consent Option”):
(1)The Parties shall each, as soon as practicable after AbbVie delivers the Option Exercise Notice, use reasonable best efforts to (i) file, or cause to be filed, any documents necessary for the licenses contemplated by such License Option to become effective and (ii) obtain any necessary actions, nonactions, waivers, consents, clearances, decisions, declarations or approvals; provided that the Parties shall each file with the U.S. Federal Trade Commission and the U.S. Department of Justice any notifications required to be filed under the HSR Act (the “HSR Filing”) within [**] (or such longer period as may reasonably be requested by AbbVie) after AbbVie provides the Option Exercise Notice [**].
(2)In furtherance of this Section 3.2.4(b) (Options and Licenses for Option Target Programs; Antitrust Consents) and unless agreed in writing by the Parties, AbbVie and Xilio shall use reasonable best efforts to prepare and file any filing required to obtain the applicable Antitrust Consents promptly after AbbVie delivers the applicable Option Exercise Notice. [**].
(3)AbbVie and Xilio shall each use reasonable best efforts to resolve as promptly as practicable any objections that may be asserted by any Governmental Authority with respect to the licenses notified in any Antitrust Consent. [**].
(c)Without limiting the foregoing and notwithstanding anything to contrary herein, if any Governmental Authority initiates an inquiry, investigation or review pursuant to Antitrust Laws of any of the transactions contemplated hereunder at any time during the Term, then [**].
3.2.5.License Option Effective Date.
(a)Procedures for License Options. With respect to each Option Target Program for which AbbVie provides Xilio an Option Exercise Notice or Xilio provides an Information Report to AbbVie, within (i) [**], (ii) [**] or (iii) [**] (each such date, a “Bring-Down Date”), Xilio shall provide AbbVie with: [**] with respect to such Option Target Program (collectively (A) and (B), the “License Option Review Package”).
(b)License Option Effective Date. The License Option for a given Option Target Program shall become effective on the earlier of: (i) [**] and (ii) [**] the “License Option Effective Date”).
(c)With respect to each License Option for an Option Target Program, Xilio shall [**].
34
(d)Termination of a License Option.
(1)AbbVie shall have the right to terminate this Agreement (a) with respect to a License Option for an Option Target Program [**] by providing written notice to Xilio no later than [**] and (b) [**], in each case ((a) and (b)), if Xilio does not [**].
(2)Without limiting the foregoing in this Section 3.2.5(d) (License Option Effective Date; Termination of a License Option), with respect to [**] for an Option Target Program, (i) AbbVie may terminate this Agreement with respect to such [**] and (ii) either Party may terminate this Agreement [**].
3.3.Licensed Therapeutic and Licensed Product Responsibility.
3.3.1.On the Effective Date, with respect to the Collaboration Target Program, except for the Development activities allocated to Xilio in the Collaboration Research Plan, AbbVie, at its sole cost and expense, shall assume sole and exclusive responsibility for all Exploitation of the Collaboration Licensed Therapeutics and Collaboration Licensed Products.
3.3.2.With respect to each Option Target Program, on the License Option Effective Date for such Option Target Program, AbbVie, at its sole cost and expense, shall assume sole and exclusive responsibility for all further Exploitation of all Option Licensed Therapeutics and Option Licensed Products [**] except to the extent [**]. For clarity, on and after the License Option Effective Date on an Option Target Program-by-Option Target Program basis, Xilio shall not perform any activities under the Option Research Plan for such Option Target Program [**].
3.4.Xilio Obligations. With respect to each Licensed Target, from and after the Collaboration Handover Date for the Collaboration Target and the License Option Effective Date for each Option Target, and without additional consideration to Xilio:
3.4.1.Upon AbbVie’s request, Xilio shall, and hereby does (and, in the case of agreements to which an Affiliate of Xilio is a party, shall cause such Affiliate to), assign to AbbVie, and AbbVie shall and hereby does assume, any agreements (or statements of work or similar portion of an agreement, to the extent assignable without their parent agreement) to the extent solely relating to the Development or Manufacture of the Licensed Therapeutics and Licensed Products [**] such Licensed Target to which Xilio or any of its Affiliates is a party; provided that, to the extent that the assignment by Xilio (or its Affiliate, as applicable) of any agreement (or statements of work or similar portion of an agreement, to the extent assignable without their parent agreement) pursuant to this Section 3.4.1 (Xilio Obligations) requires any notice to, or consent of, the relevant Third Party counterparty to such agreement [**]. Xilio will facilitate, cooperate with and reasonably assist AbbVie in entering into its own agreement with such Third Party if Xilio is not able to obtain such Third Party’s consent or if an agreement is not solely related to the Development or Manufacture of the Licensed Therapeutics and Licensed Products [**] such Licensed Target, but is necessary or reasonably useful to such Development or Manufacture. For any agreement (or statements of work or similar portion of an agreement) relating to the Development or Manufacture of the Licensed Therapeutics and Licensed Products [**] such Licensed Target that requires the separation of such agreement into an agreement that
35
is retained by Xilio or such Affiliate and an agreement that is assignable to (or entered into by) AbbVie, or the assignment of a statement of work or other ancillary agreement to AbbVie and the retention by Xilio of a master agreement relating to such statement of work or other ancillary agreement, the Parties will reasonably cooperate to negotiate such separation as soon as practicable, [**]; provided, further, that the assignment of any agreement that is necessary for Xilio to perform any unfinished Development activities under a Research Plan will be delayed until Xilio’s completion of such unfinished Development activities. Until such notice is given, such consent is obtained or such separation is executed, the Parties will reasonably cooperate to provide to AbbVie the benefits under such agreement to the extent applicable to the rights to be assigned to AbbVie at no cost to Xilio.
3.4.2.Upon AbbVie’s request, Xilio shall transfer to AbbVie (a) to the extent not previously provided to AbbVie, copies of all Information arising out of the Development activities for such Licensed Target, including all non-clinical Information necessary or reasonably useful to Exploit the Licensed Therapeutics and Licensed Products [**] such Licensed Target and any Regulatory Documentation for such Licensed Therapeutics or Licensed Products but excluding Information within Xilio Platform Technology and (b) to the extent not publicly available, previously provided to AbbVie or readily available to AbbVie, [**] for the filing, prosecution, defense, maintenance, validity and enforceability of the Licensed Product Patents, in each case ((a) and (b)) Controlled by Xilio;
3.4.3.Upon AbbVie’s request, Xilio shall provide AbbVie [**] in connection with the Development activities for such Licensed Target, and Xilio shall [**] deliver such inventory to AbbVie [**] (such delivered inventory, the “Transferred Inventory”); provided that if Xilio requires any such inventory to perform any unfinished Development activities, then transfer of such inventory may be delayed until Xilio’s completion of such unfinished Development activities;
3.4.4.Upon AbbVie’s request and as applicable, Xilio and AbbVie shall duly negotiate and execute a quality agreement with respect to the Transferred Inventory with such terms as are reasonable and customary for similar quality agreements; and
3.4.5.Xilio shall duly execute and deliver, or cause to be duly executed and delivered, such instruments and shall do and cause to be done such acts and things, including the filing of such assignments, agreements, documents and instruments [**].
3.5.Grant of Rights to Xilio. AbbVie (on behalf of itself and its Affiliates) hereby grants to Xilio and its Affiliates:
3.5.1.with respect to the Collaboration Target, from the Effective Date until [**], a non-exclusive, royalty-free license (or sublicense), without the right to grant sublicenses [**], under any Information or Patents Controlled by AbbVie or any of its Affiliates that are necessary for Xilio to use the AbbVie Proprietary Materials as set forth in the Collaboration Research Plan or to otherwise conduct activities allocated to Xilio as set forth in the Collaboration Research Plan, solely for Xilio and its Affiliates to perform the activities set forth in the Collaboration Research Plan; and
36
3.5.2.with respect to each Option Target, from the Effective Date until [**], a non-exclusive, royalty-free license (or sublicense), without the right to grant sublicenses [**], under any Information or Patents Controlled by AbbVie or any of its Affiliates that are necessary for Xilio to conduct activities allocated to Xilio as set forth in the Option Research Plan, solely for Xilio and its Affiliates to perform the activities set forth in the applicable Option Research Plan for such Option Target.
3.6.Sublicenses. AbbVie shall have the right to grant sublicenses, through multiple tiers of sublicenses, under the licenses granted in Section 3.1 (License for Collaboration Target Program), to its Affiliates and Third Parties [**].
3.7.No Implied Licenses. Except as expressly provided herein, Xilio grants no other right or license, including any rights or licenses to the Licensed Patents, Licensed Know-How, Xilio’s interests in the Joint IP, if any, Xilio’s Corporate Names or any other Patent or intellectual property rights owned or Controlled by Xilio or its Affiliates and not otherwise expressly granted herein. Except as expressly provided herein, AbbVie grants no other right or license, including any rights or licenses under any Information or Patents Controlled by AbbVie or any of its Affiliates that relate to AbbVie Proprietary Materials, AbbVie’s interests in the Joint IP, if any, AbbVie’s Corporate Names or any other Patent or intellectual property rights owned or Controlled by AbbVie or its Affiliates and not otherwise expressly granted herein.
3.9.1.Collaboration Target. Subject to the exceptions in Section 3.9.4 (Exclusivity; Exceptions), from the Effective Date, Xilio shall not, either alone or with or through any Affiliate or Third Party:
(a)until the termination or expiration of this Agreement with respect to the Collaboration Target in any country or other jurisdiction in the Territory, (i) Commercialize or Manufacture commercial supply of or (ii) license, authorize, appoint or otherwise enable any Third Party to Commercialize or Manufacture commercial supply of, in either case ((i) or (ii)), [**] the Collaboration Target;
(b)until the termination or expiration of this Agreement with respect to the Collaboration Target in the United States, (i) Develop or Manufacture pre-clinical or clinical supply of or (ii) license, authorize, appoint or otherwise enable any Third Party to Develop or Manufacture pre-clinical or clinical supply of, in either case ((i) or (ii)), [**] the Collaboration Target; and
(c)[**], in any country or other jurisdiction in the Territory outside of the United States, [**].
3.9.2.Option Targets. Subject to the exceptions in Section 3.9.4 (Exclusivity; Exceptions), on an Option Target-by-Option Target basis, from (1) the Effective Date for the First Option Target or (2) [**], Xilio shall not, either alone or with or through any Affiliate or Third Party:
37
(a)until the termination or expiration of this Agreement with respect to the applicable Option Target for the Option Target Program in any country or other jurisdiction in the Territory, (i) Commercialize or Manufacture commercial supply of or (ii) license, authorize, appoint or otherwise enable any Third Party to Commercialize or Manufacture commercial supply of, in either case ((i) or (ii)), [**] Option Target that is the subject of such Option Target Program;
(b)until the termination or expiration of this Agreement with respect to the applicable Option Target for the Option Target Program in the United States, (i) Develop or Manufacture pre-clinical or clinical supply of or (ii) license, authorize, appoint or otherwise enable any Third Party to Develop or Manufacture pre-clinical or clinical supply of, in either case ((i) or (ii)), [**] Option Target that is the subject of such Option Target Program; and
(c)[**], in any country or other jurisdiction in the Territory outside of the United States, [**] Option Target that is the subject of such Option Target Program.
For clarity, if AbbVie does not exercise its License Option with respect to an Option Target Program prior to the end of the applicable License Option Period, then this Agreement shall terminate with respect to such Option Target Program and the Option Target that is the subject of such Option Target Program, including the exclusivity obligation with respect to such Option Target.
3.9.3.Backup Option Targets. Subject to the exceptions in Section 3.9.4 (Exclusivity; Exceptions), on an Option Target Program-by-Option Target Program basis during the applicable Option Target Substitution Period, Xilio shall not, either alone or with or through any Affiliate or Third Party, (i) Exploit or (ii) license, authorize, appoint or otherwise assist or enable any Third Party to Exploit, in either case ((i) or (ii)), [**] of such Option Target Program in any country or other jurisdiction in the Territory.
3.9.4.Exceptions.
(a)The exclusivity provisions of Section 3.9.1 (Exclusivity; Collaboration Target), 3.9.2 (Exclusivity; Option Targets), and 3.9.3 (Exclusivity; Backup Option Targets) do not apply to restrict Xilio’s activities for Licensed Therapeutics and Licensed Products conducted under and in accordance with this Agreement, including under the Research Plans.
(b)[**].
(c)[**].
(d)[**].
3.9.5.[**].
3.9.6.Acknowledgement. Each Party acknowledges and agrees that (a) this Section 3.9 (Exclusivity) has been negotiated by the Parties, (b) the [**] limitations on activities set forth in this Section 3.9 (Exclusivity) are reasonable, valid and necessary in light of the Parties’ circumstances and necessary for the adequate protection of the activities under this Agreement and (c) each Party would not have entered into this Agreement without the protection afforded to it by this Section 3.9 (Exclusivity). If, notwithstanding the foregoing, a court of
38
competent jurisdiction determines that the restrictions set forth in this Section 3.9 (Exclusivity) are too broad or otherwise unreasonable under Applicable Law, including with respect to duration, geographic scope or space, then the court is hereby requested and authorized by the Parties to revise this Section 3.9 (Exclusivity) to include the maximum restrictions allowable under Applicable Law.
DEVELOPMENT AND COMMERCIALIZATION BY ABBVIE
4.1.General. With respect to each Licensed Target, after the Effective Date with respect to the Collaboration Target and after the License Option Effective Date with respect to each Option Target [**] AbbVie (itself or through its Affiliates or its or their respective Sublicensees), at its sole cost and expense and in its sole discretion, shall, as between the Parties, have the sole right to further Develop, Manufacture, Commercialize and otherwise Exploit the Licensed Therapeutics [**] such Licensed Target and the corresponding Licensed Products [**] such Licensed Target, in each case, in the Field in the Territory, including the design and performance of additional Clinical Studies, the potential expansion into additional Indications and selection of agents to be used in Combination Products. AbbVie will Exploit all Licensed Therapeutics and Licensed Products in the Field in the Territory in accordance with Applicable Law.
4.2.1.Collaboration Licensed Product. Commencing on the Effective Date, but subject to Xilio’s completion of all activities under the Collaboration Research Plan and achievement of the success criteria set forth therein, AbbVie shall [**].
4.2.2.Option Licensed Product. On an Option Target Program-by-Option Target Program basis, commencing on the License Option Effective Date for each Option Target, AbbVie shall [**].
4.2.3.Diligence After Regulatory Approval. On a Target Program-by-Target Program basis, commencing upon receipt of Regulatory Approval [**] AbbVie shall [**].
4.2.4.No Other Diligence Obligations. Except as set forth in this Section 4.2 (Diligence), AbbVie shall have no other diligence obligations, express or implied, with respect to the Development, Commercialization or other Exploitation of the Licensed Products in the Territory.
4.4.Manufacturing Technology Transfer.
4.4.1.Transfer of Licensed Know-How and Materials. With respect to each Licensed Target, after the Collaboration Handover Date for the Collaboration Target and after the License Option Effective Date for each Option Target, Xilio shall, and shall cause its Affiliates to, [**] disclose, transfer or Make Available to AbbVie, to the extent not previously provided to AbbVie, [**] all Collaboration Licensed Materials and Licensed Know-How that [**]
39
the Manufacture of such Licensed Therapeutic or Licensed Product (a) using the then-current Manufacturing process as of such Collaboration Handover Date or License Option Effective Date, as applicable [**] after such Collaboration Handover Date or License Option Effective Date, as applicable or [**].
4.4.2.Assistance from Permitted Entities. On a Target Program-by-Target Program basis, or [**] following the initiation of any technology transfer pursuant to Section 4.4.1 (Manufacturing Technology Transfer; Transfer of Licensed Know-How and Materials), Xilio shall cause its and its Affiliate’s appropriately skilled employees, [**] to provide AbbVie and its designees with such assistance [**] to enable AbbVie or such designees to Manufacture the applicable Licensed Therapeutics and Licensed Products in the Territory. For the Collaboration Target Program, Xilio shall provide [**] of Manufacturing-related support, and for each Option Target Program, (i) if [**], then Xilio shall provide [**] and (ii) if [**], then Xilio shall provide [**], in each case, [**].
4.5.Subcontracting; Distributors. AbbVie shall have the right to subcontract any of its Development, Manufacturing or Commercialization activities to a Third Party (including by appointing one (1) or more contract sales forces, co-promotion partners or Distributors); provided that no such permitted subcontracting shall relieve AbbVie of any of its obligations hereunder. AbbVie agrees that it will be fully responsible and liable for any breach of the terms of this Agreement by any of its subcontractors to the same extent as if AbbVie itself had committed any such breach [**].
4.6.Development Reports. With respect to each Licensed Target, commencing on Collaboration Handover Date and the License Option Effective Date for each Option Target, and ending upon receipt of the first Regulatory Approval for a Licensed Product [**], on an annual basis AbbVie shall provide Xilio a high-level summary of its Development activities with respect to the Licensed Products [**] such Licensed Targets conducted since the last such summary was provided hereunder.
4.7.1.Drug Approval Applications and Regulatory Approvals. After the Effective Date for the Collaboration Target, and the License Option Effective Date for each Option Target for which AbbVie exercises its License Option, AbbVie shall, as between the Parties, have the sole right, in its sole discretion, to prepare, obtain and maintain Drug Approval Applications (including the setting of the overall regulatory strategy therefor), other Regulatory Approvals and other submissions and to conduct communications with the Regulatory Authorities in the Territory for the applicable Licensed Products. Xilio and its Affiliates shall provide reasonably necessary support to AbbVie in obtaining Regulatory Approvals for the applicable Licensed Products, including providing all documents or other materials in the Control of Xilio or any of its Affiliates not previously provided to AbbVie that are necessary or reasonably useful for AbbVie or any of its Affiliates or its or their respective Sublicensees to obtain Regulatory Approvals for the applicable Licensed Products.
4.7.2.Ownership of Licensed Products Regulatory Documentation. All Regulatory Documentation (including all Regulatory Approvals) in the Territory for the
40
Licensed Products [**] shall be owned by, and shall be the sole property and held in the name of, AbbVie or its designated Affiliate, Sublicensee or designee.
4.7.3.Adverse Event Reporting. Within [**], the Parties shall enter into an agreement (the “Adverse Event and Safety Data Exchange Agreement”) to initiate a process for the exchange of adverse event safety data for (a) any Licensed Product that AbbVie believes to have an adverse event [**] or (b) any product owned or controlled by Xilio outside of the scope of this Agreement that [**], in each case, in a format agreed in writing by the Parties, including post-marketing spontaneous reports received by a Party or its Affiliates in order to monitor the safety of such Licensed Product or Xilio product, as applicable, and to meet reporting requirements with any applicable Regulatory Authority.
4.8.Booking of Sales; Distribution. AbbVie (or its designee(s)) shall have the sole and exclusive right, in its sole discretion, to invoice and book sales, establish all terms of sale (including pricing and discounts) and warehousing, and distribute the Licensed Products in the Territory and to perform or cause to be performed all related services. AbbVie shall handle all returns, recalls, withdrawals, order processing, invoicing, collection, distribution and inventory management with respect to the Licensed Products in the Territory.
4.9.Inflation Reduction Act. If the United States Department of Health and Human Services designates a Licensed Product as a Selected Drug subject to Maximum Fair Price negotiation, then, as between the Parties, AbbVie shall have the sole right, in its sole discretion, to conduct such negotiations, and all activities with respect thereto and to control all decisions and interactions with the applicable Governmental Authority(ies) with respect thereto. Xilio shall fully cooperate with all reasonable requests of AbbVie in connection therewith by undertaking efforts to do all such reasonable acts and things and to sign all such documents as will reasonably enable AbbVie to comply with Applicable Law, including providing copies of all information in the Control of Xilio that is required to be submitted to the applicable Governmental Authority(ies) [**].
COLLABORATION MANAGEMENT
5.1.Joint Governance Committee.
5.1.1.Formation. Within [**] after the Effective Date, the Parties shall establish a joint governance committee (the “Joint Governance Committee” or “JGC”) to serve as the oversight and decision-making body for the activities to be conducted by Xilio pursuant to the Research Plans, as more fully described in this ARTICLE 5 (Collaboration Management). The Parties anticipate that the JGC will serve as a collaborative forum for discussion and coordination between the Parties and the oversight and decision-making body during the Research Terms with respect to the Development activities.
5.1.2.Responsibilities. The JGC shall perform the following functions, subject to the final decision-making authority of the respective Parties as set forth in Section 5.2.4 (General Provisions Applicable to the JGC; Decision-Making):
(a)[**];
41
(b)[**];
(c)[**];
(d)[**];
(e)[**];
(f)[**];
(g)perform functions set forth elsewhere in this Agreement as being in the purview of this Agreement;
(h)perform such other functions as the Parties may mutually agree in writing, except where in conflict with any provision of this Agreement.
5.2.General Provisions Applicable to the JGC.
5.2.1.Composition. Unless otherwise agreed to by the Parties, the JGC shall consist of [**] from each Party, each with the requisite experience and seniority to enable such representative to make decisions on behalf of the applicable Party with respect to the issues falling within the jurisdiction of the JGC. From time to time, each Party may substitute [**] its representatives to the JGC on written notice to the other Party, which notice may be given by e-mail sent to the other Party’s members of the JGC. Each Party shall select from its representatives a chairperson for the JGC to chair meetings on an alternating basis, with the [**] representative acting as chairperson for the first meeting. From time to time, either Party may change the representative who will serve as chairperson on written notice to other Party.
5.2.2.Meetings and Minutes. The JGC shall meet [**] or as otherwise agreed to by the Parties. The location of such meetings (including on an ad hoc basis) shall alternate between locations designated by Xilio and locations designated by AbbVie, and the JGC may alternatively hold its meetings via teleconference or video conferences. The chairperson of the JGC shall be responsible for calling meetings [**]. Each Party shall make all proposals for agenda items and shall provide all appropriate information with respect to such proposed items [**] in advance of the applicable meeting; provided that under exigent circumstances requiring input by the JGC a Party may provide its agenda items to the other Party within a shorter period of time in advance of the meeting, or may propose that there not be a specific agenda for a particular meeting[**]. The chairperson of the JGC shall prepare and circulate for review and approval of the Parties minutes of each meeting [**]. The Parties shall agree on the minutes of each meeting [**].
5.2.3.Procedural Rules. The JGC shall have the right to adopt such standing rules as shall be necessary for its work, to the extent that such rules are not inconsistent with this Agreement. A quorum of the JGC shall exist whenever there is present at a meeting at least one (1) representative appointed by each Party. Representatives of the Parties may attend a meeting either in person or by telephone, video conference or similar means in which each participant can hear what is said by, and be heard by, the other participants. Representation by proxy shall be allowed. The JGC shall take action by consensus of the representatives present at
42
a meeting at which a quorum exists, with each Party having a single vote irrespective of the number of representatives of such Party in attendance, or by a written resolution signed by at least one (1) representative appointed by each Party. Alliance Managers and other employees of either Party that are not representatives of the Parties may attend meetings of the JGC; provided that such attendees (a) shall not vote or otherwise participate in the decision-making process of the JGC and (b) are bound by obligations of confidentiality and non-disclosure equivalent to those set forth in ARTICLE 8 (Confidentiality and Non-Disclosure).
5.2.4.Decision-Making. If the JGC cannot, or does not, reach consensus on an issue at a meeting or within a period of [**] thereafter, or such other period as the Parties may agree, including any dispute arising in a Working Group, then the dispute shall first be referred to the Senior Officers of the Parties, who shall confer in good faith on the resolution of the issue. Any final decision agreed to by the Senior Officers in writing shall be conclusive and binding on the Parties. If the Senior Officers are not able to agree on the resolution of any such issue within [**] after such issue was first referred to them, then, subject to Section 5.2.5 (General Provisions Applicable to the JGC; Limitations on Authority):
(a)Xilio shall have final decision-making authority with respect [**].
(b)AbbVie shall have final decision-making authority with respect to [**]:
[**]
(c)Neither Party shall have final decision-making authority with respect to [**]:
[**].
(d)[**].
(e)Disputes arising between the Parties in connection with or relating to this Agreement or any document or instrument delivered in connection herewith, and that are outside of the jurisdiction of the JGC, shall be resolved pursuant to Section 12.5 (Dispute Resolution).
5.2.5.Limitations on Authority. Each Party shall retain the rights, powers and discretion granted to it under this Agreement and no such rights, powers or discretion shall be delegated to or vested in a Working Group and the JGC unless such delegation or vesting of rights is expressly provided for in this Agreement or the Parties expressly so agree in writing. Notwithstanding any provision to the contrary set forth in this Agreement, without the other Party’s prior written consent, none of the JGC, any Working Group, or either Party’s Senior Officers, in each case, may make a decision that (a) could reasonably be expected to require the other Party to take any action that such other Party reasonably believes would (i) require such other Party to violate any Applicable Law, the requirements of any Regulatory Authority or any agreement with any Third Party entered into by such other Party or (ii) require such other Party to infringe or misappropriate any intellectual property rights of any Third Party, (b) conflicts with,
43
amends, interprets, modifies or waives compliance under this Agreement or (c) [**]. Following the termination of the applicable Research Term and technology transfer of a Target Program pursuant to Section 4.4 (Manufacturing Technology Transfer), if applicable, with respect to a Licensed Target, the JGC shall no longer have oversight or decision-making authority with respect to the Exploitation of the Licensed Therapeutics and Licensed Products [**] that is the subject of such Target Program, provided that [**].
5.2.6.Discontinuation; Disbandment. The JGC shall continue to have jurisdiction on a Target Program-by-Target Program basis until the first to occur of: (a) the Parties agreeing in writing to disband the JGC with respect to such Target Program, (b) the expiration of the License Option Period with respect to such Option Target Program (if applicable) and (c) with respect to the Collaboration Target and any Option Target Program [**]. Upon the occurrence of any of the foregoing, (A) the JGC and each Working Group shall disband, have no further responsibilities or authority under this Agreement and shall be considered dissolved by the Parties and (B) any requirement of Xilio to provide Information or other materials to the JGC or any Working Group shall be deemed a requirement to provide such Information or other materials to AbbVie and [**].
5.3.Working Groups. From time to time, the JGC may establish and delegate duties to other committees or directed teams (each, a “Working Group”) on an “as-needed” basis to oversee particular projects or activities. Each such Working Group shall be constituted and shall operate as the JGC determines; provided that each Working Group shall have equal representation from each Party; provided, further, that any dispute between the representatives of each Party on a Working Group shall be referred to the JGC for resolution in accordance with Section 5.2.4 (General Provisions Applicable to the JGC; Decision-Making) and the other terms and conditions of this Agreement. Working Groups may be established on an ad hoc basis for purposes of a specific project, for the term of the JGC or on such other basis as the JGC may determine. Each Working Group and its activities shall be subject to the oversight, review and approval of the JGC. In no event shall the authority of the Working Group exceed that specified for the JGC in this ARTICLE 5 (Collaboration Management). If a Working Group cannot, or does not, reach consensus on an issue at a meeting or within a period of [**] thereafter, then [**].
5.4.Alliance Managers. Each Party shall appoint an individual who shall oversee contact between the Parties for all matters between meetings of the JGC, shall be the primary contacts between the Parties after disbandment of the JGC, and shall have such other responsibilities as the Parties may agree in writing after the Effective Date, which individual may be replaced at any time by notice in writing to the other Party (the “Alliance Managers”). The Alliance Managers shall work together to manage and facilitate the communication between the Parties under this Agreement, including the resolution (in accordance with the terms of this Agreement) of issues between the Parties that arise in connection with this Agreement. The Alliance Managers shall not have final decision-making authority with respect to any matter under this Agreement.
5.5.Expenses. Each Party shall be responsible for all travel and related costs and expenses for its members and other representatives to attend meetings of, and otherwise participate on, the JGC or a Working Group.
44
PAYMENTS AND RECORDS
6.1.Upfront Payment. Subject to the terms and conditions of this Agreement, no later than [**] after the Effective Date, AbbVie shall pay Xilio a one-time, non-refundable upfront payment equal to Forty-Two Million Dollars (US$42,000,000).
6.2.Equity Investment. As of the Effective Date, AbbVie Inc. and Xilio Parent have entered into the Purchase Agreement and Investor Rights Agreement, pursuant to which AbbVie Inc. shall purchase an amount of common stock of Xilio Parent equivalent to Ten Million Dollars (US$10,000,000).
6.3.Option Exercise Payment. On an Option Target Program-by-Option Target Program basis, within [**] after AbbVie delivering an Option Exercise Notice to Xilio in accordance with Section 3.2.3 (Options and Licenses for Option Target Programs; License Option Exercise) for an Option Target Program, AbbVie shall pay Xilio (a) [**] Dollars (US$[**]) if AbbVie delivers such Option Exercise Notice on or before [**] and (b) [**] Dollars (US$[**]) if AbbVie delivers such Option Exercise Notice after [**] (each such payment, an “Option Exercise Payment”).
6.4.Option Extension Payments. On an Option Target Program-by-Option Target Program basis, with respect to each Option Target Program for which AbbVie delivers an Option Extension Notice to Xilio pursuant to Section 3.2.2 (Options and Licenses for Option Target Programs; License Option Extension), AbbVie shall pay Xilio the following one-time payment per Option Target Program (each such payment, a “Option Extension Payment”) within [**] after the delivery of such Option Extension Notice.
Option Extension Notice delivered with respect to [**] | Option Extension Payment Payable Per Option Target Program |
[**] | [**] Dollars (US$[**]) |
[**] | [**] Dollars (US$[**]) |
[**] | [**] Dollars (US$[**]) |
For clarity, the aggregate amount of Option Extension Payments payable by AbbVie to Xilio for each Option Target Program under this Section 6.4 (Option Extension Payment) shall not exceed [**] Dollars ($[**]).
6.5.Additional Option Target Program Fee. On an Additional Option Target Program-by-Additional Option Target Program basis, within [**], AbbVie shall pay to Xilio a one-time fee of [**] Dollars (US$[**]) (the “Additional Option Target Program Fee”). The aggregate amount payable by AbbVie to Xilio under this Section 6.5 (Additional Option Target Program Fee) for Additional Option Target Programs shall not exceed [**] Dollars (US$[**]), which corresponds to a maximum of two (2) Additional Option Target Programs. Xilio shall have
45
no obligation to initiate or perform any activities for an Additional Option Target Program until Xilio receives the corresponding Additional Option Target Program Fee from AbbVie.
6.6.Substitution Fee. For each Option Target for which AbbVie exercises a Substitution Right in accordance with Section 2.3.4 (Target Selection and Target Substitution; Target Substitution), AbbVie shall pay to Xilio a one-time payment of [**] Dollars (US$[**]) (each such payment, “Substitution Fee”) within [**]. The aggregate amount payable by AbbVie to Xilio under this Section 6.6 (Substitution Fee) as Substitution Fees shall not exceed [**] Dollars (US$[**]). Xilio shall have no obligation to initiate or perform any activities under the new Option Research Plan for a substituted Option Target until Xilio receives the corresponding Substitution Fee from AbbVie.
6.7.Development and Regulatory Milestone Events. Subject to the terms and conditions of this Agreement (including Section 6.19 (Right to Offset)), with respect to each milestone event set forth in the tables below in the remainder of this Section 6.7 (Development and Regulatory Milestone Events) (each, a “Milestone Event”), AbbVie shall pay Xilio the corresponding milestone payments set forth in such tables (each, a “Milestone Payment”) as follows:
6.7.1.Collaboration Development and Regulatory Milestone Events. With respect to the Collaboration Target Program, AbbVie shall pay Xilio the following one-time Milestone Payments:
(a)Within [**] after the achievement by or on behalf of Xilio of the following Milestone Events:
| Milestone Event | Milestone Payment |
|---|---|---|
1. | [**] | [**] Dollars (US$[**]) |
2. | [**] | [**] Dollars (US$[**]) |
(b)Within [**] after the achievement by or on behalf of AbbVie (or its Affiliates or its or their respective Sublicensees) of the following Milestone Events:
| Milestone Event | Milestone Payment |
|---|---|---|
1. | [**] | [**] Dollars (US$[**]) |
2. | [**] | [**] Dollars (US$[**]) |
3. | [**] | [**] Dollars (US$[**]) |
4. | [**] | [**] Dollars (US$[**]) |
46
Each Milestone Payment under this Section 6.7.1(a) (Collaboration Development and Regulatory Milestone Events) and 6.7.1(b) (Collaboration Development and Regulatory Milestone Events) is payable one (1) time only, upon the first achievement of the corresponding Milestone Event for the Collaboration Target Program. No amounts are due for subsequent or repeated achievements of the same Milestone Event [**]. The maximum aggregate amount of Milestone Payments payable under this Section 6.7.1 (Collaboration Development and Regulatory Milestone Events) by AbbVie to Xilio is [**] Dollars (US$[**]).
6.7.2.Option Development and Regulatory Milestones. On an Option Target Program-by-Option Target Program basis, AbbVie shall pay Xilio the following Milestone Payments within [**] after the achievement by or on behalf of AbbVie (or its Affiliates or its or their respective Sublicensees) of the following corresponding Milestone Events.
| Milestone Event | Milestone Payment |
|---|---|---|
1. | [**] | [**] Dollars (US$[**]) |
2. | [**] | [**] Dollars (US$[**]) |
3. | [**] | [**] Dollars (US$[**]) |
4. | [**] | [**] Dollars (US$[**]) |
5. | [**] | [**] Dollars (US$[**]) |
6. | [**] | [**] Dollars (US$[**]) |
Each Milestone Payment under this Section 6.7.2 (Option Development and Regulatory Milestones) is payable one (1) time only, upon the first achievement of the corresponding Milestone Event for each Option Target Program and no amounts are due for subsequent or repeated achievements of the same Milestone Event in a given Option Target Program [**]. The maximum aggregate amount of Milestone Payments for each Option Target Program payable under this Section 6.7.2 (Option Development and Regulatory Milestones) by AbbVie to Xilio is [**] Dollars (US$[**]).
6.8.Sales Milestone Events. Subject to the terms and conditions of this Agreement (including Section 6.19 (Right to Offset)), with respect to each milestone event set forth in the table below (each, a “Sales Milestone Event”), AbbVie shall pay Xilio the corresponding one-time milestone payment set forth in such table (each, a “Sales Milestone Payment”) as follows:
6.8.1.Collaboration Annual Net Sales Milestones. With respect to the Collaboration Target Program, AbbVie shall pay Xilio the following one-time Sales Milestone Payments within [**] after the achievement by or on behalf of AbbVie (or its Affiliates or its or their respective Sublicensees) of the following Sales Milestone Events.
47
| | |
|---|---|---|
| Sales Milestone Event | Sales Milestone Payment |
1. | Annual aggregate Net Sales of all Collaboration Licensed Products greater than or equal to [**] Dollars (US$[**]) and less than [**] Dollars (US$[**]) | [**] Dollars (US$[**]) |
2. | Annual aggregate Net Sales of all Collaboration Licensed Products greater than or equal to [**] Dollars (US$[**]) and less than [**] Dollars (US$[**]) | [**] Dollars (US$[**]) |
3. | Annual aggregate Net Sales of all Collaboration Licensed Products greater than or equal to [**] Dollars (US$[**]) and less than [**] Dollars (US$[**]) | [**] Dollars (US$[**]) |
4. | Annual aggregate Net Sales of all Collaboration Licensed Products greater than or equal to [**] Dollars (US$[**]) | [**] Dollars (US$[**]) |
Each Sales Milestone Payment under this Section 6.8.1 (Sales Milestone Events; Collaboration Annual Net Sales Milestones) is payable one (1) time only, upon the first achievement of the corresponding Sales Milestone Event and no amounts are due for subsequent or repeated achievements of the same Sales Milestone Event. If a Sales Milestone Event is achieved for the first time without having previously achieved (and paid) one or more lower threshold Sales Milestone Event(s) in the table above, then AbbVie shall be deemed to have simultaneously achieved such lower threshold Sales Milestone Event(s) and shall thereby pay the corresponding Sales Milestone Payments for all such Sales Milestone Events. The maximum aggregate amount of Sales Milestone Payments for the Collaboration Target Program payable under this Section 6.8.1 (Sales Milestone Events; Collaboration Annual Net Sales Milestones) by AbbVie is [**] Dollars (US$[**]).
6.8.2.Option Annual Net Sales Milestones. On an Option Target Program-by-Option Target Program basis, AbbVie shall pay Xilio the following Sales Milestone Payments within [**] after the achievement by or on behalf of AbbVie (or its Affiliates or its or their respective Sublicensees) of the following Sales Milestone Events.
48
| Sales Milestone Event | Sales Milestone Payment |
|---|---|---|
1. | Annual aggregate Net Sales of all Option Licensed Products Directed To the applicable Option Target that is the subject of the applicable Option Target Program greater than or equal to [**] Dollars (US$[**]) and less than [**] Dollars (US$[**]) | [**] Dollars (US$[**]) |
2. | Annual aggregate Net Sales of all Option Licensed Products Directed To the applicable Option Target that is the subject of the applicable Option Target Program greater than or equal to [**] Dollars (US$[**]) and less than [**] Dollars (US$[**]) | [**] Dollars (US$[**]) |
3. | Annual aggregate Net Sales of all Option Licensed Products Directed To the applicable Option Target that is the subject of the applicable Option Target Program greater than or equal to [**] Dollars (US$[**]) and less than [**] Dollars (US$[**]) | [**] Dollars (US$[**]) |
4. | Annual aggregate Net Sales of all Option Licensed Products Directed To the applicable Option Target that is the subject of the applicable Option Target Program greater than or equal to [**] Dollars (US$[**]) and less than [**] Dollars (US$[**]) | [**] Dollars (US$[**]) |
5. | Annual aggregate Net Sales of all Option Licensed Products Directed To the applicable Option Target that is the subject of the applicable Option Target Program greater than or equal to [**] Dollars (US$[**]) | [**] Dollars (US$[**]) |
Each Sales Milestone Payment under this Section 6.8.2 (Sales Milestone Events; Option Annual Net Sales Milestones) is payable one (1) time only, upon the first achievement of the corresponding Sales Milestone Event for each Option Target Program and no amounts are due for subsequent or repeated achievements of the same Sales Milestone Event. If a Sales Milestone Event is achieved for the first time without having previously achieved (and paid) one or more lower threshold Sales Milestone Event(s) in the table above, then AbbVie shall be deemed to have simultaneously achieved such lower threshold Sales Milestone Event(s) and shall thereby pay the corresponding Sales Milestone Payments for all such Sales Milestone Events. The maximum aggregate amount of Sales Milestone Payments for each Option Target Program payable under this Section 6.8.2
49
(Sales Milestone Events; Option Annual Net Sales Milestones) by AbbVie is [**]Dollars (US$[**]).
6.9.1.Royalty Rates. Subject to Section 6.9.3 (Royalties: Royalty Reductions) and Section 6.9.4 (Royalties: Third Party Payments), commencing upon the First Commercial Sale of a Licensed Product in the Territory, on a Licensed Product-by-Licensed Product basis, AbbVie shall pay Xilio a royalty on Net Sales of such Licensed Product in the Territory (excluding Net Sales of such Licensed Product in any country or other jurisdiction in the Territory for which the Royalty Term for such Licensed Product in such country or other jurisdiction has expired) during each Calendar Year at the following rates:
(a)Collaboration Licensed Product
Aggregate Net Sales of a Collaboration Licensed Product | Royalty Rate |
|---|---|
For that portion of aggregate Net Sales of such Collaboration Licensed Product in the Territory in a Calendar Year that is less than or equal to [**] Dollars (US$[**]) | [**] |
For that portion of aggregate Net Sales of such Collaboration Licensed Product in the Territory in a Calendar Year that is greater than [**] Dollars (US$[**]) and less than or equal to [**] Dollars (US$[**]) | [**] |
For that portion of aggregate Net Sales of such Collaboration Licensed Product in the Territory in a Calendar Year that is greater than [**] Dollars (US$[**]) | [**] |
(b)Option Licensed Product
Aggregate Net Sales of an Option Licensed Product | Royalty Rate |
|---|---|
For that portion of aggregate Net Sales of such Option Licensed Product in the Territory in a Calendar Year that is less than or equal to [**] Dollars (US$[**]) | [**] |
For that portion of aggregate Net Sales of such Option Licensed Product in the Territory in a Calendar Year that is greater than [**] Dollars (US$[**]) and less than or equal to [**] Dollars (US$[**]) | [**] |
For that portion of aggregate Net Sales of such Option Licensed Product in the Territory in a Calendar Year that is greater than [**] Dollars (US$[**]) | [**] |
50
6.9.2.Royalty Term. On a Licensed Product-by-Licensed Product and country-by-country basis (or jurisdiction-by-jurisdiction basis), AbbVie shall pay to Xilio royalties at the royalty rates set forth in Section 6.9.1 (Royalties; Royalty Rates) for the duration of the Royalty Term for such Licensed Product in such country or jurisdiction.
6.9.3.Royalty Reductions. Notwithstanding anything to the contrary in Section 6.9.1 (Royalties; Royalty Rates), but subject to Section 6.9.2 (Royalties: Royalty Term):
(a)from and after the date on which a Licensed Product is sold in a country or other jurisdiction in the Territory and is not covered by a Royalty Claim in such country or jurisdiction during the Royalty Term for such Licensed Product in such country or jurisdiction, the Net Sales in such country or other jurisdiction used for purposes of calculating the applicable royalty rate for such Licensed Product set forth in Section 6.9 (Royalties) for such Licensed Product shall be reduced by [**];
(b)following the [**] Calendar Quarter in which there is a launch of a Biosimilar Product in any country or other jurisdiction in the Territory (for such country or jurisdiction, such [**] Calendar Quarter, the “Biosimilar Launch Quarter”), if during the Royalty Term for a Licensed Product in such country or jurisdiction the [**] of such Licensed Product in such country or jurisdiction in any Calendar Quarter decline by the percentage described in the table below relative to the [**] occurring during the four (4) consecutive Calendar Quarters immediately preceding the Biosimilar Launch Quarter in such country or jurisdiction (for such country or jurisdiction, the “Base Net Sales”), then, starting from such Calendar Quarter, the Net Sales in such country or other jurisdiction used for purposes of calculating the applicable royalty rate for such Licensed Product set forth in Section 6.9 (Royalties) for such Licensed Product will be reduced by the applicable percentage set forth in the table below; and
Decline in Annual Net Sales | Reduction of Net Sales for Royalty Calculation |
Net Sales of such Licensed Product reduced by [**] of the Base Net Sales of such Licensed Product in the applicable country or jurisdiction | [**] |
Net Sales of such Licensed Product reduced by [**] of the Base Net Sales of such Licensed Product in the applicable country or jurisdiction | [**] |
(c)if, during the Royalty Term for a Licensed Product in the United States, such Licensed Product is designated as a Selected Drug by the Secretary of the U.S. Department of Health and Human Services, and AbbVie is required to negotiate a Maximum Fair Price that will apply to sales of such Licensed Product during the Price Applicability Period, then the Net Sales in the United States for the purposes of calculating the applicable royalty rate set forth in Section 6.9 (Royalties) for such Licensed Product shall be reduced by a percentage equal to [**].
51
6.9.4.Third Party Payments. [**].
6.10.Mechanics of Adjustment. Any reductions set forth in Section 6.9.3 (Royalties: Royalty Reductions) or Section 6.9.4 (Royalties: Third Party Payments) shall be applied to the royalty rate (or royalty) payable to Xilio under Section 6.9.1 (Royalties; Royalty Rates), as applicable, in the order in which the event triggering such reduction occurs; provided that the adjustments made pursuant to Section 6.9.3 (Royalties: Royalty Reductions) and Section 6.9.4 (Royalties: Third Party Payments) shall not reduce by more than [**] the royalties that would otherwise be owed under Section 6.9.1 (Royalties; Royalty Rates) except that [**] or [**]. Credits for reductions pursuant to Section 6.9.4 (Royalties: Third Party Payments) not exhausted in any Calendar Quarter may be carried into future Calendar Quarters, subject to the preceding sentence. Any adjustments pursuant to 6.9.3 (Royalties: Royalty Reductions) and Section 6.9.4 (Royalties: Third Party Payments) shall apply only to the relevant Licensed Product in the relevant country.
6.11.Estimated Sales Levels. For clarity, the sales thresholds set forth in Section 6.8 (Sales Milestone Events) and Section 6.9 (Royalties) shall not be construed as representing an estimate or projection of anticipated sales of the Licensed Products, or modifying AbbVie’s obligations set forth in Section 4.2 (Diligence), in the Territory and that the sales levels set forth in Section 6.8 (Sales Milestone Events) and Section 6.9 (Royalties) are merely intended to define AbbVie’s Sales Milestone Payment and royalty obligations, as applicable, if such sales levels are achieved.
6.12. Royalty Payments for Agreements with Compulsory Sublicensees. For any agreement with a Compulsory Sublicensee in a country, notwithstanding any provision to the contrary set forth in this Agreement, in lieu of paying royalties at the royalty rates set forth in Section 6.9 (Royalties), the Parties will share the royalty payment amounts received by AbbVie from such Third Party for sales of such Licensed Product under such agreement in such country at a ratio of [**].
6.13.Royalty Payments and Royalty Reports.
6.13.1.Quarterly Flash Reports. No later than [**] after the end of each Calendar Quarter during the Term, AbbVie will provide to Xilio a non-binding “flash” report that will set forth the estimated total aggregate Net Sales of the Licensed Products sold by AbbVie and its Affiliates and its and their respective Sublicensees in the Territory and estimated payments due pursuant to Section 6.12 (Royalty Payments for Agreements with Compulsory Licensees), in each case, to the extent required to calculate all amounts payable by AbbVie hereunder to Xilio in such Calendar Quarter.
6.13.2.Quarterly Final Reports. AbbVie shall calculate all amounts payable to Xilio pursuant to Section 6.9 (Royalties) and Section 6.12 (Royalty Payments for Agreements with Compulsory Licensees) at the end of each Calendar Quarter, which amounts shall be converted to Dollars, in accordance with Section 6.15 (Mode of Payment). Within [**] after the end of each such Calendar Quarter, AbbVie shall provide Xilio a statement of the amount of gross sales and Net Sales of Licensed Products subject to royalty payments sold by AbbVie and its Affiliates and its and their respective Sublicensees in the Territory, and a calculation of
52
the royalties payable under this Agreement, and payments due pursuant to Section 6.12 (Royalty Payments for Agreements with Compulsory Licensees), in each case, during a Calendar Quarter. AbbVie shall pay to Xilio the amounts due with respect to a given Calendar Quarter [**] after the end of such Calendar Quarter.
6.14.Financial Records. AbbVie shall, and shall cause its Affiliates and its and their respective Sublicensees to, keep complete and accurate financial books and records pertaining to Net Sales of Licensed Products and payments due pursuant to Section 6.12 (Royalty Payments for Agreements with Compulsory Licensees) to the extent required to calculate and verify all amounts payable by AbbVie hereunder. Xilio shall, and shall cause its Affiliates to, keep complete and accurate financial books and records pertaining to its FTE Costs for any transfer and support activities for the technology transfer activities set forth in Section 4.4 (Manufacturing Technology Transfer) and any other activities for which Xilio seeks reimbursement of FTE Costs from AbbVie. Each Party shall, and shall cause its Affiliates and, with respect to AbbVie, its and their respective Sublicensees to, retain such books and records until the later of (a) [**] after the end of the period to which such books and records pertain and (b) the expiration of the applicable tax statute of limitations (or any extensions thereof) or for such longer period as may be required by Applicable Law.
6.15.Mode of Payment. All payments to Xilio under this Agreement shall be made by deposit of Dollars in the requisite amount to such bank account as Xilio may from time to time designate by notice to AbbVie. For the purpose of calculating any amounts due under, or otherwise reimbursable pursuant to, this Agreement, AbbVie shall convert any amount expressed in a foreign currency into Dollar equivalents using its, its Affiliate’s or Sublicensee’s standard conversion methodology consistent with the Accounting Standards.
6.16.1.Withholding Taxes. If any sum due to be paid to either Party hereunder is or would otherwise be subject to any withholding or similar tax, the Parties shall cooperate with each other and use their reasonable efforts to do all such acts and things and to sign all such documents as will enable them to secure any available exemption from, reduction in, or refund of such tax, including by taking advantage of any applicable double taxation agreement or treaty. In the event there is no applicable double taxation agreement or treaty, or if an applicable double taxation agreement or treaty reduces but does not eliminate such withholding or similar tax, the payor Party shall remit such withholding or similar tax to the appropriate Governmental Authority, deduct the amount paid from the amount due to the payee Party and secure and send to the payee Party the best available evidence of the payment of such withholding or similar tax. Any such amounts deducted by the payor Party in respect of such withholding or similar tax shall be treated as having been paid by the payor Party for purposes of this Agreement. If a Governmental Authority retroactively determines that a payment made by a Party to the other Party pursuant to this Agreement should have been subject to withholding or similar (or to additional withholding or similar) taxes, and such Party (the “Withholding Party”) remits such withholding or similar taxes to the Governmental Authority, including any interest and penalties that may be imposed thereon (together with the tax paid, the “Withholding Amount”), then the Withholding Party shall have the right (a) to offset the Withholding Amount against future payment obligations of the Withholding Party under this Agreement, (b) to invoice the other Party
53
for the Withholding Amount (which shall be payable by the other Party within [**] of its receipt of such invoice) or (c) to pursue reimbursement by any other available remedy.
6.16.2.Indirect Taxes. All payments are exclusive of value added taxes, sales taxes, consumption taxes and other similar taxes (the “Indirect Taxes”). If any Indirect Taxes are chargeable in respect of any payments, the paying Party shall pay such Indirect Taxes at the applicable rate in respect of such payments following receipt, where applicable, of an Indirect Taxes invoice in the appropriate form issued by the receiving Party in respect of those payments. The Parties shall issue invoices for all amounts payable under this Agreement consistent with Indirect Tax requirements and irrespective of whether the sums may be netted for settlement purposes. If the Indirect Taxes originally paid or otherwise borne by the paying Party are in whole or in part subsequently determined not to have been chargeable, then all necessary steps shall be taken by the receiving Party to receive a refund of these undue Indirect Taxes from the applicable Governmental Authority or other fiscal authority and any amount of undue Indirect Taxes repaid by such authority to the payee Party shall be transferred to the payor Party within [**].
6.16.3.Tax Consequences of Assignment. Notwithstanding any provision to the contrary set forth in this Agreement (including Section 6.16.1 (Taxes; Withholding Taxes) and Section 6.16.2 (Taxes; Indirect Taxes)), [**].
6.17.Interest on Late Payments. If any undisputed payment amount due to Xilio under this Agreement is not paid when due, then AbbVie shall pay interest thereon (before and after any judgment) at an annual rate (but with interest accruing on a daily basis) of [**] above the average [**] as adjusted from time-to-time, such interest to run from the date on which payment of such amount became due until payment thereof in full together with such interest.
6.18.1.Procedures. At the request of a Party, each Party shall, and shall cause its Affiliates to, permit an independent public accounting firm of nationally recognized standing designated by the other Party and reasonably acceptable to the audited Party, at reasonable times during normal business hours and upon reasonable notice, to audit the books and records maintained pursuant to Section 6.14 (Financial Records) to ensure the accuracy of all reports and payments made hereunder. Such audits may not (a) [**], (b) [**] or (c) be repeated for any Calendar Quarter. The accounting firm shall disclose only whether the reports are correct or not and the specific details concerning any discrepancies. No other information shall be shared. Except as provided below, the cost of any audit shall be borne by the auditing Party, [**] from the reported amounts, in which case the audited Party shall bear the cost of such audit. Unless disputed pursuant to Section 6.18.2 (Audit; Dispute), if such audit concludes that (a) additional amounts were owed by the audited Party, the audited Party shall pay the additional amounts (and, if such additional amounts are owed due to an error in an invoice or report provided by the audited Party, with interest thereon as provided in Section 6.17 (Interest on Late Payments)) or (b) excess payments were made by the audited Party, the auditing Party shall reimburse such excess payments (and, if such excess payments were made due to an error in an invoice or report provided by the auditing Party, with interest thereon as provided in Section 6.17 (Interest on Late Payments)), in either case ((a) or (b)), within [**].
54
6.18.2.Dispute. In the event of a dispute with respect to any audit under Section 6.18.1 (Audit; Procedures), Xilio and AbbVie shall work in good faith to resolve the dispute. If the Parties are unable to reach a mutually acceptable resolution of any such dispute within [**], then the dispute shall be submitted for resolution to an independent public accounting firm of nationally recognized standard jointly selected by each Party’s certified public accountants or to such other Person as the Parties shall agree (the “Audit Expert”). The decision of the Audit Expert shall be final [**]. Not later than [**] after such decision and in accordance with such decision, the audited Party shall pay the additional amounts (and, if such additional amounts are owed due to an error in an invoice or report provided by the audited Party, with interest thereon as provided in Section 6.17 (Interest on Late Payments)), or the auditing Party shall reimburse the excess payments (and, if such excess payments were made due to an error in an invoice or report provided by the auditing Party, with interest thereon as provided in Section 6.17 (Interest on Late Payments)), as applicable.
6.18.3.Confidentiality. The Receiving Party shall treat all information subject to review under this ARTICLE 6 (Payments and Records) in accordance with the confidentiality provisions of ARTICLE 8 (Confidentiality and Non-Disclosure). Neither Party shall be obligated to provide any information to the accounting firm pursuant to Section 6.18.1 (Audit; Procedures) or the Audit Expert pursuant to Section 6.18.2 (Audit; Dispute), until the accounting firm or the Audit Expert, as applicable, has entered into a reasonably acceptable confidentiality agreement with such Party obligating such accounting firm or the Audit Expert, as applicable, to retain all such financial information in confidence pursuant to such confidentiality agreement.
6.20.No Other Compensation. Each Party hereby agrees that the terms of this Agreement fully define all consideration, compensation and benefits, monetary or otherwise, to be paid, granted or delivered by one Party to the other Party in connection with the transactions contemplated herein. Neither Party previously has paid or entered into any other commitment to pay, whether orally or in writing, any of the other Party’s employees, directly or indirectly, any consideration, compensation or benefits, monetary or otherwise, in connection with the transaction contemplated herein.
6.21.No Limitation. Nothing contained in this ARTICLE 6 (Payments and Records) shall in any way limit either Party’s right to indemnification under this Agreement or to otherwise recover damages for breach of this Agreement.
INTELLECTUAL PROPERTY
7.1.Ownership of Intellectual Property.
7.1.1.Ownership of Arising IP. Subject to the license grants and other rights herein as between the Parties and except as expressly set forth in Section 7.1.2 (Ownership of Intellectual Property; Ownership of Joint IP) and Section 7.1.3 (Ownership of Intellectual Property; Exceptions), each Party shall own and retain all rights, title and interests in and to any
55
and all (a) Information that is conceived, discovered, developed or otherwise made solely by or on behalf of such Party (or its Affiliates or its or their (sub)licensees/Sublicensees) in the performance of activities under this Agreement, including as a result of conducting activities pursuant to any Research Plan, whether or not patented or patentable, and any and all Patents and other intellectual property rights with respect thereto (“Arising IP”), except to the extent that [**]. For clarity, and for the purpose of ARTICLE 7 (Intellectual Property), AbbVie, its Affiliates and its or their respective Sublicensees shall not be considered a (sub)licensee of Xilio or its Affiliates. [**].
7.1.2.Ownership of Joint IP. As between the Parties, except as expressly set forth in Section 7.1.3 (Ownership of Intellectual Property; Exceptions), each Party shall each own an equal, undivided interest in any and all: (a) [**] (the “Joint Know-How”); and (b) Patents claiming Joint Know-How (the “Joint Patents”) and other intellectual property rights with respect to the Information described in clause (a) (together with Joint Know-How and Joint Patents, the “Joint IP”). Each Party shall promptly disclose to the other Party in writing and shall cause its Affiliates, and its and their (sub)licensees (if applicable) to so disclose, the conception, discovery, development or making of any Joint Know-How or Joint Patents. Except as expressly set forth in this Agreement, including the licenses granted under Section 3.1 (License for Collaboration Target Program) [**].
7.1.3.Exceptions.
(a)Notwithstanding Section 7.1.1 (Ownership of Intellectual Property; Ownership of Arising IP) or Section 7.1.2 (Ownership of Intellectual Property; Ownership of Joint IP) and subject to the licenses granted in Section 3.1 (License for Collaboration Target Program) and Section 3.2 (Options and Licenses for Option Target Programs), as between the Parties, AbbVie shall exclusively own all rights, title and interests in and to [**].
(b)Notwithstanding Section 7.1.1 (Ownership of Intellectual Property; Ownership of Arising IP) or Section 7.1.2 (Ownership of Intellectual Property; Ownership of Joint IP), and subject to the licenses granted in Sections 3.1 (License for Collaboration Target Program) and Section 3.2 (Options and Licenses for Option Target Programs), Xilio shall exclusively own all rights, title and interests in and to [**].
(c)Notwithstanding Section 7.1.1 (Ownership of Intellectual Property; Ownership of Arising IP) or Section 7.1.2 (Ownership of Intellectual Property; Ownership of Joint IP) and subject to the licenses granted in Section 3.1 (License for Collaboration Target Program), the Parties shall jointly own all rights, title and interests in and to [**].
(d)Notwithstanding Section 7.1.1 (Ownership of Intellectual Property; Ownership of Arising IP) or Section 7.1.2 (Ownership of Intellectual Property; Ownership of Joint IP), the Parties shall jointly own all rights, title and interests in and to [**].
7.1.4.United States Law. The determination of whether Information is conceived, discovered, developed or otherwise made by or on behalf of a Party for the purpose of
56
allocating proprietary rights (including Patent, copyright or other intellectual property rights) therein, shall, for purposes of this Agreement, be made in accordance with United States patent law and other Applicable Law in the United States (without regard to conflict of laws). If United States law otherwise would not apply to the conception, discovery, development or making any Information hereunder, each Party shall, and does hereby, assign, and shall cause its Affiliates and its and their licensees and (sub)licensees/Sublicensees to so assign, to the other Party, without additional compensation, such rights, title and interests in and to any Information as well as any intellectual property rights with respect thereto, as is necessary to fully effect, as applicable, (a) the sole ownership provided for in Section 7.1.1 (Ownership of Intellectual Property; Ownership of Arising IP) and Section 7.1.3 (Ownership of Intellectual Property; Exceptions) and (b) the joint ownership provided for in Section 7.1.2 (Ownership of Intellectual Property; Ownership of Joint IP).
7.1.5.Assignment Obligation. Each Party shall cause all Persons who perform Development activities, Manufacturing activities or regulatory activities for such Party under this Agreement to assign (or if such Party is unable to cause such Person to assign despite such Party’s using reasonable efforts to negotiate such assignment, then provide a license under) their rights in any Information resulting therefrom to such Party, except if Applicable Law requires otherwise and except in the case of governmental, not-for-profit, and public institutions that have standard policies against such an assignment (in which case a suitable license, or right to obtain such a license, shall be obtained). Each Party shall, and does hereby, assign, and shall cause its Affiliates and its and their (sub)licensees/Sublicensees to so assign, to the other Party, without additional compensation, such right, title, and interest in and to any Information as well as any intellectual property rights with respect thereto, as is necessary to fully effect (a) the sole ownership provided for in Section 7.1.1 (Ownership of Intellectual Property; Ownership of Arising IP) and Section 7.1.3 (Ownership of Intellectual Property; Exceptions) and (b) the joint ownership provided for in Section 7.1.2 (Ownership of Intellectual Property; Ownership of Joint IP). Each Party shall take all actions and provide the other Party with all reasonably requested assistance to effect such assignment and will execute any and all documents necessary to perfect such assignment.
7.1.6.Control of Intellectual Property. Neither Party shall, and each Party shall cause its Affiliates not to, enter into or amend any agreement with a Third Party, or include in any such agreement or amendment any restrictive provisions, with an intent to limit its Control of, or to not Control, any Information, Patent or other intellectual property right that would be subject to the license grants in Section 3.1 (License for Collaboration Target Program) or Section 3.2 (Options and Licenses for Option Target Programs) in the absence of such agreement, amendment or restrictive provisions.
7.2.Prosecution and Maintenance of Patents.
7.2.1.Licensed Platform Patents. Subject to Section [**] Xilio shall have the sole right, but not the obligation, at its sole costs and expenses, to prepare, file, prosecute, and maintain the Licensed Platform Patents in the Territory, and to conduct any proceeding regarding the validity and enforceability thereof, including any opposition, re-issuance, post-grant review, inter-partes review, reexamination request, nullity action, interference or other similar post-grant proceedings and any appeals therefrom (each, a “Defense Proceeding”) relating
57
thereto (except that in connection with any enforcement actions brought pursuant to Section 7.3 (Enforcement of Patents), the Party with responsibility for such action pursuant to Section 7.3 (Enforcement of Patents) shall have responsibility for such Defense Proceedings), in either case, using counsel of its choice. Xilio shall provide high-level updates to AbbVie of all material developments and all steps to be taken in connection with the filing and prosecution of the Licensed Platform Patents and any Defense Proceedings regarding Licensed Platform Patents at each JGC meeting or as reasonably requested by AbbVie.
7.2.2.Licensed Product Patents. With respect to each Licensed Product, from and after the Effective Date for the Collaboration Licensed Products and the License Option Effective Date for the applicable Option Licensed Products, AbbVie shall [**] the Licensed Product Patents with respect to such applicable Licensed Products in the Territory and to conduct any Defense Proceeding relating thereto (except that in connection with any actions subject to Section 7.3 (Enforcement of Patents), the Party with responsibility for such action pursuant to Section 7.3 (Enforcement of Patents) shall have responsibility for such Defense Proceedings) using counsel of its own choice. AbbVie shall notify Xilio of all material developments and all steps to be taken in connection with the prosecution of the Licensed Product Patents (including Defense Proceedings related thereto) and provide Xilio with copies of all material filings or responses to be made to the patent authorities with respect thereto and all other material submissions and correspondence with any patent authorities regarding any such Patent, in each case, in sufficient time to allow for review and comment by Xilio. [**].
7.2.3.[**].
7.2.4.[**].
7.2.5.Joint Patents. AbbVie shall have the first right, but not the obligation, at its sole cost and expense, to prepare, file, prosecute, and maintain any Joint Patents [**], and to conduct any Defense Proceeding relating thereto using counsel of its own choice, provided that, subject to Section [**], Xilio will have the sole right to prepare, file, prosecute, and maintain any Joint Patents [**]. AbbVie shall notify Xilio of all material developments and all steps to be taken in connection with the filing and prosecution of such Joint Patents (including Defense Proceedings related thereto) and provide Xilio with copies of all material filings or responses to be made to the patent authorities with respect thereto and all other material submissions and correspondence with any patent authorities regarding any Joint Patent, in each case, in sufficient time to allow for review and comment by Xilio. [**]. If AbbVie elects not to prepare, file, prosecute or maintain, or not to initiate or continue any Defense Proceeding related to, any Joint Patent in a particular country, [**]. If Xilio elects to prosecute any Joint Patent in a particular country (including Defense Proceedings related thereto), Xilio shall notify AbbVie of all material developments and all steps to be taken in connection with the filing and prosecution of the Joint Patents and provide AbbVie with copies of all material filings or responses to be made to the patent authorities with respect thereto and all other material submissions and correspondence with any patent authorities regarding any Joint Patent, in each case, in sufficient time to allow for review and comment by AbbVie. AbbVie shall offer its comments or proposals, if any, promptly, and Xilio shall consider in good faith such comments and proposals and shall implement any such comments or proposals that are necessary for the applicable filing or response to be consistent with AbbVie’s global patent strategy for the Licensed Products.
58
7.2.6.[**]
7.2.7.Cooperation. The Parties agree to cooperate fully in the preparation, filing, prosecution and maintenance of, and any Defense Proceeding relating to, the [**] in the Territory under this Agreement. Such cooperation shall include:
(a)executing all papers and instruments, or requiring its respective employees or contractors to execute such papers and instruments, so as to (i) effectuate the ownership of intellectual property set forth in Section 7.1.1 (Ownership of Intellectual Property; Ownership of Arising IP), Section 7.1.2 (Ownership of Intellectual Property; Ownership of Joint IP) and Section 7.1.3 (Ownership of Intellectual Property; Exceptions); and (ii) enable the other Party to apply for and to prosecute Patent applications in the Territory, in each case ((i) and (ii)), to the extent provided for in this Agreement;
(b)where a Patent application provides written description support for [**], the Party prosecuting such Patent application will [**], to the extent possible under Applicable Laws governing the prosecution of Patents, [**];
(c)[**];
(d)consistent with this Agreement, assisting in any license registration processes with applicable Governmental Authorities that may be available in the Territory for the protection of a Party’s interests in this Agreement; and
(e)promptly informing the other Party of any matters coming to such Party’s attention that may materially affect the preparation, filing, prosecution or maintenance of, or any Defense Proceeding relating to, any such Patents in the Territory.
7.2.8.Patent Term Extension and Supplementary Protection Certificate. With respect to each Licensed Product, AbbVie shall be responsible for making decisions regarding patent term extensions, including supplementary protection certificates and any other extensions that are now or become available in the future, wherever applicable, for any Patent in any country or other jurisdiction, provided that AbbVie will not extend a [**] without Xilio’s consent (not to be unreasonably withheld, conditioned or delayed) [**]. AbbVie shall have the responsibility for applying for any extension or supplementary protection certificate with respect to such Patents in the Territory. AbbVie shall keep Xilio fully informed of its efforts to obtain such extension or supplementary protection certificate. [**]. AbbVie shall pay all expenses in regard to obtaining the extension or supplementary protection certificate in the Territory.
7.2.9. Patent Listings. With respect to each Licensed Product, AbbVie shall have the sole right to make all filings with Regulatory Authorities in the Territory with respect to any Licensed Patents, including as required or allowed in or outside the United States, under the national implementations of Article 10.1(a)(iii) of Directive 2001/EC/83 or other international equivalents. AbbVie shall consult with Xilio to determine the course of action with respect to such filings for Licensed Platform Patents and Joint Patents. Xilio shall cooperate with AbbVie’s reasonable requests in connection therewith, including meeting any submission deadlines to the extent required or permitted by Applicable Law.
59
7.2.10.UPC Opt-Out and Opt-In. AbbVie shall have the sole right to make any decision regarding whether or not to elect Opt-Out or Opt-In with respect to any [**]; provided that AbbVie shall consider in good faith Xilio’s comments with respect thereto.
7.2.11.Settlement of Defense Proceedings. Neither Party may settle any Defense Proceeding without the other Party’s written consent (such consent not to be unreasonably withheld, conditioned or delayed) if [**].
7.3.1.Notice. Each Party shall [**] notify the other Party in writing if and when it becomes aware of any alleged or threatened infringement of [**] by a Third Party’s Competing Product (including a Biosimilar Product) in the Territory (“Product Infringement”).
7.3.2.Licensed Platform Patents. Subject to Section 7.3.6 (Enforcement of Patents; Non-Product Infringement) and 7.3.7 (Enforcement of Patents; Biosimilar Litigation), Xilio shall have the sole right, but not the obligation, to prosecute any Product Infringement with respect to Licensed Platform Patents in the Territory, including as a defense or counterclaim in connection with any Third Party Infringement Claim, at its sole expense, and Xilio shall retain control of the prosecution of the applicable claim, suit or proceeding with respect to such Product Infringement [**].
7.3.3.Licensed Product Patents. Prior to the applicable License Option Effective Date if the Licensed Product affected by Product Infringement is an Option Licensed Product, Xilio shall have the first right, but not the obligation, to prosecute any Product Infringement in the Territory with respect to the applicable Option Product Patents, including as a defense or counterclaim in connection with any Third Party Infringement Claim, at its sole expense, and Xilio shall retain control of the prosecution of the applicable claim, suit or proceeding with respect to such Product Infringement; [**]. With respect to each Licensed Product affected by Product Infringement, from and after the Effective Date if the affected Licensed Product is a Collaboration Licensed Product and the applicable License Option Effective Date if the affected Licensed Product is an Option Licensed Product, AbbVie shall have the [**] right, but not the obligation, to prosecute any Product Infringement in the Territory with respect to Licensed Product Patents [**], including as a defense or counterclaim in connection with any Third Party Infringement Claim, at its sole expense and AbbVie shall retain control of the prosecution of the applicable claim, suit or proceeding with respect to such Product Infringement. If AbbVie prosecutes any such Product Infringement, then Xilio shall have the right to join as a party to such claim, suit or proceeding in the Territory and participate with its own counsel at its own expense[**].
7.3.4.[**].
7.3.5.Joint Patents. AbbVie shall have the first right, but not the obligation, to prosecute any Product Infringement of the Joint Patents [**] in the Territory, including as a defense or counterclaim in connection with any Third Party Infringement Claim, at its sole expense, and AbbVie shall retain control of the prosecution of the applicable claim, suit or proceeding with respect to such infringement, provided that Xilio will have the first right to
60
prosecute any Product Infringement of the Joint Patents [**] in the Territory, including as a defense or counterclaim in connection with any Third Party Infringement Claim, at its sole expense, with respect to an Option Target Program prior to the License Option Effective Date for such Option Target Program [**]. If AbbVie decides not to prosecute the alleged or threatened infringement in the Territory with respect to such Joint Patents, then AbbVie shall timely inform Xilio and then Xilio may prosecute the alleged or threatened infringement in the Territory at its own expense. If Xilio prosecutes such Product Infringement, AbbVie shall [**].
7.3.6.Non-Product Infringement.
(a)Xilio shall have the sole right, but not the obligation, to prosecute any alleged or threatened infringement of a [**] that is not Product Infringement in the Territory, including as a defense or counterclaim in connection with any Third Party Infringement Claim, at its sole expense, and Xilio shall retain control of the prosecution of the applicable claim, suit or proceeding with respect to such infringement and retain all recoveries in connection therewith.
(b)AbbVie shall have the sole right, but not the obligation, to prosecute any alleged or threatened infringement of any [**] in the Territory, including as a defense or counterclaim in connection with any Third Party Infringement Claim, at its sole expense, and AbbVie shall retain control of the prosecution of the applicable claim, suit or proceeding with respect to such infringement and retain all recoveries in connection therewith.
7.3.7.Biosimilar Litigation. Notwithstanding any provision to the contrary in this Agreement, during the Term on a Target Program-by-Target Program basis, AbbVie shall have the sole right to prosecute, manage and settle any litigation with respect to Biosimilar Products of Licensed Products with respect to such Target Program or any product sought to be approved as Biosimilar Product of a Licensed Product with respect to such Target Program, and any proceedings associated therewith, in connection with any Licensed Patents, including any invalidity, unpatentability or unenforceability challenges, oppositions and post-grant proceedings in connection therewith. During the Term on a Target Program-by-Target Program basis, if Xilio receives notice or a copy of an application submitted to the FDA for a Biosimilar Product of a Licensed Product with respect to such Target Program (a “Biosimilar Application”) for which such Licensed Product is a “reference product,” as such term is used in the BPCI Act, whether or not such notice or copy is provided under any Applicable Laws, or otherwise becomes aware that such a Biosimilar Application has been submitted to a Regulatory Authority for Regulatory Approval (such as in an instance described in Section 351(1)(9)(C) of the PHSA), the remainder of this Section 7.3.7 (Enforcement of Patents; Biosimilar Litigation) shall apply. Xilio shall, within [**], notify and provide AbbVie copies of such communication for such Licensed Product to the extent permitted by Applicable Law. AbbVie shall have the right to carry out the rights and responsibilities of the “reference product sponsor,” as defined in Section 351(l)(1)(A) of the PHSA, for purposes of such Biosimilar Application, in consultation with Xilio to the extent requested by AbbVie and permitted under Applicable Law. If requested by AbbVie, Xilio shall seek to obtain access to the Biosimilar Application and related confidential information, including in accordance with Section 351(l)(1)(B)(iii) of the PHSA, if applicable. If permitted pursuant to Applicable Law, then upon AbbVie’s request, Xilio shall assist AbbVie in identifying and listing any Patents as required pursuant to Section 351(l)(1)(3)(A) or
61
Section 351(l)(7) of the PHSA, in negotiating with the filer of the Biosimilar Application pursuant to Section 351(l)(4) of the PHSA, and in selecting Patents for and conducting litigation pursuant to Section 351(l)(5) and Section 351(l)(6) of the PHSA, to the extent applicable, and shall cooperate with AbbVie in responding to relevant communications with respect to such lists from the filer of the Biosimilar Application. Upon AbbVie’s request, Xilio shall assist in seeking an injunction against any commercial marketing by the filer of a Biosimilar Application as permitted pursuant to Section 351(l)(8)(B) of the PHSA or in filing an action for infringement against the filer of such Biosimilar Application. AbbVie shall reimburse Xilio for its FTE Costs and Xilio’s reasonable and verifiable Out-of-Pocket Costs, in each case, incurred in conjunction with providing support to AbbVie under this Section 7.3.7 (Enforcement of Patents; Biosimilar Litigation).
7.3.8.Cooperation. The Parties agree to cooperate fully in any infringement action pursuant to this Section 7.3 (Enforcement of Patents). If a Party brings such an action, then the other Party shall, if necessary, furnish a power of attorney solely for such purpose or shall join in, or be named as a necessary party to, such action. Unless otherwise set forth herein, the Party entitled to bring any patent infringement litigation in accordance with this Section 7.3 (Enforcement of Patents) shall have the right to settle such claim; provided that neither Party shall have the right to settle any patent infringement litigation under this Section 7.3 (Enforcement of Patents) [**]. The Party commencing the litigation shall provide the other Party with copies of all pleadings and other documents filed with the court and shall consider reasonable input from the other Party during the course of the proceedings.
7.3.9.Recovery. Except as otherwise agreed by the Parties in connection with a cost sharing arrangement and except with respect to costs incurred by a Party that joins and participates in such litigation at its sole cost and expense as set forth in this Section 7.3 (Enforcement of Patents), any recovery realized as a result of such litigation described in Section 7.3.2 (Enforcement of Patents; Licensed Platform Patents), Section 7.3.3 (Enforcement of Patents; Licensed Product Patents) or Section 7.3.7 (Enforcement of Patents; Biosimilar Litigation) (whether by way of settlement or otherwise), including any payment pursuant to a settlement agreement for past infringement by a Settlement Sublicensee with respect to the Exploitation of a Licensed Product or a Biosimilar Product prior to such counterparty becoming a Settlement Sublicensee or for the future Exploitation of Licensed Products by such Settlement Sublicensee, shall be first allocated to reimburse the Parties for their costs and expenses in making such recovery (which amounts shall be allocated pro rata if insufficient to cover the totality of such expenses). [**].
7.4.Infringement Claims by Third Parties.
7.4.1.If the Exploitation of a Licensed Product in the Territory pursuant to this Agreement results in, or may result in, any claim, suit or proceeding by a Third Party alleging patent infringement by AbbVie (or its Affiliates or Sublicensees) (a “Third Party Infringement Claim”), including any defense or counterclaim in connection with an infringement action initiated pursuant to Section 7.3 (Enforcement of Patents), the Party first becoming aware of such Third Party Infringement Claim shall promptly notify the other Party thereof in writing.
62
7.4.2.Notwithstanding Section 10.3.2 (Indemnification Procedures; Control of Defense), AbbVie shall have the sole right, but not the obligation, to defend and control the defense and settlement of any Third Party Infringement Claim at its own expense (but subject to deduction as provided below), using counsel of its own choice. Xilio may participate in any such Third Party Infringement Claim with counsel of its choice at its own expense whether or not it is a named defendant. Without limitation of the foregoing, if AbbVie finds it necessary or desirable to join Xilio as a party to any such Third Party Infringement Claim, Xilio shall execute all papers and perform such acts as shall be reasonably required at AbbVie’s expense.
7.4.3.AbbVie shall keep Xilio reasonably informed of all material developments in connection with any Third Party Infringement Claim. AbbVie shall have the right to settle any Third Party Infringement Claim in its reasonable discretion; provided that AbbVie shall not have the right to settle any Third Party Infringement Claim in a manner that imposes any costs or liability on, or involves any admission by, Xilio, without the express written consent of Xilio. If Xilio is named as a party in a Third Party Infringement Claim, AbbVie agrees to allow Xilio reasonable opportunity to participate in the defense of the Third Party Infringement Claim.
7.4.4.Any recoveries by a Party of any sanctions awarded to such Party and against a party asserting a claim being defended under this Section 7.4 (Infringement Claims by Third Parties) shall be applied [**].
7.5.Third Party Licenses and Patents.
7.5.1.Notice. Each Party shall notify the other Party when such Party becomes aware of any Patent, trade secret or other intellectual property right of a Third Party in any country or other jurisdiction in the Territory that is necessary or reasonably useful for the Exploitation of any Licensed Therapeutic or Licensed Product (“Third Party Rights”).
7.5.2.Pre-Option Exercise. On an Option Target-by-Option Target basis, prior to the License Option Effective Date for such Option Target, neither Party will [**].
7.5.3.Product In-Licenses.
[**].
7.5.4.Platform In-Licenses. [**].
7.6.1.Selection of Product Trademarks. With respect to each Licensed Product, AbbVie shall have the sole and exclusive right to determine the Product Trademarks to be used with respect to the Exploitation of such Licensed Product on a worldwide basis. Xilio shall not, and shall not permit its Affiliates to, (a) use in their respective businesses, any Trademark that is confusingly similar to, misleading or deceptive with respect to or that dilutes any (or any part) of the Product Trademarks or (b) do any act that endangers, destroys or similarly affects, in any material respect, the value of the goodwill pertaining to the Product Trademarks.
63
7.6.2.Ownership and Prosecution of Product Trademarks. AbbVie shall own all rights, title, and interests in and to the Product Trademarks in the Territory, and shall be responsible for the registration, prosecution and maintenance thereof. All costs and expenses of registering, prosecuting and maintaining the Product Trademarks shall be borne solely by AbbVie. Xilio shall provide reasonable assistance and documents reasonably requested by AbbVie in support of its prosecution, registration and maintenance of the Product Trademarks.
7.6.3.Enforcement of Product Trademarks. AbbVie shall have the sole right and responsibility for taking such action as AbbVie deems necessary against a Third Party based on any alleged, threatened or actual infringement, dilution, misappropriation or other violation of, or unfair trade practices or any other like offense relating to, the Product Trademarks by a Third Party in the Territory. AbbVie shall bear the costs and expenses relating to any enforcement action commenced pursuant to this Section 7.6.3 (Product Trademarks; Enforcement of Product Trademarks) and any settlements and judgments with respect thereto, and shall retain any damages or other amounts collected in connection therewith.
7.6.4.Third Party Claims. AbbVie shall have the sole right and responsibility for defending against and settling any alleged, threatened or actual claim by a Third Party that the use or registration of the Product Trademarks in the Territory infringes, dilutes, misappropriates or otherwise violates any Trademark or other right of that Third Party or constitutes unfair trade practices or any other like offense, or any other claims as may be brought by a Third Party against a Party in connection with the use of the Product Trademarks with respect to a Licensed Product in the Territory. AbbVie shall bear the costs and expenses relating to any defense commenced pursuant to this Section 7.6.4 (Product Trademarks; Third Party Claims) and any settlements and judgments with respect thereto, and shall retain any damages or other amounts collected in connection therewith.
7.6.5.Notice and Cooperation. Each Party shall provide to the other Party prompt written notice of any actual or threatened infringement of the Product Trademarks in the Territory and of any actual or threatened claim that the use of the Product Trademarks in the Territory violates the rights of any Third Party, in each case, of which such Party becomes aware. Each Party agrees to cooperate fully with the other Party with respect to any enforcement action or defense commenced pursuant to this Section 7.6 (Product Trademarks).
7.7.Inventor’s Remuneration. Each Party shall be solely responsible for any remuneration that may be due such Party’s employees or agents that are inventors under any applicable inventor remuneration laws.
7.8.International Nonproprietary Name. As between the Parties, AbbVie shall have the sole right and responsibility to select the International Nonproprietary Name or other name or identifier for any Licensed Product. AbbVie shall have the sole right and responsibility to apply for submission to the World Health Organization for the International Nonproprietary Name, and submission to the United States Adopted Names Council for the United States Adopted Name.
64
CONFIDENTIALITY AND NON-DISCLOSURE
8.1.Confidentiality Obligations.
8.1.1.Confidential Information. At all times during the Term and [**] following termination or expiration of this Agreement in its entirety (or, with respect to trade secrets, for so long as such trade secret remains a trade secret under Applicable Law), each Party shall, and shall cause its Affiliates and each of its and their respective officers, directors, employees and agents to, keep confidential and not publish or otherwise disclose to a Third Party and not use, directly or indirectly, for any purpose, any Confidential Information furnished or otherwise made known to it, directly or indirectly, by the other Party, except to the extent such disclosure or use is expressly permitted by the terms of this Agreement. “Confidential Information” means any Information provided orally, visually, in writing or other form that is disclosed or otherwise provided by or on behalf of one Party or any of its Affiliates (the “Disclosing Party”) to the other Party or any of its Affiliates (the “Receiving Party”) under this Agreement or that certain Confidential Disclosure Agreement entered into by the Parties, dated [**] (the “CDA”), whether prior to, on or after the Effective Date, including (a) the terms of this Agreement (subject to Section 8.2 (Permitted Disclosures)), (b) Information relating to the Development activities or any Exploitation of any Licensed Therapeutic or any Licensed Product (including the Regulatory Documentation) and any Information with respect thereto developed by or on behalf of the Disclosing Party or its Affiliates or its and their respective Sublicensees (including Licensed Know-How) and (c) the scientific, regulatory or business affairs or other activities of either Party or its Affiliates. Notwithstanding the foregoing, irrespective of the Party who first disclosed it: (i) [**] (ii) [**] (“Collaboration Licensed Target Information”, together with the Option Licensed Target Information, the “Licensed Target Information”) [**] and (iv) [**]. Notwithstanding any provision to the contrary set forth in this Agreement, on and after the effective date of termination of this Agreement for (1) [**] for which Xilio was the Disclosing Party will be Confidential Information of Xilio (and AbbVie shall be deemed to be the Receiving Party with respect thereto), and (2) [**] will be deemed the Confidential Information of both Parties (and both Parties shall be deemed to be the Receiving Party and the Disclosing Party with respect thereto).
8.1.2.Exceptions. Notwithstanding Section 8.1.1 (Confidentiality Obligations; Confidential Information), Confidential Information shall not include, to the extent the Receiving Party can demonstrate by documentation or other competent proof, any information that:
(a)has been published by a Third Party or otherwise is or hereafter becomes part of the public domain by public use, publication, general knowledge or the like through no wrongful act, fault or negligence by the Receiving Party;
(b)has been in the Receiving Party’s possession prior to disclosure by the Disclosing Party without any obligation of confidentiality with respect to such information;
65
(c)is subsequently received by the Receiving Party from a Third Party who is not bound by any obligation of confidentiality to the Disclosing Party with respect to such information; or
(d)has been independently developed by or for the Receiving Party without reference to, or use or disclosure of, the Disclosing Party’s Confidential Information.
Specific aspects or details of Confidential Information shall not be deemed to be within the public domain or in the possession of the Receiving Party merely because the Confidential Information is embraced by more general information in the public domain or in the possession of the Receiving Party. Further, any combination of Confidential Information shall not be considered in the public domain or in the possession of the Receiving Party merely because individual elements of such Confidential Information are in the public domain or in the possession of the Receiving Party unless the combination and its principles are in the public domain or in the possession of the Receiving Party.
8.2.Permitted Disclosures. The Receiving Party may disclose Confidential Information of the Disclosing Party to the extent that such disclosure is:
8.2.1.in the reasonable opinion of the Receiving Party’s legal counsel (including in-house counsel), required to be disclosed pursuant to law, regulation or a valid order of a court of competent jurisdiction or other Governmental Authority (provided that any filing with securities regulators will be subject to Section 8.4 (Public Announcements)); provided further that, [**]. In the event that no protective order or other remedy is obtained, or the Disclosing Party waives the requirements of this Section 8.2.1 (Permitted Disclosures), the Receiving Party shall furnish only that portion of Confidential Information that the Receiving Party is advised by its counsel is legally required to be disclosed; or
8.2.2.made by or on behalf of the Receiving Party to Regulatory Authorities as required in connection with any filing, application or request for any Regulatory Approval in accordance with the terms of this Agreement; provided that the Receiving Party will take reasonable measures to seek to obtain confidential treatment of such Confidential Information to the extent practicable and consistent with Applicable Law;
8.2.3.made by or on behalf of the Receiving Party to a patent authority as may be reasonably necessary or useful for purposes of obtaining, defending or enforcing a Patent under this Agreement; provided that the Receiving Party will take reasonable measures to seek to obtain confidential treatment of such Confidential Information, to the extent practicable and consistent with Applicable Law;
8.2.4.made to its or its Affiliates’ financial and legal advisors who have a need to know such Disclosing Party’s Confidential Information and are either under professional codes of conduct giving rise to expectations of confidentiality and non-use or under written agreements of confidentiality and non-use at least as restrictive as those set forth in this Agreement; provided that the Receiving Party shall remain responsible for any failure by such financial and legal advisors to treat such Confidential Information as required under this ARTICLE 8 (Confidentiality and Non-Disclosure);
66
8.2.5.made by the Receiving Party or its Affiliates to potential or actual investors, financing sources or acquirers, including potential or actual assignees of payments to Xilio hereunder, to the extent necessary in connection with such Persons’ evaluation of such potential or actual investment or acquisition; provided that such Persons shall be subject to obligations of confidentiality and non-use with respect to such Confidential Information substantially similar to the obligations of confidentiality and non-use of the Receiving Party pursuant to this ARTICLE 8 (Confidentiality and Non-Disclosure) or otherwise customary for the nature and type of the disclosure;
8.2.6.made by AbbVie or its Affiliates or Sublicensees to its or their advisors, consultants, clinicians, vendors, service providers, contractors, existing or prospective collaboration partners, licensees, sublicensees or other Third Parties as may be necessary or useful in connection with the Exploitation of the Licensed Products, including in connection with any filing, application or request for Regulatory Approval by or on behalf of AbbVie or any of its Affiliates or any of its or their respective Sublicensees for any Licensed Product and including to existing or potential Distributors, Sublicensees, collaboration partners or acquirers or transferees, or otherwise in connection with the performance of its obligations or exercise of its rights as contemplated by this Agreement; provided that such Persons shall be subject to obligations of confidentiality and non-use with respect to such Confidential Information substantially similar to the obligations of confidentiality and non-use of the Receiving Party pursuant to this ARTICLE 8 (Confidentiality and Non-Disclosure); or
8.2.7.made by Xilio or its Affiliates to its or their advisors, consultants, clinicians, vendors, service providers, contractors [**] to the extent necessary in assisting with Xilio’s activities contemplated by and in accordance with this Agreement; provided that such Persons shall be subject to obligations of confidentiality and non-use with respect to such Confidential Information of AbbVie substantially similar to the obligations of confidentiality and non-use of Xilio pursuant to this ARTICLE 8 (Confidentiality and Non-Disclosure) [**].
Notwithstanding the foregoing, as between the Parties, Confidential Information disclosed pursuant to this Section 8.2 (Permitted Disclosures) shall remain subject to the terms of this Agreement.
8.3.Use of Name. Each Party will have the right to use the other Party’s name and logo in (i) any press release or securities filing issued in accordance with Section 8.4 (Public Announcements) and (ii) its corporate investor presentations and corporate website to describe the collaboration relationship. Except as otherwise provided by this Section 8.3 (Use of Name) or as otherwise permitted by this ARTICLE 8 (Confidentiality and Non-Disclosure), neither Party shall mention or otherwise use the name, logo or Trademarks of the other Party or any of its Affiliates or any of its or their respective (sub)licensees (or any abbreviation or adaptation thereof) in any publication, press release, marketing and promotional material or other form of publicity without the prior written approval of such other Party. Notwithstanding any provision to the contrary set forth in this Agreement, including the restrictions imposed by this Section 8.3 (Use of Name), each Party will have the right to make any disclosure identifying the other Party to the extent required in connection with its exercise of its rights or obligations under this Agreement. In addition, any use of a name, logo or Trademark of a Party under this Agreement will be in accordance with such Party’s guidelines for quality and use of name, logo and Trademarks, and no provision set forth in
67
this Agreement will be construed to limit either Party’s right to engage in fair use of the name, logo or Trademark of the other Party.
8.4.1.Neither Party shall issue any public announcement, press release or other public disclosure regarding this Agreement or its subject matter without the other Party’s prior written consent.
8.4.2.Each Party acknowledges that the other Party may be legally required to make public disclosures regarding this Agreement or its subject matter to comply with Applicable Laws (including the rules and regulations of the U.S. Securities and Exchange Commission or a securities exchange on which its or its Affiliate’s securities are listed), provided that, prior to any such disclosure, to the extent not prohibited by Applicable Law, the disclosing Party shall provide prior written notice (which may be via e-mail) together with a draft of the proposed disclosure to the non-disclosing Party as far in advance as reasonably practicable [**] so as to provide such non-disclosing Party a reasonable opportunity to review and comment thereon.
8.4.3.AbbVie, its Affiliates and its and their respective Sublicensees shall have the right to publicly disclose research, development and commercial information (including with respect to regulatory matters) regarding the Licensed Therapeutics and Licensed Products; provided that such disclosure is subject to the provisions of ARTICLE 8 (Confidentiality and Non-Disclosure) with respect to Xilio’s Confidential Information.
8.4.4.After a public disclosure has been made by either Party pursuant to this Section 8.4 (Public Announcements), each Party may make subsequent public disclosures reiterating such information without having to obtain the other Party’s prior consent and approval so long as the information in such press release, securities filing or other public disclosure remains true, accurate and the most current information with respect to the subject matter thereof. Similarly, after a publication has been made available to the public in accordance with Section 8.5 (Publications), each Party may post such publication or a link to it on its corporate website without the prior written approval of the other Party.
8.5.Publications. The Parties recognize that the publication of papers regarding results of, and other information regarding activities under this Agreement, including oral presentations and abstracts, may be beneficial to both Parties; provided that such publications are subject to reasonable controls to protect Confidential Information.
8.5.1.Xilio Publications. Xilio shall not, and shall cause each of its Affiliates and its and their licensees and (sub)licensees not to, make any publications or public disclosure regarding any Confidential Information regarding activities under this Agreement with respect to Licensed Targets, Backup Option Targets, Target Programs, the Licensed Therapeutics or Licensed Products (excluding in each case, publications or public disclosures solely related to the Xilio Platform Technology) without AbbVie’s prior written consent (not to be unreasonably withheld, conditioned or delayed).
68
8.5.2.AbbVie Publications. With respect to each (a) Collaboration Target, from and after the Effective Date, and (b) Option Target, from and after the License Option Effective Date, in each case ((a) and (b)), until termination of this Agreement with respect to such Licensed Target, AbbVie shall be free to publicly disclose the results of and Information regarding activities under this Agreement with respect to such Licensed Target or any Licensed Therapeutic or Licensed Product [**] such Licensed Target, subject to prior review by Xilio for any disclosure of Confidential Information of Xilio for issues of patentability and protection of such Confidential Information, in a manner consistent with Applicable Law and industry practices, as provided in this Section 8.5.2 (Publications; AbbVie Publications). Accordingly, prior to publishing or disclosing any Confidential Information of Xilio, AbbVie shall provide Xilio with drafts of proposed abstracts, manuscripts or summaries of presentations that cover such Confidential Information. Xilio shall respond promptly through its designated representative and in any event [**] after receipt of such proposed publication or presentation or such shorter period as may be required by the publication or presentation. AbbVie shall allow a reasonable period ([**]) to permit filings for patent protection and to otherwise address issues of Confidential Information.
REPRESENTATIONS AND WARRANTIES
9.1.Mutual Representations and Warranties. Each Party and Xilio Parent represents and warrants to the other Party, as of the Effective Date:
9.1.1.it is duly organized, validly existing and in good standing under the Applicable Laws of the jurisdiction of its incorporation and has full corporate power and authority to enter into this Agreement and to carry out the provisions hereof;
9.1.2.the execution and delivery of this Agreement and the performance by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action and do not violate: (a) such Party’s charter documents, bylaws or other organizational documents; (b) in any material respect, any agreement, instrument or contractual obligation to which such Party is bound; (c) any requirement of any Applicable Law; or (d) any order, writ, judgment, injunction, decree, determination or award of any court or governmental agency presently in effect applicable to such Party;
9.1.3.this Agreement is a legal, valid and binding obligation of such Party enforceable against it in accordance with its terms and conditions, subject to the effects of bankruptcy, insolvency or other laws of general application affecting the enforcement of creditor rights, judicial principles affecting the availability of specific performance and general principles of equity (whether enforceability is considered a proceeding at law or equity); and
9.1.4.it is not under obligation, contractual or otherwise, to any Person that conflicts with or is inconsistent in any material respect with the terms of this Agreement, or that would impede the diligent and complete fulfillment of its obligations hereunder.
9.2.Representations and Warranties of Xilio as of the Effective Date. Xilio and Xilio Parent additionally represent and warrant to AbbVie as of the Effective Date, except as
69
set forth in the disclosure schedules delivered by Xilio on the Effective Date (the “Initial Disclosure Schedules”):
9.2.1.All Existing Patents (a) are listed on Schedule 9.2.1 (Existing Patents), (b) are [**], (c) are [**] (d) have been [**].
9.2.2.In respect of the pending Patent applications included in the Existing Patents, to the extent required by applicable Patent laws and regulations, Xilio and its Affiliates [**].
9.2.3.The Existing Patents represent [**].
9.2.4.[**].
9.2.5.Xilio [**].
9.2.6.Xilio is authorized to grant the licenses specified herein.
9.2.7.To Xilio’s Knowledge, [**].
9.2.8.[**] no claims, judgments or settlements against, or amounts with respect thereto, owed by Xilio or any of its Affiliates relating to [**]. No claim or litigation has been brought or threatened by any Person alleging, and Xilio has no Knowledge of any claim, whether or not asserted, that [**]. To Xilio’s Knowledge, no Person [**].
9.2.9.To Xilio’s Knowledge, [**].
9.2.10.[**] has assigned and has executed an agreement assigning its entire rights, title, and interests in and to such Licensed Patents and Licensed Know-How to Xilio. [**].
9.2.11.To the extent not publicly available, Xilio has [**].
9.2.12.[**].
9.2.13.[**].
9.2.14.The inventions claimed [**] (a) were not [**] (b) are not [**] (c) are not [**] and (d) are not [**].
9.2.15.Xilio and its Affiliates have [**].
9.2.16.Neither Xilio nor any of its Affiliates, nor any of its or their respective officers, employees or agents has [**].
9.2.17.[**].
9.2.18.Xilio and its Affiliates (a) have complied and shall comply with all Applicable Law governing bribery, money laundering and other corrupt practices and behavior
70
(including, as applicable, the U.S. Foreign Corrupt Practices Act and UK Bribery Act) and (b) shall not, directly or indirectly, offer, give, pay, promise to pay or authorize the payment of any bribes, kickbacks, influence payments or other unlawful or improper inducements to any Person in whatever form (including gifts, travel, entertainment, contributions or anything else of value).
9.2.19. [**], Xilio has not received written notice of any [**]. To Xilio’s Knowledge, Xilio and its Affiliates are not [**].
9.2.20.[**].
9.3.Additional Representations and Warranties of Xilio. Xilio and Xilio Parent additionally represent and warrant to AbbVie as of each applicable Bring-Down Date, except as set forth in the disclosure schedules delivered by Xilio on each applicable Bring-Down Date (the “Bring-Down Disclosure Schedule”):
9.3.1.All Existing Patents existing as of the Bring-Down Date (a) are listed on Schedule 9.2.1 (Existing Patents), [**].
9.3.2.In respect of the pending Patent applications included in the Existing Patents, to the extent required by applicable Patent laws and regulations, Xilio and its Affiliates have [**].
9.3.3.The Existing Patents [**].
9.3.4.[**].
9.3.5.[**].
9.3.6.Xilio is authorized to grant the licenses specified herein.
9.3.7.As of the Bring-Down Date, Xilio has not sent a notice that [**].
9.3.8.[**] no claims, judgments or settlements against, or amounts with respect thereto, owed by Xilio or any of its Affiliates relating to the [**]. No claim or litigation has been brought or threatened by any Person alleging, and Xilio has no Knowledge of any claim, whether or not asserted, that [**]. To Xilio’s Knowledge, no Person [**].
9.3.9.To Xilio’s Knowledge, [**].
9.3.10.Schedule 9.3.10 (Third Party Agreements) sets forth a complete and correct list of all agreements, whether written or oral, entered into by Xilio or any of its Affiliates that relate to the Exploitation of any Licensed Product (other than the In-License Agreements listed on Schedule 9.3.10 (Third Party Agreements)), [**].
9.3.11.Neither Xilio nor any of its Affiliates has previously entered into [**].
71
9.3.12.[**] has assigned and has executed an agreement assigning its entire rights, title, and interests in and to such Licensed Patents and Licensed Know-How to Xilio. [**].
9.3.13.[**].
9.3.14.To the extent not publicly available, Xilio has [**].
9.3.15.The [**]
9.3.16.[**] no pending, alleged or threatened (a) [**] or (b) [**].
9.3.17.The inventions claimed by [**] (a) [**], (b) [**] (c) [**] and (d) [**].
9.3.18.Xilio and its Affiliates have [**].
9.3.19.Neither Xilio nor any of its Affiliates[**].
9.3.20.[**].
9.3.21.Xilio and its Affiliates (a) have complied and shall comply with all Applicable Law governing bribery, money laundering and other corrupt practices and behavior (including, as applicable, the U.S. Foreign Corrupt Practices Act and UK Bribery Act) and (b) shall not, directly or indirectly, offer, give, pay, promise to pay or authorize the payment of any bribes, kickbacks, influence payments or other unlawful or improper inducements to any Person in whatever form (including gifts, travel, entertainment, contributions or anything else of value).
9.3.22.To the extent that Xilio Processed Personal Data (including any transfer of Personal Data across national borders) in the performance of its activities under this Agreement, such Processing [**]. Since the Effective Date, Xilio has not [**]. To Xilio’s Knowledge, Xilio and its Affiliates are not [**].
9.3.23.[**].
9.4.Additional Covenants of Xilio. Xilio covenants to AbbVie as follows:
9.4.1.From and after the Effective Date and until the expiration or earlier termination of this Agreement in its entirety or with respect to a Licensed Target, as applicable, [**].
9.4.2.Xilio shall [**] provide AbbVie with notice of [**].
9.4.3.Neither Xilio nor any of its Affiliates [**] (a) [**] or (b) [**].
9.4.4.Neither Xilio nor any of its Affiliates will [**] (i) [**] or (ii) [**] in each case ((i) and (ii)), that is [**].
72
9.4.5.To the extent any of Xilio’s or its Affiliates’ (sub)licensees, employees and agents [**].
9.4.6.Xilio shall not, and shall cause its Affiliates not to, use in any capacity, in connection with the obligations to be performed under this Agreement [**]. Xilio covenants that if, during the Term, it or its Affiliates become [**], then Xilio shall [**].
9.4.7.Xilio shall not, and shall cause its Affiliates not to, directly or indirectly, [**] in performing its activities under this Agreement [**] Xilio shall, and shall cause its Affiliates to [**]. Without limiting any other provision of this Agreement, Xilio shall ensure that no [**].
9.4.8.Xilio shall, and shall cause its Affiliates to, (a) comply with all Applicable Law [**] and (b) not, [**].
9.4.9.Xilio and its Affiliates shall employ or engage Persons with [**] to conduct and to oversee the conduct of its activities under this Agreement.
9.4.10.In the event the consummation of this Agreement and the transactions contemplated herein require Xilio to transfer Personal Data across national borders, Xilio shall comply with Applicable Law in the export of Personal Data, and at the request of either Party, the Parties shall negotiate in good faith and enter into a customary data processing agreement governing the procedures for such transfer of Personal Data in compliance with Applicable Law.
9.4.11.Xilio and its Affiliates have, and undertake that they shall update and maintain during the Term, an [**].
9.5.Bring-Down Disclosure Schedules. The Parties agree that any disclosure made by Xilio pursuant to a Bring-Down Disclosure Schedule shall [**]. For clarity, [**].
9.6.DISCLAIMER OF WARRANTIES. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH HEREIN, NEITHER PARTY OR XILIO PARENT MAKES ANY REPRESENTATIONS OR GRANTS ANY WARRANTIES, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE AND EACH PARTY SPECIFICALLY DISCLAIMS ANY OTHER WARRANTIES, WHETHER WRITTEN OR ORAL OR EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF QUALITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE, WARRANTY OF REGULATORY APPROVAL OF ANY LICENSED PRODUCT, WARRANTY OF ACHIEVEMENT OF MILESTONE EVENTS OR LEVELS OF SALES OF LICENSED PRODUCT OR ANY WARRANTY AS TO THE VALIDITY OF ANY PATENTS OR THE NON-INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.
73
INDEMNITY
10.1.Indemnification of Xilio. AbbVie shall indemnify Xilio, its Affiliates and its and their respective directors, officers, employees and agents (collectively, “Xilio Indemnitees”), and defend and save each of them harmless, from and against any and all losses, damages, liabilities, penalties, costs and expenses (including reasonable attorneys’ fees and expenses) (collectively, “Losses”) in connection with any and all suits, investigations, claims or demands of Third Parties (collectively, “Third Party Claims”) incurred by or rendered against the Xilio Indemnitees arising from or occurring as a result of: (a) the breach by or on behalf of AbbVie or its Affiliates or Sublicensees of this Agreement; (b) [**]; or (c) the Exploitation of any Licensed Therapeutic or Licensed Product in the Territory or use of any Product Trademark by or on behalf of AbbVie or any of its Affiliates or Sublicensees [**], except, in each case ((a) through (c)), for Losses for which Xilio has an obligation to indemnify AbbVie, in whole or in part, pursuant to Section 10.2 (Indemnification of AbbVie), as to which Losses each Party shall indemnify the other Party and the AbbVie Indemnitees or Xilio Indemnitees, as applicable, to the extent of its respective liability for such Losses.
10.2.Indemnification of AbbVie. Xilio shall indemnify AbbVie, its Affiliates and its and their respective directors, officers, employees and agents (collectively, “AbbVie Indemnitees”), and defend and save each of them harmless, from and against any and all Losses in connection with any and all Third Party Claims arising from or occurring as a result of: (a) the breach by Xilio or its Affiliates of this Agreement; (b) [**]; and (c) the Exploitation of the Licensed Therapeutics, Licensed Products, Grantback Products or use of any Product Trademark by or on behalf of Xilio or its Affiliates or its or their (sub)licensees or distributors in accordance with this Agreement during the Term and after any termination of this Agreement [**] except, in each case ((a) through (c)), for Losses for which AbbVie has an obligation to indemnify Xilio, in whole or in part, pursuant to Section 10.1 (Indemnification of Xilio) as to which Losses each Party shall indemnify the other Party and the AbbVie Indemnitees or Xilio Indemnitees, as applicable, to the extent of its respective liability for such Losses.
10.3.Indemnification Procedures.
10.3.1.Notice of Claim. All indemnification claims in respect of an AbbVie Indemnitee or a Xilio Indemnitee shall be made solely by Xilio or AbbVie, as applicable (each of Xilio or AbbVie in such capacity, the “Indemnified Party”). The Indemnified Party shall give the indemnifying Party (each of Xilio or AbbVie in such capacity, the “Indemnifying Party”) prompt written notice (an “Indemnification Claim Notice”) of any Losses or discovery of fact upon which such Indemnified Party intends to base a request for indemnification under this Agreement, but in no event shall the Indemnifying Party be liable for any Losses to the extent such Losses result from any delay in the Indemnified Party providing such Indemnification Claim Notice; provided that any delay or failure to provide such Indemnification Claim Notice in a prompt manner will not constitute a waiver or release of, or otherwise limit, the Indemnified Party’s rights to indemnification under Section 10.1 (Indemnification of Xilio) or Section 10.2 (Indemnification of AbbVie), as applicable, except to the extent that such delay or failure prejudices the Indemnifying Party’s ability to defend against the relevant claims. Each Indemnification Claim Notice must contain a description of the Third Party Claim and the nature
74
and amount of such Loss (to the extent that the nature and amount of such Loss is known at such time). The Indemnified Party shall promptly furnish to the Indemnifying Party copies of all papers and official documents received in respect of any Losses and Third Party Claims.
10.3.2.Control of Defense. Subject to Section 7.6 (Product Trademarks) and excluding any Third Party Claim for which AbbVie assumes responsibility for defense pursuant to Section 7.4 (Infringement Claims by Third Parties) or Defense Proceedings in Section 7.2 (Prosecution and Maintenance of Patents), at its option, the Indemnifying Party may assume the defense of any Third Party Claim by notifying the Indemnified Party in writing within [**] after the Indemnifying Party’s receipt of an Indemnification Claim Notice. The assumption of the defense of a Third Party Claim by the Indemnifying Party shall not be construed as an acknowledgment that the Indemnifying Party is liable to indemnify the Indemnified Party in respect of such Third Party Claim, nor shall it constitute a waiver by the Indemnifying Party of any defenses it may assert against the Indemnified Party’s claim for indemnification. Upon assuming the defense of a Third Party Claim, the Indemnifying Party may appoint as lead counsel in the defense of the Third Party Claim any legal counsel selected by the Indemnifying Party, which shall be reasonably acceptable to the Indemnified Party. If the Indemnifying Party assumes the defense of a Third Party Claim, then the Indemnified Party shall immediately Make Available to the Indemnifying Party all original notices and documents (including court papers) received by the Indemnified Party in connection with such Third Party Claim. If the Indemnifying Party assumes the defense of a Third Party Claim, then, except as provided in Section 10.3.3 (Indemnification Procedures; Right to Participate in Defense), the Indemnifying Party shall not be liable to the Indemnified Party for any legal expenses subsequently incurred by such Indemnified Party in connection with the analysis, defense or settlement of such Third Party Claim unless specifically requested in writing by the Indemnifying Party. If it is ultimately determined that the Indemnifying Party is not obligated to indemnify, defend or hold harmless the Indemnified Party from and against a Third Party Claim, then the Indemnified Party shall reimburse the Indemnifying Party for any Losses incurred by the Indemnifying Party in its defense of such Third Party Claim.
10.3.3.Right to Participate in Defense. Any Indemnified Party shall be entitled to participate in, but not control (except as provided in Section 7.4 (Infringement Claims by Third Parties), Defense Proceedings in Section 7.2 (Prosecution and Maintenance of Patents) and Section 7.6 (Product Trademarks)), the defense of a Third Party Claim and to employ counsel of its choice for such purpose; provided that such employment shall be at the Indemnified Party’s sole cost and expense unless (a) the employment thereof has been specifically authorized in writing by the Indemnifying Party, (b) the Indemnifying Party has failed to assume the defense and employ counsel in accordance with Section 10.3.2 (Indemnification Procedures; Control of Defense) (in which case the Indemnified Party shall control the defense) or (c) the interests of the Indemnified Party and the Indemnifying Party with respect to such Third Party Claim are sufficiently adverse to prohibit the representation by the same counsel of both Parties under Applicable Law, ethical rules or equitable principles. For clarity, if the Indemnified Party has the right to control the defense of a Third Party Claim pursuant to Section 7.4 (Infringement Claims by Third Parties), Defense Proceedings in Section 7.2 (Prosecution and Maintenance of Patents) or Section 7.6 (Product Trademarks), then the Indemnified Party shall be entitled to control such Third Party Claim, without limiting the Indemnifying Party’s responsibility for Losses under Section 10.1 (Indemnification of Xilio) or Section 10.2 (Indemnification of AbbVie), as applicable.
75
10.3.4.Settlement. With respect to any Losses relating solely to the payment of money damages in connection with a Third Party Claim and that shall not result in the Indemnified Party or any AbbVie Indemnitee or Xilio Indemnitee, as applicable, admit fault or liability, becoming subject to injunctive or other relief (including payment of lump sum or ongoing royalties) or otherwise adversely affecting the business of the Indemnified Party or any AbbVie Indemnitee or Xilio Indemnitee, as applicable, in any manner, and as to which the Indemnifying Party has acknowledged in writing the obligation to indemnify the Indemnified Party or any AbbVie Indemnitees or Xilio Indemnitees, as applicable, hereunder, the Indemnifying Party shall have the sole and exclusive right to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Loss, on such terms as the Indemnifying Party, in its sole discretion, shall deem appropriate. With respect to all other Losses in connection with Third Party Claims the Indemnifying Party has assumed the defense of the Third Party Claim in accordance with Section 10.3.2 (Indemnification Procedures; Control of Defense), the Indemnifying Party shall have authority to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Loss; provided that it obtains the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld, conditioned or delayed). If the Indemnifying Party does not assume and conduct the defense of a Third Party Claim as provided above, then the Indemnified Party may defend against such Third Party Claim. For clarity, if a Third Party Claim, or the events giving rise to or resulting in such Third Party Claim, are subject to ARTICLE 7 (Intellectual Property) and either Section 10.1 (Indemnification of Xilio) or Section 10.2 (Indemnification of AbbVie), then ARTICLE 7 (Intellectual Property) shall apply with respect to the defense of such Third Party Claim and Section 10.1 (Indemnification of Xilio) or Section 10.2 (Indemnification of AbbVie), as applicable, shall apply with respect to the allocation of financial responsibility for the related Losses.
10.3.5.Cooperation. Regardless of whether the Indemnifying Party chooses to defend or prosecute any Third Party Claim, the Indemnified Party shall, and shall cause each AbbVie Indemnitee or Xilio Indemnitee, as applicable, to, cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, provide such witnesses and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested in connection therewith. Such cooperation shall include access during normal business hours on the date(s) previously discussed in good faith by the Parties, afforded to the Indemnifying Party to, and reasonable retention by the Indemnified Party and AbbVie Indemnitee or Xilio Indemnitee, as applicable, of, records and information that are reasonably relevant to such Third Party Claim and making such AbbVie Indemnitees or Xilio Indemnitees, as applicable, and other employees and agents available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder; provided that neither Party shall be required to disclose legally privileged information unless and until procedures reasonably acceptable to such Party are in place to protect such privilege, and the Indemnifying Party shall reimburse the Indemnified Party for all its reasonable and verifiable out-of-pocket expenses in connection therewith, without prejudice to the Indemnifying Party’s right to contest any AbbVie Indemnitee’s or Xilio Indemnitee’s, as applicable, right to indemnification and subject to refund if the Indemnifying Party is ultimately held not to be obligated to indemnify an AbbVie Indemnitee or a Xilio Indemnitee, as applicable.
10.3.6.Expenses. Except as provided above, the reasonable and verifiable costs and expenses, including fees and disbursements of counsel, incurred by the Indemnified
76
Party in connection with any Third Party Claim shall be reimbursed on a Calendar Quarter basis in arrears by the Indemnifying Party, without prejudice to the Indemnifying Party’s right to contest the Indemnified Party’s right to indemnification and subject to refund if the Indemnifying Party is ultimately held not to be obligated to indemnify the Indemnified Party.
10.4.Special, Indirect and Other Losses. EXCEPT (A) FOR WILLFUL MISCONDUCT OR FRAUD, (B) FOR A PARTY’S BREACH OF ITS OBLIGATIONS UNDER [**].
10.5.Insurance. Each Party shall obtain and carry in full force and effect the minimum insurance requirements set forth herein from an insurance company properly licensed to provide the required insurance. Such insurance (a) shall be primary insurance with respect to each Party’s own participation under this Agreement, (b) shall be issued by a recognized insurer rated by A.M. Bests “A-IX” (or its equivalent) or better or an insurer pre-approved in writing by the other Party, and (c) shall require 30 days’ written notice to be given to the other Party prior to any cancellation, non-renewal or material change thereof.
10.5.1.The types of insurance and minimum limits shall be:
(a)Worker’s Compensation with statutory limits in compliance with the Worker’s Compensation laws of the state or states in which the Party has employees in the United States (excluding Puerto Rico).
(b)Employer’s Liability coverage with a minimum limit of [**] per occurrence; provided that if a Party has employees in the United States (excluding Puerto Rico).
(c)General Liability Insurance that is adequate to cover its obligations associated with its activities contemplated by this Agreement.
(d)Solely with respect to AbbVie, Clinical Trial Insurance, and, [**], product liability insurance, in each case, that is adequate to cover its obligations associated with its activities contemplated by this Agreement.
10.5.2.Each Party shall at all times maintain in force any insurance policy that is required by any federal, state, national or other such Applicable Law that may govern or have jurisdiction over any provision of this Agreement and at all times remain fully compliant with any such Applicable Law.
10.5.3.Upon request by a Party, the other Party shall provide Certificates of Insurance evidencing compliance with the above requirements in this Section 10.5 (Insurance). The insurance policies shall be under an occurrence form, but if only a claims-made form is available to a Party, then such party shall continue to maintain such insurance after the expiration or termination of this Agreement for the longer of (a) [**] or (b) with respect to a particular Party, [**].
10.5.4.Notwithstanding the foregoing, AbbVie may self-insure, in whole or in part, the insurance requirements described above.
77
TERM AND TERMINATION
11.1.Term and Expiration. This Agreement shall commence on the Effective Date and, unless earlier terminated pursuant to Section 11.2 (Termination), shall continue in force and effect until the date of expiration of the last Royalty Term for the last Licensed Product; provided that with respect to each Option Target, if AbbVie does not exercise the License Option with respect to such Option Target prior to the expiration of the License Option Period for such Option Target, this Agreement shall terminate with respect to such Option Target Program effective on the expiration of such License Option Period (such period, the “Term”). Following the expiration of the Royalty Term for a Licensed Product in a country or other jurisdiction, this Agreement shall terminate with respect to such Licensed Product in such country or other jurisdiction and the license grants in Section 3.1 (License for Collaboration Target Program) and Section 3.2 (Options and Licenses for Option Target Programs), as applicable, shall become fully-paid, royalty-free, perpetual and irrevocable for such Licensed Product in such country or other jurisdiction. For clarity, upon the expiration of the Term, the license grants in Section 3.1 (License for Collaboration Target Program) and Section 3.2 (Options and Licenses for Option Target Programs) shall become fully-paid, royalty-free, perpetual and irrevocable in their entirety, provided that Xilio shall retain the right to terminate the applicable licenses granted to AbbVie under this Agreement with respect to the applicable Licensed Product in such country or other jurisdiction to the extent [**].
11.2.1.Material Breach.
(a)Material Breach by Xilio. If AbbVie believes that Xilio has materially breached one (1) or more of its material obligations under this Agreement, then AbbVie may deliver notice of such material breach to Xilio (a “Xilio Default Notice”). If Xilio does not dispute that it has committed a material breach of one (1) or more of its material obligations under this Agreement, and Xilio fails to cure such breach [**] after receipt of the Xilio Default Notice, or if such breach cannot be cured [**] period [**] (such period, the “Xilio Cure Period”), then AbbVie may immediately terminate this Agreement in its entirety, or on a Target Program-by-Target Program or Region-by-Region basis upon written notice to Xilio at the end of Xilio Cure Period [**]. If Xilio disputes that it has materially breached one (1) or more of its material obligations under this Agreement, then the Dispute shall be resolved pursuant to Section 12.5 (Dispute Resolution) and the Xilio Cure Period shall toll during the pendency of such Dispute. If, as a result of the application of such Dispute resolution procedures, Xilio is determined to be in material breach of one (1) or more of its material obligations under this Agreement (an “Adverse Ruling”), then if Xilio fails to complete the actions specified by the Adverse Ruling to cure such material breach during the remainder of the Xilio Cure Period, then AbbVie may immediately terminate this Agreement in its entirety, or on a Target Program-by-Target Program or Region-by-Region basis upon written notice to Xilio at the end of the Xilio Cure Period [**].
(b)Material Breach by AbbVie.
78
(1)If Xilio believes that AbbVie’s breach of [**] constitutes a material breach of this Agreement, then Xilio may deliver notice of such material breach to AbbVie (an “AbbVie Default Notice”).
(2)If AbbVie does not dispute that it has committed such material breach, then if AbbVie fails to cure such breach [**] after receipt of the AbbVie Default Notice, or if such material breach cannot be cured [**] (such period, the “AbbVie Cure Period”), then Xilio may immediately terminate this Agreement in its entirety, or on a Target Program-by-Target Program or Region-by-Region basis upon written notice to AbbVie at the end of the AbbVie Cure Period, [**]. If AbbVie disputes that it has committed such a material breach, then the Dispute shall be resolved pursuant to Section 12.5 (Dispute Resolution) [**]. If, as a result of the application of such Dispute resolution procedures, AbbVie is determined to have committed such a material breach, then if AbbVie fails to cure such material breach within [**], Xilio may terminate this Agreement in its entirety, or on a Target Program-by-Target Program or Region-by-Region basis upon written notice to AbbVie at the end of the AbbVie Cure Period, [**].
(3)Notwithstanding any provision to the contrary set forth herein, if an AbbVie Default Notice alleges that a breach [**] constitutes a material breach of the Agreement, then:
[**].
11.2.2.Termination by AbbVie.
(a)AbbVie may terminate this Agreement in its entirety or on a Target Program-by-Target Program or Region-by-Region, as applicable, basis, at any time during the Term (i) [**] or (ii) [**].
(b)AbbVie may terminate this Agreement in its entirety or on a Target Program-by-Target Program, or Region-by-Region, as applicable, basis, at any time during the Term for any reason or no reason, upon (i) [**] prior written notice to Xilio for a Target Program where no Licensed Products have entered Registrational Clinical Trials and (ii) [**] prior written notice to Xilio for a Target Program where at least one (1) Licensed Product has entered Registrational Clinical Trials.
11.3.Termination [**]. Without limiting either Party’s termination rights under Section 3.2.5(d) (License Option Effective Date; Termination of a License Option), (a) AbbVie may terminate this Agreement with respect to the applicable Option Program effective immediately upon written notice to Xilio in the event that the transactions contemplated under this Agreement with respect to such Option Program are [**] and (b) either Party may terminate this Agreement with respect to the applicable Option Program [**].
11.4.Termination for Failure to Make Certain Payments.
11.4.1.Non-Payment of Option Extension Payment. If AbbVie fails to pay the corresponding Option Extension Payment within [**] after the delivery of the applicable Option Extension Notice, then Xilio may provide written notice of its intent to terminate this Agreement in its entirety for the applicable Option Target Program. If AbbVie does not cure such
79
non-payment within [**] after AbbVie’s receipt of such written notice, then such termination will be automatically effective as of such date.
11.4.2.Non-Payment of the Option Exercise Payment. If AbbVie fails to pay the applicable Option Exercise Payment set forth in Section 6.3 (Option Exercise Payment) within [**] of AbbVie delivering an Option Exercise Notice to Xilio in accordance with Section 3.2.3 (Options and Licenses for Option Target Programs; License Option Exercise), then Xilio may provide written notice of its intent to terminate this Agreement in its entirety for the applicable Option Target Program. If AbbVie does not cure such non-payment within [**] after AbbVie’s receipt of such written notice, then such termination will be automatically effective as of such date.
11.5.Termination for Bankruptcy or Insolvency.
11.5.1.Termination Rights. If either Party (or, if applicable, any controlling Affiliate of such Party) (a) files for protection under bankruptcy or insolvency laws, (b) makes an assignment for the benefit of creditors, (c) appoints or suffers appointment of a receiver or trustee over substantially all of its property that is not discharged within [**] after such filing, (d) proposes a written agreement of composition or extension of its debts, (e) proposes or is a party to any dissolution or liquidation or (f) files a petition under any bankruptcy or insolvency act or has any such petition filed against that is not discharged within [**] of the filing thereof, then the other Party may terminate this Agreement in its entirety effective immediately upon written notice to such Party.
11.5.2.Rights in Bankruptcy.
(a)The Parties intend to take advantage of the protections of Section 365(n) (or any successor provision) of the U.S. Bankruptcy Code or any analogous provisions in any other country or jurisdiction to the maximum extent permitted by Applicable Law. All rights and licenses granted to AbbVie under or pursuant to this Agreement, but only to the extent they constitute licenses of a right to “intellectual property” as defined in Section 101 of the U.S. Bankruptcy Code, shall be deemed to be “intellectual property” for the purposes of Section 365(n) or any analogous provisions in any other country or jurisdiction. AbbVie shall retain and may fully exercise all of its rights and elections under the U.S. Bankruptcy Code or any analogous provisions in any other country or jurisdiction, including the right to obtain the intellectual property from another entity.
(b)Xilio will, during the Term, create and maintain current and updated copies or, if not amenable to copying, detailed descriptions or other appropriate embodiments, to the extent feasible, of all intellectual property licensed to AbbVie under this Agreement. Each Party acknowledges and agrees that “embodiments” of intellectual property within the meaning of Section 365(n) include: (a) copies of research Information; (b) laboratory samples; (c) product samples and inventory; (d) formulas; (e) laboratory notes and notebooks; (f) Information related to preclinical and Clinical Studies; (g) Regulatory Documentation (including Regulatory Approvals); (h) rights of reference in respect of Regulatory Documentation (including Regulatory Approvals); (i) tangible Information (including the Licensed Know-How and Joint Know-How); and (j) marketing, advertising and promotional materials that relate to such
80
intellectual property. Upon the commencement of a bankruptcy proceeding by or against Xilio under the U.S. Bankruptcy Code or any analogous provisions in any other country or jurisdiction, AbbVie shall be entitled to a complete duplicate of (or complete access to, as appropriate) all such intellectual property (including all embodiments of such intellectual property), which, if not already in AbbVie’s possession, shall be promptly Made Available to it upon AbbVie’s written request (x) upon commencement of a bankruptcy proceeding, unless Xilio continues to perform all of its obligations under this Agreement or (y) if not Made Available pursuant to clause (x) above because Xilio continues to perform, upon the rejection of this Agreement by or on behalf of Xilio. Unless and until Xilio rejects this Agreement, Xilio shall perform all of its obligations under this Agreement. Xilio shall not interfere with the rights of AbbVie to intellectual property as set forth in this Section 11.5.2 (Termination for Bankruptcy or Insolvency; Rights in Bankruptcy), including the right to obtain the intellectual property from another entity.
(c)The Parties intend and agree that any sale of Xilio’s assets under Section 363 of the Bankruptcy Code shall be subject to AbbVie’s rights under Section 365(n), that AbbVie cannot be compelled to accept a money satisfaction of its interests in the intellectual property licensed pursuant to this Agreement, and that any such sale therefore may not be made to a purchaser “free and clear” of AbbVie’s rights under this Agreement and Section 365(n) without the express, contemporaneous written consent of AbbVie.
(d)All rights, powers and remedies AbbVie provided in this Section 11.5 (Termination for Bankruptcy or Insolvency) are not in substitution for any other rights, powers and remedies now or hereafter existing at law or in equity (including the U.S. Bankruptcy Code). The Parties intend the following rights to extend to the maximum extent permitted by Applicable Law, and to be enforceable under U.S. Bankruptcy Code Section 365(n):
(1)the right of access to any intellectual property rights (including all embodiments thereof) of Xilio or any Third Party with whom Xilio contracts to perform an obligation of Xilio under this Agreement, and, in the case of any such Third Party, that is necessary or useful for the Exploitation of any Licensed Products or the exercise of any other rights granted to AbbVie under this Agreement;
(2)the right to contract directly with any Third Party to complete the contracted work; and
(3)the right to cure any default under any such agreement with a Third Party and set off the costs thereof against amounts payable to Xilio under this Agreement.
11.6.Consequences of Termination.
11.6.1.Termination in its Entirety. If this Agreement is terminated in its entirety:
(a)all rights and licenses granted by Xilio hereunder shall immediately terminate except as set forth in clause (c) below and AbbVie will not, itself or through an Affiliate, and will not authorize any Third Party to, Exploit any Licensed Product or Licensed Therapeutic;
81
(b)[**];
(c)all rights and licenses granted by AbbVie hereunder, including all rights to use AbbVie Proprietary Material, shall immediately terminate and Xilio and its Affiliates shall not practice, or license to any Third Party to practice, [**] or Exploit any AbbVie Proprietary Materials;
(d)notwithstanding the termination of AbbVie’s licenses and other rights under this Agreement, AbbVie shall have the right [**] to sell or otherwise dispose of all (i) Collaboration Licensed Products and (ii) subject to the obligation to supply Xilio pursuant to Section 11.7 (Transition of Option Licensed Products), Option Licensed Products, in each case ((i) and (ii)), then in its or its Affiliates’ or Sublicensee’s inventory and any in-progress inventory as though this Agreement had not been terminated, and AbbVie shall continue to make payments thereon as provided in ARTICLE 6 (Payments and Records).
Upon the effective date of the termination of this Agreement in its entirety for any reason, at the written request of a Party, the non-requesting Party shall either, at the requesting Party’s election: (a) promptly destroy all copies of the Confidential Information solely owned by the requesting Party in the possession or Control of the non-requesting Party and confirm such destruction in writing to the requesting Party; or (b) promptly deliver to the requesting Party, at the requesting Party’s sole cost and expense, all copies of such Confidential Information solely owned by the requesting Party in the possession or Control of the non-requesting Party, delivering any Licensed Target Information for the applicable terminated Target Program to Xilio. Notwithstanding the foregoing, the non-requesting Party shall be permitted to retain (i) one (1) copy of such Confidential Information for the sole purpose of performing any continuing obligations or exercising any ongoing rights hereunder or as required by Applicable Law, and (ii) copies of such Confidential Information for archival purposes and any computer records or files containing such Confidential Information that have been created solely by the non-requesting Party’s automatic archiving and back-up procedures, to the extent created and retained in a manner consistent with such non-requesting Party’s standard archiving and back-up procedures, but not for any other uses or purposes; provided that in each case ((i) and (ii)), such copies or records of Confidential Information shall remain subject to the terms of this Agreement, including ARTICLE 8 (Confidentiality and Non-Disclosure).
11.6.2.Termination in a Terminated Territory or for Terminated Programs. If this Agreement is terminated with respect to a Terminated Territory and one (1) or more Target Programs (each a, “Terminated Program”) by AbbVie pursuant to Section 11.2.1(a) (Termination; Material Breach by Xilio) or 11.2.2 (Termination; Termination by AbbVie) (but not in the case of any termination of this Agreement in its entirety):
(a)except to the extent required for AbbVie to exercise its rights and perform its obligations under the Transition Agreement, all rights and licenses granted by Xilio hereunder shall terminate with respect to each Terminated Program (including Terminated Products) in the Terminated Territory, provided that such licenses shall otherwise survive non-exclusively in the Terminated Territory solely for the purpose of furthering any Commercialization of the Licensed Therapeutics and Licensed Products in the remaining Territory or any Development or Manufacturing in support thereof;
82
(b)AbbVie shall not, and shall not permit any of its Affiliates to, and shall use commercially reasonable efforts to prohibit any of its and their respective Sublicensees or Distributors to, Exploit any Terminated Products directly or indirectly (i) to any Person for use in such Terminated Territory or (ii) to any Person in the Territory that AbbVie or any of its Affiliates knows is likely to distribute, market, promote, offer for sale or sell any Terminated Product for use in such Terminated Territory or assist another Person to do so. If AbbVie or any of its Affiliates receives, or becomes aware of the receipt by a Sublicensee or Distributor of, any orders for any Terminated Product for use in such Terminated Territory, AbbVie shall, or shall instruct such Sublicensee or Distributor to, as applicable, refer such orders to Xilio. AbbVie shall cause its Affiliates to, and shall instruct its and their respective Sublicensees and Distributors to, notify Xilio of any receipt of any orders for any Terminated Product for use in such Terminated Territory;
(c)Subject to Section 11.7.2 (Transition of Option Licensed Products; Grantback License), Xilio shall not, and shall not permit any of its Affiliates to, and shall use commercially reasonable efforts to prohibit any of its and their (sub)licensees or distributors to Exploit any Terminated Product directly or indirectly (i) to any Person for use in the Territory or (ii) to any Person in such Terminated Territory that Xilio or any of its Affiliates or any of its or their (sub)licensees or distributors knows is likely to distribute, market, promote, offer for sale or sell any Terminated Product for use in the Territory or assist another Person to do so. If Xilio or any of its Affiliates receives, or becomes aware of the receipt by a (sub)licensee or distributor of, any orders for any Terminated Product for use in the Territory, Xilio shall, or shall instruct such (sub)licensee or distributor to, as applicable, refer such orders to AbbVie. Xilio shall cause its Affiliates to, and shall instruct its and their (sub)licensees and distributors to, notify AbbVie of any receipt of any orders for any Terminated Product for use in the Territory; and
(d)notwithstanding the amendment of AbbVie’s licenses and other rights under this Agreement in the Terminated Territory, AbbVie shall have the right [**] to sell or otherwise dispose of all Terminated Products that are (i) Collaboration Licensed Products and (ii) subject to the obligation to supply Xilio pursuant to Section 11.7 (Transition of Option Licensed Products), Option Licensed Products, in each case ((i) and (ii)), then in its or its Affiliates’ or Sublicensee’s inventory and any in-progress inventory, in each case, intended for sale or disposal in such Terminated Territory, as though this Agreement had not terminated in the Terminated Territory, and AbbVie shall continue to make payments thereon as provided in ARTICLE 6 (Payment and Records).
(e)On a Terminated Territory-by-Terminated Territory and Terminated Program-by-Terminated Program basis, upon the effective date of the termination of this Agreement for such Terminated Program in such Terminated Territory for any reason, at the written request of a Party, the non-requesting Party shall either, at the requesting Party’s election: (i) promptly destroy all copies of the requesting Party’s Confidential Information solely related to such Terminated Program in such Terminated Territory in the possession or Control of the non-requesting Party and confirm such destruction in writing to the requesting Party; or (ii) promptly deliver to the requesting Party, at the non-requesting Party’s sole cost and expense, all copies of such Confidential Information in the possession or Control of the non-requesting Party. Notwithstanding the foregoing, the non-requesting Party shall be permitted to retain such Confidential Information (A) to the extent necessary or reasonably useful for purposes of
83
performing any continuing obligations or exercising any ongoing rights hereunder and, in any event, a single copy of such Confidential Information for archival purposes and (B) any computer records or files containing such Confidential Information that have been created solely by such non-requesting Party’s automatic archiving and back-up procedures, to the extent created and retained in a manner consistent with such non-requesting Party’s standard archiving and back-up procedures, but not for any other uses or purposes. All Confidential Information shall continue to be subject to the terms of this Agreement for the period set forth in Section 8.1 (Confidentiality Obligations).
11.7.Transition of Option Licensed Products.
11.7.1.General. Promptly after any termination of this Agreement by AbbVie pursuant to Section 11.2.2(b) (Termination; Termination by AbbVie) or by Xilio pursuant to Section 11.2.1(b) (Termination; Material Breach; Material Breach by AbbVie), Section 11.4 (Termination for Failure to Make Certain Payments) or Section 11.5 (Termination for Bankruptcy or Insolvency), [**] after the effective date of termination. [**].
11.7.2.[**].
11.7.3.[**].
11.7.4.[**].
11.7.5.[**].
11.8.AbbVie Rights in Lieu of Termination. If AbbVie has the right to terminate this Agreement [**], then in lieu of such termination, AbbVie may, by written notice to Xilio, elect to continue this Agreement as modified by this Section 11.8 (AbbVie Rights in Lieu of Termination), in which case, effective as of the date AbbVie delivers such notice of such election to Xilio:
11.8.1.[**];
11.8.2.[**];
11.8.3.all other provisions of this Agreement shall remain in full force and effect without change.
Notwithstanding the foregoing, if AbbVie’s right to terminate pursuant to Section 11.2.1(a) (Material Breach; Material Breach by Xilio) solely relates to a Target Program, then AbbVie’s rights and remedies under this Section 11.8 (AbbVie Rights in Lieu of Termination) will be limited solely to as applicable for such Target Program [**]. Notwithstanding any provision to the contrary set forth in this Agreement, the remedies set forth in this Section 11.8 (AbbVie Rights in Lieu of Termination), if elected by AbbVie, shall be taken into account in determining damages for any claim arising from the same circumstances.
11.9.Accrued Rights; Surviving Obligations.
84
11.9.1.Accrued Rights. Termination or expiration of this Agreement (either in its entirety or with respect to one (1) or more Licensed Product, Target Program or Region) for any reason shall be without prejudice to any rights that shall have accrued to the benefit of a Party prior to such termination or expiration. Such termination or expiration shall not relieve a Party from obligations that are expressly indicated to survive the termination or expiration of this Agreement.
11.9.2.Surviving Provisions. Without limiting the foregoing, in the event of termination of this Agreement in its entirety, the following Sections and Articles shall survive: [**] (“Surviving Provisions”). If this Agreement is terminated with respect to the Terminated Territory or one (1) or more, but not all, Target Programs (including all Licensed Products therein) or Licensed Products, as applicable, but not in its entirety, then following such termination, the Surviving Sections shall remain in effect with respect to such Terminated Territory, terminated Target Program or terminated Licensed Product, as applicable.
MISCELLANEOUS
12.1.Force Majeure. Neither Party shall be held liable or responsible to the other Party or be deemed to have defaulted under or breached this Agreement for failure or delay in fulfilling or performing any term of this Agreement when such failure or delay is caused by or results from events beyond the reasonable control of the non-performing Party, including fires, floods, earthquakes, hurricanes, embargoes, shortages, epidemics, pandemics, quarantines, war, acts of war (whether war be declared or not), terrorist acts, insurrections, riots, civil commotion, strikes, lockouts or other labor disturbances (whether involving the workforce of the non-performing Party or of any other Person), acts of God or acts, omissions or delays in acting by any Governmental Authority (except to the extent such delay results from the breach by the non-performing Party or any of its Affiliates of any term or condition of this Agreement); provided that if such force majeure continues for a period of [**] or more, then this Section 12.1 (Force Majeure) shall not restrict either Party’s right to terminate this Agreement pursuant to Section 11.2.1 (Termination; Material Breach) with respect to such suspension of performance. The non-performing Party shall notify the other Party of such force majeure within [**] after such occurrence by giving written notice to the other Party stating the nature of the event, its anticipated duration and any action being taken to avoid or minimize its effect. The suspension of performance shall be of no greater scope and no longer duration than is necessary and the non-performing Party shall use reasonable efforts to remedy its inability to perform.
12.2.Export Control. This Agreement is made subject to any restrictions concerning the export of products or technical information from the United States or other countries or jurisdictions that may be imposed on the Parties from time to time. Each Party shall not, and shall cause its Affiliates not to, export, directly or indirectly, any technical information acquired from the other Party under this Agreement or any products using such technical information to a location or in a manner that at the time of export requires an export license or other governmental approval, without first obtaining the written consent to do so from the appropriate agency or other governmental entity in accordance with Applicable Law.
85
12.3.1.Neither Party may assign its rights or, except as provided in Section 2.10 (Subcontracting), Section 3.6 (Sublicenses) or Section 4.5 (Subcontracting; Distributors), delegate its obligations under this Agreement, whether by operation of law or otherwise, in whole or in part without the prior written consent of the other Party, such consent not to be unreasonably withheld, conditioned or delayed, except that (a) AbbVie shall have the right, without such consent, to perform any or all of its obligations and exercise any or all of its rights under this Agreement through any of its Affiliates (in accordance with Section 12.17 (Performance by Affiliates)) or Sublicensees or Distributors, (b) either Party shall have the right, without such consent, to assign this Agreement to any of its Affiliates and (c) either Party shall have the right, without such consent, to assign any or all of its rights to any successor in interest (whether by merger, acquisition, asset purchase or otherwise) of the business to which this Agreement relates. Any permitted successor of a Party or any permitted assignee of all of a Party’s rights under this Agreement shall assume all of such Party’s obligations hereunder in writing and shall, upon any such succession or assignment and assumption, be deemed to be a party to this Agreement as though named herein in substitution for the assigning Party, whereupon the assigning Party shall cease to be a party to this Agreement and shall cease to have any rights or obligations under this Agreement; provided that with respect to any assignment to an Affiliate, the assigning Party shall remain responsible for the performance by such Affiliate of its obligations hereunder. All validly assigned rights of a Party shall inure to the benefit of and be enforceable by, and all validly delegated obligations of such Party shall be binding on and be enforceable against, the permitted successors and assigns of such Party; provided, further, that such Party, if it survives, shall remain jointly and severally liable for the performance of such delegated obligations under this Agreement. Any attempted assignment or delegation in violation of this Section 12.3.1 (Assignment) shall be null and void and of no effect. Notwithstanding any provision to the contrary set forth in this Agreement, Xilio Parent shall not assign this Agreement, in whole or in part, without the prior written consent of AbbVie; provided that AbbVie’s prior written consent shall not be required for Xilio Parent to assign this Agreement in its entirety in connection with any merger, consolidation or any sale of all or substantially all of the assets of Xilio Parent.
12.3.2.Securitization Transaction. Notwithstanding any provision to the contrary in Section 12.3.1 (Assignment) or elsewhere in this Agreement, Xilio may [**] assign to a Third Party its right to receive the Milestone Payments and royalties hereunder (such assignment, a “Securitization Transaction”). In connection with an actual or potential Securitization Transaction, Xilio may disclose to such Third Party the royalty reports contemplated under Section 6.13 (Royalty Payments and Royalty Reports), audit reports contemplated under Section 6.18 (Audit), and any other reports reasonably requested by such Third Party, in each case, without the prior written consent of AbbVie, to enable such Third Party to evaluate, exercise its rights with respect to, such Securitization Transaction; provided that such Third Party is under obligations of confidentiality and non-use with respect to Confidential Information included in such reports and plans that are no less protective or restrictive than the terms of ARTICLE 8 (Confidentiality and Non-Disclosure) (but of duration customary in confidentiality agreements entered into for a similar purpose). [**].
86
12.4.Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future law, then (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 therefrom 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 under Applicable Law and reasonably acceptable to the Parties. To the fullest extent permitted by Applicable Law, each Party hereby waives any provision of law that would render any provision hereof illegal, invalid or unenforceable in any respect.
12.5.Dispute Resolution. Except for disputes resolved by the procedures set forth in Section 5.2.4 (General Provisions Applicable to the JGC; Decision-Making), Section 6.18.2 (Audit; Dispute) or Section 12.10 (Equitable Relief), if a dispute arises between the Parties in connection with or relating to this Agreement or any document or instrument delivered in connection herewith (a “Dispute”), then it shall be resolved pursuant to this Section 12.5 (Dispute Resolution).
12.5.1.General. Any Dispute shall first be referred to the Senior Officers of the Parties, who shall confer in good faith on the resolution of such Dispute. Any final decision mutually agreed to by the Senior Officers in writing shall be conclusive and binding on the Parties. If the Senior Officers are not able to agree on the resolution of any such Dispute [**].
12.5.2. [**].
12.5.3.[**].
12.6.1.Governing Law. This Agreement or the performance, enforcement, breach or termination hereof shall be interpreted, governed by and construed in accordance with the laws of the State of New York, United States excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction; provided that all questions concerning (a) inventorship and ownership of Patents under this Agreement shall be determined in accordance with Section 7.1 (Ownership of Intellectual Property) and (b) the construction or effect of Patents shall be determined in accordance with the laws of the country or other jurisdiction in which the particular Patent has been filed or granted, as the case may be. The Parties agree to exclude the application to this Agreement of the United Nations Convention on Contracts for the International Sale of Goods.
12.6.2.Service. Each Party further agrees that service of any process, summons, notice or document by registered mail to its address set forth in Section 12.7.2 (Notices; Address for Notice) shall be effective service of process for any action, suit or proceeding brought against it under this Agreement in any such court.
87
12.7.1.Notice Requirements. Any notice, request, demand, waiver, consent, approval or other communication permitted or required under this Agreement shall be in writing, shall refer specifically to this Agreement and shall be deemed given only if delivered by hand, sent by electronic mail or sent by internationally recognized overnight delivery service that maintains records of delivery, addressed to the applicable Party at its respective address specified in Section 12.7.2 (Notices; Address for Notice) or to such other address as the Party to whom notice is to be given may have provided to the other Party in accordance with this Section 12.7.1 (Notices; Notice Requirements). Such notice shall be deemed to have been given as of the date delivered by hand, on the date of receipt of such electronic mail, provided that any notice sent via electronic mail is not deemed received if the sender receives a delivery failure notification or on the second Business Day (at the place of delivery) after deposit with an internationally recognized overnight delivery service. Any notice delivered by electronic mail shall be confirmed by a hard copy delivered as soon as practicable thereafter. This Section 12.7.1 (Notice Requirements) is not intended to govern the day-to-day business communications necessary between the Parties in performing their obligations under the terms of this Agreement.
12.7.2.Address for Notice.
If to AbbVie, to:
1 North Waukegan Road
North Chicago, Illinois 60064
United States
Attention: General Counsel and Corporate Secretary
If to Xilio, to:
Xilio Development, Inc.
828 Winter Street, Suite 300
Waltham, MA 02451
Email: [**]
Attention: Alliance Manager
88
with a copy (which shall not constitute notice) to:
Ropes & Gray LLP
800 Boylston Street, Prudential Tower
Boston, MA 02199
Email: [**]
Attention: Hannah H. England
and
Xilio Therapeutics, Inc.
828 Winter Street, Suite 300
Waltham, MA 02451
Email: [**]
Attention: Legal Department
12.8.Entire Agreement; Amendments. This Agreement, together with the Schedules attached hereto, sets forth and constitutes the entire agreement and understanding between the Parties with respect to the subject matter hereof and all prior agreements, understandings, promises and representations, whether written or oral, with respect thereto are superseded hereby, including the CDA, as amended from time to time by the parties thereto. Each Party confirms that it is not relying on any representations or warranties of the other Party except as specifically set forth in this Agreement. No amendment, modification, release or discharge shall be binding upon the Parties unless in writing and duly executed by authorized representatives of both Parties. In the event of any inconsistencies between this Agreement and any Schedules or other attachments hereto, the terms of this Agreement shall control.
12.9.English Language. This Agreement shall be written and executed in, and all other communications under or in connection with this Agreement shall be in, the English language. Any translation into any other language shall not be an official version thereof and in the event of any conflict in interpretation between the English version and such translation, the English version shall control.
12.10.Equitable Relief. Each Party acknowledges and agrees that the restrictions, rights and obligations set forth in [**] are reasonable and necessary to protect the legitimate interests of the other Party, that such other Party would not have entered into this Agreement in the absence of such restrictions, and that any breach or threatened breach of any provision of such aforementioned Sections or Articles shall result in irreparable injury to such other Party for which monetary damages would provide inadequate and insufficient compensation to remedy any and all harms that such Party will, could, or might suffer from such breach. In the event of a breach or threatened breach of any provision of such aforementioned Sections or Articles, the non-breaching Party shall be authorized and entitled to seek from any court of competent jurisdiction injunctive relief, whether preliminary or permanent, specific performance and an equitable accounting of all earnings, profits and other benefits arising from such breach, which rights shall be cumulative and in addition to any other rights or remedies to which such non-breaching Party may be entitled in law or equity. Each Party hereby waives any requirement that the other Party (x) post a bond or other security as a condition for obtaining any such relief and (y) show irreparable harm, balancing of harms, consideration of the public interest or inadequacy of monetary damages as a remedy.
89
Each Party hereby consents that a temporary restraining order is a necessary remedy to protect against such harm and each Party will take all actions to the fullest extent permitted under Applicable Law to effectuate the granting of such temporary restraining order. Nothing in this Section 12.10 (Equitable Relief) is intended or should be construed, to limit either Party’s right to equitable relief or any other remedy for a breach of any other provision of this Agreement, and, notwithstanding any provision to the contrary, neither Party may seek equitable relief in the form of termination or recission of this Agreement.
12.11.Waiver and Non-Exclusion of Remedies. 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 either 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 such other Party whether of a similar nature or otherwise. The rights and remedies provided herein are cumulative and do not exclude any other right or remedy provided by Applicable Law or otherwise available except as expressly set forth herein.
12.12.No Benefit to Third Parties. Except as provided in ARTICLE 10 (Indemnity), the covenants and agreements set forth in this Agreement are for the sole benefit of the Parties and their successors and permitted assigns and they shall not be construed as conferring any rights on any other Persons.
12.13.Further Assurance. Each Party shall duly execute and deliver or cause to be duly executed and delivered, such further instruments and do and cause to be done such further acts and things, including the filing of such assignments, agreements, documents and instruments, as may be necessary or as the other Party may reasonably request in connection with this Agreement or to carry out more effectively the provisions and purposes hereof or to better assure and confirm unto such other Party its rights and remedies under this Agreement.
12.14.Relationship of the Parties. It is expressly agreed that Xilio, on the one hand, and AbbVie, on the other hand, shall be independent contractors and that the relationship between the Parties shall not constitute a partnership, joint venture or agency, including for all tax purposes. Neither Xilio, on the one hand, nor AbbVie, on the other hand, shall have the authority to make any statements, representations or commitments of any kind, or to take any action, that is binding on the other, without the prior written consent of the other Party to do so. All Persons employed by a Party shall be employees of such Party and not of the other Party and all costs and obligations incurred by reason of any such employment shall be for the account and expense of such Party.
12.15.References. Unless otherwise specified, (a) references in this Agreement to any Article, Section or Schedule shall mean references to such Article, Section or Schedule of this Agreement, (b) references in any Section to any clause are references to such clause of such Section and (c) 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.
90
12.16.Construction. Except where the context otherwise requires, wherever used, the singular shall include 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). Whenever this Agreement refers to a number of days, unless otherwise specified, such number refers to calendar days. The captions of this Agreement 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 term “including,” “include,” or “includes” as used herein shall mean including, without limiting the generality of any description preceding such term. All references to “will” are interchangeable with the word “shall” and shall be understood to be imperative or mandatory in nature. 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 either Party. Each Party represents that it has been represented by legal counsel in connection with this Agreement and acknowledges that it has participated in the drafting hereof. In interpreting and applying the terms and provisions of this Agreement, the Parties agree that no presumption will apply against the Party which drafted such terms and provisions.
12.17.Performance by Affiliates. Either Party may use one (1) or more of its Affiliates to perform its obligations and duties hereunder and such Affiliates of such Party are expressly granted certain rights herein; provided that each such Affiliate will be bound by the corresponding obligations of such Party and, subject to an assignment to such Affiliate pursuant to Section 12.3 (Assignment), each Party will remain liable hereunder for the prompt payment and performance of all its Affiliates’ respective obligations hereunder.
12.18.1.[**].
12.18.2.[**]. .
12.18.3.[**]. .
12.19.Guarantee. Xilio Parent hereby guarantees [**]. The obligations of Xilio Parent under this Section 12.19 (Guarantee) [**]. To the extent AbbVie grants to Xilio (a) any waiver of any default by Xilio of the guaranteed obligations; (b) any extension of time for performance by Xilio of the guaranteed obligations; or (c) any release of Xilio from the performance of the guaranteed obligations, AbbVie will have and be deemed to have also granted the same to Xilio Parent hereunder.
12.20.Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may be executed by facsimile, .pdf format via email or other electronically transmitted signatures and such signatures shall be deemed to bind each Party as if they were original signatures.
[SIGNATURE PAGE FOLLOWS.]
91
THIS AGREEMENT IS EXECUTED by the authorized representatives of the Parties as of the Effective Date.
ABBVIE GROUP HOLDINGS LIMITED |
| XILIO DEVELOPMENT, INC. | ||||
| | | ||||
By: | /s/ Arthur C. Price | | By: | /s/ René Russo | ||
| | | | | | |
Name: | Arthur C. Price | | Name: | Rene Russo | ||
| | | | | | |
Title: | Director | | Title: | President and Chief Executive Officer | ||
| | | ||||
| | | ||||
| | XILIO THERAPEUTICS, INC. | ||||
| | | ||||
| | By: | /s/ René Russo | |||
| | | | | ||
| | Name: | Rene Russo | |||
| | | | | ||
| | Title: | President and Chief Executive Officer | |||
[Signature Page to Collaboration, License and Option Agreement]
Exhibit 10.2
Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Double asterisks denote omissions.
XILIO THERAPEUTICS, INC.
COMMON STOCK PURCHASE AGREEMENT
This Common Stock Purchase Agreement (this “Agreement”) is dated as of February 10, 2025, by and between Xilio Therapeutics, Inc., a Delaware corporation (the “Company”), and AbbVie Inc., a Delaware corporation (“AbbVie”).
WHEREAS, subject to the terms and conditions set forth in this Agreement, the Company desires to issue and sell to AbbVie, and AbbVie desires to purchase from the Company, shares of common stock of the Company as more fully described in this Agreement; and
WHEREAS, concurrently herewith, Xilio Development, Inc. (“Xilio Development”) and AbbVie have entered into an Option and License Agreement (the “License Agreement”), and the Company and AbbVie have entered into an Investor Rights Agreement (the “Investor Rights Agreement”).
NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and AbbVie agree as follows:
ARTICLE 1
DEFINITIONS
1.1Definitions. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms have the meanings set forth in this Section 1.1:
1.1.1“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with a Person.
1.1.2“Aggregate Purchase Price” means the dollar amount obtained by multiplying the number of shares of Common Stock constituting the Shares by the Purchase Price.
1.1.3“Anti-Corruption Laws” has the meaning set forth in Section 3.1.17 hereof.
1.1.4 “Bankruptcy Law” means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors.
1.1.5 “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange Act.
1.1.6“Business Day” means any day on which Nasdaq and commercial banks in the City of New York and the City of Chicago are open for business.
1.1.7“Closing” means the closing of the sale of the Shares pursuant to Section 2.3.1 hereof.
1.1.8“Closing Date” has the meaning set forth in Section 2.3.1 hereof.
1.1.9“Commission” means the United States Securities and Exchange Commission.
1.1.10“Common Stock” means the Company’s common stock, par value $0.0001 per share.
1.1.11“Control,” including the terms “Controlling,” “Controlled by” and “under common Control with,” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
1.1.12“Cross-Receipt” means a cross-receipt substantially in the form of Exhibit A hereto.
1.1.13“Custodian” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.
1.1.14“Disqualification Event” has the meaning set forth in Section 3.1.20 hereof.
1.1.15“Entity” has the meaning set forth in Section 3.1.18(a) hereof.
1.1.16“Evaluation Date” has the meaning set forth in Section 3.1.10 hereof.
1.1.17“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
1.1.18“FDA” has the meaning set forth in Section 3.1.13 hereof.
1.1.19“GAAP” has the meaning set forth in Section 3.1.9 hereof.
1.1.20“Governmental Authority” means any multi-national, federal, state, local, municipal or other government authority of any nature (including any governmental division, subdivision, department, agency, bureau, branch, office, commission, council, court or other tribunal, as well as any securities exchange or securities exchange authority, including Nasdaq).
- 2 -
1.1.21“Individual” has the meaning set forth in Section 3.1.18(a) hereof.
1.1.22“Intellectual Property Rights” has the meaning set forth in Section 3.1.15 hereof.
1.1.23“Investor Rights Agreement” has the meaning set forth in the recitals.
1.1.24“Issuer Covered Person” has the meaning set forth in Section 3.1.20 hereof.
1.1.25“Law” or “law” means any supranational, national, federal, state, regional, provincial, local or municipal constitution, treaty, law, statute, ordinance, code, determination, principle of common law or any other requirement having the effect of law of any Governmental Authority (including any rule, regulation, plan, injunction, judgment, order, award, decree, ruling, requirement, guidance, policy or charge thereunder or related thereto), in each case as amended, whether in the United States or a foreign jurisdiction.
1.1.26“License Agreement” has the meaning set forth in the recitals.
1.1.27“Liens” means a lien, charge, pledge, security interest, encumbrance, right of first refusal, mortgage, claim, easement, right-of-way, option, title retention agreement, preemptive right or other restriction.
1.1.28“Material Adverse Effect” means a material adverse effect on the condition (financial or otherwise), results of operations, business, management, properties or prospects of the Company and its subsidiaries taken as a whole or on the performance by the Company of its obligations under this Agreement.
1.1.29“Nasdaq” means the Nasdaq Stock Market.
1.1.30“OFAC” has the meaning set forth in Section 3.1.18(a) hereof.
1.1.31“Permits” has the meaning set forth in Section 3.1.13 hereof.
1.1.32“Person” means an individual, sole proprietorship, partnership, limited partnership, limited liability partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or other similar entity or organization, including a government or political subdivision, department or agency of a government.
1.1.33“Principal Market” means the NASDAQ Global Select Market; provided however, that in the event the Company’s Common Stock is ever listed or traded on the New
- 3 -
York Stock Exchange, the NYSE MKT, the Nasdaq Global Market or the NASDAQ Capital Market, then the “Principal Market” shall mean such other market or exchange on which the Company’s Common Stock is then listed or traded.
1.1.34“Purchase Price” means [**], rounded to the nearest cent.
1.1.35“Required Approvals” has the meaning set forth in Section 3.1.4 hereof.
1.1.36“Rule 144” means Rule 144 promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.
1.1.37“Sanctions” has the meaning set forth in Section 3.1.18(a) hereof.
1.1.38“SEC Report” means any report filed or furnished by the Company with the Commission under the Exchange Act or the Securities Act.
1.1.39“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
1.1.40“Shares” means 4,347,826 shares of Common Stock.
1.1.41“Trading Day” means a day on which Nasdaq is open for trading.
1.1.42“Transfer Agent” means Computershare Trust Company, N.A., with a mailing address of 150 Royall Street, Canton, Massachusetts 02021, or any successor transfer agent of the Common Stock.
1.1.43“Valid Account Details” means, with respect to any bank account, the valid (a) name of bank, (b) bank address, (c) account number and (d) ABA routing number.
ARTICLE 2
PURCHASE AND SALE OF SHARES
2.1Purchase of Shares. Subject to the terms and conditions of this Agreement, at the Closing, the Company will issue and sell to AbbVie, and AbbVie will purchase from the Company, the Shares, at a price per share equal to the Purchase Price, for an aggregate purchase price equal to the Aggregate Purchase Price.
- 4 -
2.2Payment.
2.2.1At the Closing, AbbVie will pay the Aggregate Purchase Price to the Company by wire transfer of immediately available funds in accordance with the Valid Account Details, together with a Form W-9, which Valid Account Details will have been provided by the Company to AbbVie at least two (2) Business Days prior to the Closing Date.
2.2.2The Company shall cause delivery of the Shares at the Closing to be made in book-entry form to an account of AbbVie specified in writing by AbbVie at the Transfer Agent.
2.3Closing.
2.3.1The Closing shall occur at 12:00 pm (New York City time) on such date as the parties may select, not later than the first (1st) Business Day after satisfaction or (to the extent permitted by law) waiver of the conditions set forth in Section 2.5 (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or (to the extent permitted by law) waiver of those conditions), unless such other place, time and date shall be agreed in writing between the Company and AbbVie (such date, the “Closing Date”).
2.4Closing Deliverables.
2.4.1At the Closing, the Company will deliver to AbbVie:
(a) | a duly executed Cross-Receipt with respect to the Shares; |
(b) | a duly executed Investor Rights Agreement; |
(c) | a License Agreement, duly executed by Xilio Development; |
(d) | a certificate in form and substance reasonably satisfactory to AbbVie and duly executed on behalf of the Company by an authorized officer of the Company, certifying that the conditions to the Closing set forth in Sections 2.5.1(a) and (b) of this Agreement have been fulfilled; |
(e) | evidence that the Company has delivered to the Transfer Agent irrevocable written instructions to issue the Shares to AbbVie in a form and substance acceptable to the Transfer Agent; and |
(f) | a certificate of the secretary of the Company dated as of the Closing Date certifying that attached thereto is a true and complete |
- 5 -
copy of all resolutions adopted by the Company’s board of directors authorizing the execution, delivery and performance of this Agreement and the transactions contemplated herein and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated hereby as of the Closing Date.
2.4.2At the Closing, AbbVie will deliver to the Company:
(a) | a duly executed Cross-Receipt with respect to the Shares; |
(b) | a duly executed Investor Rights Agreement; |
(c) | a duly executed License Agreement; and |
(d) | a certificate in form and substance reasonably satisfactory to the Company and duly executed on behalf of AbbVie by an authorized officer of AbbVie, certifying that the conditions to the Closing set forth in Sections 2.5.2(a) and (b) of this Agreement have been fulfilled. |
2.5Conditions to the Closing.
2.5.1The obligations of AbbVie hereunder in connection with the Closing are subject to the following conditions being satisfied or waived:
(a) | The representations and warranties of the Company set forth in Section 3.1 hereof shall be true and correct in all respects as of the Closing Date. |
(b) | The Company shall have complied in all material respects with its covenants hereunder as of the Closing Date. |
(c) | The License Agreement shall be in full force and effect. |
(d) | The Investor Rights Agreement shall be in full force and effect. |
(e) | The Company shall have obtained any and all consents, permits, approvals, registrations and waivers necessary for the consummation of the purchase and sale of the Shares, all of which shall be in full force and effect. |
- 6 -
(f) | All closing deliverables as required under Section 2.4.1 shall have been delivered by the Company to AbbVie. |
(g) | No proceeding challenging this Agreement or the transactions contemplated hereby, or seeking to prohibit, alter, prevent or materially delay the Closing, shall have been instituted or be pending before any Governmental Authority. |
(h) | The Company shall have delivered to the Transfer Agent irrevocable written instructions to issue the Shares to AbbVie in a form and substance acceptable to the Transfer Agent. |
(i) | The Company shall have filed with Nasdaq a Listing of Additional Shares Notification Form for the listing of the Shares, if required, and Nasdaq shall not have raised an objection to the consummation of the transactions contemplated by this Agreement, the Investor Rights Agreement and the License Agreement in the absence of stockholder approval of such transactions. |
(j) | The Company shall have delivered Valid Account Details, together with a Form W-9, to AbbVie at least two (2) Business Days prior to the Closing Date in a form and substance acceptable to AbbVie. |
(k) | No Material Adverse Effect with respect to the Company or its subsidiaries shall have occurred or be existing as of the Closing Date. |
(l) | The Principal Market shall not have commenced any final delisting proceedings against the Company. |
2.5.2The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being satisfied or waived:
(a) | The representations and warranties of AbbVie set forth in Section 3.2 hereof shall be true and correct in all respects as of the Closing Date. |
(b) | AbbVie shall have complied in all material respects with its covenants hereunder as of the Closing Date. |
(c) | The License Agreement shall be in full force and effect. |
- 7 -
(d) | The Investor Rights Agreement shall be in full force and effect. |
(e) | All closing deliverables required under Section 2.4.2 shall have been delivered by AbbVie to the Company. |
(f) | No proceeding challenging this Agreement or the transactions contemplated hereby, or seeking to prohibit, alter, prevent or materially delay the Closing, shall have been instituted or be pending before any Governmental Authority. |
2.6Taxes. The Company shall pay any and all transfer, stamp or similar taxes that may be payable with respect to the issuance and delivery of any shares of Common Stock to AbbVie made under this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1Representations and Warranties of the Company. The Company hereby makes the following representations and warranties to AbbVie as of the date hereof and as of the Closing Date (except for the representations and warranties that speak as of a specific earlier date, which shall be made as of such date).
3.1.1Organization and Good Standing. The Company and each of its subsidiaries have been duly organized and are validly existing and in good standing under the laws of their respective jurisdictions of organization. The Company and each of its subsidiaries are duly licensed or qualified to do business and are in good standing in each jurisdiction in which their respective ownership or lease of property or the conduct of their respective businesses requires such license or qualification, and have all corporate power and authority necessary to own or hold their respective properties and to conduct their respective businesses, except where the failure to be so qualified or in good standing or have such power or authority would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
3.1.2Subsidiaries. All of the outstanding shares of capital stock or equivalent equity interests of each subsidiary listed in Exhibit 21 to the Company’s most recent Annual Report on Form 10-K filed with the Commission are owned of record and beneficially, directly or indirectly, by the Company free and clear of all material Liens, pledges, security interests or other encumbrances.
3.1.3Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this
- 8 -
Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by the Company and the consummation by it of the transactions contemplated hereby (including the issuance and sale of the Shares by the Company) have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Company’s board of directors or the Company’s stockholders in connection herewith other than the Required Approvals (as defined below). This Agreement has been duly executed by the Company and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (a) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally and (b) insofar as indemnification and contribution provisions may be limited by applicable law.
3.1.4No Conflicts; Filings, Consents and Approvals. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby (including the issuance of the Shares) will not (i) conflict with or result in a violation of any provision of the Company’s Restated Certificate of Incorporation or Amended and Restated Bylaws, each as in effect on the date hereof, (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default under, any agreement, indenture, or instrument to which the Company is a party, or (iii) result in a violation of any law applicable to the Company, except in the case of clauses (ii) and (iii) only, for such conflicts, breaches, defaults, and violations as would not reasonably be expected to have a Material Adverse Effect on the Company. The Company is not required to obtain any consent, waiver, approval, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other Governmental Authority or other Person in the United States in connection with the execution, delivery and performance by the Company of this Agreement (including the offer, sale or issuance of the Shares by the Company), other than the listing of the Shares on Nasdaq, filing a Form D with the Commission or as may be required under applicable state securities laws or the by-laws and rules of the Financial Industry Regulatory Authority (collectively, the “Required Approvals”).
3.1.5Issuance of Shares. The Shares are duly authorized and, when issued and paid for in accordance with this Agreement, will be validly issued, fully paid and nonassessable, free and clear of all Liens, other than restrictions on transferability under the Investor Rights Agreement and applicable federal securities laws. The Shares are not and will not be subject to any preemptive rights held by any holders of any security of the Company or any similar contractual rights granted by the Company to any Person (except as have been waived or otherwise been complied with).
3.1.6Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the audited financial statements included within the Company’s Annual Report
- 9 -
on Form 10-K, originally filed with the Commission on April 1, 2024, except as specifically disclosed in a subsequent SEC Report, there has been no event, occurrence or development that has had or that could reasonably be expected to, either individually or in the aggregate, have a Material Adverse Effect on the business, condition (financial or other), assets, liabilities or results of operations of the Company, taken as a whole.
3.1.7No General Solicitation. Neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of the Shares.
3.1.8Private Placement. Neither the Company nor any Person acting on its behalf, has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under any circumstances that would require registration of the Shares under the Securities Act. Subject to the accuracy of the representations made by AbbVie in Section 3.2, the Shares will be issued and sold to AbbVie in compliance with applicable exemptions from the registration and prospectus delivery requirements of the Securities Act and the registration and qualification requirements of all applicable securities laws of the states of the United States. The Company has not engaged any brokers, finders or agents, or incurred, or will incur, directly or indirectly, any liability for brokerage or finder’s fees or agents’ commissions or any similar charges in connection with this Agreement and the transactions contemplated hereby, other than brokerage or finder’s fees or agent’s commissions or similar charges for which the Company is wholly responsible.
3.1.9SEC Reports, Financial Statements.
(a) | The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act. The Company has delivered or made available (by filing on the Commission’s electronic data gathering and retrieval system (EDGAR)) to AbbVie complete copies of its SEC Reports since January 1, 2024. As of its date, each SEC Report complied in all material respects with the requirements of the Exchange Act, and other Laws applicable to it, and, as of its date, such SEC Report did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. |
(b) | The financial statements, together with the related notes and schedules, of the Company included in the SEC Reports comply as |
- 10 -
to form in all material respects with all applicable accounting requirements and the published rules and regulations of the Commission and all other applicable rules and regulations with respect thereto. Such financial statements, together with the related notes and schedules, have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) applied on a consistent basis during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements), and fairly present in all material respects the financial condition of the Company and its consolidated subsidiaries as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal quarterly or year-end audit adjustments).
(c) | The Common Stock is listed on Nasdaq, and the Company has taken no action designed to, or that to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or delisting the Common Stock from Nasdaq. Except for that certain notice from Nasdaq received on or about September 10, 2024 related to the minimum bid price requirement, the Company has not received any notification that, and has no knowledge that, the Commission or Nasdaq is contemplating terminating such registration or listing. |
3.1.10Disclosure Controls; Accounting Controls. The Company’s internal control over financial reporting was effective as of the most recent date on which the Company completed an evaluation of the effectiveness of its internal control over financial reporting and the Company is not currently aware of any material weaknesses in its internal control over financial reporting. Except as may be disclosed in the SEC Reports, since the date of the latest audited financial statements of the Company, there has been no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company and each of its subsidiaries maintains disclosure controls and procedures (as such is defined in Rule 13a-15(e) under the Exchange Act) that are designed to comply with the requirements of the Exchange Act; such disclosure controls and procedures have been designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, including controls and procedures designed to ensure that
- 11 -
such information is accumulated and communicated to the Company’s management to allow timely decisions regarding disclosures. The Company’s certifying officers have evaluated the effectiveness of the Company’s disclosure controls and procedures as of a date within 90 days prior to the filing date of the Company’s most recently filed Form 10-K (such date, the “Evaluation Date”). Except as may be disclosed in the SEC Reports, since the Evaluation Date, there have been no significant changes in the Company’s internal controls (as such term is defined in Item 307(b) of Regulation S-K under the Securities Act) or, to the Company’s knowledge, in other factors that could materially and adversely affect the Company’s internal controls.
3.1.11Capitalization and Voting Rights.
(a) | The authorized capital of the Company consists of: (i) 200,000,000 shares of Common Stock of which, as of January 31, 2025, (A) 45,862,179 shares were issued and outstanding, (B) 2,131,406 shares were reserved for future grants pursuant to the Company’s equity incentive plans (including its stockholder approved equity compensation plans and outstanding equity compensation arrangements that have not been approved by the Company’s stockholders) described in the SEC Reports, (C) 11,042,083 shares were issuable upon the exercise of stock options outstanding, (D) 334,125 shares were issuable upon the vesting of restricted stock units outstanding, (E) 1,359,889 shares were reserved for future purchase pursuant to the Company’s employee stock purchase plan, and (F) 25,605,338 shares were issuable upon the exercise of warrants outstanding, and (ii) 5,000,000 shares of designated preferred stock, none of which shares of preferred stock are issued and outstanding. All of the issued and outstanding shares of Common Stock (1) have been duly authorized and validly issued, (2) are fully paid and non-assessable and (3) were issued in compliance with all applicable federal and state securities Laws and not in violation of any preemptive rights. |
(b) | All of the authorized shares of Common Stock are entitled to one (1) vote per share. |
(c) | Except as described or referred to in the SEC Reports, there are not: (i) any outstanding equity securities, options, warrants, rights (including conversion or preemptive rights) or other agreements pursuant to which the Company is or may become obligated to issue, sell or repurchase any shares of its capital stock or any other |
- 12 -
securities of the Company other than equity securities that may have been granted pursuant to its equity incentive plans, which plans are described in the SEC Reports; or (ii) any restrictions on the transfer of capital stock of the Company other than pursuant to federal or state securities Laws or as set forth in this Agreement.
(d) | The Company is not a party to or subject to any agreement or understanding relating to the voting of shares of capital stock of the Company or the giving of written consents by a stockholder or director of the Company. |
3.1.12Litigation. There is no action, charge, suit, proceeding, litigation, arbitration, settlement or complaint (each an “Action”) by or before any Governmental Authority pending, nor, to the Company’s knowledge, any audits or investigations by or before any Governmental Authority to which the Company or any of its subsidiaries is a party or to which any property of the Company or any of its subsidiaries is the subject that, individually or in the aggregate, if determined adversely to the Company or any of its subsidiaries, would reasonably be expected to have a Material Adverse Effect and, to the Company’s knowledge, no such Actions, audits or investigations are threatened or contemplated by any Governmental Authority or threatened by others; and (a) there are no current or pending Actions, audits or investigations by or before any Governmental Authority that are required under the Securities Act to be described in the SEC Reports that are not so described; and (b) there are no contracts or other documents that are required under the Securities Act to be filed as exhibits to the SEC Reports that are not so filed.
3.1.13Licenses and Permits. The Company and its subsidiaries have made all filings, applications and submissions required by, possess and are operating in compliance with, all approvals, licenses, certificates, certifications, clearances, consents, grants, exemptions, marks, notifications, orders, permits and other authorizations issued by, the appropriate federal, state or foreign Governmental Authority (including, without limitation, the United States Food and Drug Administration (the “FDA”), the United States Drug Enforcement Administration or any other foreign, federal, state, provincial, court or local government or regulatory authorities including self-regulatory organizations engaged in the regulation of clinical trials, pharmaceuticals, biologics or biohazardous substances or materials) necessary for the ownership or lease of their respective properties or to conduct its businesses as described in the SEC Reports (collectively, “Permits”), except for such Permits the failure of which to possess, obtain or make the same would not reasonably be expected to have a Material Adverse Effect; the Company and its subsidiaries are in compliance with the terms and conditions of all such Permits, except where the failure to be in compliance would not reasonably be expected to have a Material Adverse Effect; all of the Permits are valid and in full force and effect, except where any invalidity, individually or in the aggregate, would not be reasonably expected to have a
- 13 -
Material Adverse Effect; and neither the Company nor any of its subsidiaries has received any written notice relating to the limitation, revocation, cancellation, suspension, modification or non-renewal of any such Permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would reasonably be expected to have a Material Adverse Effect, or has any reason to believe that any such license, certificate, permit or authorization will not be renewed in the ordinary course due to non-compliance with any applicable Law. To the extent required by applicable laws and regulations of the FDA, the Company or the applicable subsidiary has submitted to the FDA an Investigational New Drug Application or amendment or supplement thereto for each clinical trial it has conducted or sponsored or is conducting or sponsoring; all such submissions were in material compliance with applicable laws and rules and regulations when submitted and no material deficiencies have been asserted by the FDA with respect to any such submissions.
3.1.14Clinical Data and Regulatory Compliance.
(a) | Neither the Company nor any of its subsidiaries has failed to file with the applicable Governmental Authorities (including, without limitation, the FDA, or any foreign, federal, state, provincial or local Governmental Authority performing functions similar to those performed by the FDA) any required filing, declaration, listing, registration, report or submission, except for such failures that, individually or in the aggregate, would not have a Material Adverse Effect; all such filings, declarations, listings, registrations, reports or submissions were in compliance with applicable laws when filed and no deficiencies have been asserted by any applicable regulatory authority with respect to any such filings, declarations, listings, registrations, reports or submissions, except for any deficiencies that, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. The Company has operated and currently is, in all material respects, in compliance with the United States Federal Food, Drug, and Cosmetic Act, and all applicable rules and regulations of the FDA and each other federal, state, local and foreign Governmental Authority exercising comparable authority. |
(b) | The preclinical studies and tests and clinical trials described in the SEC Reports were, and, if still pending, are being conducted in all material respects in accordance with the experimental protocols, procedures and controls pursuant to, where applicable, accepted professional and scientific standards for products or product candidates comparable to those being developed by the Company; |
- 14 -
the descriptions of such studies, tests and trials, and the results thereof, contained in the SEC Reports are accurate and complete in all material respects; the Company is not aware of any tests, studies or trials not described in the SEC Reports, the results of which reasonably call into question the results of the tests, studies and trials described in the SEC Reports; and the Company has not received any written notice or correspondence from the FDA or any foreign, state or local Governmental Authority exercising comparable authority or any institutional review board or comparable authority requiring the termination, suspension, clinical hold or material modification of any tests, studies or trials.
3.1.15Intellectual Property. (i) The Company and its subsidiaries own or have a valid license to all pending patent applications and issued patents, inventions, copyrights, know how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks and trade names (collectively, “Intellectual Property Rights”) used in or reasonably necessary to the conduct of their businesses in the manner described in the SEC Reports; (ii) the Intellectual Property Rights owned by the Company and its subsidiaries and, to the Company’s knowledge, the Intellectual Property Rights licensed to the Company and its subsidiaries, are valid, subsisting and enforceable, and there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the validity, scope or enforceability of any such Intellectual Property Rights; (iii) neither the Company nor any of its subsidiaries has received any notice alleging any infringement, misappropriation or other violation of Intellectual Property Rights which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a Material Adverse Effect on the Company and its subsidiaries, taken as a whole, and, to the Company’s knowledge, none of the licensors, in relation to the Intellectual Property Rights licensed to the Company and its subsidiaries, have received any notice alleging any infringement, misappropriation or other violation of Intellectual Property Rights licensed to the Company and its subsidiaries which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a Material Adverse Effect on the Company and its subsidiaries, taken as a whole; (iv) to the Company’s knowledge, no third party is infringing, misappropriating or otherwise violating, or has infringed, misappropriated or otherwise violated, any Intellectual Property Rights owned by the Company or any of its subsidiaries, and any Intellectual Property Rights licensed to the Company and its subsidiaries, that would materially adversely affect the Company and its subsidiaries, taken as a whole; (v) neither the Company nor any of its subsidiaries infringes, misappropriates or otherwise violates, or has infringed, misappropriated or otherwise violated, any Intellectual Property Rights of a third party in any material respect; (vi) all employees and contractors engaged in the development of material Intellectual Property Rights on behalf of the Company or any subsidiary of the Company have executed an invention assignment agreement whereby such employees or contractors presently
- 15 -
assign all of their right, title and interest in and to such Intellectual Property Rights to the Company or the applicable subsidiary, and to the Company’s knowledge no such agreement has been breached or violated; (vii) the Company and its subsidiaries use, and have used, commercially reasonable efforts to appropriately maintain the confidentiality of all information intended to be maintained as a trade secret; and (viii) all employees or contractors engaged in the development of material trade secrets on behalf of the Company or any subsidiary of the Company have executed a confidentiality agreement with the Company or any subsidiary of the Company.
3.1.16Sarbanes-Oxley. There is and has been no failure on the part of the Company or any of the Company’s directors or officers, in their capacities as such, to comply in all material respects with any applicable provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder. Each of the principal executive officer and the principal financial officer of the Company (or each former principal executive officer of the Company and each former principal financial officer of the Company as applicable) has made all certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act with respect to all reports, schedules, forms, statements and other documents required to be filed by the Company or furnished by it to the Commission. For purposes of the preceding sentence, “principal executive officer” and “principal financial officer” shall have the meanings as such terms are used in the Sarbanes-Oxley Act.
3.1.17No Improper Practices. (a) Neither the Company nor and of its subsidiaries, nor any director, officer, or employee of the Company or any subsidiary nor, to the Company’s knowledge, any agent, Affiliate or other Person acting on behalf of the Company or any subsidiary has, in the past five years, made any unlawful contributions to any candidate for any political office (or failed fully to disclose any contribution in violation of applicable law) or made any contribution or other payment to any official of, or candidate for, any federal, state, municipal, or foreign office or other person charged with similar public or quasi-public duty in violation of any applicable law or of the character required to be disclosed in the SEC Reports; (b) no relationship, direct or indirect, exists between or among the Company or any subsidiary or any Affiliate of any of them, on the one hand, and the directors, officers and stockholders of the Company or any subsidiary, on the other hand, that is required by the Securities Act to be described in the SEC Reports that is not so described; (c) no relationship, direct or indirect, exists between or among the Company or any subsidiary or any Affiliate of them, on the one hand, and the directors, officers, or stockholders of the Company or any subsidiary, on the other hand, that is required by the rules of the Financial Industry Regulatory Authority to be described in the SEC Reports that is not so described; (d) there are no material outstanding loans or advances or material guarantees of indebtedness by the Company or any subsidiary to or for the benefit of any of their respective officers or directors or any of the members of the families of any of them; and (e) the Company has not offered, or caused any placement agent to offer, Common Stock to any person with the intent to influence unlawfully (i) a customer or supplier of the Company or
- 16 -
any subsidiary to alter the customer’s or supplier’s level or type of business with the Company or any subsidiary or (ii) a trade journalist or publication to write or publish favorable information about the Company or any subsidiary or any of their respective products or services, and, (f) neither the Company nor any subsidiary nor any director, officer or employee of the Company or any subsidiary nor, to the Company’s knowledge, any agent, Affiliate or other person acting on behalf of the Company or any subsidiary has (i) violated or is in violation of any applicable provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or any other applicable anti-bribery or anti-corruption law (collectively, “Anti-Corruption Laws”), (ii) illegally promised, offered, provided, attempted to provide or authorized the provision of anything of value, directly or indirectly, to any person for the purpose of obtaining or retaining business, influencing any act or decision of the recipient, or securing any improper advantage; or (iii) made any payment of funds of the Company or any subsidiary or received or retained any funds in violation of any Anti-Corruption Laws.
3.1.18Sanctions.
(a) | The Company represents that, neither the Company nor any of its subsidiaries (collectively, the “Entity”), nor any director or officer of the Entity, nor, to the Company’s knowledge after reasonable due inquiry, any employee, agent, Affiliate or representative of the Entity, is a government, individual or entity (an “Individual”) that is, or is owned or controlled by an Individual that: |
(1) | is the subject of any applicable sanctions administered or enforced by the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”), the United Nations Security Council, the European Union, His Majesty’s Treasury, or other relevant sanctions authorities, including, without limitation, designation on OFAC’s Specially Designated Nationals and Blocked Persons List or OFAC’s Foreign Sanctions Evaders List and the U.S. Entity List, all administered by the U.S. Department of Commerce; the consolidated list of Persons, Groups and Entities subject to EU Financial Sanctions, as implemented by the EU Common Foreign & Security Policy; and similar lists of restricted parties maintained by any other applicable governmental entity or Governmental Authority (as amended, collectively, “Sanctions”), nor |
(2) | is located, organized or resident in a country or territory that is the subject of Sanctions that broadly prohibit |
- 17 -
dealings with that country or territory (including, without limitation, Cuba, Iran, North Korea, Syria and the Crimea, Donetsk People’s Republic and Luhansk People’s Republic regions of Ukraine).
(b) | The Entity represents and covenants that it will not, directly or indirectly, use the proceeds from the sale of the Shares, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Individual: |
(1) | to fund or facilitate any activities or business of or with any Individual that, at the time of such funding or facilitation, is the subject of Sanctions or in any country or territory that is a Sanctioned Country in violation of Sanctions; or |
(2) | in any other manner that will result in a violation of Sanctions by any Individual (including any Individual participating in the offer and sale of the Shares, whether as underwriter, advisor, investor or otherwise). |
(c) | The Entity represents and covenants that for the past five (5) years, it has not engaged in, is not now engaging in, and will not engage in, any dealings or transactions with any Individual that at the time of the dealing or transaction is or was the subject of Sanctions or in any country or territory that is or was a Sanctioned Country in violation of Sanctions. |
3.1.19Not an Investment Company. Neither the Company nor any of its subsidiaries is or, after giving effect to the offering and sale of the Shares, will be, an “investment company” or an entity “controlled” by an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended.
3.1.20No Disqualification Events. None of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company participating in the offering of the Shares contemplated by this Agreement, or to the Company’s knowledge, any Beneficial Owner of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has
- 18 -
exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event.
3.1.21No Integration. The Company has not, directly or through any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security (as defined in the Securities Act) that is or will be integrated with the Shares sold pursuant to this Agreement in a manner that would require the registration of the Shares under the Securities Act.
3.1.22Tax Matters. Since January 1, 2019, the Company and each of its subsidiaries have timely prepared and filed all income and other material tax returns required to have been filed by them with all appropriate Governmental Authorities and timely paid all taxes shown thereon, except as currently being contested in good faith and for which adequate reserves have been created in the financial statements of the Company, if such reserves are determined to be necessary or advisable by the Company. The charges, accruals and reserves on the books of the Company in respect of taxes for all fiscal periods have been and are adequate, and there are no unpaid assessments against the Company or any of its subsidiaries nor any basis for the assessment of any additional taxes, penalties or interest for any fiscal period or audits by any federal, state or local taxing authority, except as would not, individually or in the aggregate, have a Material Adverse Effect. All taxes and other assessments and levies that the Company or any of its subsidiaries is required to withhold or to collect for payment have been duly withheld and collected and paid to the proper Governmental Authority or third party when due, except as would not, individually or in the aggregate, have a Material Adverse Effect. There are no tax liens or claims pending or, to the Company’s knowledge, threatened, against the Company or any of its subsidiaries or any of their assets or properties, except as would not, individually or in the aggregate, have a Material Adverse Effect.
3.2Representations and Warranties of AbbVie. AbbVie hereby makes the following representations and warranties to the Company as of the date hereof and as of the Closing Date (except, in each case, for the representations and warranties that speak as of a specific earlier date, which shall be made as of such date).
3.2.1Organization; Authority; Enforcement. AbbVie is duly incorporated, validly existing and in good standing under the laws of the State of Delaware. AbbVie has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by AbbVie and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary action on the part of AbbVie and no further action is required by AbbVie, AbbVie’s board of directors or AbbVie’s stockholders in connection herewith. This Agreement has been duly executed by AbbVie and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of AbbVie enforceable against AbbVie in accordance with its terms, except
- 19 -
(a) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally and (b) insofar as indemnification and contribution provisions may be limited by applicable law.
3.2.2No Conflicts; Filings, Consents and Approvals. The execution, delivery and performance of this Agreement by AbbVie and the consummation by AbbVie of the transactions contemplated hereby will not (i) conflict with or result in a violation of any provision of AbbVie’s certificate of incorporation or bylaws, each as in effect on the date hereof, (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default under, any agreement, indenture, or instrument to which AbbVie is a party, or (iii) result in a violation of any law applicable to AbbVie, except in the case of clauses (ii) and (iii) only, for such conflicts, breaches, defaults, and violations as would not reasonably be expected to result in a material liability for the Company or prevent the consummation of this Agreement. AbbVie is not required to obtain any consent, waiver, approval, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other Governmental Authority or other Person in the United States in connection with the execution, delivery and performance by AbbVie of this Agreement except for such filings as may be required by the Commission regarding AbbVie’s acquisition of beneficial ownership of the Shares.
3.2.3AbbVie Status. At the time AbbVie was offered the Shares, it was, and as of the date hereof it is either: (a) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (b) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act. AbbVie is acting alone in its determination as to whether to invest in the Shares.
3.2.4Experience of AbbVie. AbbVie, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Shares, and has so evaluated the merits and risks of such investment. AbbVie is able to bear the economic risk of an investment in the Shares and, at the present time, is able to afford a complete loss of such investment.
3.2.5Access to Information. AbbVie acknowledges that it has had the opportunity to review the SEC Reports and has been afforded, (a) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Shares and the merits and risks of investing in the Shares; (b) access to information (other than material non-public information) about the Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (c)
- 20 -
the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment.
3.2.6Certain Transactions and Confidentiality. Other than consummating the transactions contemplated hereunder, AbbVie has not, nor has any Person acting on behalf of or pursuant to any understanding with AbbVie, directly or indirectly executed any purchases or sales, including any “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include locating and/or borrowing shares of Common Stock) of the securities of the Company during the period commencing as of the time that AbbVie first received any materials setting forth the material pricing terms of the transactions contemplated hereunder and ending immediately prior to the execution hereof.
3.2.7Legends. AbbVie understands and agrees that the Shares will bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the Shares):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR WITH THE SECURITIES COMMISSION OF ANY STATE, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY AND THE COMPANY’S TRANSFER AGENT.
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE, INCLUDING A LOCK-UP PERIOD, AS SET FORTH IN AN INVESTOR RIGHTS AGREEMENT, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE COMPANY.
3.2.8Reliance on Exemptions. AbbVie understands that the Shares are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of the representations and warranties of AbbVie set forth in this Section 3.2 in order to determine the availability of such exemptions and the eligibility of AbbVie to acquire the Shares.
3.2.9No Disqualification Events. AbbVie is not subject to any Disqualification Event, except for Disqualification Events covered by Rule 506(d)(2) or (d)(3) under the
- 21 -
Securities Act and disclosed reasonably in advance of the Closing in writing in reasonable detail to the Company.
ARTICLE 4
OTHER AGREEMENTS OF THE PARTIES
4.1Survival. The representations, warranties, covenants and agreements contained in this Agreement shall survive the Closings and the delivery of the Shares and any termination of this Agreement for the applicable statute of limitations.
4.2Legend Removal. The Company shall direct its transfer agent to remove the transfer restriction set forth in Section 3.2.7 applicable to any portion of the Shares that are restricted securities, upon the written request of AbbVie, within two (2) Business Days of the Company’s receipt of such request, at such time as such portion of the Shares (a) are being sold by AbbVie pursuant to Rule 144 or (b) may be transferred without the requirement that the Company be in compliance with the public information requirements and volume or manner-of-sale restrictions under Rule 144. AbbVie, or if the Company’s transfer agent requires, the Company, shall provide such opinions of counsel reasonably requested by the Company’s transfer agent in connection with the removal of legends pursuant to this Section 4.2.
4.3Book Entry Statement. The Company hereby agrees to cause the Company’s transfer agent to deliver to AbbVie a book entry share position for the Shares registered in the name of AbbVie within three (3) Business Days following the Closing.
4.4Confidentiality. AbbVie covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company, AbbVie will maintain the confidentiality of the existence and terms of this transaction.
ARTICLE 5
MISCELLANEOUS
5.1Fees and Expenses. Each party shall pay all fees and expenses that it incurs (including on account of any of their respective advisers, counsel, accountants and other experts) in connection with the negotiation, preparation, execution and delivery of this Agreement, including, in the case of the Company, all Transfer Agent fees (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company), stamp taxes and other taxes and duties levied in connection with the delivery of any Shares to AbbVie.
5.2Entire Agreement. This Agreement, the License Agreement, including the appendices and schedules attached thereto, and the Investor Rights Agreement contain the entire
- 22 -
understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.
5.3Notices. Any notice or other communication required or permitted to be given under this Agreement shall be in writing (whether or not specifically stated), shall specifically refer to this Agreement, and shall be addressed to the appropriate party at the address specified below or such other address as may be specified by such party in writing in accordance with this Section 5.3, and shall be deemed to have been given for all purposes (i) when received, if hand-delivered or sent by a reputable international expedited delivery service (with receipt confirmed), (ii) if given by e-mail, upon receipt of confirmation of receipt of an e-mail transmission (including automated confirmation of delivery) and (iii) five (5) Business Days after mailing, if mailed by first class certified or registered mail, postage prepaid, return receipt requested. This Section 5.3 is not intended to govern the day-to-day business communications necessary between the parties in performing their obligations under the terms of this Agreement (for which e-mail or other methods of communications shall suffice).
If to the Company: | Xilio Therapeutics, Inc. |
| Attention: Chief Financial Officer and Chief Operating Officer |
| 828 Winter Street, Suite 300 |
| Waltham, MA 02451 |
| Email: [**] |
| |
With a copy to (which shall not constitute notice): | Wilmer Cutler Pickering Hale and Dorr LLP |
| Attention: Cynthia T. Mazareas |
| 60 State Street |
| Boston, MA 02109 |
| Email: [**] |
| |
If to AbbVie: | AbbVie Inc. |
| 1 North Waukegan Road |
| North Chicago, IL 60064 |
| Attention: Executive Vice President, General Counsel and Secretary |
| Email: [**] |
- 23 -
With a copy to (which shall not constitute notice): | Latham & Watkins LLP |
| Attention: Nathan Ajiashvili |
| 1271 Avenue of the Americas |
| New York, NY 10020 |
| Email: [**] |
5.4Amendments; Waivers. No subsequent alteration, amendment, change or addition to this Agreement shall be binding upon the parties hereto unless reduced to writing and signed by an authorized officer of each party. Any delay in enforcing a party’s rights under this Agreement or any waiver as to a particular default or other matter shall not constitute a waiver of such party’s rights to the future enforcement of its rights under this Agreement, except with respect to an express written and signed waiver relating to a particular matter for a particular period of time.
5.5Termination. This Agreement may not be terminated except by the execution of a writing and signed by an authorized officer of each party hereto.
5.6Construction; Headings. The terms “includes,” “including,” “include” and derivative forms of them shall be deemed followed by the phrase “without limitation” (regardless of whether it is actually written (and drawing no implication from the actual inclusion of such phrase in some instances after such terms but not others)) and the term “or” has the inclusive meaning represented by the phrase “and/or” (regardless of whether it is actually written (and drawing no implication from the actual use of the phrase “and/or” in some instances but not in others)). Unless specified to the contrary, references to Articles or Sections shall refer to the particular Articles or Sections of or to this Agreement. The word “day,” “quarter” or “year” (and derivatives thereof, e.g., “quarterly”) shall mean a calendar day, calendar quarter or calendar year unless otherwise specified. The word “hereof,” “herein,” “hereby” and derivative or similar word refers to this Agreement. The words “will” and “shall” shall have the same obligatory meaning. Provisions that require that a party or parties hereunder “agree,” “consent” or “approve” or the like shall require that such agreement, consent or approval be specific and in writing, whether by written agreement, letter or otherwise. Words of any gender include the other gender. Words using the singular or plural number also include the plural or singular number, respectively. References to any specific law or article, section or other division thereof shall be deemed to include the then-current amendments or any replacement law thereto, and any rules and regulations promulgated thereunder. All dollar-denominated amounts herein are in United States dollars. This Agreement has been prepared jointly and shall not be strictly construed against either party. Ambiguities, if any, in this Agreement shall not be construed against either party, irrespective of which party may be deemed to have authored the ambiguous provision. The headings of each Article and Section in this Agreement have been inserted for convenience of reference only and are not intended to limit or expand on the meaning of the language contained in the particular Article or Section.
- 24 -
5.7Further Assurances. Each party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.
5.8Successors and Assigns. This Agreement may not be assigned by a party hereto without the prior written consent of the other party, provided, however, that AbbVie may assign its rights and delegate its duties hereunder in whole or in part to an Affiliate without the prior written consent of the Company, provided such assignee agrees in writing to be bound by the provisions hereof that apply to AbbVie. The provisions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties.
5.9Third Party Beneficiaries. This Agreement is not intended to and shall not be construed to give any third party any interest, rights (including any third party beneficiary rights), remedies, obligations, or liabilities with respect to or in connection with any agreement or provision contained herein or contemplated hereby, except as expressly provided in this Agreement.
5.10Publicity. AbbVie shall have the right to provide comment on and approve before issuance any press release, filing with the Commission or any other public disclosure made by or on behalf of the Company whatsoever with respect to, in any manner, AbbVie or the purchase and sale of the Shares contemplated by this Agreement; provided, however, that the Company shall be entitled, without the prior approval of AbbVie, to make any press release or other public disclosure (including any filings with the Commission) with respect to such transactions as is required by applicable law and regulations so long as the Company (i) provides AbbVie with a copy thereof as far in advance as reasonably practicable so as to provide a reasonable opportunity to comment thereon, and (ii) with respect to any proposed filing by the Company with the Commission, reasonably cooperates with AbbVie regarding any redactions requested by AbbVie to any exhibit thereto. Notwithstanding the foregoing, the Company shall not be obligated to deliver AbbVie a copy of any release or other public disclosure that contains information that is substantially similar to disclosure previously provided to AbbVie pursuant to this Section 5.10.
5.11Governing Law. This Agreement shall be governed by and construed under the substantive laws of the State of New York, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction.
5.12Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of AbbVie and the Company will be entitled to seek specific performance under this Agreement. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of
- 25 -
obligations contained in this Agreement and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.
5.13WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.
5.14Attorneys’ Fees. In the event that any action is instituted under or in relation to this Agreement, including without limitation to enforce any provision in this Agreement, each party shall bear its own fees, costs and expenses of enforcing any right of such party under or with respect to this Agreement.
5.15Counterparts; Electronic Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file (including any “.pdf” including any electronic signature covered by the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act, the Electronic Signatures and Records Act or other applicable law, e.g., a signature applied with DocuSign), such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.
5.16Severability. If any one or more of the provisions of this Agreement is held to be invalid or unenforceable by an arbitrator or by any court of competent jurisdiction from which no appeal can be or is taken, the provision shall be considered severed from this Agreement and shall not serve to invalidate any remaining provisions hereof. The parties shall make a good faith effort to replace any invalid or unenforceable provision with a valid and enforceable one such that the objectives contemplated by the parties when entering into this Agreement may be realized.
[Remainder of Page Intentionally Left Blank]
- 26 -
IN WITNESS WHEREOF, the parties hereto have caused this Common Stock Purchase Agreement to be duly executed by their respective authorized signatories as of February 10, 2025.
| Xilio Therapeutics, Inc. | |
| | |
| By: | /s/ René Russo |
| | Name: René Russo |
| | Title: President and Chief Executive Officer |
| | |
| AbbVie Inc. | |
| | |
| By: | /s/ Lindsey Bristow |
| | Name: Lindsey Bristow |
| | Title: SVP, Tax |
Signature Page to Common Stock Purchase Agreement
Exhibit 10.3
Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Double asterisks denote omissions.
Xilio Therapeutics, Inc.
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (this “Agreement”) is dated as of February 10, 2025, by and between Xilio Therapeutics, Inc., a Delaware corporation (the “Company”), and AbbVie Inc., a Delaware corporation (“AbbVie”).
WHEREAS, concurrently herewith, the Xilio Development, Inc. (“Xilio Development”) and AbbVie have entered into an Option and License Agreement (the “License Agreement”) pursuant to which they have established a collaboration with respect to certain of the Company’s product development programs;
WHEREAS, concurrently herewith, the Company and AbbVie have entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) pursuant to which AbbVie has agreed to purchase from the Company shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”); and
WHEREAS, the Company and AbbVie wish to set forth in this Agreement certain terms and conditions regarding AbbVie’s ownership of Common Stock and certain other matters as set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises contained in this Agreement and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto hereby agree as follows:
Article 1
DEFINITIONS
1.1Definitions. For purposes of this Agreement:
1.1.1“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with a Person.
1.1.2“Beneficially Own” has the meaning specified in Rule 13d-3 promulgated under the Exchange Act.
1.1.3“Board” means the Board of Directors of the Company.
1.1.4“Business Day” means any day on which Nasdaq and commercial banks in the City of New York and the City of Chicago are open for business.
1.1.5“Change of Control” has the meaning set forth in Section 2.3.
1.1.6“Closing Date” means the Closing Date as defined in the Purchase Agreement.
1.1.7“Commission” means the United States Securities and Exchange Commission.
1.1.8“Commission Rule 144” means Rule 144 promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.
1.1.9“Commission Rule 415” means Rule 415 promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.
1.1.10“Common Stock” has the meaning set forth in the recitals.
1.1.11“Company Capitalization” means, as of any date of measurement, the total number of outstanding shares of voting capital stock of the Company.
1.1.12“Control,” including the terms “Controlling,” “Controlled by” and “under common Control with,” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting shares, by contract or otherwise.
1.1.13“Entity” means any corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any limited liability company or joint stock company), branch office, firm or other enterprise, association, organization or entity.
1.1.14“Equity Securities” means (a) any shares of Common Stock or preferred stock of the Company, and (b) any other security, financial instrument, certificate and other right (including options, futures, swaps and other derivatives) issued or, with respect to options, futures, swaps and other derivatives, contracted by the Company and representing, being exercisable, convertible or exchangeable into or for, or otherwise providing a right to acquire, directly or indirectly, any of the Equity Securities referred to in clause (a).
1.1.15“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
- 2 -
1.1.16“Final Prospectus” has the meaning set forth in Section 6.1.1.
1.1.17“Holder” means AbbVie or its permitted successors and assigns pursuant to Section 8.8 of this Agreement.
1.1.18“Indemnified Party” has the meaning set forth in Section 6.1.3.
1.1.19“Indemnifying Party” has the meaning set forth in Section 6.1.3.
1.1.20“Inspectors” has the meaning set forth in Section 7.1.
1.1.21“License Agreement” has the meaning set forth in the recitals.
1.1.22“Lock-up Period” has the meaning set forth in Section 3.1.
1.1.23“Lock-up Termination Date” has the meaning set forth in Section 5.1.1.
1.1.24“Nasdaq” means the Nasdaq Stock Market.
1.1.25“Person” means any individual, Entity or governmental authority.
1.1.26“Principal Market” means the Nasdaq Global Select Market; provided however, that in the event the Company’s Common Stock is ever listed or traded on the New York Stock Exchange, the NYSE MKT, the Nasdaq Global Market or the Nasdaq Capital Market, then the “Principal Market” shall mean such other market or exchange on which the Company’s Common Stock is then listed or traded.
1.1.27“Purchase Agreement” has the meaning set forth in the recitals.
1.1.28“Records” has the meaning set forth in Section 7.1.
1.1.29“Registrable Securities” means the shares of Common Stock purchased by AbbVie under the Purchase Agreement and any shares of Common Stock issued as a dividend or other distribution with respect to, in exchange for or in replacement of such shares; provided, however, that securities shall cease to be Registrable Securities if they (a) have been disposed of pursuant to a registration statement declared effective by the Commission, (b) have been sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act so that all transfer restrictions and restrictive legends with respect thereto are removed upon the consummation of such sale or (c) may be sold or transferred without any volume limitations pursuant to Commission Rule 144.
- 3 -
1.1.30“Registration Expenses” means all expenses incurred by the Company in performing or complying with Article 5, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of the Company’s counsel and one counsel for AbbVie (which amount may not exceed $[**]), blue sky fees and accounting fees.
1.1.31“Registration Period” has the meaning set forth in Section 5.1.3.
1.1.32“Registration Statement” has the meaning set forth in Section 5.1.1.
1.1.33“Restricted Securities” means shares of Common Stock held by AbbVie or any of its Affiliates, or by any person to whom such shares are transferred by AbbVie, any of its Affiliates or any of their respective transferees, that are “restricted securities” as defined in Commission Rule 144.
1.1.34“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
1.1.35“Selling Expenses” means all underwriting discounts and selling commissions applicable to an offering involving Registrable Securities registered pursuant to Article 5.
1.1.36“Shares” means the Shares as defined in the Purchase Agreement.
1.1.37“Standstill” means the provisions set forth in Section 2.2.
1.1.38“Standstill Fall-Away” has the meaning set forth in Section 2.3.
1.1.39“Standstill Fall-Away Notice” has the meaning set forth in Section 2.3.
1.1.40“Standstill Period” has the meaning set forth in Section 2.1.
1.1.41“Underwritten Offering” has the meaning set forth in Section 5.3.2.
Capitalized terms used but not defined herein shall have the meanings given to them in the Purchase Agreement.
Article 2
STANDSTILL
2.1Standstill Obligation. The standstill obligation, as set out in this Article 2, will be in effect for the period (the “Standstill Period”) beginning on the Closing Date and ending on the [**] anniversary of the Closing Date.
- 4 -
2.2Standstill Limitations. During the Standstill Period, AbbVie shall not and shall cause its Controlled Affiliates to not, without the prior express written consent of the Company, directly or indirectly:
2.2.1acquire any Equity Securities of the Company other than pursuant to the Purchase Agreement or in any other transaction with the Company;
2.2.2knowingly encourage or support a tender, exchange or other offer or proposal by a third party for an extraordinary transaction or series of related transactions resulting in an extraordinary transaction involving the Company;
2.2.3propose any (a) merger, consolidation, business combination, tender or exchange offer, purchase of substantially all of the Company’s consolidated assets or businesses, or similar extraordinary transaction or series of related transactions resulting in an extraordinary transaction involving the Company or (b) recapitalization, restructuring, liquidation or other extraordinary transaction with respect to the Company (it being understood that AbbVie’s Chief Executive Officer, Chief Scientific Officer, Chief Business and Strategy Officer or other appropriate representative of AbbVie may contact the Company’s Chief Executive Officer and/or the Board on a non-public and non-committal basis in such a way that would not be reasonably likely to require the Company to disclose publicly any such matter described in clause (a) or (b));
2.2.4(a) publicly submit matters to, publicly request that matters be submitted to, or publicly request the convening of, a meeting of the stockholders of the Company, or (b) solicit proxies or consents, or become a participant in a solicitation in relation to matters submitted to a meeting of the stockholders of the Company, in each case of (a) and (b) without or against the recommendation or support by the Board; or
2.2.5(a) make public statements with respect to (unless legally obliged to do so) or (b) with the actual knowledge of AbbVie’s executive officers, provide assistance to, commit to, or discuss or enter into any agreement or arrangement with any party to do, any of the foregoing prohibited actions.
The foregoing standstill provisions shall not prohibit passive investments by a pension or employee benefit plan or trust for AbbVie’s employees.
2.3Standstill Fall-Away. The foregoing standstill provisions shall terminate automatically in the event that (a) the Company enters into, or publicly announces its intention to enter into, a definitive agreement to effect a business combination, merger or other extraordinary transaction that would, if consummated, result in more than 50% of the Company’s outstanding voting securities being owned by persons other than the current holders of such voting securities, or
- 5 -
which would result in more than 50% of the Company’s consolidated assets being sold (such transaction, a “Change of Control”), (b) any third party commences, or publicly announces its intention to commence, a tender or exchange offer for more than 50% of the outstanding voting securities of the Company and (i) the Board fails to recommend prior to the date that is [**] after such commencement that the Company’s stockholders not tender their shares in such tender or exchange offer or (ii) such proposal has been publicly supported or recommended by the Board or (c) the Board publicly announces its intention to commence a process to seek a potential sale of the Company or all or substantially all of its assets (the “Standstill Fall-Away”) and the Company shall notify AbbVie of such Standstill Fall-Away event as promptly as practicable and in any event no later than [**] after such Standstill Fall-Away event (the “Standstill Fall-Away Notice”). Upon the Standstill Fall-Away, the Standstill obligations of AbbVie shall terminate. The Company shall not be required to specify in the Standstill Fall-Away Notice any information regarding any proposed transaction that has not been publicly disclosed.
2.4Material Non-Public Information. AbbVie acknowledges that the information contained in the Standstill Fall-Away Notice may, prior to the public announcement of such information, constitute material, non-public information of the Company. When receiving the Standstill Fall-Away Notice, AbbVie shall take all appropriate measures to ensure the confidentiality of such information.
Article 3
LOCK-UP
3.1Lock-Up Obligation. During the period beginning on the Closing Date and ending on the earliest of (a) [**] of the Closing Date, (b) the date the Company delivers a Standstill Fall-Away Notice, (c) the termination of the License Agreement in its entirety and (d) the termination of this Agreement pursuant to Section 8.5 (the “Lock-up Period”), AbbVie shall not, and shall cause its Affiliates not to, without the prior consent of the Company, transfer, sell or otherwise dispose of any Equity Securities held by AbbVie or any of its Affiliates, other than transfers, sales or dispositions permitted pursuant to Section 3.3.
3.2 [Reserved].
3.3Permitted Transfers. A transfer, sale or other divestment of Equity Securities by AbbVie or any of its Affiliates to any of its or their Affiliates shall be permitted and not be subject to the restrictions set out in Section 3.1 or Section 3.2, provided that (a) the obligations of AbbVie pursuant to this Agreement remain unaffected by the proposed transfer, sale or divestment, (b) the transferee agrees in writing to be bound by the restrictions set out in Section 3.1 and Section 3.2 in relation to the Equity Securities it received and the other obligations of AbbVie in relation to the Equity Securities under this Agreement, and (c) the relevant Equity
- 6 -
Securities will be re-transferred to AbbVie immediately prior to the transferee ceasing to be an Affiliate.
Article 4
ADDITIONAL COVENANTS
4.1Restrictions on Transfer.
4.1.1Subject to Article 5, the Shares will not be sold, pledged, or otherwise transferred, and the Company will not recognize and will issue stop-transfer instructions to its transfer agent with respect to any such sale, pledge, or transfer, except such sales, pledges or transfers as are executed in accordance with Article 5 or upon the conditions specified in this Section 4.1, which conditions are intended to ensure compliance with the provisions of the Securities Act. AbbVie, if effecting a transfer of Shares other than a sale pursuant to Commission Rule 144 or sale pursuant to a registration statement under the Securities Act, will cause any proposed purchaser, pledgee, or transferee of the Shares to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Section 4.1.
4.1.2AbbVie consents to the Company making a notation in its records and giving instructions to any transfer agent of the Common Stock in order to implement the restrictions on transfer set forth in this Section 4.1.
4.1.3AbbVie agrees that before any proposed sale, pledge, or transfer of any Restricted Securities that is not effected pursuant to Commission Rule 144, unless there is in effect a registration statement under the Securities Act covering the proposed transaction, AbbVie will give notice to the Company of its intention to effect such sale, pledge, or transfer. Each such notice will describe the manner and circumstances of the proposed sale, pledge, or transfer in sufficient detail and, if reasonably requested by the Company, will be accompanied at AbbVie’s expense by either: (a) a written opinion of legal counsel who will, and whose legal opinion will, be reasonably satisfactory to the Company, addressed to the Company, to the effect that the proposed transaction may be effected without registration under the Securities Act; (b) a “no action” letter from the Commission to the effect that the proposed sale, pledge, or transfer of such Restricted Securities without registration will not result in a recommendation by the staff of the Commission that action be taken with respect thereto; or (c) any other evidence reasonably satisfactory to counsel to the Company to the effect that the proposed sale, pledge, or transfer of the Restricted Securities may be effected without registration under the Securities Act, whereupon AbbVie will be entitled to sell, pledge, or transfer such Restricted Securities in accordance with the terms of the notice given by AbbVie to the Company and such securities will no longer constitute Restricted Securities for purposes of this Agreement. The Company will not require such a legal opinion or “no action” letter in any transaction in which AbbVie
- 7 -
distributes Restricted Securities to an Affiliate of AbbVie for no consideration; provided that each such transferee agrees in writing to be subject to the terms of this Section 4.1. Each certificate or instrument evidencing the Restricted Securities transferred as above provided will bear, except if such transfer is made pursuant to Commission Rule 144, the appropriate restrictive legend set forth in Section 3.2.7 of the Purchase Agreement, except that such certificate will not bear such restrictive legend if, in the opinion of counsel for AbbVie and the Company, such legend is not required in order to establish compliance with any provisions of the Securities Act. The Company will take all actions necessary to have the lock-up legend set forth in Section 3.2.7 of the Purchase Agreement removed from all Restricted Securities on the day the Lock-up Period expires.
Article 5
REGISTRATION RIGHTS
5.1Registration Statements.
5.1.1If, at any time following the termination of the Lock-up Period (such date, the “Lock-up Termination Date”), AbbVie or any Holder holds any Registrable Securities, the Company shall, upon AbbVie’s written request, (a) [**] after the date of such request, file a registration statement on Form S-3, or, if the Company is not eligible to register such Registrable Securities on Form S-3, (b) [**] after the date of such request, file a registration statement on Form S-1, in each case covering the resale of the Registrable Securities for an offering to be made on a continuous basis pursuant to Commission Rule 415, or if Commission Rule 415 is not available for offers and sales of the Registrable Securities, by such other means of distribution of Registrable Securities as AbbVie may reasonably specify, and will use commercially reasonable efforts to have such registration statement on Form S-3 or S-1 (either such registration statement, the “Registration Statement”) be declared effective [**] from clearing any comments from the Commission, and in any event [**] from the initial filing date of such Registration Statement ([**], in the event such Registration Statement is reviewed by the Commission). For purposes of clarification, any failure by the Company to file the Registration Statement by the applicable deadline set forth in this Section 5.1.1 shall not otherwise relieve the Company of its obligations to file the Registration Statement and to effect the registration of the Registrable Securities as set forth above in this Section 5.1.1.
5.1.2Notwithstanding the foregoing, if the Company furnishes to AbbVie a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Board it would be materially detrimental to the Company and its stockholders for such Registration Statement to become effective, because such action would (a) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction
- 8 -
involving the Company; (b) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (c) render the Company unable to comply with requirements under the Securities Act or Exchange Act, then the Company shall have the right to defer taking action with respect to such filing, and any time periods with respect to filing or effectiveness thereof shall be tolled correspondingly, [**]; provided, however, that the Company may not invoke this right more than [**] in any [**]; and provided further that the Company shall not register any securities for its own account or that of any other stockholder during such period (other than (a) a registration relating to the sale of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, or similar plan; (b) a registration relating to a Rule 145 transaction; or (c) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered).
5.1.3Registration Period. The Company will use commercially reasonable efforts to keep the Registration Statement continuously effective under the Securities Act for [**] (such period, the “Registration Period”).
5.2Company Obligations. In the case of the registration, qualification, exemption or compliance effected by the Company pursuant to this Agreement, the Company shall, upon reasonable request, inform each Holder as to the status of such registration, qualification, exemption and compliance.
5.2.1 At its expense the Company shall:
(a) | advise the Holders [**]: |
(A) | when a Registration Statement or any amendment thereto has been filed with the Commission and when such Registration Statement or any post-effective amendment thereto has become effective; |
(B) | of any request by the Commission for amendments or supplements to the Registration Statement or the prospectus included therein or for additional information; |
(C) | of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for such purpose; |
(D) | of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities included |
- 9 -
therein for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and
(E) | of the occurrence of any event that requires the making of any changes in the Registration Statement or prospectus so that, as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading; |
(b) | use its commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of the Registration Statement as soon as reasonably practicable; |
(c) | during the Registration Period, promptly deliver to each such Holder, without charge, as many copies of each prospectus included in a Registration Statement and any amendment or supplement thereto as such Holder may reasonably request in writing; and the Company consents to the use, consistent with the provisions hereof, of the prospectus or any amendment or supplement thereto by each of the selling Holders of Registrable Securities in connection with the offering and sale of the Registrable Securities covered by a prospectus or any amendment or supplement thereto; |
(d) | prior to any public offering of Registrable Securities pursuant to the Registration Statement, promptly take such actions as may be necessary to register or qualify or obtain an exemption for offer and sale under the securities or blue sky laws of such United States jurisdictions as any such Holders reasonably request in writing, provided that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction, and do any and all other acts or things reasonably necessary or advisable to enable the offer and sale in such jurisdictions of the Registrable Securities covered by any such Registration Statement; |
(e) | upon the occurrence of any event contemplated by Section 5.2.1(a)(E) above, except for such times as the Company is permitted hereunder to suspend the use of a prospectus forming part of a Registration Statement, the Company shall use its commercially reasonable efforts to as soon as reasonably practicable prepare a post-effective amendment to such Registration Statement or a supplement to the related prospectus, or file any other required document so that, as thereafter delivered to purchasers of the Registrable Securities included therein, such |
- 10 -
prospectus will not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;
(f) | otherwise use its commercially reasonable efforts to comply in all material respects with all applicable rules and regulations of the Commission which could affect the sale of the Registrable Securities; |
(g) | use its commercially reasonable efforts to cause all Registrable Securities to be listed on each securities exchange or market, if any, on which equity securities issued by the Company have been listed; |
(h) | use its commercially reasonable efforts to take all other steps necessary to effect the registration of the Registrable Securities contemplated hereby and to enable the Holders to sell Registrable Securities under Commission Rule 144; |
(i) | permit counsel for AbbVie to review the Registration Statement and all amendments and supplements thereto (other than any supplements to a Registration Statement on Form S-1 solely for the purpose of incorporating other filings with the Commission into such Registration Statement and other than any amendment to a Registration Statement on Form S-1 for the purpose of converting such Registration Statement into a Registration Statement on Form S-3), within [**] prior to the filing thereof with the Commission; and |
(j) | provided that, in the case of clause (i) above, the Company shall not be required (a) to delay the filing of the Registration Statement or any amendment or supplement thereto as a result of any ongoing diligence inquiry by or on behalf of a Holder or to incorporate any comments to the Registration Statement or any amendment or supplement thereto by or on behalf of a Holder if such inquiry or comments would require a delay in the filing of such Registration Statement, amendment or supplement, as the case may be, or (b) to provide, and shall not provide, AbbVie or its representatives with material, non-public information unless AbbVie agrees in writing to receive such information and enters into a written confidentiality agreement with the Company in a form reasonably acceptable to the Company. |
5.3Investor Obligations.
5.3.1AbbVie shall furnish to the Company such information regarding AbbVie, and the distribution proposed by AbbVie, as the Company may reasonably request in writing and as shall be required in connection with the Registration Statement.
- 11 -
5.3.2In the event AbbVie intends to dispose of the Registrable Securities registered on the Registration Statement through an underwritten public offering (an “Underwritten Offering”), (a) the Company shall select the underwriter(s) of the Underwritten Offering that are reasonably acceptable to AbbVie and (b) each of the Company and AbbVie shall enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering; provided, that AbbVie shall not be required to make any representations and warranties to, or agreements with, any underwriter in a registration other than customary representations, warranties and agreements. Notwithstanding the foregoing, the Company shall not be obligated to effect, or to take any action to effect, any registration or Underwritten Offering pursuant to this Section 5.3.2 (a) during the period that is [**] before the Company’s good faith estimate of the date of filing of, and ending on a date that is [**] after the effective date of, a Company-initiated registration, provided that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; (b) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (c) if the Company has previously effected one Underwritten Offering pursuant to this Section 5.3.2.
5.4Registration Expenses. The Company shall pay all Registration Expenses incident to the performance of or compliance with Article 5 by the Company. AbbVie will bear any Selling Expenses based upon the sale of Registrable Securities.
Article 6
Indemnification.
6.1.1To the extent permitted by law, the Company shall indemnify AbbVie, each Holder, each director and officer of AbbVie or any Holder, and each Person controlling AbbVie or any Holder within the meaning of Section 15 of the Securities Act, with respect to which any registration that has been effected pursuant to this Agreement, against all claims, losses, damages and liabilities (or action in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened (subject to Section 6.1.3 below), arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in the Registration Statement, or other document incident to any such registration, qualification or compliance or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any prospectus, in light of the circumstances in which they were made), or any violation by the Company of any rule or regulation promulgated by the Securities Act applicable to the Company and relating to any action or inaction required of the Company in connection with any such registration, qualification or compliance, and will reimburse AbbVie, each Holder, each director and officer of AbbVie or any Holder and each Person controlling AbbVie or any Holder,
- 12 -
for reasonable and documented legal and other out-of-pocket expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action as incurred; provided that the Company will not be liable in any such case to the extent that any untrue statement or omission or allegation thereof is made in reliance upon and in conformity with written information furnished to the Company by AbbVie for use in preparation of any registration statement, prospectus, amendment or supplement; provided further, that the Company will not be liable in any such case where the claim, loss, damage or liability arises out of or is related to the failure of AbbVie to comply with the covenants and agreements contained in this Agreement respecting sales of Registrable Securities, and except that the foregoing indemnity agreement is subject to the condition that, insofar as it relates to any such untrue statement or alleged untrue statement or omission or alleged omission made in any preliminary prospectus but eliminated or remedied in the amended prospectus on file with the Commission at the time the Registration Statement becomes effective or in an amended prospectus filed with the Commission pursuant to Rule 424(b) which meets the requirements of Section 10(a) of the Securities Act (each, a “Final Prospectus”), such indemnity shall not inure to the benefit of AbbVie or any such controlling Person, if a copy of a Final Prospectus furnished by the Company to AbbVie for delivery was not furnished to the Person asserting the loss, liability, claim or damage at or prior to the time such furnishing is required by the Securities Act and a Final Prospectus would have cured the defect giving rise to such loss, liability, claim or damage.
6.1.2AbbVie will indemnify the Company, each of its directors and officers, and each Person who controls the Company within the meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened (subject to Section 6.1.3 below), arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in the Registration Statement, incident to any such registration, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any prospectus, in light of the circumstances in which they were made), and will reimburse the Company, such directors and officers, and each other Person controlling the Company for reasonable and documented legal and other out-of-pocket expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action as incurred, in each case to the extent, but only to the extent, that such untrue statement or omission or allegation thereof is made in reliance upon and in conformity with written information furnished to the Company by AbbVie expressly for use in any registration statement, prospectus, amendment or supplement.
6.1.3Each party entitled to indemnification under this Article 6 (the “Indemnified Party”) shall give notice to the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any claim as to which
- 13 -
indemnity may be sought, and shall permit the Indemnifying Party (at its expense) to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such Indemnified Party’s expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Agreement, unless such failure is materially prejudicial to the Indemnifying Party in defending such claim or litigation. An Indemnifying Party shall not be liable for any settlement of an action or claim effected without its written consent (which consent will not be unreasonably withheld). No Indemnifying Party, in its defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation.
6.1.4If the indemnification provided for in this Article 6 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage or expense referred to therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party thereunder, shall, to the extent permitted by applicable law, contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions which resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
Article 7
Information AND ACCESS RIGHTS
7.1Information. So long as AbbVie and its Affiliates, directly or indirectly, Beneficially Own [**] of the Company’s outstanding Common Stock, the Company shall make available upon reasonable prior notice during normal business hours and for reasonable periods for inspection by AbbVie and by any attorney, accountant or other agent retained by AbbVie and who is reasonably acceptable to the Company (collectively, the “Inspectors”) all reasonably pertinent financial and other records and pertinent corporate documents and properties of the
- 14 -
Company (collectively, the “Records”), including with respect to each of the Company’s subsidiaries, and cause the Company’s officers, directors and, as deemed appropriate by the Company’s officers, other Company employees, and the independent public accountants who have certified its financial statements to make themselves reasonably available to discuss the business of the Company and to supply all information reasonably requested by AbbVie and the Inspectors, in each case as is reasonably necessary for the purpose of conducting due diligence with respect to the Company (including as related to the License Agreement); provided, however, that AbbVie shall agree to, and direct its Inspectors to, hold in strict confidence and shall not make any disclosure of any Record or other information which the Company determines in good faith to be confidential, and of which determination AbbVie and the Inspectors are so notified, unless (a) the disclosure of such Records is required under applicable Law, (b) the release of such Records is ordered pursuant to a final, non-appealable subpoena or order from a court or government body of competent jurisdiction, (c) the information in such Records has been previously publicly disclosed other than by disclosure in violation of this Section 7.1, or (d) the release or disclosure of such Records is required by applicable regulations or to a self-regulatory agency, and, to the extent permitted by applicable law and regulations, AbbVie provides the Company with notice of such disclosure, which notice shall be in advance to the extent practicable. Notwithstanding the foregoing, the Company shall not disclose material nonpublic information to AbbVie, or to advisors to or representatives of AbbVie, unless prior to disclosure of such information the Company identifies such information as being material nonpublic information and provides AbbVie, such advisors and such representatives with the opportunity to accept or refuse to accept such material nonpublic information for review and AbbVie enters into an appropriate confidentiality agreement with the Company with respect thereto.
Article 8
MISCELLANEOUS
8.1Fees and Expenses. Except as provided in Section 5.4, each party shall pay all fees and expenses that it incurs (including on account of any of their respective advisers, counsel, accountants and other experts) in connection with the negotiation, preparation, execution and delivery of this Agreement and its performance under or compliance with the terms of this Agreement.
8.2Entire Agreement. This Agreement, the License Agreement, including the appendices and schedules attached thereto, and the Purchase Agreement contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.
- 15 -
8.3Notices. Any notice or other communication required or permitted to be given under this Agreement shall be in writing (whether or not specifically stated), shall specifically refer to this Agreement, and shall be addressed to the appropriate party at the address specified below or such other address as may be specified by such party in writing in accordance with this Section 8.3, and shall be deemed to have been given for all purposes (i) when received, if hand-delivered or sent by a reputable international expedited delivery service (with receipt confirmed), (ii) if given by e-mail, upon receipt of confirmation of receipt of an e-mail transmission (including automated confirmation of delivery) and (iii) five (5) Business Days after mailing, if mailed by first class certified or registered mail, postage prepaid, return receipt requested. This Section 8.3 is not intended to govern the day-to-day business communications necessary between the parties in performing their obligations under the terms of this Agreement (for which e-mail or other methods of communications shall suffice).
If to the Company: | Xilio Therapeutics, Inc. Attention: Chief Financial Officer and Chief Operating Officer 828 Winter Street, Suite 300 Waltham, MA 02451 Email: [**] |
| |
With a copy to (which shall not constitute notice): | Wilmer Cutler Pickering Hale and Dorr LLP Attention: Cynthia T. Mazareas 60 State Street Boston, MA 02109 Email: [**] |
| |
If to AbbVie: | AbbVie Inc. 1 North Waukegan Road North Chicago, IL 60064 Attention: Executive Vice President, General Counsel and Secretary Email: [**] |
| |
With a copy to (which shall not constitute notice): | Latham & Watkins LLP Attention: Nathan Ajiashvili 1271 Avenue of the Americas New York, NY 10020 Email: [**] |
- 16 -
8.4Amendments and Waivers. No subsequent alteration, amendment, change or addition to this Agreement shall be binding upon the parties hereto unless reduced to writing and signed by an authorized officer of each party. Any delay in enforcing a party’s rights under this Agreement or any waiver as to a particular default or other matter shall not constitute a waiver of such party’s rights to the future enforcement of its rights under this Agreement, except with respect to an express written and signed waiver relating to a particular matter for a particular period of time.
8.5Termination. This Agreement shall simultaneously and automatically terminate in the event that (a) the License Agreement terminates in its entirety for any reason, (b) the Purchase Agreement is terminated if such termination occurs before the Closing Date, or (c) the Company consummates any merger, consolidation or similar transaction unless immediately following the consummation of such transaction the stockholders of the Company immediately prior to the consummation of such transaction continue to hold, as a result of their holding of outstanding Common Stock and other securities entitled to vote for the election of directors of the Company immediately prior to the consummation of such transaction, in aggregate more than 50% of the outstanding Common Stock and other securities entitled to vote for the election of directors of the surviving or resulting entity in such transaction. If not earlier terminated, this Agreement shall automatically terminate upon the tenth anniversary of the Closing Date. Notwithstanding anything to the contrary set forth herein, (A) the Company’s obligations under Article 5 of this Agreement shall survive until the earlier of (i) an event set forth in (c) above or (ii) such obligations are fully performed and discharged; and (B) if this Agreement has terminated as a result of AbbVie having terminated the License Agreement for convenience or the Company having terminated the License Agreement as a result of AbbVie’s material breach of the License Agreement, and an event set forth in (c) above has not occurred, AbbVie’s obligations in Article 3 shall survive until terminated as set forth in Article 3, and AbbVie’s obligations in Article 4 shall survive until terminated as set forth in Article 4.
8.6Construction; Headings. The terms “includes,” “including,” “include” and derivative forms of them shall be deemed followed by the phrase “without limitation” (regardless of whether it is actually written (and drawing no implication from the actual inclusion of such phrase in some instances after such terms but not others)) and the term “or” has the inclusive meaning represented by the phrase “and/or” (regardless of whether it is actually written (and drawing no implication from the actual use of the phrase “and/or” in some instances but not in others)). Unless specified to the contrary, references to Articles or Sections shall refer to the particular Articles or Sections of or to this Agreement. The word “day,” “quarter” or “year” (and derivatives thereof, e.g., “quarterly”) shall mean a calendar day, calendar quarter or calendar year unless otherwise specified. The word “hereof,” “herein,” “hereby” and derivative or similar word refers to this Agreement. The words “will” and “shall” shall have the same obligatory meaning. Provisions that require that a party or parties hereunder “agree,” “consent” or
- 17 -
“approve” or the like shall require that such agreement, consent or approval be specific and in writing, whether by written agreement, letter or otherwise. Words of any gender include the other gender. Words using the singular or plural number also include the plural or singular number, respectively. References to any specific law or article, section or other division thereof, shall be deemed to include the then-current amendments or any replacement law thereto, and any rules and regulations promulgated thereunder. All dollar-denominated amounts herein are in United States dollars. This Agreement has been prepared jointly and shall not be strictly construed against either party. Ambiguities, if any, in this Agreement shall not be construed against either party, irrespective of which party may be deemed to have authored the ambiguous provision. The headings of each Article and Section in this Agreement have been inserted for convenience of reference only and are not intended to limit or expand on the meaning of the language contained in the particular Article or Section.
8.7Further Assurances. Each party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.
8.8Successors and Assigns. This Agreement may not be assigned by a party hereto without the prior written consent of the other party, provided, however, that AbbVie may assign its rights and delegate its duties hereunder in whole or in part to an Affiliate without the prior written consent of the Company, provided such assignee agrees in writing to be bound by the provisions hereof that apply to AbbVie. The provisions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties.
8.9Third Party Beneficiaries. This Agreement is not intended to and shall not be construed to give any third party any interest, rights (including any third-party beneficiary rights) remedies, obligations, or liabilities with respect to or in connection with any agreement or provision contained herein or contemplated hereby, except as expressly provided in this Agreement.
8.10Governing Law. This Agreement shall be governed by and construed under the substantive laws of the State of New York, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction.
8.11WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.
- 18 -
8.12Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of AbbVie and the Company will be entitled to seek specific performance under this Agreement. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in this Agreement and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.
8.13Attorneys’ Fees. In the event that any action is instituted under or in relation to this Agreement, including without limitation to enforce any provision in this Agreement, each party shall bear its own fees, costs and expenses of enforcing any right of such party under or with respect to this Agreement.
8.14Counterparts; Electronic Execution. This Agreement may be executed in one or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file (including any “.pdf” including any electronic signature covered by the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act, the Electronic Signatures and Records Act or other applicable law, e.g., a signature applied with DocuSign), such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.
8.15Severability. If any one or more of the provisions of this Agreement is held to be invalid or unenforceable by an arbitrator or by any court of competent jurisdiction from which no appeal can be or is taken, the provision shall be considered severed from this Agreement and shall not serve to invalidate any remaining provisions hereof. The parties shall make a good faith effort to replace any invalid or unenforceable provision with a valid and enforceable one such that the objectives contemplated by the parties when entering into this Agreement may be realized.
[Remainder of Page Intentionally Left Blank]
- 19 -
IN WITNESS WHEREOF, the parties hereto have caused this Investor Rights Agreement to be duly executed by their respective authorized signatories as of February 10, 2025.
| Xilio Therapeutics, Inc. | ||
| | ||
| | ||
| By: | /s/ René Russo | |
| | Name: | René Russo |
| | Title: | President and Chief Executive Officer |
| | ||
| AbbVie Inc. | ||
| | ||
| | ||
| By: | /s/ Lindsey Bristow | |
| | Name: | Lindsey Bristow |
| | Title: | SVP, Tax |
Signature Page to Investor Rights Agreement
EXHIBIT 31.1
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, René Russo, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of Xilio 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: May 8, 2025
/s/ René Russo | | |
Name: | René Russo | |
Title: | President and Chief Executive Officer | |
| (Principal Executive Officer) | |
EXHIBIT 31.2
CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Christopher Frankenfield, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of Xilio 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: May 8, 2025
/s/ Christopher Frankenfield | | |
Name: | Christopher Frankenfield | |
Title: | Chief Financial Officer and Chief Operating Officer | |
| (Principal Financial Officer) | |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Quarterly Report on Form 10-Q of Xilio Therapeutics, Inc. (the “Company”) for the three months ended March 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, René Russo, President and Chief Executive Officer of the Company, and Christopher Frankenfield, Chief Financial Officer and Chief Operating Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to our knowledge that:
| (1) | 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 the Company. |
/s/ René Russo | | /s/ Christopher Frankenfield |
Name: René Russo | | Name: Christopher Frankenfield |
Title: President and Chief Executive Officer | | Title: Chief Financial Officer and Chief Operating Officer |
(Principal Executive Officer) | | (Principal Financial Officer) |
| |
|
Date: May 8, 2025 | | Date: May 8, 2025 |