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As filed with the Securities and Exchange Commission on June 4, 2021
Registration No. 333-       
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ELEVATION ONCOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware
2836
84-1771427
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)
888 Seventh Ave., 12th Floor
New York, New York 10106
(716) 371-1125
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Shawn Leland, Pharm.D., R.Ph.
Chief Executive Officer
Elevation Oncology, Inc.
888 Seventh Ave., 12th Floor
New York, New York 10106
(716) 371-1125
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Effie Toshav, Esq.
Robert A. Freedman, Esq.
Julia Forbess, Esq.
Ryan Mitteness, Esq.
Fenwick & West LLP
555 California Street
San Francisco, California 94104
(415) 875-2300
Charles S. Kim
Brian Leaf
Divakar Gupta
Cooley LLP
4401 Eastgate Mall
San Diego, California 92121
(858) 550-6000
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ☒
Smaller reporting company ☒
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities to be Registered
Proposed
Maximum
Aggregate
Offering Price(1)(2)
Amount of
Registration Fee
Common Stock, par value $0.0001 per share
$ 100,000,000 $ 10,910
(1)
The proposed maximum aggregate offering price includes the offering price of additional shares that the underwriters have the option to purchase.
(2)
Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended.
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities, and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to completion, dated June 4, 2021
Preliminary prospectus
                 shares
[MISSING IMAGE: lg_elevation-4clr.jpg]
Common stock
This is an initial public offering of shares of common stock by Elevation Oncology, Inc. We are offering                 shares of our common stock to be sold in the offering. The initial public offering price is expected to be between           and           per share. Prior to this offering, there has been no public market for our common stock. We have applied to list our common stock on the Nasdaq Global Market under the symbol “ELEV.”
We are an “emerging growth company” and a “smaller reporting company” as defined under the federal securities laws and, as such, we have elected to comply with certain reduced reporting requirements for this prospectus and may elect to do so in future filings.
Per share
Total
Initial public offering price $ $
Underwriting discounts and commissions(1) $ $
Proceeds to Elevation Oncology, Inc., before expenses $ $
(1) See the section titled “Underwriting” for a description of the compensation payable to the underwriters.
We have granted the underwriters an option for a period of 30 days after the date of this prospectus to purchase up to        additional shares of our common stock from us at the initial public offering price, less underwriting discounts and commissions.
Investing in our common stock involves a high degree of risk. Please read the section entitled “Risk factors” beginning on page 12 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the shares to purchasers against payment in New York, New York, on or about            , 2021.
J.P. Morgan
Cowen
SVB Leerink
Wedbush PacGrow
Prospectus dated                  , 2021

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F-1
Through and including                 , 2021 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This delivery is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
Neither we nor the underwriters have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus or in any applicable free writing prospectus is current only as of its date, regardless of its time of delivery or the time of any sale of shares of our common stock.
For investors outside of the United States: Neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than the United States. Persons outside of the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of our common stock and the distribution of this prospectus outside of the United States.
This prospectus contains references to our trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus, including logos, artwork and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
 
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Prospectus summary
This summary highlights selected information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including our financial statements and the related notes thereto and the information set forth under the sections entitled “Risk factors” and “Management’s discussion and analysis of financial condition and results of operations,” in each case included in this prospectus. Some of the statements in this prospectus constitute forward-looking statements that involve risks and uncertainties. See the section entitled “Special note regarding forward-looking statements” for additional information. Unless the context otherwise requires, we use the terms “Elevation Oncology,” “the company,” “we,” “us” and “our” in this prospectus to refer to Elevation Oncology, Inc.
Overview
We are a precision oncology company focused on the development of targeted therapeutics for the treatment of cancer in genomically-defined patient populations. Our vision is to elevate precision medicine to the forefront of every cancer treatment journey, as we believe that each patient living with cancer deserves the opportunity to benefit from a genomically-driven treatment decision. We utilize our deep expertise in developing drugs for rare, genomically-defined patient populations and strategic collaborations with our diagnostic collaborators to work towards a future where each tumor’s unique genomic test result can be matched with a purpose-built precision medicine.
We are focused on identifying oncogenic drivers that are known to be predominantly mutually exclusive with other driver alterations and pursuing innovations and efficiencies in the conduct of clinical trials that we believe may enable development of targeted therapeutics against those oncogenic drivers.
Our lead program is focused on neuregulin-1, or NRG1, fusions, which are rare genomic alterations that have recently been identified as oncogenic driver alterations and that we believe have the potential to be therapeutically actionable through targeted HER3 inhibition. We have designed and initiated our potentially registration-enabling Phase 2 CRESTONE trial to investigate the safety and efficacy of seribantumab, an anti-HER3 monoclonal antibody, in advanced solid tumors harboring an NRG1 fusion. We are conducting this trial in a tumor-agnostic fashion, such that any patient with a solid tumor that harbors an NRG1 fusion, regardless of the tissue of origin, may be eligible. If the CRESTONE trial meets its primary endpoint, and subject to continued discussions with the FDA, we anticipate submitting a BLA under an accelerated approval pathway for the treatment of patients with solid tumors harboring an NRG1 fusion. We expect data from the pre-planned interim analysis of CRESTONE in           and topline data from the full trial accrual in           .
Our approach
We employ a capital-efficient approach to identify druggable oncogenic driver alterations, and to acquire and develop drugs that specifically target them. We believe our approach may allow us to efficiently advance product candidates through clinical development in rare, genomically-defined patient populations.
Target identification
Our collaborations with diagnostic leaders, academic researchers and community oncologists allow us to uncover genomic alterations that we believe are clear oncogenic drivers and potentially amenable to therapeutic inhibition. In contrast, genomic alterations that are overexpressed or amplified in tumors may be more common and they are also more likely to co-exist with other known genomic alterations. These are generally considered “passenger” alterations. We focus on genomic driver alterations that may be rare but are predominantly mutually exclusive with other known driver alterations. When such targets are found, they are likely to be the sole driver of the tumor’s growth and proliferation, making them a possible target for inhibition.
Therapeutic candidate selection
Subsequent to identifying compelling and actionable targets, we selectively in-license, acquire or discover assets that we believe have potential for a genomically-defined patient population. Through this flexible approach, we
 
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highlight the importance of matching the right drug with the right target and the opportunity to leverage existing chemical matter for drug development in a rigorously selected patient population. In particular, we believe that by focusing our development on targeting predominantly mutually exclusive driver alterations in tumors that have no known competing oncogenic drivers, we may improve the potential for product candidates to achieve clinical benefit for patients as a monotherapy.
Optimize clinical trial and regulatory execution
We aim to drive operational success by implementing process innovations that we believe may enable us to efficiently advance product candidates through clinical development in genomically-defined patient populations. Given these populations are often relatively rare, we have built an innovative model that recognizes the importance and impact of each individual patient. Where appropriate, we also employ innovations in trial design that, contingent upon continued discussion with the FDA, may support a potential registration through an accelerated approval pathway. For example, we believe rare, genomic driver alterations are good candidates for a tumor-agnostic development approach based on the growing recognition that tumors may be categorized by the actionability of their unique genomic signatures instead of by their tissue of origin. By enabling parallel investigation across a wide range of tumor types, we intend to rapidly enroll patients and generate a dataset in support of a potential accelerated approval registrational filing. We believe proactive implementation and advancement of processes designed specifically with rare, genomically-defined tumors in mind are needed to enable efficient development of therapies for all patient populations living with cancer, even down to the 0.1%.
Our lead program: NRG1 fusions
Our lead program is focused on patients with advanced solid tumors harboring an NRG1 fusion. NRG1 fusions are oncogenic driver events that have been identified in over ten solid tumor types to date and occur in approximately 0.2% of all cancers, or approximately 3,200 new cases per year, in the United States. Importantly, NRG1 fusions are predominantly found to be mutually exclusive with other known driver alterations. There are no approved therapies specifically for the treatment of patients with tumors harboring an NRG1 fusion and the prognosis for these patients is poor.
NRG1 is the primary activating ligand of HER3. NRG1 fusions lead to the ligand-dependent activation of HER3 and the subsequent homo- or heterodimerization of HER3 with HER2 or other ERBB family members, which results in activation of the PI3-Kinase and AKT, or PI3K/AKT, and MAP-Kinase, or MAPK, downstream signaling pathways, both of which are well-characterized drivers of cell proliferation and survival. We believe that direct inhibition of the NRG1 activation of HER3 with a monoclonal antibody approach may drive improved responses for these patients given its direct role in sustaining proliferation and survival of tumors harboring an NRG1 fusion.
We specifically selected and acquired seribantumab, an anti-HER3 monoclonal antibody, as a Phase 2 ready asset with existing clinical supply and data from over 800 patients with advanced solid tumors dosed across twelve prior Phase 1 and 2 trials. The majority of adverse events observed with seribantumab monotherapy were transient and mild to moderate in severity with no dose-limiting toxicity observed at the highest dose level. There was one serious adverse event, or SAE, considered possibly related to seribantumab in the trial, a Grade 4 confusional state at the lowest dose level tested. A maximum tolerated dose, or MTD, of seribantumab monotherapy was not defined in the prior Phase 1 dose-escalation study.
We conducted targeted preclinical studies in NRG1 fusion patient-derived xenograft, or PDX, mouse models across multiple tissue types, where we demonstrated that seribantumab inhibits ligand-dependent activation of HER3 by NRG1 fusions, HER3 dimerization with HER2, and phosphorylation of all ERBB family members as well as downstream signaling pathway members. This inhibition resulted in robust reductions of growth for NRG1 fusion driven tumors at escalating doses of seribantumab. Importantly, these models identified a wide active dose range in mice that may correspond to clinically-achievable doses in humans.
Our preclinical characterization of seribantumab, coupled with its observed side effect profile in clinical trials to date, supports our belief that seribantumab has the potential to generate robust and durable responses for patients with tumors harboring an NRG1 fusion.
 
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In July 2020, we initiated our Phase 2 CRESTONE trial following a Type C meeting with the U.S. Food and Drug Administration, or the FDA, as the first clinical trial of seribantumab in patients with solid tumors driven by an NRG1 fusion. We have designed CRESTONE as a tumor-agnostic trial with the potential for registration through an accelerated approval pathway, subject to continued discussions with the FDA.
We have proactively included multiple design elements in the CRESTONE trial that we believe may optimize for efficient conduct and detection of clinical activity in the intention-to-treat, or ITT, population, in support of a potential registrational submission. These trial design elements include:

Allowance for enrollment screening based on local CLIA-certified testing for an NRG1 fusion to avoid delays in treatment.

Requirement of an additional central confirmatory test for an NRG1 fusion by RNA-based next-generation sequencing, or NGS, to accurately enroll the appropriate patients in the ITT population that will be used for statistical analysis of the primary endpoint.

Proactive patient stratification to account for known factors that may confound the final statistical analysis, such as prior anti-ERBB therapy, presence of an NRG1 fusion that lacks an EGF-like domain, or co-expression of other known oncogenic drivers; these patients may be enrolled into exploratory cohorts and are not included in the ITT population.

Central review of radiographic scans from the ITT population to reduce the variability in determination of the primary endpoint.
We are employing an innovative model as part of the conduct of our Phase 2 CRESTONE trial to address key risks in the development of therapies for genomically-defined patient populations while enhancing enrollment and trial conduct in a capital efficient manner. In addition to enrollment from our core sites at major academic and community medical centers, we have partnered with diagnostic providers such as Ashion Analytics (now Exact Sciences), NeoGenomics, and Strata Oncology that allow access to data generated using DNA- and RNA-based NGS assays for the presence of an NRG1 fusion. We have also partnered with diagnostic providers such as Caris Life Sciences and Tempus, and health networks like The US Oncology Network (through their Selected Trials for Accelerate Rollout program), giving us access to pre-qualified sites that can be quickly activated following the identification of a patient harboring an NRG1 fusion that meets trial entry criteria for CRESTONE. This innovative model grants us access to approximately 400 potential clinical trial sites to support enrollment into the CRESTONE trial.
We believe that the design and conduct of the CRESTONE trial has the possibility to produce results that may provide support for us to seek accelerated approval of seribantumab for patients with advanced solid tumors harboring an NRG1 fusion, subject to discussions with the FDA. Any accelerated marketing approval is subject to continued discussions with the FDA, and agreement on post-approval confirmatory trials to confirm an anticipated clinical benefit. Even if we seek FDA approval through the accelerated approval pathway, this may not lead to faster development, regulatory review, or approval. The accelerated approval pathway does not increase the likelihood that seribantumab will receive marketing approval.
We believe any future programs that we pursue will directly benefit from the innovative model we have established for efficient development in rare, genomically-defined cancers. As new potential targets emerge, we are committed to prioritizing the science first and believe that every oncogenic driver alteration deserves an actionable therapeutic — no matter how rare the population.
Our team and investors
Our approach is powered by an accomplished senior management team led by our Founder and Chief Executive Officer, Shawn Leland, PharmD, RPh, with a career in medical affairs and business development at Eli Lilly, ARIAD Pharmaceuticals, Argos Therapeutics and Verastem Oncology. Our Board of Directors is led by Steve Elms, Managing Partner at Aisling Capital, co-founder and Chair of Elevation Oncology, and previous Chair of the Board of Directors at LOXO Oncology Inc. Together, our senior management team and Board of Directors combine
 
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extensive experience in the development of precision oncology therapeutics with recent experience in designing and operationalizing innovative development programs in rare, genomically-defined patient populations.
Our Scientific Advisory Board is chaired by Lori Kunkel, M.D., former Chief Medical Officer and Board Member of LOXO Oncology Inc., and includes academic researchers and industry experts at the forefront of identifying emergent and actionable genomic driver alterations. Many of our advisors also lead clinical units at renowned precision medicine cancer centers and are actively involved in our program selection and clinical development.
We are backed by a sophisticated group of investors that are highly experienced in precision oncology including Aisling Capital, Qiming Venture Partners USA, Vertex Ventures HC, Cormorant Asset Management, venBio Partners, BVF Partners, and other top tier investors.
Our strategy
Our goal is to translate advances in genomic testing and novel scientific insights related to oncogenic driver alterations into the development of targeted therapeutics for the treatment of patients with cancer. Key elements of our strategy include:

Prioritize oncogenic drivers that are predominantly mutually exclusive oncogenic alterations to maximize the probability of clinical success.

Rapidly advance our lead product candidate seribantumab, an anti-HER3 monoclonal antibody, through late-stage clinical development for solid tumors harboring NRG1 gene fusions.

Expand our pipeline of drug candidates targeted against oncogenic driver alterations through strategic collaborations and/or external development.

Collaborate with diagnostic providers and NGS centers of excellence to identify patients with rare, genomically-defined cancers, starting with solid tumors harboring an NRG1 fusion.

Design and implement an innovative operational model tailored to the efficient development and potential regulatory approval of precision therapeutics for rare, genomically-defined cancers, beginning with the investigation of seribantumab for any solid tumor driven by an NRG1 fusion.

Evaluate strategic opportunities to potentially accelerate development timelines and enhance the commercial potential of our product candidates globally.

Actively advocate for and participate in industry-wide initiatives to improve access, awareness and clarity around precision medicines for rare, genomically-defined cancers.
While each driver alteration may individually be rare, we believe that our combined efforts as part of a vibrant precision medicine community may enable a future where every patient’s cancer genomic test results in an actionable treatment decision. Our focused drug development efforts combined with our active role in the broader precision medicine community contributes to a future where precision medicine can be elevated to the forefront of every cancer treatment journey.
Risks affecting us
Our business is subject to a number of risks and uncertainties, including those highlighted in the section entitled “Risk factors” immediately following this prospectus summary. These risks include, among others, the following:

We have a limited operating history, which may make it difficult to evaluate the success of our business to date and to assess our future viability. We have incurred significant operating losses since our inception in 2019 and have not generated any revenue. We expect to incur continued losses for the foreseeable future and may never achieve or maintain profitability.

Our recurring losses from operations could continue to raise substantial doubt regarding our ability to continue as a going concern. Our ability to continue as a going concern requires that we obtain sufficient funding to finance our operations. Our independent registered public accounting firm has included an explanatory paragraph
 
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in its report on our financial statements included elsewhere in this prospectus regarding our ability to continue as a going concern.

Even if this offering is successful, we will require substantial additional funding to pursue our business objectives.

We are highly dependent on the success of our lead product candidate, seribantumab. We have not completed clinical development or obtained regulatory approval for any product candidate. We may never obtain approval for seribantumab or any other product candidate.

The COVID-19 pandemic could adversely impact our business, including the conduct of our clinical trials.

If we experience delays or difficulties in enrolling patients in our ongoing or planned clinical trials, our receipt of necessary regulatory approval could be delayed or prevented.

Adverse side effects or other safety risks associated with seribantumab or our other future product candidates could delay or preclude approval, cause us to suspend or discontinue clinical trials or abandon further development, limit the commercial profile of an approved product or result in significant negative consequences following marketing approval, if any.

We may in the future seek to engage in strategic transactions to acquire or in-license new products, product candidates or technologies. If we are unable to realize the benefits from such transactions, it may adversely affect our ability to develop and commercialize product candidates, negatively impact our cash position, increase our expenses and present significant distractions to our management.

The development and commercialization of biological products are subject to extensive regulation, and we may not obtain regulatory approvals for seribantumab or any other future product candidates, on a timely basis or at all.

If we are unable to successfully develop, validate, obtain regulatory approval of and commercialize companion diagnostic tests for seribantumab or any future product candidates that require or would benefit from such tests, or experience significant delays in doing so, we may not realize the full commercial potential of these product candidates.

Manufacturing biological products is complex and subject to product loss for a variety of reasons. We rely on third-party suppliers, including single source suppliers, to manufacture clinical supplies of our lead product candidate and we intend to rely on third parties to produce commercial supplies of any approved product.

The incidence and prevalence for target patient populations of seribantumab and our future product candidates have not been established with precision. If the market opportunities for our product candidates are smaller than we estimate or if any approval that we obtain is based on a narrower definition of the patient population, then our revenue potential and ability to achieve profitability will be adversely affected.

We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

We expect to significantly expand our development and regulatory capabilities as we grow our company, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

If we are unable to obtain and maintain sufficient patent protection for our product candidates, or if the scope of the patent protection is not sufficiently broad, third parties, including our competitors, could develop and commercialize products similar or identical to ours, and our ability to commercialize our seribantumab and our future product candidates may be adversely affected.
Corporate information
We were incorporated under the laws of the State of Delaware on April 29, 2019, or Inception, originally under the name 14ner Oncology, Inc. We changed our name on February 12, 2020 to Elevation Oncology, Inc.
Our principal executive offices are located at 888 Seventh Ave., 12th Floor, New York, New York 10106, and our telephone number is (716) 371-1125. Our website address is https://elevationoncology.com. The information
 
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contained on, or that can be accessed through, our website is not part of, and is not incorporated by reference into, this prospectus. Investors should not rely on any such information in deciding whether to purchase our common stock.
The mark “Elevation Oncology,” the Elevation Oncology logo and all product names are our common law trademarks. All other service marks, trademarks and trade names appearing in this prospectus are the property of their respective owners. Solely for convenience, the trademarks and tradenames referred to in this prospectus appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or the right of the applicable licensor to these trademarks and tradenames.
Implications of being an emerging growth company and a smaller reporting company
As a company with less than $1.07 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies. These provisions include, but are not limited to:

being permitted to present only two years of audited financial statements and only two years of related “Management’s discussion and analysis of financial condition and results of operations” disclosure in this prospectus;

not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, on the effectiveness of our internal controls over financial reporting;

reduced disclosure obligations regarding executive compensation arrangements; 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.
We may use these provisions until the last day of our fiscal year following the fifth anniversary of the completion of this offering. However, if certain events occur prior to the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenues exceed $1.07 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.
We have elected to take advantage of certain of the reduced disclosure obligations for emerging growth companies in the registration statement of which this prospectus is a part and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.
The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards, until those standards apply to private companies. We have elected to use this extended transition period to enable us to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with such new or revised accounting standards. Until the date that we are no longer an emerging growth company or affirmatively and irrevocably opt out of the exemption provided by Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, upon issuance of a new or revised accounting standard that applies to our financial statements and that has a different effective date for public and private companies, we will disclose the date on which adoption is required for non-emerging growth companies and the date on which we will adopt the recently issued accounting standard.
We are also a “smaller reporting company,” meaning that the market value of our capital stock held by non-affiliates plus the proposed aggregate amount of gross proceeds to us as a result of this offering is less than
 
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$700.0 million and our annual revenue is less than $100.0 million during the most recently completed fiscal year. We may continue to be a smaller reporting company after this offering if either (i) the market value of our capital stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our capital stock held by non-affiliates is less than $700.0 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
 
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The offering
Common stock offered by us
          shares
Common stock to be outstanding immediately after this offering
        shares (or         shares, if the underwriters exercise their option to purchase additional shares in full).
Option to purchase additional shares
We have granted the underwriters an option, exercisable for 30 days after the date of this prospectus, to purchase up to an additional          shares from us at the initial public offering price per share less the underwriting discounts and commissions.
Use of proceeds
We estimate that the net proceeds from this offering will be approximately $      million (or approximately $      million if the underwriters exercise their option to purchase additional shares in full), based upon the assumed initial public offering price of $      per share, which is the midpoint of the estimated price range set forth on the cover of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
We currently intend to use the net proceeds from this offering, together with our existing cash and cash equivalents, to advance our lead product candidate, seribantumab, through               , for potential expansion of our pipeline and other research and development activities, as well as for working capital and other general corporate purposes.
See the section entitled “Use of proceeds” for additional information.
Risk factors
You should read the section entitled “Risk factors” in this prospectus for a discussion of factors to consider carefully before deciding to invest in shares of our common stock.
Proposed Nasdaq Global Market
symbol
“ELEV”
The number of shares of our common stock to be outstanding after this offering is based on (i) 70,027,222 shares of our common stock outstanding as of March 31, 2021, including 133,333 shares that are unvested and subject to repurchase or forfeiture and (ii) the automatic conversion of all shares of our outstanding Series A convertible preferred stock, or the Series A Preferred Stock, and Series B convertible preferred stock, or Series B Preferred Stock, as of March 31, 2021 into an aggregate of 66,493,889 shares of our common stock immediately prior to the completion of this offering, and excludes:

7,609,140 shares of our common stock issuable upon the exercise of options to purchase shares of our common stock outstanding as of March 31, 2021 under our 2019 Stock Incentive Plan, or the 2019 Plan, with a weighted-average exercise price of $0.23 per share;

2,546,428 shares of our common stock issuable upon the exercise of options to purchase shares of our common stock granted after March 31, 2021 under our 2019 Plan, with an exercise price of $0.73 per share; and
 
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         shares of our common stock reserved for future issuance under our equity compensation plans, consisting of:

6,164,760 shares of our common stock reserved for future issuance under our 2019 plan;

         shares of our common stock to be reserved for future issuance under our 2021 Equity Incentive Plan, or the 2021 Plan, which will become effective immediately prior to the date of the effectiveness of the registration statement of which this prospectus forms a part; and

         shares of our common stock to be reserved for future issuance under our 2021 Employee Stock Purchase Plan, or the ESPP, which will become effective immediately prior to the date of the effectiveness of the registration statement of which this prospectus forms a part.
Our 2021 Plan and our ESPP provide for automatic annual increases in the number of shares of our common stock reserved thereunder, and our 2021 Plan provides for increases to the number of shares that may be granted thereunder based on shares under our 2019 Plan that expire, are tendered to or withheld by us for payment of an exercise price or for satisfying tax withholding obligations or are forfeited or otherwise repurchased by us. Upon completion of this offering, any remaining shares of our common stock available for issuance under our 2019 Plan will be added to the shares reserved under our 2021 Plan and we will cease granting awards under our 2019 Plan. See the section entitled “Executive compensation — Equity compensation plans and other benefit plans” for additional information.
Except as otherwise indicated, all information in this prospectus assumes or gives effect to:

the automatic conversion of all outstanding shares of our convertible preferred stock into an aggregate of 66,493,889 shares of our common stock immediately prior to the completion of this offering;

a                 -for-                 reverse stock split of our outstanding common stock, which will become effective prior to the completion of this offering;

the filing and effectiveness of our restated certificate of incorporation and restated bylaws in connection with the completion of this offering;

no exercise of outstanding options referred to above; and

no exercise of the underwriters’ option to purchase up to           additional shares of our common stock.
 
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Summary financial data
The following tables set forth our summary statements of operations and balance sheet data. You should read the following summary financial data together with our financial statements and the related notes appearing at the end of this prospectus and “Management’s discussion and analysis of financial condition and results of operations” sections of this prospectus. We have derived the statement of operations data for the period from Inception through December 31, 2019 and for the year ended December 31, 2020 from our audited financial statements appearing at the end of this prospectus. The statement of operations data for the three months ended March 31, 2020 and 2021 and the balance sheet data as of March 31, 2021 have been derived from our unaudited condensed interim financial statements appearing at the end of this prospectus and have been prepared on the same basis as the audited financial statements. In the opinion of management, the unaudited data reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the financial information in those statements. Our historical results are not necessarily indicative of results that should be expected in any future period and the statement of operations data for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full year ending December 31, 2021 or any future period.
Elevation Oncology, Inc.
Statements of operations data
(in thousands except share and per share data)
Inception through
December 31,
Year ended
December 31,
Three months ended March 31,
2019
2020
2020
2021
Statement of Operations Data
Research and development
$ 5,338 $ 15,476 $ 1,488 $ 4,134
General and administrative
544 1,800 471 952
Total operating expenses
5,882 17,276 1,959 5,086
Loss from operations
(5,882) (17,276) (1,959) (5,086)
Other income (expense), net
11 1 (5)
Net loss
$ (5,882) $ (17,265) $ (1,958) $ (5,091)
Net loss per share, basic and diluted(1)
$ (1.87) $ (5.16) $ (0.59) $ (1.50)
Weighted average common shares outstanding, basic and diluted(1)
3,143,631 3,345,901 3,333,333 3,383,333
Pro forma net loss per share attributable to
common stockholders,
basic and diluted
$ (0.25) $ (0.07)
Pro forma weighted average common shares
outstanding, basic and diluted
69,839,790 69,877,222
(1) See Note 12 to our financial statements appearing at the end of this prospectus for details on the calculation of basic and diluted net loss per share.
 
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The following table sets forth summary balance sheet data as of March 31, 2021:
As of March 31, 2021
(in thousands)
Actual
Pro forma(1)
Pro forma as
Adjusted(2)(3)
Balance Sheet Data:
Cash and cash equivalents
$ 69,912 $ 69,912 $       
Working capital(4)
68,444 68,444
Total assets
71,762 71,762
Total convertible preferred stock
97,188
Total stockholders’ (deficit) equity
(28,105) 69,083
(1) Pro forma amounts give effect to (i) the automatic conversion of all outstanding shares of our convertible preferred stock as of March 31, 2021 into an aggregate of 66,493,889 shares of our common stock immediately prior to the completion of this offering and (ii) the filing and effectiveness of our amended and restated certificate of incorporation.
(2) Pro forma as adjusted amounts reflect pro forma adjustments described in footnote (1) as well as the sale of                 shares of our common stock in this offering, based upon an assumed initial public offering price of $           per share, which is the midpoint of the estimated price range set forth on the cover of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
(3) The pro forma as adjusted information is illustrative only and will change based on the actual initial public offering price and other terms of this offering determined at pricing. A $1.00 increase (decrease) in the assumed initial public offering price of $    per share, the midpoint of the price range set forth on the cover of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, working capital, total assets and total stockholders’ equity by $         million, assuming that the number of shares offered by us, as set forth on the cover of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions. Similarly, each increase (decrease) of 1.0 million in the number of shares offered by us in this offering would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, working capital, total assets and total stockholders’ equity by $    million, assuming the assumed initial offering price remains the same and after deducting estimated underwriting discounts and commissions.
(4) We define working capital as current assets less current liabilities.
 
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Risk factors
Investing in our common stock involves a high degree of risk. Before making your decision to invest in shares of our common stock, you should carefully consider and read carefully all of the risks described below, together with the other information contained in this prospectus, including our financial statements and the related notes and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus, before deciding whether to invest in our common stock. We cannot assure you that any of the events discussed below will not occur. These events could have a material and adverse impact on our business, financial condition, results of operations and prospects. Unless otherwise indicated, references to our business being harmed in these risk factors will include harm to our business, reputation, financial condition, results of operations, net revenue and future prospects. In such event, the trading price of our common stock could decline, and you could lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations and the market price of our common stock.
Risks Related to Our Financial Position and Need for Additional Capital
We have a limited operating history, which may make it difficult to evaluate the success of our business to date and to assess our future viability. We have incurred significant operating losses since our inception in 2019 and have not generated any revenue. We expect to incur continued losses for the foreseeable future and may never achieve or maintain profitability.
Investment in drug development is a highly speculative undertaking and involves a substantial degree of risk. We commenced operations in 2019 and are a clinical-stage biologics company with a limited operating history. We have not yet commercialized any product, nor do we expect to generate revenue from sales of any products for several years, if at all. Consequently, there have been limited operations upon which you can evaluate our business, and predictions about our future success or viability may not be as cancer therapies. For the year ended December 31, 2020 and for the three months ended March 31, 2021 we had a net loss of $17.3 million and $5.1 million, respectively. As of March 31, 2021, we had an accumulated deficit of $28.2 million. We expect to continue to incur significant research and development and other expenses related to our ongoing operations, which we anticipate will result in net losses for at least the next several years.
Since our inception, we have focused substantially all of our efforts and financial resources on the acquisition and clinical development of our lead product candidate, seribantumab. To date, we have funded our operations with proceeds from sales of shares of our convertible preferred stock. From Inception through March 31, 2021, we received an aggregate of $97.2 million in net proceeds from such sales. As of March 31, 2021, our cash and cash equivalents were $69.9 million.
We expect to incur increasing levels of operating losses for the foreseeable future, particularly as we advance seribantumab and potential future product candidates through clinical development. Our prior losses, combined with expected future losses, have had, and will continue to have, an adverse effect on our stockholders’ equity and working capital. We expect our research and development expenses to significantly increase in connection with our additional planned clinical trials for seribantumab, including our ongoing Phase 2 clinical trial, CRESTONE, and the planned exploratory cohorts, and the development of other future product candidates we may choose to pursue. In addition, if we obtain marketing approval for seribantumab or another future product candidate, we will incur significant sales, marketing and outsourced manufacturing expenses in connection with the commercialization of seribantumab or such other future product candidate. After this offering, we will incur additional costs associated with operating as a public company. As a result, we expect to continue to incur significant and increasing operating losses for the foreseeable future.
Our ability to become profitable depends upon our ability to generate revenue. To date, we have not generated any revenue and we do not know when, or if, we will generate any revenue. We do not expect to generate significant revenue unless and until we obtain marketing approval for, and begin to sell, seribantumab or another future product candidate. Our ability to generate revenue and become profitable will depend on a number of factors, including, but not limited to, our ability to:

successfully meet our clinical endpoints in our Phase 2 CRESTONE clinical trial;
 
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initiate and successfully complete all safety, pharmacokinetic and other registrational-enabling studies required to obtain U.S. and foreign marketing approval for seribantumab as a treatment for patients with solid tumors driven by an NRG1 gene fusion;

initiate and complete successful later-stage clinical trials that meet their clinical endpoints;

submit a BLA for seribantumab to the FDA;

obtain marketing approval for seribantumab and our other potential future product candidates;

establish licenses, collaborations or strategic partnerships that may increase the value of our programs;

successfully manufacture or contract with others to manufacture seribantumab and our other future product candidates;

commercialize seribantumab, if approved, by building a sales force or entering into collaborations with third parties;

obtain, maintain, protect and defend our intellectual property portfolio;

achieve market acceptance of seribantumab and our other potential future product candidates with the medical community and with third-party payors; and

attract, hire and retain additional administrative, clinical, regulatory and scientific personnel.
We are only in the preliminary stages of most of these activities. We may never succeed in these activities and, even if we do, may never generate revenues that are significant enough to achieve profitability.
In cases where we are successful in obtaining regulatory approval to market our product candidates, our revenue will be dependent, in part, upon the size of the markets in the territories for which we gain regulatory approval, the accepted price for the product, the ability to obtain coverage and reimbursement, and whether we own the commercial rights for that territory. If the number of our addressable patients is significantly lower than we estimate, the indication approved by regulatory authorities is narrower than we expect, or the treatment population is narrowed by competition, physician choice or treatment guidelines, we may not generate significant revenue from sales of such products, even if they are approved.
Because of the numerous risks and uncertainties associated with drug development, we are unable to accurately predict the timing or amount of increased expenses we will incur and when, or if, we will be able to achieve profitability. If we decide to or are required by the FDA or regulatory authorities in other jurisdictions to perform studies or clinical trials in addition to those we currently anticipate, or if there are any delays in establishing appropriate manufacturing arrangements for, in initiating or completing our current and planned clinical trials for, or in the development of, our product candidates, our expenses could increase materially and our potential profitability could be further delayed.
Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Accordingly, you should not rely upon the results of any quarterly or annual periods as predictions or indications of future operating performance. We expect our financial condition and operating results to fluctuate from quarter-to-quarter and year-to-year due to a variety of factors, many of which are beyond our control. Our failure to become and remain profitable would decrease 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 offerings or even continue our operations. A decline in the value of our company could also cause you to lose all or part of your investment.
Our recurring losses from operations could continue to raise substantial doubt regarding our ability to continue as a going concern. Our ability to continue as a going concern requires that we obtain sufficient funding to finance our operations.
Based upon our $69.9 million in existing cash and cash equivalents as of March 31, 2021, we do not have sufficient existing cash and cash equivalents, without giving effect to the proceeds from this offering, to support
 
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operations for at least one year following the date our financial statements included in this prospectus are issued. Our independent registered public accounting firm has included an explanatory paragraph in its report on our financial statements as of, and for, the period from Inception to December 31, 2019 and for the year ended December 31, 2020 stating that our recurring losses from operations since Inception and required additional funding to finance our operations raise substantial doubt about our ability to continue as a going concern. If we are unable to obtain sufficient funding, we could be forced to delay, reduce or eliminate all of our research and development programs, future research and development efforts and ongoing preclinical studies and clinical trials, and our financial condition and results of operations will be materially and adversely affected and we may be unable to continue as a going concern. After the completion of this offering, future financial statements may continue to disclose substantial doubt about our ability to continue as a going concern. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to us on commercially reasonable terms or at all.
Even if this offering is successful, we will require substantial additional funding to pursue our business objectives. If we are unable to raise additional capital when needed or on terms acceptable to us, we could be forced to delay, reduce or terminate our research or drug development programs, any future commercialization efforts or other operations.
Identifying and developing 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 begin selling any approved product. We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the clinical development of seribantumab and seek to develop or acquire additional product candidates. We expect increased expenses as we continue our research and development activities, initiate additional clinical trials and seek marketing approval for seribantumab and our future product candidates. In addition, if we obtain marketing approval for seribantumab, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. Furthermore, upon the closing of this offering, we expect to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. Adequate additional financing may not be available to us on favorable terms, or at all. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. If we are unable to raise additional capital when needed or on favorable terms, we could be forced to delay, reduce or eliminate our research and development programs, our commercialization plans or other operations.
We believe that the net proceeds from this offering, together with our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into                  . We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect. Changes beyond our control may occur that would cause us to use our available capital before that time, including changes in and progress of our drug development activities and changes in government regulations. Our future capital requirements will depend on many factors, including:

the progress, timing and results of preclinical studies and clinical trials for seribantumab or any future product candidates;

disruptions or delays in enrollment of our clinical trials;

the extent to which we develop, in-license or acquire other product candidates or technologies;

the number and development requirements of other future product candidates that we may pursue, and other indications for seribantumab that we may pursue;

the costs, timing and outcome of obtaining regulatory approvals of seribantumab or future product candidates and any companion diagnostics that we may pursue;
 
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the scope and costs of making arrangements with third-party manufacturers, or establishing manufacturing capabilities, for both clinical and commercial supplies of seribantumab or future product candidates;

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

the costs associated with commercializing any approved product candidates, including establishing sales, marketing and distribution capabilities;

the costs associated with completing any post-marketing studies or trials required by the FDA or other regulatory authorities;

the revenue, if any, received from commercial sales of seribantumab, if approved, or any other future product candidates that receive marketing approval;

the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims that we may become subject to, including any litigation costs and the outcome of such litigation;

the costs associated with potential product liability claims, including the costs associated with obtaining insurance against such claims and with defending against such claims; and

to the extent we pursue strategic collaborations, including collaborations to commercialize seribantumab or to develop any future product candidates, our ability to establish and maintain collaborations on favorable terms, if at all, as well as the timing and amount of any milestone or royalty payments that we are required to make or are eligible to receive under any such collaborations.
Even if this offering is successful, we will require additional capital to complete our planned clinical development programs for our current product candidates to obtain regulatory approval. Our ability to raise additional funds will depend on financial, economic and market conditions and other factors over which we may have no or limited control. If adequate funds are not available on commercially acceptable terms when needed, we may be forced to delay, reduce or terminate the development or commercialization of seribantumab or future product candidates or we may be unable to take advantage of future business opportunities. Furthermore, any additional capital-raising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize seribantumab and future product candidates.
Raising additional capital may cause dilution to our stockholders, including purchasers of common stock in this offering, restrict our operations or require us to relinquish proprietary rights to our technologies or product candidates.
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends.
If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization
 
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efforts or grant rights to third parties to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Risks Related to the Design and Development of Our Product Candidates
We are highly dependent on the success of our lead product candidate, seribantumab. We have not completed clinical development or obtained regulatory approval for any product candidate. We may never obtain approval for seribantumab or any other product candidate.
Our future success is highly dependent on our ability to obtain regulatory approval for, and then successfully commercialize or identify a strategic partner to commercialize, our lead product candidate, seribantumab. Seribantumab is currently being evaluated in a Phase 2 clinical trial, which we refer to as CRESTONE. We currently have no products that are approved for sale in any jurisdiction. Seribantumab or any of our other future product candidates may not achieve success in their clinical trials or obtain regulatory approval. If we do not obtain regulatory approval for seribantumab and successfully commercialize seribantumab in one or more indications or if we experience significant delays in doing so, we may never generate any revenue or become profitable.
Our ability to generate product revenues, which we do not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of seribantumab or other future product candidates. The success of seribantumab or any other future product candidate will depend on several factors, including the following:

successful completion of preclinical studies and clinical trials, including our CRESTONE trial;

timely and successful enrollment of patients in, and completion of, clinical trials with favorable results;

demonstration of safety, efficacy and acceptable risk-benefit profiles of seribantumab and our future product candidates to the satisfaction of the FDA and other regulatory agencies;

our ability, or that of our collaborators, to develop and obtain clearance or approval of companion diagnostics, on a timely basis, or at all;

receipt and related terms of marketing approvals from applicable regulatory authorities for seribantumab and our future product candidates, including the completion of any required post-marketing studies or trials;

raising additional funds necessary to complete the clinical development of and commercialization of seribantumab;

successfully identifying and developing, acquiring or in-licensing additional product candidates to expand our pipeline;

acceptance of an IND by the FDA or other similar clinical trial applications from other regulatory authorities for clinical trials for future product candidates;

obtaining and maintaining patent, trade secret and other intellectual property protection and regulatory exclusivity for seribantumab and our future product candidates;

making arrangements with third-party manufacturers, or establishing manufacturing capabilities, for both clinical and commercial supplies of our product candidates;

establishing sales, marketing and distribution capabilities and launching commercial sales of our products, if approved, whether alone or in collaboration with third parties;

acceptance of our products, if approved, by patients, the medical community and third-party payors;

effectively competing with other therapies available on the market or in development;

obtaining and maintaining third-party payor coverage and adequate reimbursement; and

maintaining a continued acceptable safety profile of any products following regulatory approval.
 
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Many of these factors are beyond our control, and it is possible that none of our product candidates, including seribantumab, will ever obtain regulatory approval even if we expend substantial time and resources seeking such approval. If we experience significant delays or are otherwise unable to successfully commercialize our product candidates, it would materially harm our business.
Drug development is a lengthy and expensive process, and clinical testing is uncertain as to the outcome.
We currently have one product candidate in Phase 2 clinical development, and the risk of failure is high. We are unable to predict when or if seribantumab will prove effective and safe in humans or will obtain marketing approval. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidate in humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to the outcome.
A failure of one or more clinical trials can occur at any stage of testing. The outcomes of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials or of clinical trials of the same product candidates in other indications, and interim or preliminary results of a clinical trial do not necessarily predict final results. For example, Merrimack Pharmaceuticals, Inc., or the previous sponsor, terminated its Phase 2 clinical trial of seribantumab in combination with docetaxel in patients with heregulin positive non-small cell lung cancer based on an interim analysis that demonstrated that the addition of seribantumab to docetaxel did not improve progression-free survival over docetaxel alone in this patient population. The previous sponsor also terminated its Phase 2 clinical trial of seribantumab in combination with fulvestrant in patients with heregulin positive, hormone receptor positive, ERBB2 (HER2) negative, metastatic breast cancer based on the interim analysis of the results of the non-small lung cancer trial. Although our CRESTONE trial of seribantumab is in a tumor-agnostic NRG1 fusion indication and therefore differs from the previous trials conducted by the previous sponsor, we may observe similar outcomes that could limit our ability to receive regulatory approval for seribantumab. While we believe that oncogenic driver events are a primary cause for the oncogenesis and progression of certain tumors, the signaling pathways in cancer are complex and treatment with a monotherapy may not produce a durable clinical benefit and combinations with other anti-cancer agents may need to be explored. There are no approved therapies for patients with tumors harboring an NRG1 fusion and our approach of inhibiting HER3 may not result in a durable clinical outcome. In addition, while some results in patients, such as observations of stable disease, may suggest encouraging clinical activity with respect to seribantumab, we expect that stable disease would not be considered to be a sufficient response for regulatory approval purposes. Furthermore, we may observe adverse safety events in the CRESTONE trial or later trials that were not observed in prior trials, which would alter the anticipated risk-benefit profile of seribantumab and reduce the likelihood that seribantumab receives regulatory approval.
The COVID-19 pandemic could adversely impact our business, including the conduct of our clinical trials.
The ongoing COVID-19 pandemic, both in the United States and in other countries in which we have planned or have active clinical trial sites and where our third-party manufacturers operate, could cause significant disruptions that could severely impact our business, including:

delays or difficulties in screening, enrolling and maintaining patients in our clinical trials;

delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff;

diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;

inability or unwillingness of subjects to travel to the clinical trial sites;

delays, difficulties or incompleteness in data collection and analysis and other related activities;

decreased implementation of protocol required clinical trial activities and quality of source data verification at clinical trial sites;
 
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interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others;

limitations in employee resources that would otherwise be focused on the conduct of our clinical trials and our other research and development activities, including because of sickness of employees or their families or mitigation measures such as lock-downs and social distancing;

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

delays in receiving approval from local regulatory authorities to initiate our planned clinical trials;

delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials;

interruption in global and domestic shipping that may affect the transport of clinical trial materials, such as investigational drug products used in our clinical trials;

changes in local regulations as part of a response to the COVID-19 pandemic which may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs, delays or require us to discontinue the clinical trials altogether;

delays in necessary interactions with local regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees;

refusal of regulatory authorities such as FDA or European Medicines Agency, or EMA, to accept data from clinical trials in affected geographies; and

adverse impacts on global economic conditions which could have an adverse effect on our business and financial condition, including impairing our ability to raise capital when needed.
Such disruptions could impede, delay, limit or prevent completion of our ongoing clinical trials and preclinical studies or commencement of new clinical trials and ultimately lead to the delay or denial of regulatory approval of seribantumab, which would seriously harm our operations and financial condition and increase our costs and expenses. Furthermore, if either we or any third party in the supply chain for materials used in the production of our product candidates are adversely impacted by restrictions resulting from the COVID-19 pandemic, our supply chain may be disrupted, limiting our ability to manufacture product candidates for our clinical trials. We are in close contact with our clinical research organizations, or CROs, our contract manufacturing organizations, or CMOs, and clinical sites as we seek to mitigate the impact of COVID-19 on our CRESTONE trial and current timelines. Measures we have taken in response to COVID-19 include, where feasible, conducting remote clinical trial site activations and data monitoring, and limiting on-site patient visits by adjusting patient assessments and protocol. However, despite these efforts, we have experienced limited delays in trial site initiations, patient participation and patient enrollment in some of our clinical trials and we may continue to experience some delays in our clinical trials and preclinical studies and delays in data collection and analysis.
These delays so far have had a limited impact on our development prospects for seribantumab, but the negative impacts could be exacerbated as the COVID-19 pandemic and the response to it continues to evolve. The COVID-19 pandemic could also affect the business of the FDA, EMA or other health authorities, which could result in delays in meetings related to planned or completed clinical trials and ultimately of reviews and approvals of seribantumab. The extent to which the pandemic impacts our business and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the success of mass vaccination efforts globally, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken by governmental authorities to contain and address the challenges posed by COVID-19.
We may incur additional costs or experience delays in completing, or ultimately be unable to complete the development and/or commercialization of seribantumab or our other future product candidates.
Any delays in the commencement or completion of our ongoing, planned or future clinical trials could significantly increase our product development costs. We may experience numerous unforeseen events during, or as a result
 
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of, clinical trials that could delay or prevent our ability to obtain marketing approval or commercialize seribantumab or our future product candidates, including:

regulators, institutional review boards, or IRBs, or ethics committees, or ECs, may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;

the FDA may disagree as to the design or implementation of our clinical trials or with our recommended Phase 2 doses for seribantumab, or with respect to any of our future product candidates;

we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with prospective CROs and prospective trial sites;

clinical trials for seribantumab or our future product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials, delay or halt clinical trials or abandon product development programs;

lack of adequate funding to continue clinical trials;

the number of patients required for clinical trials may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or may be lower than we anticipate due to challenges in recruiting and enrolling suitable patients who meet the trial criteria, participants may drop out of these clinical trials at a higher rate than we anticipate or the duration of these clinical trials may be longer than we anticipate;

competition for clinical trial participants from investigational and approved therapies may make it more difficult to enroll patients in our clinical trials;

we may experience difficulties in maintaining contact with patients after treatment, resulting in incomplete data;

we or third-party collaborators may fail to obtain regulatory approval of companion diagnostic tests, if required, on a timely basis, or at all;

our third-party contractors may fail to meet their contractual obligations to us in a timely manner, or at all, or may fail to comply with regulatory requirements;

we may have to suspend or terminate clinical trials for various reasons, including a finding by us or by a Data Monitoring Committee for a trial that the participants are being exposed to unacceptable health risks;

seribantumab or our future product candidates may have undesirable or unexpected side effects or other unexpected characteristics, causing us or our investigators, regulators or IRBs or ECs to suspend or terminate the trials;

the cost of clinical trials may be greater than we anticipate;

changes to clinical trial protocols;

the supply or quality of seribantumab or our future product candidates or other materials necessary to conduct clinical trials may be insufficient or inadequate and result in delays or suspension of our clinical trials; and

the impact of the ongoing COVID-19 pandemic, which may slow potential enrollment, reduce the number of eligible patients for clinical trials, or reduce the number of patients who remain in our trials.
Delays, including delays caused by the above factors, can be costly and could negatively affect our ability to complete a clinical trial or obtain timely marketing approvals. We do not know whether any of our planned preclinical studies or clinical trials will begin on a timely basis or at all, will need to be restructured or will be completed on schedule, or at all. For example, the FDA may place a partial or full clinical hold on the CRESTONE trial or any of our future clinical trials for a variety of reasons, including safety concerns and noncompliance with regulatory requirements. If we are not able to complete successful clinical trials, we will not be able to obtain regulatory approval and will not be able to commercialize seribantumab or our future product candidates.
Significant preclinical or clinical trial delays also could 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
 
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do and impair our ability to successfully commercialize our product candidates, which would limit our future revenues and harm our commercial prospects.
If we experience delays or difficulties in enrolling patients in our ongoing or planned clinical trials, our receipt of necessary regulatory approval could be delayed or prevented.
We may not be able to initiate or continue our ongoing or planned clinical trials if we are unable to identify and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or comparable foreign regulatory authorities. In addition, some of our competitors currently have ongoing clinical trials for product candidates that would treat the same patients as our lead clinical product candidate, and patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ product candidates. This is acutely relevant for our development of seribantumab for the treatment of patients with solid tumors driven by an NRG1 gene fusion, which are rare genomic alterations. Enrolling patients for our clinical trials requires promptly identifying cancer patients with NRG1 fusions and placing these patients in one of our qualified sites in a timely manner. We rely on several diagnostic partners to conduct initial testing to identify patients with NRG1 fusions that are eligible for the CRESTONE trial. If one or more of these partners encounters delays or is otherwise unable to conduct these tests and identify potential patients, enrollment in our clinical trials may be substantially delayed. In addition, these partners work with several other companies, including our competitors, and may divert resources to collaborations with these other companies, which may detrimentally affect enrollment in our clinical trials. Patient enrollment is also affected by other factors, including:

the severity of the disease under investigation;

our ability to recruit clinical trial investigators of appropriate competencies and experience;

the incidence and prevalence of our target indications;

clinicians’ and patients’ awareness of genomic testing mechanisms to screen patients for NRG1 gene fusions and perceptions as to the potential advantages and risks of our product candidates in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating;

competing studies or trials with similar eligibility criteria;

invasive procedures required to enroll patients and to obtain evidence of the product candidates’ performance during clinical trials;

availability and efficacy of approved medications for the disease under investigation;

eligibility criteria defined in the protocol for the trial in question;

the size and nature of the patient population required for analysis of the trial’s primary endpoints;

efforts to facilitate timely enrollment in clinical trials;

whether we are subject to a partial or full clinical hold on any of our clinical trials;

reluctance of physicians to encourage patient participation in clinical trials;

the ability to monitor patients adequately during and after treatment;

our ability to obtain and maintain patient consents; and

proximity and availability of clinical trial sites for prospective patients.
Our inability to enroll and maintain a sufficient number of patients for our clinical trials would result in significant delays or may require us to abandon one or more clinical trials altogether. Enrollment delays in our clinical trials, including due to the COVID-19 pandemic, may result in increased development costs, which would cause the value of our company to decline, limit our ability to obtain additional financing and delay or limit our ability to obtain regulatory approval for our product candidates.
 
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Adverse side effects or other safety risks associated with seribantumab or our other future product candidates could delay or preclude approval, cause us to suspend or discontinue clinical trials or abandon further development, limit the commercial profile of an approved product or result in significant negative consequences following marketing approval, if any.
As is the case with biologics generally, we have observed side effects and adverse events associated with seribantumab. Although seribantumab has been evaluated in over 800 patients in clinical trials to date, unexpected side effects may still arise in our ongoing or any future clinical trial. These side effects have included rashes, diarrhea, nausea, fatigue and hypomagnesemia. Additionally, reported treatment emergent serious adverse events, or SAEs, included one patient at the lowest dose cohort (3.2mg/kg), who experienced Grade 4 confusional state determined to be possibly related to seribantumab, and which was considered to be the only dose limiting toxicity, or DLT.
Results of our ongoing and planned clinical trials, which will include testing of seribantumab at doses and on schedules that have not been previously tested clinically, could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. Undesirable side effects could result in the delay, suspension or termination of clinical trials by us or regulatory authorities for a number of reasons. Furthermore, clinical trials by their nature utilize a sample of the potential patient population. With a limited number of subjects and limited duration of exposure, rare and severe side effects of our product candidates or those of our competitors may only be uncovered with a significantly larger number of patients exposed to the drug.
Additionally, due to the high mortality rates of the cancers for which we are initially pursuing development and the pretreated nature of many patients in our ongoing clinical trial of seribantumab, a material percentage of patients in these clinical trials may die during a trial. If we elect to, or are required to, delay, suspend or terminate any clinical trial, whether due to a patient death or otherwise, the commercial prospects of seribantumab or our future product candidates will be harmed and our ability to generate product revenues will be delayed or eliminated. SAEs observed in clinical trials could hinder or prevent market acceptance of our product candidates, which would harm our commercial prospects our financial condition and our reputation.
Moreover, if seribantumab or any of our future product candidates is associated with undesirable or unexpected side effects in clinical trials, we may elect to abandon or limit their development to more narrow uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective, which may limit the commercial expectations for the product candidate, even if it is approved. We may also be required to modify our trial plans based on findings in our clinical trials. Side effects could also affect patient recruitment or the ability of enrolled patients to complete a trial. Many drugs that initially showed promise in early stage testing have later been found to cause side effects that prevented further development. In addition, regulatory authorities may draw different conclusions, require additional testing to confirm these determinations, require more restrictive labeling or deny regulatory approval of the product candidate.
It is possible that, as we test our product candidates in larger, longer and more extensive clinical trials, including with different dosing regimens, or as the use of our product candidates becomes more widespread following any regulatory approval, illnesses, injuries, discomforts and other adverse events that were observed in earlier trials, as well as conditions that did not occur or went undetected in previous trials, will be reported by patients. If such side effects become known later in development or upon approval, if any, such findings may harm our business, financial condition, results of operations and prospects significantly.
In addition, if our lead product candidate receives marketing approval, and we or others later identify undesirable side effects caused by treatment with such drug, a number of potentially significant negative consequences could result, including:

regulatory authorities may withdraw approval of the drug;

we may be required to recall a product or change the way the drug is administered to patients;
 
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regulatory authorities may require additional warnings in the labeling, such as a contraindication or a boxed warning, or issue safety alerts, Dear Healthcare Provider letters, press releases or other communications containing warnings or other safety information about the product;

we may be required to implement a Risk Evaluation and Mitigation Strategy, or REMS, or create a medication guide outlining the risks of such side effects for distribution to patients;

additional restrictions may be imposed on the marketing or promotion of the particular product or the manufacturing processes for the product or any component thereof;

we could be sued and held liable for harm caused to patients;

we may be subject to regulatory investigations and government enforcement actions;

the drug could become less competitive; and

our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of our product candidates, if approved, and could significantly harm our business, financial condition, results of operations and prospects.
Preliminary, interim and topline data from our clinical trials that we announce or publish from time to time may change as more patient data becomes available and is subject to audit and verification procedures that could result in material changes in the final data.
From time to time, we may publicly disclose preliminary, interim or topline data from our clinical trials, such as the planned interim data analysis for our open-label CRESTONE trial. These updates will be based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. Additionally, interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data becomes available. Therefore, positive interim results in any ongoing clinical trial may not be predictive of such results in the completed study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the topline results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data has been received and fully evaluated. Topline data also remains subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, topline data should be viewed with caution until the final data is available. In addition, we may report interim analyses of only certain endpoints rather than all endpoints. Adverse changes between preliminary or interim data and final data could significantly harm our business and prospects. Further, additional disclosure of interim data by us or by our competitors in the future could result in volatility in the price of our common stock after this offering. See the description of risks under the heading “Risks Related to our Common Stock and This Offering” for more disclosure related to the risk of volatility in our stock price.
Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is typically selected from a more extensive amount of available information. You or others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular product, product candidate or our business.
Additionally, our CRESTONE trial and potentially other future clinical trials we conduct may be open-label trials in which both the patient and investigator know whether the patient is receiving the investigational product
 
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candidate or either an existing approved product or placebo. Open-label clinical trials typically test only the investigational product candidate and sometimes may do so at different dose levels. Open-label clinical trials are subject to various limitations that may exaggerate any therapeutic effect as patients in open-label clinical trials are aware when they are receiving treatment. Open-label clinical trials may be subject to a “patient bias” where patients perceive their symptoms to have improved merely due to their awareness of receiving an experimental treatment. In addition, open-label clinical trials may be subject to an “investigator bias” where those assessing and reviewing the physiological outcomes of the clinical trials are aware of which patients have received treatment and may interpret the information of the treated group more favorably given this knowledge.
If the preliminary or topline data that we report differs from late, final or actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, seribantumab, or any other future product candidates may be harmed.
We may in the future seek to engage in strategic transactions to acquire or in-license new products, product candidates or technologies. If we are unable to realize the benefits from such transactions, it may adversely affect our ability to develop and commercialize product candidates, negatively impact our cash position, increase our expenses and present significant distractions to our management.
From time to time, we may consider strategic transactions, such as additional collaborations, acquisitions of companies, asset purchases, joint ventures and in-licensing of new products, product candidates or technologies that we believe will complement or augment our existing business. For example, in 2019, we acquired our lead product candidate, seribantumab, pursuant to an asset acquisition agreement with the previous sponsor. If we acquire assets with promising markets or technologies, we may not be able to realize the benefit of acquiring such assets if we are not able to successfully integrate them with our existing technologies. We may encounter numerous difficulties in developing, testing, manufacturing and marketing any new products resulting from a strategic acquisition that delay or prevent us from realizing their expected benefits or enhancing our business.
Following any such strategic transaction, we may not achieve any expected synergies to justify the transaction. For example, such transactions may require us to incur non-recurring or other charges, increase our near-term and long-term expenditures and pose significant integration or implementation challenges or disrupt our management or business. These transactions would entail numerous operational and financial risks, including, but not limited to, exposure to unknown liabilities, disruption of our business and diversion of our management’s time and attention in order to manage a collaboration or develop acquired products, product candidates or technologies, incurrence of substantial debt or dilutive issuances of equity securities to pay transaction consideration or costs, higher than expected acquisition or integration costs, write-downs of assets or goodwill or impairment charges, increased amortization expenses, difficulty and cost in facilitating the transaction or combining the operations and personnel of any acquired business, impairment of relationships with key suppliers, manufacturers or customers of any acquired business due to changes in management and ownership and the inability to retain key employees of any acquired business.
Accordingly, although there can be no assurance that we will undertake or successfully complete any transactions of the nature described above, any transactions that we do complete may be subject to the foregoing or other risks and could have a material and adverse effect on our business, financial condition, results of operations and prospects. Conversely, any failure to enter any strategic transaction that would be beneficial to us could delay the development and potential commercialization of our product candidates and could have a negative impact on the competitiveness of any product candidate that reaches market.
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.
Because we have limited financial and managerial resources, we focus on research programs and product candidates that we identify for specific indications. As a result, we may forego or delay pursuit of opportunities with other future product candidates or for other indications that later prove to have greater commercial potential.
 
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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 commercially viable products. 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 royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to that product candidate.
We may in the future conduct clinical trials for seribantumab or other product candidates outside the United States, and the FDA or comparable foreign regulatory authorities may not accept data from such trials.
We may in the future choose to conduct one or more clinical trials outside the United States. Further, we may open sites for our CRESTONE trial that are located outside the United States. The acceptance of trial data from clinical trials conducted outside the United States or another jurisdiction by the FDA or comparable regulatory authorities may be subject to certain conditions or may not be accepted at all. In cases where data from clinical trials conducted outside the United States is intended to serve as the basis for marketing approval in the United States, the FDA will generally not approve the application on the basis of these data alone unless the data is applicable to the U.S. population and U.S. medical practice and the trials were performed by clinical investigators of recognized competence and pursuant to Good Clinical Practice, or GCP, regulations. Additionally, the FDA’s clinical trial requirements, including sufficient size of patient populations and statistical powering, must be met. Many other regulatory authorities have similar approval requirements. In addition, such trials would be subject to the applicable local laws of the respective jurisdictions where the trials are conducted. There can be no assurance that the FDA, EMA or any comparable regulatory authority will accept data from trials conducted outside of the United States or the applicable jurisdiction. If the FDA, EMA or any comparable regulatory authority does not accept such data, it would result in the need for additional trials, which would be costly and time-consuming and delay aspects of our business plan, and which may result in product candidates that we may develop not receiving approval for commercialization in the applicable jurisdiction.
This lengthy approval process, as well as the unpredictability of the results of clinical trials, may result in our failing to obtain regulatory approval to market any of our product candidates, which would significantly harm our business, results of operations, and prospects.
Risks Related to Government Regulation
The development and commercialization of biological products are subject to extensive regulation, and we may not obtain regulatory approvals for seribantumab or any other future product candidates, on a timely basis or at all.
The clinical development, manufacturing, labeling, packaging, storage, recordkeeping, advertising, promotion, export, import, marketing, distribution, adverse event reporting, including the submission of safety, and other post-marketing information and reports, and other possible activities relating to seribantumab, currently our only product candidate in clinical trials, as well as any other product candidates that we may develop in the future, are subject to extensive regulation. Marketing approval of biologics in the United States requires the submission of a BLA to the FDA, and we are not permitted to market any product candidate in the United States until we obtain approval from the FDA of the BLA for that product. A BLA must be supported by extensive clinical and preclinical data, as well as extensive information regarding pharmacology, chemistry, manufacturing and controls. Our product candidates must also be approved by comparable regulatory authorities in other jurisdictions prior to commercialization in those jurisdictions.
FDA approval of a BLA is not guaranteed, and the review and approval process is an expensive and uncertain process that may take several years. Of the large number of drugs in development in the United States, only a small percentage will successfully complete the FDA regulatory approval process and will be commercialized. Accordingly, there can be no assurance that any of our product candidates will receive regulatory approval in the United States, or other jurisdictions. Most applications for standard review biologic products are reviewed
 
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within ten to twelve months; most applications for priority review biologics are reviewed in six to eight months. Priority review can be applied to biologics that the FDA determines may offer significant improvement in safety or effectiveness compared to marketed products or where no adequate therapy exists. The review process for both standard and priority review may be extended by the FDA for three additional months to consider certain late-submitted information, or information intended to clarify information already provided in the submission. The FDA does not always meet its goal dates for standard and priority BLAs, and the review process can be extended by FDA requests for additional information or clarification.
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. For example, if successful, we believe that the CRESTONE trial may be sufficient to support FDA approval of a BLA for seribantumab, but the FDA may disagree with the sufficiency of our data and require additional clinical trials. In addition, development programs that span many tumor types are relatively novel, and, to date, the FDA has approved only a handful of therapies to treat multiple tumor types based on a common biomarker. We cannot be sure that the FDA will accept our BLA for seribantumab or our other product candidates. Further, depending upon the results of the CRESTONE trial, we may choose to seek Subpart H accelerated approval for seribantumab, which would require completion of a confirmatory trial to validate its clinical benefit. Despite the time and expense associated with preclinical studies and clinical trials, failure can occur at any stage. The results of preclinical and early clinical trials of seribantumab or any other future product candidate may not be predictive of the results of our later-stage clinical trials.
Clinical trial failure may result from a multitude of factors including flaws in trial design, dose selection, patient enrollment criteria and failure to demonstrate favorable safety or efficacy traits, and failure in clinical trials can occur at any stage. Companies in the biologics industry frequently suffer setbacks in the advancement of clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Based upon negative or inconclusive results, we may decide, or regulators may require us, to conduct additional clinical trials or preclinical studies. In addition, data obtained from clinical trials is susceptible to varying interpretations, and regulators may not interpret our data as favorably as we do, which may further delay, limit or prevent marketing approval.
The FDA could delay, limit or deny approval of a product candidate for many reasons, including because the FDA:

may not deem our product candidate to be safe and effective;

determines that the product candidate does not have an acceptable benefit-risk profile;

determines in the case of a BLA seeking accelerated approval that the BLA does not provide evidence that the product candidate represents a meaningful advantage over available therapies;

determines that the objective response rate, or ORR, and duration of response are not clinically meaningful;

determines that a tissue agnostic indication is not appropriate, for example, because a consistent anti-tumor effect is not observed across multiple tumor types;

may not agree that the data collected from preclinical studies and clinical trials are acceptable or sufficient to support the submission of a BLA or other submission or to obtain regulatory approval, and may impose requirements for additional preclinical studies or clinical trials;

may determine that adverse events experienced by participants in our clinical trials represent an unacceptable level of risk;

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

may not accept clinical data from trials, which are conducted at clinical facilities or in countries where the standard of care is potentially different from that of the United States;
 
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may disagree regarding the formulation, labeling and/or specifications;

may not approve the manufacturing processes associated with our product candidate or may determine that a manufacturing facility does not have an acceptable compliance status;

may change approval policies or adopt new regulations; or

may not file a submission due to, among other reasons, the content or formatting of the submission.
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 seribantumab.
If we experience delays in obtaining approval or if we fail to obtain approval of seribantumab, our commercial prospects will be harmed and our ability to generate revenues will be materially impaired.
The accelerated approval pathway for seribantumab may not lead to a faster development or regulatory review or approval process and does not increase the likelihood that it will receive marketing approval.
Under the FDA’s accelerated approval program, the FDA may approve a drug or biologic for a serious or life-threatening illness that provides meaningful therapeutic benefit to patients over existing treatments based upon a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. We may seek accelerated approval for seribantumab on the basis of ORR with an acceptable duration of response, a surrogate endpoint that we believe is reasonably likely to predict clinical benefit.
For drugs or biologics granted accelerated approval, post-marketing confirmatory trials are required to describe the anticipated effect on irreversible morbidity or mortality or other clinical benefit. These confirmatory trials must be completed with due diligence and, in some cases, the FDA may require that the trial be designed, initiated and/or fully enrolled prior to approval. If any of our competitors were to receive full approval on the basis of a confirmatory trial for an indication for which we are seeking accelerated approval before we receive accelerated approval, the indication we are seeking may no longer qualify as a condition for which there is an unmet medical need and accelerated approval of our product candidate would be more difficult or may not occur. Moreover, the FDA may withdraw approval of our product candidate approved under the accelerated approval pathway if, for example:

the trial or trials required to verify the predicted clinical benefit of our product candidate fail to verify such benefit or do not demonstrate sufficient clinical benefit to justify the risks associated with the candidate;

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 the relevant product candidate.
Our failure to obtain marketing approval in jurisdictions outside the United States would prevent seribantumab from being marketed in those jurisdictions, and any approval we are granted for it in the United States would not assure approval in other jurisdictions.
In order to market and sell our products in any jurisdiction outside the United States, 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 regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, it is required that the product be approved for reimbursement before the product can be approved for sale in that country. We may not obtain approvals from regulatory authorities outside the United
 
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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 not be able to submit for marketing approvals and may not receive necessary approvals to commercialize our products in any market, which would impair our financial prospects.
We may not be able to obtain or maintain orphan drug designation or exclusivity for our product candidates.
Regulatory authorities in some jurisdictions, including the United States, may designate drugs for relatively small patient populations as “orphan drugs.” Under the Orphan Drug Act, the FDA may designate a drug as an orphan drug if it is intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals in the United States, or if the disease or condition affects more than 200,000 individuals in the United States and there is no reasonable expectation that the cost of developing the drug for the type of disease or condition will be recovered from sales of the product in the United States.
Orphan drug designation entitles a party to financial incentives, such as opportunities for grant funding towards clinical trial costs, tax advantages and user fee waivers. Additionally, if a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same indication for seven years, except in certain circumstances, such as a showing of clinical superiority (i.e., another product is safer, more effective or makes a major contribution to patient care) over the product with orphan exclusivity or where the manufacturer is unable to assure sufficient product quantity. Competitors, however, may receive approval of different products for the same indication for which the orphan product has exclusivity, or obtain approval for the same product but for a different indication than that for which the orphan product has exclusivity.
The FDA has granted orphan drug designation to seribantumab in the United States for patients with heregulin-positive non-small-cell lung cancer. We may apply for an additional orphan drug designation in the United States or other geographies for seribantumab or our future product candidates. However, obtaining an orphan drug designation can be difficult, and we may not be successful in doing so. Even if we obtain orphan drug designation for a product candidate in specific indications, we may not be the first to obtain regulatory approval of the product candidate for the orphan-designated indication, due to the uncertainties associated with developing biological products. In addition, exclusive marketing rights in the United States may be limited if we seek approval for an indication broader than the orphan-designated indication or may be lost if the FDA later determines that the request for orphan designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition. Orphan drug designation does not ensure that we will receive marketing exclusivity in a particular market, and we cannot assure you that any future application for orphan drug designation in any other geography or with respect to any other future product candidate will be granted. Orphan drug designation neither shortens the development time or regulatory review time of a drug, nor gives the drug any advantage in the regulatory review or approval process.
A Breakthrough Therapy Designation by the FDA for any of our current or future product candidates may not lead to a faster development or regulatory review or approval process, and it would not increase the likelihood that the product candidate will receive marketing approval.
We may seek a Breakthrough Therapy Designation for seribantumab or our future product candidates. A breakthrough therapy is defined as a drug or biologic that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug 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 drugs 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
 
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number of patients placed in ineffective control regimens. Drugs designated as breakthrough therapies by the FDA are also eligible for priority review if supported by clinical data at the time of the submission of the BLA.
Designation as a breakthrough therapy is at the discretion of the FDA. Accordingly, even if we believe that a product candidate meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of a Breakthrough Therapy Designation for a drug may not result in a faster development process, review, or approval compared to drugs considered for approval under conventional FDA procedures and it would not assure ultimate approval by the FDA. In addition, even if the product candidate qualifies as a breakthrough therapy, the FDA may later decide that the product candidate no longer meets the conditions for qualification or that the time period for FDA review or approval will not be shortened.
If we decide to pursue a Fast Track Designation by the FDA, it may not lead to a faster development or regulatory review or approval process.
We may seek Fast Track Designation for seribantumab or our future product candidates. If a drug or biologic is intended for the treatment of a serious or life-threatening condition and the drug demonstrates the potential to address unmet medical needs for this condition, the product sponsor may apply for FDA Fast Track Designation. The FDA has broad discretion whether to grant this designation, so even if we believe a particular product candidate is eligible for this designation, we cannot assure you that the FDA would decide to grant it. Even if we do receive Fast Track Designation, we may not experience a faster development process, review or approval compared to conventional FDA procedures. The FDA may withdraw Fast Track Designation if it believes that the designation is no longer supported by data from our clinical development program.
If we are unable to successfully develop, validate, obtain regulatory approval of and commercialize companion diagnostic tests for seribantumab or any future product candidates that require or would benefit from such tests, or experience significant delays in doing so, we may not realize the full commercial potential of these product candidates.
A companion diagnostic is a medical device, often an in vitro device, which provides information that is essential for the safe and effective use of a corresponding therapeutic drug or biologic product. A companion diagnostic can be used to identify patients who are most likely to benefit from the therapeutic product. We plan to engage a third-party provider to develop companion diagnostic tests to identify NRG1 fusions.
A companion diagnostic is generally developed in conjunction with the clinical program for an associated therapeutic product. To date, the FDA has generally required premarket approval of all companion diagnostics for cancer therapies. Generally, when a companion diagnostic is essential to the safe and effective use of a drug product, the FDA requires that the companion diagnostic be approved before or concurrent with approval of the therapeutic product and before a product can be commercialized. The approval of a companion diagnostic as part of the therapeutic product’s labeling limits the use of the therapeutic product to only those patients who express the specific genetic alteration that the companion diagnostic was developed to detect.
Development of a companion diagnostic could include additional meetings with regulatory authorities, such as a pre-submission meeting and the requirement to submit an investigational device exemption application. In the case of a companion diagnostic that is designated as “significant risk device,” approval of an investigational device exemption by the FDA and IRB is required before such diagnostic is used in conjunction with the clinical trials for a corresponding product candidate.
To be successful in developing, validating, obtaining approval of and commercializing a companion diagnostic, we or our collaborators will need to address a number of scientific, technical, regulatory and logistical challenges. We have no prior experience with medical device or diagnostic test development. If we choose to develop and seek FDA approval for companion diagnostic tests on our own, we will require additional personnel. We may rely on third parties for the design, development, testing, validation and manufacture of companion diagnostic tests for our therapeutic product candidates that require such tests, the application for and receipt of any required regulatory approvals, and the commercial supply of these companion diagnostics. If these parties are unable to
 
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successfully develop companion diagnostics for these therapeutic product candidates, or experience delays in doing so, we may be unable to enroll enough patients for our current and planned clinical trials, the development of these therapeutic product candidates may be adversely affected, these therapeutic product candidates may not obtain marketing approval, and we may not realize the full commercial potential of any of these therapeutics that obtain marketing approval. For any product candidate for which a companion diagnostic is necessary to select patients who may benefit from use of the product candidate, any failure to successfully develop a companion diagnostic may cause or contribute to delayed enrollment of our clinical trials, and may prevent us from initiating a pivotal trial. In addition, the commercial success of any product candidate that requires a companion diagnostic will be tied to and dependent upon the receipt of required regulatory approvals and the continued ability of such third parties to make the companion diagnostic commercially available to us on reasonable terms in the relevant geographies. Any failure to do so could materially harm our business, results of operations and financial condition.
Even if we obtain marketing approval for a product candidate, the terms of approvals, ongoing regulation of our products or other post-approval restrictions may limit how we manufacture and market our products and compliance with such requirements may involve substantial resources, which could materially impair our ability to generate revenue.
Any product candidates for which we receive accelerated approval from the FDA are required to undergo one or more confirmatory clinical trials. If such a product candidate fails to meet its safety and efficacy endpoints in such confirmatory clinical trials, the regulatory authority may withdraw its conditional approval. There is no assurance that any such product will successfully advance through its confirmatory clinical trial(s). Therefore, even if a product candidate receives accelerated approval from the FDA, such approval may be withdrawn at a later date.
Even if marketing approval of a product candidate is granted, an approved product and its manufacturer and marketer are subject to ongoing review and extensive regulation, which may include the requirement to implement a REMS or to conduct costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of the product.
We must also comply with requirements concerning advertising and promotion for our product candidates for which we obtain marketing approval. Promotional communications with respect to prescription drugs or biologics are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved labeling. Thus, we will not be able to promote any products we develop for indications or uses for which they are not approved.
In addition, manufacturers of approved products and those manufacturers’ facilities are required to ensure that quality control and manufacturing procedures conform to current good manufacturing practices, or cGMPs, which include requirements relating to quality control and quality assurance as well as the corresponding maintenance of records and documentation and reporting requirements. We and our CMOs will be subject to periodic unannounced inspections by the FDA to monitor and ensure compliance with cGMPs.
Accordingly, even if we obtain marketing approval for a product candidate, we and our CMOs will continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production, product surveillance and quality control. If we are not able to comply with post-approval regulatory requirements, we could have the marketing approvals for our products withdrawn by regulatory authorities and our ability to market any future products could be limited, which could adversely affect our ability to achieve or sustain profitability. As a result, the cost of compliance with post-approval regulations may have a negative effect on our operating results and financial condition.
Any product candidate for which we obtain marketing approval will be subject to ongoing enforcement of post-marketing requirements by regulatory agencies, and we could be subject to substantial penalties, including withdrawal of our product from the market, if we fail to comply with all regulatory requirements or if we experience unanticipated problems with our products, when and if any of them are approved.
Any product candidate for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, advertising and promotional activities for such product, will be subject to
 
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continual requirements of and review by the FDA and other regulatory authorities. These requirements include, but are not limited to, restrictions governing promotion of an approved product, submissions of safety and other post-marketing information and reports, registration and listing requirements, cGMP requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, and requirements regarding drug distribution and the distribution of samples to physicians and recordkeeping.
The FDA and other federal and state agencies, including the Department of Justice, closely regulate compliance with all requirements governing prescription drug and biologic products, including requirements pertaining to their marketing and promotion in accordance with the provisions of the approved labeling and manufacturing of products in accordance with cGMP requirements. For example, the FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability. Violations of such requirements may lead to investigations alleging violations of the Federal Food, Drug, and Cosmetic Act, or FDCA, and other statutes, including the False Claims Act and other federal and state healthcare fraud and abuse laws as well as state consumer protection laws. Our failure to comply with all regulatory requirements, and later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes, may yield various results, including:

litigation involving patients taking our products;

restrictions on such products, manufacturers or manufacturing processes;

restrictions on the labeling or marketing of a product;

restrictions on product distribution or use;

requirements to conduct post-marketing studies or clinical trials;

warning 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;

fines, restitution or disgorgement of profits or revenues;

suspension or withdrawal of marketing approvals;

damage to relationships with any potential collaborators;

unfavorable press coverage and damage to our reputation;

refusal to permit the import or export of our products;

product seizure; or

injunctions or the imposition of civil or criminal penalties.
Non-compliance by us or any future collaborator with regulatory requirements, including safety monitoring or pharmacovigilance, and with requirements related to the development of products for the pediatric population can also result in significant financial penalties.
Our current and future relationships with customers and third-party payors may be subject to applicable anti-kickback, fraud and abuse, transparency, health privacy, and other healthcare laws and regulations, which could expose us to significant penalties, including criminal, civil, and administrative penalties, contractual damages, reputational harm and diminished profits and future earnings.
Healthcare providers, including physicians, and third-party payors will play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our current and future arrangements with healthcare providers, third-party payors and customers may expose us to broadly applicable
 
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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. Restrictions under applicable federal and state healthcare laws and regulations that may be applicable to our business include the following:

the federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid;

the federal civil and criminal false claims laws, including the False Claims Act, which can be enforced by civil whistleblower or qui tam actions on behalf of the government, and criminal false claims laws and the civil monetary penalties law, prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented false or fraudulent claims for payment by a federal government program, or making a false statement or record material to payment of a false claim or avoiding, decreasing or concealing an obligation to pay money to the federal government;

the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, prohibits, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, regardless of the payor (e.g. public or private), and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false, fictitious or fraudulent statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters;

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing regulations, impose requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses as well as their respective business associates and their subcontractors that perform services for them that involve the use, or disclosure of, individually identifiable health information, relating to the privacy, security, and transmission of such individually identifiable health information;

the federal Physician Payments Sunshine Act’s transparency requirements under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, collectively referred to as the ACA, requires certain manufacturers of drugs, devices, biologics and medical supplies to annually report to the Centers for Medicare & Medicaid Services, or CMS, information related to payments and other transfers of value provided to physicians, defined to include doctors, dentists, optometrists, podiatrists and chiropractors, teaching hospitals, as well as ownership and investment interests held by physicians, and their immediate family members. Beginning in 2022, applicable manufacturers also will be required to report such information regarding payments and transfers of value provided during the previous year to physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified nurse anesthetists and certified nurse-midwives. The reported information is made available on a public website; and

analogous state laws and regulations such as state anti-kickback and false claims laws and analogous non-U.S. fraud and abuse laws and regulations, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers. Some state laws require biologics companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance regulations promulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers, marketing expenditures, or drug pricing, including price increases. State and local laws require the registration of pharmaceutical sales representatives. State and non-U.S. laws that 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.
Efforts to ensure that our business arrangements with third parties 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
 
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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, disgorgement, imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional integrity reporting and oversight obligations, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to significant criminal, civil and administrative sanctions, including exclusions from government funded healthcare programs, which could have a material adverse effect on our business, results of operations, financial condition and prospects.
We may face difficulties from healthcare legislative reform measures.
Existing regulatory policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.
In the United States, there have been and continue to be a number of legislative initiatives to contain healthcare costs. For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Healthcare and Education Reconciliation Act, or together, the ACA, was enacted, which substantially changed the way healthcare is financed by both governmental and private insurers, and significantly impacts the U.S. pharmaceutical industry. The ACA, among other things, (i) subjected therapeutic biologics to potential competition by lower-cost biosimilars by creating a licensure framework for follow-on biologic products, (ii) prescribed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs and therapeutic biologics that are inhaled, infused, instilled, implanted or injected, (iii) increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled in Medicaid managed care organizations, (iv) established annual fees and taxes on manufacturers of certain branded prescription drugs and therapeutic biologics, (v) established a Medicare Part D coverage gap discount program, in which manufacturers must agree to offer point-of-sale discounts (now 70%) off negotiated prices of applicable brand drugs and therapeutic biologics to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs and therapeutic biologics to be covered under Medicare Part D, (vi) expanded eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers’ Medicaid rebate liability, (vii) expanded the entities eligible for discounts under the Public Health program (viii) created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research and (ix) established a Center for Medicare Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.
There have been executive, legislative and judicial efforts to modify, repeal or otherwise invalidate all or certain aspects of the ACA. By way of example, the Tax Cuts and Jobs Act, or the TCJA, was enacted, effective January 1, 2019, and included, among other things, a provision repealing the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” On December 14, 2018, a Texas United States District Court Judge ruled that the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Cuts and Jobs Act. On December 18, 2019, the United States Court of Appeals for the 5th Circuit ruled that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well. The United
 
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States Supreme Court is currently reviewing the case, although it is unclear when a decision will be made or how the Supreme Court will rule. It is unclear when a decision will be made or how the Supreme Court will rule. Although the Supreme Court has not yet ruled on the constitutionality of the ACA, on January 28, 2021, President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through May 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructs certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is uncertain how the United States Supreme court ruling, other such litigation, or the healthcare measures of the Biden administration will impact the ACA and our business.
In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted to reduce healthcare expenditures. U.S. federal government agencies also currently face potentially significant spending reductions, which may further impact healthcare expenditures. On August 2, 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. This includes aggregate reductions of Medicare payments to providers of 2% per fiscal year, which began in 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2030, with the exception of a temporary suspension from May 1, 2020 through March 31, 2021 due to the COVID-19 pandemic, unless additional Congressional action is taken. Legislation is currently pending in Congress that would further extend the suspension through December 31, 2021. Moreover, on January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. If federal spending is further reduced, anticipated budgetary shortfalls may also impact the ability of relevant agencies, such as the FDA or the National Institutes of Health to continue to function at current levels. Amounts allocated to federal grants and contracts may be reduced or eliminated. These reductions may also impact the ability of relevant agencies to timely review and approve research and development, manufacturing, and marketing activities, which may delay our ability to develop, market and sell any products we may develop.
Moreover, payment methodologies, including payment for companion diagnostics, may be subject to changes in healthcare legislation and regulatory initiatives. For example, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or MMA, changed the way Medicare covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based on average sales prices for physician-administered drugs. In addition, this legislation provided authority for limiting the number of drugs that will be covered in any therapeutic class. While the MMA only applies to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement that results from the MMA may result in a similar reduction in payments from private payors. In addition, CMS has begun bundling the Medicare payments for certain laboratory tests ordered while a patient received services in a hospital outpatient setting and, beginning in 2018, CMS will pay for clinical laboratory services based on a weighted average of reported prices that private payors, Medicare Advantage plans, and Medicaid Managed Care plans pay for laboratory services. Further, on March 16, 2018, CMS finalized its National Coverage Determination, or NCD, for certain diagnostic laboratory tests using next generation sequencing that are approved by the FDA as a companion in vitro diagnostic and used in a cancer with an FDA-approved companion diagnostic indication. Under the NCD, diagnostic tests that gain FDA approval or clearance as an in vitro companion diagnostic will automatically receive full coverage and be available for patients with recurrent, metastatic relapsed, refractory or stages III and IV cancer. Additionally, the NCD extended coverage to repeat testing when the patient has a new primary diagnosis of cancer.
 
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Recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. At the federal level, the Trump administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders, and policy initiatives. For example, on July 24, 2020 and September 13, 2020, the Trump administration announced several executive orders related to prescription drug pricing and importation. As a result, the FDA also released a final rule in September 2020 providing guidance for states to build and submit importation plans for drugs from Canada.
Further, in November 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 from January 1, 2022 to January 1, 2023 in response to ongoing litigation. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the implementation of which have also been delayed pending review by the Biden administration until January 1, 2023. The CMS also issued an interim final rule that establishes a Most Favored Nation, or MFN, Model for Medicare Part B drug payments. This regulation would substantially change the reimbursement landscape as it bases Medicare Part B payment for 50 selected drugs on prices in foreign countries instead of average sales prices, or ASP, and establishes a fixed add-on payment in place of the current 6 percent (4.3 percent after sequestration) of ASP. The MFN drug payment amount is expected to be lower than the current ASP-based limit because U.S. drug prices are generally the highest in the world. On December 28, 2020, the United States District Court in Northern California issued a nationwide preliminary injunction against implementation of the interim final rule. In December 2020, CMS issued a final rule implementing significant manufacturer price reporting changes under the Medicaid Drug Rebate Program, including regulations that affect manufacturer-sponsored patient assistance programs subject to pharmacy benefit manager accumulator programs and Best Price reporting related to certain value-based purchasing arrangements. It is unclear to what extent these new regulations will be implemented and to what extent these regulations or any future legislation or regulations by the Biden administration will have on our business, including our ability to generate revenue and achieve profitability. At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
Additionally, on May 30, 2018, the Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try Act of 2017 was signed into law. The law, among other things, provides a federal framework for certain patients to access certain investigational new drug products that have completed a Phase 1 clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA authorization under an FDA expanded access program; however, manufacturers are not obligated to provide investigational new drug products under the current federal right to try law. We may choose to seek an expanded access program for our product candidates, or to utilize comparable rules in other countries that allow the use of a drug, on a named patient basis or under a compassionate use program.
We expect that additional state and federal healthcare reform measures will be adopted in the future, particularly in light of the new presidential administration. Such reform measures may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our products.
 
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Governments outside of the United States tend to impose strict price controls, which may adversely affect our revenues, if any.
In some countries, particularly the countries of the EU, the pricing of prescription biological products is subject to governmental control. 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 may be required to conduct a clinical trial that compares the cost-effectiveness of our lead product candidate 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 harmed. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. Reference pricing used by various EU member states, and parallel trade, such as arbitrage between low-priced and high-priced member states, can further reduce prices. There can be no assurance that any country that has price controls or reimbursement limitations for biological products will allow favorable reimbursement and pricing arrangements for any products, if approved in those countries. In addition, the recent withdrawal of the United Kingdom from its membership in the EU, often referred to as “Brexit”, could lead to legal and regulatory uncertainty in the United Kingdom and may lead to the United Kingdom and EU adopting divergent laws and regulations, including those related to the pricing of prescription biological products, as the United Kingdom determines which EU laws to replicate or replace. If the United Kingdom were to significantly alter its regulations affecting the pricing of prescription biological products, we could face significant new costs. As a result, Brexit could impair our ability to transact business in the EU and the United Kingdom.
Laws and regulations governing any international operations we may have in the future may preclude us from developing, manufacturing and selling certain product candidates and products outside of the United States and require us to develop and implement costly compliance programs.
If we expand our operations outside of the United States, we must dedicate additional resources to comply with numerous laws and regulations in each jurisdiction in which we plan to operate. The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying, offering, authorizing payment or offering anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of such third party in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with certain accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the company, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.
Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA presents particular challenges in the biological products industry, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials. Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions.
Various laws, regulations and executive orders also restrict the use and dissemination outside of the United States, or the sharing with certain non-U.S. nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products. If we expand our presence outside of the United States, it will require us to dedicate additional resources to comply with these laws, and these laws may preclude us from developing, manufacturing or selling certain product candidates and products outside of the United States, which could limit our growth potential and increase our development costs.
The failure to comply with laws governing international business practices may result in substantial civil and criminal penalties and suspension or debarment from government contracting. The Securities and Exchange Commission, or the SEC, also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPA’s accounting provisions.
 
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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 and our third-party contractors are subject to numerous foreign, federal, state and local environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources, including any available insurance.
In addition, our leasing and operation of real property may subject us to liability pursuant to certain of these laws or regulations. Under existing U.S. environmental laws and regulations, current or previous owners or operators of real property and entities that disposed or arranged for the disposal of hazardous substances may be held strictly, jointly and severally liable for the cost of investigating or remediating contamination caused by hazardous substance releases, even if they did not know of and were not responsible for the releases.
We could incur significant costs and liabilities which may adversely affect our financial condition and operating results for failure to comply with such laws and regulations, including, among other things, civil or criminal fines and penalties, property damage and personal injury claims, costs associated with upgrades to our facilities or changes to our operating procedures, or injunctions limiting or altering our operations.
Although we maintain liability insurance to cover us for costs and expenses we may incur due to injuries to our employees, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials.
In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations, which are becoming increasingly more stringent, may impair our research, development or production efforts. Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
We are subject to certain U.S. and certain other anti-corruption, anti-money laundering, export control, sanctions and other trade laws and regulations. We can face serious consequences for violations.
U.S. and other anti-corruption, anti-money laundering, export control, sanctions and other trade laws and regulations prohibit, among other things, companies and their employees, agents, CROs, CMOs, legal counsel, accountants, consultants, contractors and other partners from authorizing, promising, offering, providing, soliciting, or receiving directly or indirectly, corrupt or improper payments or anything else of value to or from recipients in the public or private sector. Violations of these laws can result in substantial criminal fines and civil penalties, imprisonment, the loss of trade privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm and other consequences. We have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities and other organizations. We also expect our non-U.S. activities to increase over time. We expect to rely on third parties for research, preclinical studies and clinical trials and/or to obtain necessary permits, licenses, patent registrations and other marketing approvals. We can be held liable for the corrupt or other illegal activities of our personnel, agents, or partners, even if we do not explicitly authorize or have prior knowledge of such activities.
Any violations of the laws and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm and other consequences.
 
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Risks Related to Our Reliance on Third Parties
We rely, and intend to continue to rely, on third parties to conduct our clinical trials and perform all of our research and preclinical studies. If these third parties do not satisfactorily carry out their contractual duties, fail to comply with applicable regulatory requirements or do not meet expected deadlines, our development programs may be delayed or subject to increased costs or we may be unable to obtain regulatory approval, each of which may have an adverse effect on our business, financial condition, results of operations and prospects.
We do not have the ability to independently conduct all aspects of our preclinical testing or clinical trials ourselves. As a result, we are dependent on third parties to conduct our ongoing CRESTONE trial and our ongoing and planned preclinical studies and clinical trials of our future product candidates. The timing of the initiation and completion of these trials will therefore be partially controlled by such third parties and may result in delays to our development programs. Specifically, we expect CROs, clinical investigators and consultants to play a significant role in the conduct of these trials and the subsequent collection and analysis of data. However, these CROs and other third parties are not our employees, and we will not be able to control all aspects of their activities. Nevertheless, we are responsible for ensuring that each clinical trial is conducted in accordance with the applicable protocol and legal, regulatory and scientific standards, and our reliance on the CROs and other third parties does not relieve us of our regulatory responsibilities. We and our CROs are required to comply with good clinical practices, or GCP, requirements, which are regulations and guidelines enforced by the FDA for product candidates in clinical development. Regulatory authorities enforce these GCP requirements through periodic inspections of trial sponsors, clinical trial investigators and clinical trial sites. If we or any of our CROs or clinical trial sites fail to comply with applicable GCP requirements, the data generated in our clinical trials may be deemed unreliable, and the FDA may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that, upon inspection, the FDA will determine that our clinical trials comply with GCPs. In addition, our clinical trials must be conducted with product produced under cGMP regulations. Our failure, or the failure of third parties on whom we rely, to comply with these regulations may require us to stop and/or repeat clinical trials, which would delay the marketing approval process.
There is no guarantee that any such CROs, clinical trial investigators or other third parties on which we rely will devote adequate time and resources to our development activities or perform as contractually required. If any of these third parties fail to meet expected deadlines, adhere to our clinical protocols or meet regulatory requirements, otherwise perform in a substandard manner, or terminate their engagements with us, the timelines for our development programs may be extended or delayed or our development activities may be suspended or terminated. If our clinical trial site terminates for any reason, we may experience the loss of follow-up information on subjects enrolled in such clinical trial unless we are able to transfer those subjects to another qualified clinical trial site, which may be difficult or impossible.
Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors, for whom they may also be conducting clinical trials or other biological product development activities that could harm our competitive position. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals for seribantumab or any other future product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our products.
Manufacturing biological products is complex and subject to product loss for a variety of reasons. We rely on third-party suppliers, including single source suppliers, to manufacture clinical supplies of our lead product candidate and we intend to rely on third parties to produce commercial supplies of any approved product. This reliance on third parties increases the risk that we will not have sufficient quantities of our lead product candidate or products or such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts.
We do not have any manufacturing facilities. We rely, and expect to continue to rely, on third parties for the manufacture of seribantumab and our future product candidates for clinical testing, product development
 
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purposes, to support regulatory application submissions, as well as for commercial manufacture if a product candidate obtains marketing approval. In addition, we expect to contract with analytical laboratories for release and stability testing of our product candidates. We acquire our clinical supply of seribantumab from our contract manufacturer on an ongoing basis after the completion of stability testing, and have periodically encountered delays in receiving such clinical supply. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or products or such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts. In addition, the ongoing COVID-19 pandemic may result in disruptions to the operations or an extended shutdown of certain businesses, which could include certain of our contract manufacturers.
We may be unable to establish any agreements with third-party manufacturers or do so on favorable terms. Even if we are able to establish agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:

reliance on the third party for regulatory, compliance and quality assurance;

reliance on the third party for product development, analytical testing, and data generation to support regulatory applications;

lack of qualified backup suppliers for those components or materials that are currently purchased from a sole or single source supplier;

operations of our third-party manufacturers or suppliers could be disrupted by conditions unrelated to our business or operations, including the bankruptcy of the manufacturer or supplier, the issuance of an FDA Form 483 notice or warning letter or other enforcement action by FDA or other regulatory authority;

the possible breach of the manufacturing agreement by the third party;

the possible misappropriation of our proprietary information, including our trade secrets and know-how;

the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us;

carrier disruptions or increased costs that are beyond our control; and

failure to deliver our drugs under specified storage conditions and in a timely manner.
We have only limited clinical trial supply arrangements in place for seribantumab, and these arrangements do not extend to commercial supply. We acquire many key materials on a purchase order basis. As a result, we do not have long-term committed arrangements with respect to seribantumab or any future product candidate. We will need to establish one or more agreements with third parties in order to develop and scale up our drug manufacturing process, conduct drug testing and generate data to support one or more regulatory submissions. If we obtain marketing approval for seribantumab or any future product candidate, we will need to establish an agreement for commercial manufacture with a third party.
In addition, we currently use a single supplier for certain key components of our manufacturing process. Even if we are able to replace any raw materials or other materials with an alternative, such alternatives may cost more, result in lower yields or not be as suitable for our purposes. In addition, some of the materials that we use to manufacture our product candidates are complex materials, which may be more difficult to substitute. Therefore, any disruptions arising from our current supplier could result in delays and additional regulatory submissions.
Third-party manufacturers may not be able to comply with cGMP regulations or similar regulatory requirements outside of the United States. If the FDA determines that our CMOs are not in compliance with FDA laws and regulations, including those governing cGMPs, the FDA may not approve a BLA until the deficiencies are corrected or we replace the manufacturer in our application with a manufacturer that is in compliance. Moreover, our failure, or the failure of our third-party manufacturers and suppliers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly
 
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and adversely affect supplies of our products. In addition, approved products and the facilities at which they are manufactured are required to maintain ongoing compliance with extensive FDA requirements and the requirements of other similar agencies, including ensuring that quality control and manufacturing procedures conform to cGMP requirements. As such, our CMOs are subject to continual review and periodic inspections to assess compliance with cGMPs. Furthermore, although we do not have day-to-day control over the operations of our CMOs, we are responsible for ensuring compliance with applicable laws and regulations, including cGMPs.
Further, if we make manufacturing or formulation changes to our product candidates or change CMOs in the future, the FDA or other regulatory authorities will require a demonstration of the comparability of the new product to the prior product, including potentially through a clinical bridging study.
In addition, our third-party manufacturers and suppliers are subject to numerous environmental, health and safety laws and regulations, including those governing the handling, use, storage, treatment and disposal of waste products, and failure to comply with such laws and regulations could result in significant costs associated with civil or criminal fines and penalties for such third parties. Based on the severity of regulatory actions that may be brought against these third parties in the future, our clinical or commercial supply of drug and packaging and other services could be interrupted or limited, which could harm our business.
Our product candidates and any products that we may develop may compete with other future product candidates and products for access to manufacturing facilities. As a result, we may not obtain access to these facilities on a priority basis or at all. There are a limited number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for us.
As we prepare for potential commercialization, we will need to take steps to increase the scale of production of our lead product candidate. Although seribantumab was previously manufactured at commercial scale, we have not yet scaled up the manufacturing process for commercialization since acquiring seribantumab. Third party manufacturers may be unable to successfully increase the manufacturing capacity for seribantumab in a timely or cost-effective manner, or at all. In addition, quality issues may arise during scale-up or commercial activities. For example, if microbial, viral or other contaminations are discovered in the clinical trial supply of seribantumab or in the manufacturing facilities in which it is made, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination.
Any performance failure on the part of our existing or future manufacturers could delay clinical development or marketing approval. We do not currently have arrangements in place for redundant supply or a second source for bulk drug substances. If our current CMOs for preclinical and clinical testing cannot perform as agreed, we may be required to replace such CMOs. Although we believe that there are several potential alternative manufacturers who could manufacture seribantumab, we may incur added costs and delays in identifying and qualifying any such replacement manufacturer or we may not be able to reach agreement with any alternative manufacturer. Further, our third-party manufacturers may experience manufacturing or shipping difficulties due to resource constraints or as a result of natural disasters, labor disputes, unstable political environments or public health epidemics such as the COVID-19 pandemic. If our current third-party manufacturers cannot perform as agreed, we may be required to replace such manufacturers and we may be unable to replace them on a timely basis or at all. Further, to meet the demand for COVID-19 vaccine production, manufacturers are required to prioritize rated orders issued by the Federal Emergency Management Agency pursuant to the U.S. Defense Production Act of 1950, or the DPA. The potential for manufacturing facilities and materials to be commandeered under the DPA, or equivalent foreign legislation, could make it more difficult to obtain materials or manufacturing slots for the products needed for our clinical trials, which could lead to delays in these trials.
Our current and anticipated future dependence upon others for the manufacture of our lead product candidate or products may adversely affect our future profit margins and our ability to commercialize any products that obtain marketing approval on a timely and competitive basis.
 
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We may enter into collaborations with third parties for the development and commercialization of seribantumab and any future product candidates. If those collaborations are not successful, we may not be able to capitalize on the market potential of seribantumab and our future product candidates.
We may seek third-party collaborators for the development and commercialization of seribantumab or our future product candidates on a select basis. We have not entered into any collaborations to date. Our likely collaborators for any future collaboration arrangements include large and mid-size biologics companies, regional and national biologics companies and biotechnology companies. We will face significant competition in seeking appropriate collaborators. Our ability to reach a definitive agreement for a future collaboration will depend, among other things, upon our assessment of the future collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors.
If we do enter into any such arrangements with any third parties, we will likely have limited control over the amount and timing of resources that our future collaborators dedicate to the development or commercialization of our product candidates. Our ability to generate revenues from these arrangements will depend on our future collaborators’ abilities and efforts to successfully perform the functions assigned to them in these arrangements. Collaborations with future collaborators involving our product candidates would pose numerous risks to us, including the following:

collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations and may not perform their obligations as expected;

collaborators may de-emphasize or not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborators’ strategic focus, including as a result of a sale or disposition of a business unit or development function, or available funding or external factors such as an acquisition that diverts resources or creates competing priorities;

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

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

a collaborator with marketing and distribution rights to multiple products may not commit sufficient resources to the marketing and distribution of our product relative to other products;

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

disputes may arise between the collaborators and us that result in the delay or termination of the research, development or commercialization of our products or product candidates or that result in costly litigation or arbitration that diverts management attention and resources;

collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates;

collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all; and

if a future collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis on our product development or commercialization program could be delayed, diminished or terminated.
 
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If we establish one or more collaborations, all of the risks relating to product development, regulatory approval and commercialization described herein would also apply to the activities of any such future collaborators.
Risks Related to Commercialization of Our Product Candidates
The incidence and prevalence for target patient populations of seribantumab and our future product candidates have not been established with precision. If the market opportunities for our product candidates are smaller than we estimate or if any approval that we obtain is based on a narrower definition of the patient population, then our revenue potential and ability to achieve profitability will be adversely affected.
The total addressable market opportunity for seribantumab and any other future product candidates we may develop will ultimately depend upon, among other things, the diagnosis criteria included in the final labeling for each such product candidate if it is approved for sale for these indications, acceptance by the medical community, patient access, drug and any related companion diagnostic pricing and their reimbursement. Additionally, for enrollment in the CRESTONE trial, we are utilizing novel RNA-based testing methodologies to identify NRG1 gene fusions due to the methodology’s higher sensitivity compared to DNA-based testing methodologies for identifying oncogenic fusions. We may continue to prioritize novel RNA-based testing methodologies to identify NRG1 gene fusions for seribantumab. The total addressable market opportunity for seribantumab and any other future product candidates we may develop will depend upon commercially available RNA-based next generation sequencing testing.
We may initially seek regulatory approval of seribantumab or our future product candidates as therapies for relapsed or refractory patients. The number of patients in our targeted commercial markets and elsewhere may turn out to be lower than expected, patients may not be otherwise amenable to treatment with our drugs or new patients may become increasingly difficult to identify or gain access to, all of which would adversely affect our results of operations and our business.
Even if our product candidates receive marketing approval, they may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.
If seribantumab or our future product candidates receive marketing approval, they may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. For example, current cancer treatments, such as existing targeted therapies, chemotherapy, and radiation therapy, are well established in the medical community, and doctors may continue to rely on these treatments. If our product candidates 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 our product candidates, if approved for commercial sale, will depend on a number of factors, including:

the efficacy and potential advantages compared to alternative treatments;

the acceptance of our product candidates as front-line treatments for various indications;

the prevalence and severity of any side effects, in particular compared to alternative treatments;

limitations or warnings contained in the labeling approved by the FDA or other regulatory authorities;

the size of the target patient population;

the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;

our ability to offer our products for sale at competitive prices;

the convenience and ease of administration compared to alternative treatments;

the strength of marketing and distribution support;

publicity for our product candidates and competing products and treatments;
 
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the existence of distribution and/or use restrictions, such as through a REMS;

the availability of third-party payor coverage and adequate reimbursement;

the timing of any marketing approval in relation to other product approvals;

support from patient advocacy groups; and

any restrictions on the use of our products together with other medications.
We currently have no marketing and sales organization and have no experience as a company in commercializing products and we may have to invest significant resources to develop these capabilities. If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our products, we may not be able to generate revenue.
We have never commercialized a product candidate and we currently have no sales or marketing infrastructure and have no experience in the sale, marketing or distribution of biological products. Our operations to date have been limited to organizing and staffing our company, business planning, raising capital, acquiring the rights to our product candidate and undertaking preclinical studies and clinical trials of our product candidate. To achieve commercial success for any product for which we obtain marketing approval, we will need to establish sales, marketing and distribution capabilities, either ourselves or through collaboration or other arrangements with third parties.
There are risks involved with establishing our own sales and marketing capabilities. For example, recruiting and training a sales force is expensive and time-consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. These efforts are expected to be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
Factors that may inhibit our efforts to commercialize our products on our own include:

our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;

our inability to raise financing necessary to build our commercialization infrastructure;

the inability of sales personnel to obtain access to physicians or educate an adequate number of physicians as to the benefits of our products;

unfavorable third-party payor coverage and reimbursement in any geography;

the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and

unforeseen costs and expenses associated with creating an independent sales and marketing organization.
Furthermore, developing a sales and marketing organization requires significant investment, is time-consuming and could delay the launch of our product candidate. We may not be able to build an effective sales and marketing organization in the United States, the EU or other key global markets. If we are unable to build our own distribution and marketing capabilities or to find suitable partners for the commercialization of our product candidate, we may have difficulties generating revenue from them.
If we enter into arrangements with third parties to perform sales and marketing services, our product revenues and our profitability, if any, are likely to be lower than if we were to market and sell any products that we develop ourselves. In addition, we may not be successful in entering into arrangements with third parties to market and sell our product candidates or may be unable to do so on terms that are acceptable to us. We likely will have little control over such third parties, and any of these third parties may fail to devote the necessary resources and attention to sell and market our products effectively. If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing any product candidate for which we receive marketing approval.
 
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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 biological 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 biologics companies, specialty biologics companies and existing or emerging biotechnology companies, academic research institutions and governmental agencies and public and private research institutions worldwide.
There are a number of biological and biotechnology companies that currently are pursuing the development of precision oncology therapies for patients with undrugged, genetically-defined cancers with high unmet need. In particular, we expect that seribantumab will compete against other ERBB or HER3 inhibitors that target tumors with NRG1 gene fusion. Several such candidates are currently in clinical development, including those of Merus N.V. (zenocutuzumab — MCLA-128), Rain Therapeutics, Inc. (tarloxotinib), Hummingbird Bioscience Ltd. (HMBD-001 — 10D1F), GamaMabs Pharma (9F7-F11) and AVEO Pharmaceuticals, Inc. (AV-203). We may face further competition from companies pursuing the development of product candidates that are ERBB or HER3 inhibitors not currently in defined clinical plans for targeting tumors with an NRG1 fusion, including ISU ABXIS Co., Ltd, Daiichi Sankyo Company, Ltd, Celldex Therapeutics, Inc., GlaxoSmithKline PLC, Boehringer Ingelheim International GmbH, or others. Development efforts with respect to, and clinical trial results of, these potentially competitive product candidates may be unsuccessful, which could result in a negative perception of HER3 inhibitors in general, for instance, which could in turn negatively impact the regulatory approval process for seribantumab.
Many of the companies against which we are competing or against which we may compete in the future, either alone or through collaborations, have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller and other early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific, management and sales and marketing personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.
Furthermore, we also face competition more broadly across the oncology market for cost-effective and reimbursable cancer treatments. There are a variety of available drug therapies marketed for cancer. In many cases, these drugs are administered in combination to enhance efficacy. While seribantumab or our future product candidates, if approved, may compete with these existing drugs and other therapies, to the extent they are ultimately used in combination with or as an adjunct to these therapies, our product candidates may not be competitive with them. Some of these drugs are branded and subject to patent protection, and others are available on a generic basis. Insurers and other third-party payors may also encourage the use of generic products or specific branded products. As a result, obtaining market acceptance of, and gaining significant share of the market for, our product candidates may pose challenges. In addition, many companies are developing new oncology therapeutics, and we cannot predict what the standard of care will be as product candidates progress through clinical development.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient to administer, are less expensive or with a more favorable labeling than seribantumab or our future product candidates. Our competitors also may obtain FDA, foreign regulatory authority, or other marketing or regulatory approval for their products more rapidly than any approval we may obtain for ours, which could result in our competitors establishing a strong market position before we are able to enter the market, thereby limiting our potential for commercial success.
 
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Even if we are able to commercialize any product candidates, the products may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, which would harm our business.
The regulations that govern marketing approvals, pricing, coverage and reimbursement for new drug products vary widely from country to country. Current and future legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain marketing approval for a product candidate in a particular country, but then be subject to price regulations that delay our commercial launch of the product, possibly for lengthy time periods, and negatively impact the revenues, if any, we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if such product candidates obtain marketing approval.
Our ability to commercialize any product candidates successfully also will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from third-party payors, including government healthcare programs, private health insurers and other organizations. Third-party payors decide which medications they will pay for and establish reimbursement levels. In the United States, the principal decisions about reimbursement for new medicines are typically made by the CMS, which decides whether and to what extent a new medicine will be covered and reimbursed under Medicare. Private payors often, but not always, follow CMS’s decisions regarding coverage and reimbursement.
A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. Coverage and reimbursement may not be available for any product that we commercialize and, even if these are available, the level of reimbursement may not be satisfactory. Reimbursement may affect the demand for, or the price of, any product candidate for which we obtain marketing approval. Obtaining and maintaining coverage and adequate reimbursement for our products may be difficult. We may be required to conduct expensive pharmacoeconomic studies to justify coverage and reimbursement or the level of reimbursement relative to other therapies. If coverage and adequate reimbursement are not available or reimbursement is available only to limited levels, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval.
Additionally, we may develop, either by ourselves or with collaborators, companion diagnostic tests for our lead product candidate for certain indications. We, or our collaborators, if any, will be required to obtain coverage and reimbursement for these tests separate and apart from the coverage and reimbursement we seek for our product candidates, if approved. While we have not yet developed any companion diagnostic test for our product candidates, if we do, there is significant uncertainty regarding our ability to obtain coverage and adequate reimbursement for the same reasons that are applicable to our product candidates.
There may also be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the FDA or similar regulatory authorities outside of the United States. Moreover, eligibility for coverage and reimbursement does not imply that a drug will be paid for in all cases or at a rate that covers our costs, including research, development, intellectual property, manufacture, sale and distribution expenses. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government
 
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healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies, but also have their own methods and approval process apart from Medicare determinations. Our inability to promptly obtain coverage and adequate reimbursement rates from third-party payors for any approved products that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.
We also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States, particularly in light of the recent presidential election, or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, our product candidates may lose any marketing approval that may have been obtained and we may not achieve or sustain profitability, which would adversely affect our business.
Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.
We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials and will face an even greater risk if we commercialize any products that we may develop. If we cannot successfully defend ourselves against any claims that our product candidates or products caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

decreased demand for any product candidates or products that we may develop;

injury to our reputation and significant negative media attention;

initiation of investigations by regulators;

withdrawal of clinical trial participants;

significant time and costs to defend the related litigation;

diversion of management and scientific resources from our business operations;

substantial monetary awards to trial participants or patients;

loss of revenue;

reduced resources of our management to pursue our business strategy; and

the inability to commercialize any products that we may develop.
Our current product liability insurance coverage for the United States and certain other jurisdictions may not be adequate to cover all liabilities that we may incur. We likely will need to increase our insurance coverage as we expand our clinical trials or if we commence commercialization of seribantumab or our future product candidates. Insurance coverage is increasingly expensive. 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. A successful product liability claim or series of claims brought against us could decrease our cash and adversely affect our business and financial condition.
Risks Related to Employee Matters and Our Operations
We expect to significantly expand our development and regulatory capabilities as we grow our company, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.
As of March 31, 2021, we had eight full-time employees. We expect significant growth in the number of our employees and the scope of our operations, particularly in the areas of clinical development, clinical operations, manufacturing, late-stage regulatory affairs, finance, accounting, business operations, public company compliance,
 
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communications and other corporate development functions, and, if seribantumab or any of our future product candidates receives marketing approval, sales, marketing and distribution. If we acquire additional product candidates or enter into future collaborations, we may have to further expand our employee base beyond our current projections, which may include further preclinical research and development or later-stage regulatory operations. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth and with developing sales, marketing and distribution infrastructure, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The expansion of our operations may lead to significant costs and may divert our management and business development resources. Further, rapid expansion of our workforce while remaining a virtual company and working through the COVID-19 pandemic may have a detrimental impact on employee morale and cohesion.
Further, we currently rely, and for the foreseeable future will continue to rely, in substantial part on certain third-party contract organizations, advisors and consultants to provide certain services, including assuming substantial responsibilities for the conduct of our clinical trials and the manufacturing of seribantumab or any future product candidates. We cannot assure you that the services of such third-party contract organizations, advisors and consultants will continue to be available to us on a timely basis when needed, or that we can find qualified replacements. In addition, if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services provided by our vendors or consultants is compromised for any reason, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain marketing approval of seribantumab or any future product candidates or otherwise advance our business. We cannot assure you that we will be able to properly manage our existing vendors or consultants or find other competent outside vendors and consultants on economically reasonable terms, or at all.
If we are not able to effectively manage growth and expand our organization, we may not be able to successfully implement the tasks necessary to further develop and commercialize seribantumab or our future product candidates and, accordingly, we may not achieve our research, development and commercialization goals.
Our future success depends on our ability to retain key employees and to attract, retain and motivate qualified personnel and manage our human capital.
Our ability to compete in the highly competitive biotechnology and pharmaceutical industries depends upon our ability to attract, motivate and retain highly qualified managerial, scientific and medical personnel. We are highly dependent on the development and management expertise of Shawn Leland, our founder and Chief Executive Officer, as well as the other principal members of our management, scientific and clinical teams. We currently do not maintain key person insurance on these individuals. Although we have entered into employment agreements with our executive officers, each of them may terminate their employment with us at any time. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and manufacturing 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. Recruiting and retaining qualified finance and accounting personnel will also be critical to our success. We may not be able to attract or retain qualified personnel in the future due to the intense competition for a limited number of qualified personnel among pharmaceutical companies. Many of the other pharmaceutical companies against which we compete have greater financial and other resources, different risk profiles and a longer history in the industry than we do. Our competitors may provide higher compensation, more diverse opportunities and/or better opportunities for career advancement. Any or all of these competing factors may limit our ability to continue to attract and retain high quality personnel, which could negatively affect our ability to successfully develop and commercialize our lead product candidate and to grow our business and operations as currently contemplated.
 
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Our employees, clinical trial investigators, CROs, CMOs, consultants, vendors and any potential commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.
We are exposed to the risk of fraud or other misconduct by our employees, clinical trial investigators, CROs, CMOs, consultants, vendors and any potential commercial partners. Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to us that violates: (i) FDA regulations or those of comparable foreign regulatory authorities, including those laws that require the reporting of true, complete and accurate information, (ii) manufacturing standards, (iii) federal and state health and data privacy, security, fraud and abuse, government price reporting, transparency reporting requirements, and other healthcare laws and regulations in the United States and abroad, (iv) sexual harassment and other workplace misconduct or (v) laws that require the true, complete and accurate reporting of financial information or data. Such misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and cause serious harm to our reputation.
We intend to adopt a code of conduct applicable to all of our employees prior to completion of this offering, as well as a disclosure program and other applicable policies and procedures, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from government funded healthcare programs, such as Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional integrity reporting and oversight obligations, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
We are a virtual company and our business depends on the efficient and uninterrupted operation of our information technology systems and those of our third-party CROs, CMOs, or other vendors, contractors or consultants, may fail or suffer security breaches, cyber-attacks, loss or leakage of data and other disruptions, which could result in a material disruption of our development programs, compromise sensitive information related to our business or prevent us from accessing critical information, potentially exposing us to liability or otherwise adversely affecting our business.
We are a virtual company and our business success depends on the security and efficient and uninterrupted operation of our information technology systems and we may be unable to adequately protect our information technology systems from cyber-attacks, which could result in the disclosure of confidential information, damage our reputation, and subject us to significant financial and legal exposure. We are increasingly dependent upon information technology systems, infrastructure and data to operate our business. In the ordinary course of business, we collect, store and transmit confidential information (including but not limited to intellectual property, proprietary business information and sensitive personal information). It is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information. We also have outsourced elements of our operations to third parties, and as a result we manage a number of third-party CROs, CMOs, vendors, and other contractors and consultants who have access to our confidential information. System failures or outages, including any potential disruptions due to significantly increased global demand on certain cloud-based systems during the remote work environment resulting from the COVID-19 pandemic, could compromise our ability to perform these functions in a timely manner, which could harm our ability to conduct business or delay our financial reporting.
Despite the implementation of security measures, given their size and complexity and the increasing amounts of confidential information that they maintain, our internal information technology systems and those of our third-party CROs, CMOs, vendors and other contractors and consultants are potentially vulnerable to breakdown or other damage or interruption from service interruptions, system malfunction, accidents by our employees
 
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or third party service providers, natural disasters, terrorism, war, global pandemics, and telecommunication and electrical failures, as well as security breaches from inadvertent or intentional actions by our employees, third-party CROs, CMOs, vendors, contractors, consultants, business partners and/or other third parties, or from cyber-attacks or supply chain attacks by malicious third parties (including the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information), which may compromise our system infrastructure, or that of our third-party CROs, CMOs, vendors and other contractors and consultants, or lead to data leakage. The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer hackers, 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. The COVID-19 pandemic is generally increasing the attack surface available for exploitation, as more companies and individuals work online and remotely, and as such, the risk of a cybersecurity incident occurring, and our investment in risk mitigations against such an incident, are increasing. For example, there has been an increase in phishing and spam email attacks as well as social engineering attempts from “hackers” hoping to use the recent COVID-19 pandemic to their advantage. We may not be able to anticipate all types of security threats, nor implement preventive measures effective against all such security threats. The techniques used by cyber criminals change frequently, may not be recognized until launched and can originate from a wide variety of sources, including outside groups such as external service providers, organized crime affiliates, terrorist organizations, or hostile foreign governments or agencies. Any breach, loss or compromise of clinical trial participant personal data may also subject us to civil fines and penalties, including under HIPAA, and other relevant state and federal privacy laws in the United States. If the information technology systems of our third-party CROs, CMOs, vendors and other contractors and consultants become subject to disruptions or security breaches, we may have insufficient recourse against such third parties and we may have to expend significant resources to mitigate the impact of such an event, and to develop and implement protections to prevent future events of this nature from occurring.
While we have not experienced any such system failure, accident or security breach to date, we cannot assure you that our data protection efforts and our investment in information technology will prevent significant breakdowns, data leakages, breaches in our systems, or those of our third-party CROs, CMOs, vendors and other contractors and consultants, or other cyber incidents that could have a material adverse effect upon our reputation, business, operations, or financial condition. For example, if such an event were to occur and cause interruptions in our operations, or those of our third-party CROs, CMOs, vendors and other contractors and consultants, it could result in a material disruption of our programs and the development of our lead product candidate could be delayed. In addition, the loss of clinical trial data for seribantumab or any other future product candidates could result in delays in our marketing approval efforts and significantly increase our costs to recover or reproduce the data. Furthermore, significant disruptions of our internal information technology systems or those of our third-party CROs, CMOs, vendors and other contractors and consultants, or security breaches could result in the loss, misappropriation and/or unauthorized access, use, or disclosure of, or the prevention of access to, confidential information (including trade secrets or other intellectual property, proprietary business information, and sensitive personal information), which could result in financial, legal, business and reputational harm to us.
A security breach may cause us to breach customer contracts. Our agreements with certain customers may require us to use industry-standard or reasonable measures to safeguard sensitive personal information or confidential information. A security breach could lead to claims by our customers, their end users, or other relevant stakeholders that we have failed to comply with such legal or contractual obligations. As a result, we could be subject to legal action or our customers could end their relationships with us. There can be no assurance that the limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from liabilities or damages.
In addition, litigation resulting from security breaches may adversely affect our business. Unauthorized access to our platform, systems, networks, or physical facilities could result in litigation with our customers, our customers’ end users, or other relevant stakeholders. These proceedings could force us to spend money in defense or settlement, divert management’s time and attention, increase our costs of doing business, or adversely affect our reputation. We could be required to fundamentally change our business activities and practices or
 
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modify our solutions and/or platform capabilities in response to such litigation, which could have an adverse effect on our business. If a security breach were to occur and the confidentiality, integrity or availability of our data or the data of our partners, our customers or our customers’ end users was disrupted, we could incur significant liability, or our platform, systems or networks may be perceived as less desirable, which could negatively affect our business and damage our reputation.
We may not have adequate insurance coverage with respect to security breaches or disruptions. The successful assertion of one or more large claims against us that exceeds our available insurance coverage, or results in changes to our insurance policies (including premium increases or the imposition of large deductible or co-insurance requirements), could have an adverse effect on our business. In addition, we cannot be sure that our existing insurance coverage and coverage for errors and omissions will continue to be available on acceptable terms or that our insurers will not deny coverage as to any future claim.
We are subject to stringent and changing laws, regulations, rules, policies, standards, and contractual obligations related to privacy and data security. Our actual or perceived failure to comply with such obligations could lead to government enforcement actions (which could include civil or criminal penalties), private litigation and/or adverse publicity and could negatively affect our operating results and business.
We and any potential collaborators may be subject to federal, state and other data protection laws and regulations (i.e., laws and regulations that address privacy and data security). The regulatory framework for privacy, data security and data transfers worldwide is rapidly evolving and there has been an increasing focus on privacy and data protection issues with the potential to affect our business and as a result, interpretation and implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future. Failure to comply with any of these laws and regulations could result in enforcement actions against us, including fines, public censure, 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.
In the United States, numerous federal and state laws and regulations, including federal health information privacy laws, state data breach notification laws, state health information privacy laws and federal and state consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), that govern the collection, use, disclosure and protection of health-related and other personal information could apply to our operations or the operations of our collaborators. In addition, we may obtain health information from third parties (including research institutions from which we obtain clinical trial data) that are subject to privacy and security requirements under HIPAA, as amended by HITECH. Depending on the facts and circumstances, we could be subject to penalties if we obtain, use, or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA.
In addition, the state of California recently enacted the California Consumer Privacy Act, or CCPA, which creates new individual privacy rights for California consumers (as defined in the CCPA) and places increased privacy and security obligations on entities handling certain personal data of consumers or households. The CCPA requires covered companies to provide new disclosures to consumers about such companies’ data collection, use and sharing practices, provide such consumers new ways to opt-out of certain sales or transfers of personal information, and provide consumers with a private right of action for data breaches. The CCPA went into effect on January 1, 2020 and may impact our business activities and exemplifies the vulnerability of our business to the evolving regulatory environment related to personal data and protected health information. Additionally, although not effective until January 1, 2023, the California Privacy Rights Act, or the CPRA, which expands upon the CCPA, was recently passed in California. The CCPA gives (and the CPRA will give) California residents expanded privacy rights, including the right to request correction, access, and deletion of their personal information, the right to opt out of certain personal information sharing, and the right to receive detailed information about how their personal information is processed. The CCPA and CPRA provide for unlimited civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. The CCPA and CPRA may increase our compliance costs and potential liability, particularly in the event of a data breach. Additionally, the CCPA has prompted a number of proposals in the U.S. for new federal and state-level privacy legislation that, if passed, could increase our potential liability, increase our compliance costs, and adversely affect our business.
 
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Additionally, laws, regulations, rules and standards in many foreign jurisdictions apply broadly to the collection, use, retention, security, disclosure, transfer and other processing of personal information, which may impose significant compliance obligations on us. For example, in the EU, the processing of personal data, is governed by the provisions of the General Data Protection Regulation, or the GDPR.
In May 2018, the GDPR took effect in the European Economic Area, or the EEA. The GDPR governs the collection, use, disclosure, transfer or other processing of personal data of natural persons. Among other things, the GDPR imposes strict obligations on the ability to process health-related and other personal data of data subjects in the EEA, including in relation to use, collection, analysis and transfer (including cross-border transfers) of such personal data. The GDPR includes requirements relating to the consent of the individuals to whom the personal data relates, including detailed notices for clinical trial subjects and investigators. The GDPR also includes certain requirements regarding the security of personal data and notification of data processing obligations or security incidents to appropriate data protection authorities or data subjects, as well as requirements for establishing a lawful basis on which personal data can be processed. In addition, the GDPR increases the scrutiny of cross-border transfers of personal data from clinical trial sites located in the EEA to the United States and other jurisdictions that the European Commission does not recognize as having “adequate” data protection laws, and imposes substantial fines for breaches and violations (up to the greater of €20 million or 4% of our consolidated annual worldwide gross revenue). Further, recent legal developments in Europe have created complexity and compliance uncertainty regarding certain transfers of information from the EEA to the United States. For example, on June 16, 2020, the Court of Justice of the European Union, or the CJEU, declared the EU-U.S. Privacy Shield framework, or the Privacy Shield, to be invalid. As a result, Privacy Shield is no longer a valid mechanism for transferring personal data from the EEA to the United States. Moreover, it is uncertain whether the standard contractual clauses will also be invalidated by the European courts or legislature, which seems possible given the rationale behind the CJEU’s concerns about U.S. law and practice on government surveillance. The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies and obtain compensation for damages resulting from violations of the GDPR.
We also may make public statements about our use and disclosure of personal information through our privacy policy and press statements. Although we endeavor to comply with our public statements and documentation, we may at times fail to do so or be alleged to have failed to do so. Despite our efforts, we may not be successful in achieving compliance if our employees or vendors fail to comply with our policies, certifications, and documentation. The publication of our privacy policy and other statements that provide promises and assurances about data privacy and security can subject us to potential government or legal action if they are found to be deceptive, unfair or misrepresentative of our actual practices. Any failure, real or perceived, by us to comply with our posted privacy policies or with any legal or regulatory requirements, standards, certifications or orders or other privacy or consumer protection-related laws and regulations applicable to us could cause our customers to reduce their use of our solutions and services and could materially and adversely affect our business, results of operations, financial condition, cash flows and prospects.
Compliance with U.S. and foreign data protection laws and regulations could require us to take on more onerous obligations in our contracts, restrict our ability to collect, transfer, use and disclose data, or in some cases, impact our ability to operate in certain jurisdictions. Failure to comply with U.S. and foreign data protection laws and regulations could result in government enforcement actions (which could include civil, criminal, and administrative penalties), private litigation and/or adverse publicity and could negatively affect our operating results and business. Moreover, clinical trial subjects about whom we or our potential collaborators obtain information, as well as the providers who share this information with us, may contractually limit our ability to use and disclose the information. Claims that we have violated individuals’ privacy rights, failed to comply with data protection laws, or breached our contractual obligations, even if we are not found liable, could be expensive and time consuming to defend and could result in adverse publicity that could harm our business.
We or the third parties upon whom we depend may be adversely affected by natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.
Any unplanned event, such as flood, fire, explosion, earthquake, extreme weather condition, public health epidemic, including the COVID-19 pandemic, power shortage, telecommunication failure or other natural or
 
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manmade accidents or incidents that result in us being unable to fully utilize our facilities, or the manufacturing facilities of our third-party CMOs, may have a material and adverse effect on our ability to operate our business, particularly on a daily basis, and have significant negative consequences on our financial and operating conditions. Extreme weather conditions or other natural disasters could further disrupt our operations and have a material and adverse effect on our business, financial condition, results of operations and prospects. If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our facilities, that damaged critical infrastructure, such as our research facilities or the manufacturing facilities of our third-party CMOs, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time.
Operating as a virtual company, our employees conduct business outside of any leased or owned facilities. These locations may be subject to additional security and other risk factors due to the limited control of our employees. The disaster recovery and business continuity plans we have in place may prove inadequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which could have a material adverse effect on our business. As part of our risk management policy, we maintain insurance coverage at levels that we believe are appropriate for our business. However, in the event of an accident or incident at these facilities, we cannot assure you that the amounts of insurance will be sufficient to satisfy any damages and losses. If our facilities, or the manufacturing facilities of our third-party CMOs, are unable to operate because of an accident or incident or for any other reason, even for a short period of time, any or all of our research and development programs may be harmed. Any business interruption could have a material and adverse effect on our business, financial condition, results of operations and prospects.
Changes in tax laws or regulations that are applied adversely to us may have a material adverse effect on our business, cash flow, financial condition or results of operations.
New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our business operations and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. For example, the Tax Cuts and Jobs Act, enacted many significant changes to the U.S. tax laws. Future guidance from the Internal Revenue Service and other tax authorities with respect to the Tax Cuts and Jobs Act may affect us, and certain aspects of the Tax Cuts and Jobs Act could be repealed or modified in future legislation. For example, the CARES Act modified certain provisions of the Tax Cuts and Jobs Act. In addition, it is uncertain if and to what extent various states will conform to the Tax Cuts and Jobs Act, the CARES Act, or any other newly enacted federal tax legislation. Changes in corporate tax rates, the realization of net deferred tax assets relating to our operations, the taxation of foreign earnings, and the deductibility of expenses under the Tax Cuts and Jobs Act, the CARES Act or future reform legislation could have a material impact on the value of our deferred tax assets, could result in significant one-time charges, and could increase our future U.S. tax expense.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
We have incurred substantial losses during our history and do not expect to become profitable in the near future, and we may never achieve profitability. Under the Tax Cuts and Jobs Act, as modified by the CARES Act, unused U.S. federal net operating losses generated in tax years beginning after December 31, 2017, will not expire and may be carried forward indefinitely but the deductibility of such federal net operating losses may be limited to 80% of current year taxable income. It is uncertain if and to what extent various states will conform to the Tax Cuts and Jobs Act or the CARES Act. In addition, both our current and our future unused losses and other tax attributes may be subject to limitation under Sections 382 and 383 of the U.S. Internal Revenue Code of 1986, as amended, or the Code, if we undergo, or have undergone, an “ownership change,” generally defined as a greater than 50 percentage point change (by value) in our equity ownership by certain stockholders over a three-year period. We have not completed a Section 382 study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since our formation due to the complexity and cost associated with such a study and the fact that there may be additional ownership changes in the future. As a result, if we
 
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undergo an ownership change (or if we previously underwent such an ownership change), our ability to use all of our pre-change net operating loss carryforwards and other pre-change tax attributes (such as research tax credits) to offset our post-change income or taxes may be limited. Similar provisions of state tax law may also apply to limit our use of accumulated state tax attributes. In addition, at the state level, there may be periods during which the use of net operating losses is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. As a result, even if we attain profitability, we may be unable to use all or a material portion of our net operating losses and other tax attributes, which could adversely affect our future cash flows.
Risks Related to Intellectual Property
If we are unable to obtain and maintain sufficient patent protection for our product candidates, or if the scope of the patent protection is not sufficiently broad, third parties, including our competitors, could develop and commercialize products similar or identical to ours, and our ability to commercialize seribantumab and our future product candidates may be adversely affected.
Our success depends in large part on our ability to protect our proprietary technologies that we believe are important to our business, including pursuing, obtaining and maintaining patent protection in the United States and other countries intended to cover the compositions of matter of seribantumab and our future product candidates, their methods of use, related technologies and other inventions that are important to our business. In addition to patent protection, we also rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection. If we do not adequately pursue, obtain, maintain, protect or enforce our intellectual property, third parties, including our competitors, may be able to erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability.
The patent application and approval process is expensive, time-consuming and complex. We may not be able to file, prosecute and maintain all necessary or desirable patent applications at a reasonable cost or in a timely manner or in all jurisdictions. We also cannot predict whether the patent applications we are currently pursuing will issue as patents in any particular jurisdictions. It is also possible that we will fail to identify patentable aspects of our product candidates before it is too late to obtain patent protection. Moreover, depending on the terms of any future license agreements to which we may become a party, we may not have the right to control the preparation, filing, and prosecution of patent applications, or to maintain the patents, covering technology licensed from third parties. Therefore, these patents and patent applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.
Furthermore, the patent position of biotechnology and pharmaceutical companies generally is highly uncertain. No consistent policy regarding the breadth of claims allowed in biotechnology and pharmaceutical patents has emerged to date in the United States or in many foreign jurisdictions. The standards applied by the United States Patent and Trademark Office, or the USPTO, and foreign patent offices in granting patents are not always applied uniformly or predictably. In addition, the determination of patent rights with respect to biological and pharmaceutical products commonly involves complex legal and factual questions, which have in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Thus, we cannot offer any assurances about which, if any, patents will be issued, the breadth of any such patents, whether any issued patents will be found invalid and unenforceable or will be threatened by third parties or whether any issued patents will effectively prevent others from commercializing competing technologies and product candidates. While we have filed patent applications covering aspects of our current lead product candidate, we currently have only two U.S. applications specifically covering the use of seribantumab to treat patients with tumors harboring an NRG1 fusion according to our CRESTONE clinical dosing regimen. Any patents issuing from these currently unpublished applications would expire in 2040 and 2042, respectively, subject to any disclaimers or extensions.
Our pending patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until at least one patent issues from such applications. Assuming the other requirements for patentability are met, currently, the first to file a patent application is generally entitled to the
 
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patent. However, prior to March 16, 2013, in the United States, the first to invent was entitled to the patent. Publications of discoveries in the scientific 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. Since patent applications in the United States and most other countries are confidential for a period of time after filing, and some remain so until issued, we cannot be certain that we were the first to file or invent (prior to March 16, 2013) any patent application related to our current or future product candidates. In addition, we enter into non-disclosure and confidentiality agreements with parties who have access to confidential or patentable aspects of our research and development output, such as our employees, collaborators, CROs, CMOs, hospitals, independent treatment centers, consultants, independent contractors, suppliers, advisors and other third parties; however, any of these parties may breach the agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek patent protection. Furthermore, if third parties have filed patent applications related to our current or future product candidates or technology, we may not be able to obtain our own patent rights to those product candidates or technology.
Moreover, because the issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, our patents or pending patent applications may be challenged in the courts or patent offices in the United States and abroad. For example, we may be subject to a third-party pre-issuance submission of prior art to the USPTO or become involved in post-grant review procedures, oppositions, derivations, revocation, reexaminations, inter partes review or interference proceedings, in the United States or elsewhere, challenging our patent rights or the patent rights of others. An adverse 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, or result in our inability to manufacture or commercialize products without infringing third-party rights. Moreover, we may have to participate in interference proceedings declared by the USPTO to determine priority of invention or in post-grant challenge proceedings, such as oppositions in a foreign patent office, that challenge priority of invention or other features of patentability. Such challenges may result in loss of exclusivity or in our patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and products or limit the duration of the patent protection of our technology and products. Such challenges also may result in substantial cost and require significant time from our scientists and management, even if the eventual outcome is favorable to us. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, and prospects.
In addition, given the amount of time required for the development, testing and regulatory review of new product candidates, our patents protecting such product candidates might expire before or shortly after such product 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, some of our patents and patent applications may in the future be co-owned with third parties. 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 may need the cooperation of any such co-owners of our patents in order to enforce such patents against third parties, and such cooperation may not be provided to us. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and prospects.
Our pending and future patent applications may not result in patents being issued that protect our product candidates, in whole or in part, or which effectively prevent others from commercializing competitive products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. In addition, the laws of other countries may not protect our rights to the same extent or in the same manner as the laws of the United States. For example, European patent law restricts the patentability of methods of treatment of the human body more than United States law does.
Even if our patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors or other third parties from competing with us or otherwise provide
 
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us with any competitive advantage. Moreover, the coverage claimed in a patent application can be significantly reduced before the patent is issued and its scope can be reinterpreted after issuance. Consequently, we do not know whether our lead product candidate will be protectable or remain protected by valid and enforceable patents. Our competitors and other third parties may be able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner. Our competitors and other third parties may also seek approval to market their own products similar to or otherwise competitive with our products. Alternatively, our competitors or other third parties may seek to market generic versions or “follow-on” versions of any approved products by submitting abbreviated new drug applications, or ANDAs, or new drug applications under Section 505(b)(2) of the FDCA, respectively, to the FDA during which they may claim that patents owned by us are invalid, unenforceable or not infringed. In these circumstances, we may need to defend or assert our patents, or both, including by filing lawsuits alleging patent infringement. In any of these types of proceedings, a court or other agency with jurisdiction may find our patents invalid or unenforceable, or that our competitors are competing in a non-infringing manner. Thus, even if we have valid and enforceable patents, these patents still may not provide protection against competing products or processes sufficient to achieve our business objectives. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and prospects.
Furthermore, future patents may be subject to a reservation of rights by one or more third parties. For example, to the extent the research resulting in future patent rights or technologies is funded in the future in part by the U.S. government, the government could have certain rights in any resulting patents and technology, including a non-exclusive license authorizing the government to use the invention or to have others use the invention on its behalf for non-commercial purposes. If the U.S. government then decides to exercise these rights, it is not required to engage us as its contractor in connection with doing so. These rights may also permit the government to disclose our confidential information to third parties and to exercise march-in rights to use or allow third parties to use our licensed technology. The government may also exercise its march-in rights if it determines that action is necessary because we failed to achieve practical application of the government-funded technology, because action is necessary to alleviate health or safety needs, to meet requirements of federal regulations, or to give preference to U.S. industry. In addition, our rights in such government-funded inventions may be subject to certain requirements to manufacture products embodying such inventions in the United States. Any exercise by the government of aforementioned proprietary rights could harm our competitive position, business, financial condition, results of operations, and prospects.
Changes to patent laws in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our products.
As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biotechnology and pharmaceutical industries involves both technological and legal complexity and is therefore costly, time consuming and inherently uncertain. Changes in either the patent laws or interpretation of the patent laws in the United States could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents. Recent patent reform legislation in the United States and other countries, including the Leahy-Smith America Invents Act, or the Leahy-Smith Act, signed into law in September 2011, could increase those uncertainties and costs. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted, redefine prior art and provide more efficient and cost-effective avenues for competitors to challenge the validity of patents. For example, the Leahy-Smith Act allows third-party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO administered post-grant proceedings, including post-grant review, inter partes review, and derivation proceedings. In addition, the Leahy-Smith Act has transformed the U.S. patent system from a “first-to-invent” system to a “first-to-file” system in which, assuming that other requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention. The first-to-file provisions, however, only became effective on March 16, 2013. It is not yet clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation
 
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could make it more difficult to obtain patent protection for our inventions and increase the uncertainties and costs surrounding the prosecution of our or our potential collaboration partners’ patent applications and the enforcement or defense of our or our future collaboration partners’ issued patents, all of which could harm our business, results of operations, financial condition and prospects.
In addition, the patent positions of companies in the development and commercialization of biologics are particularly uncertain. The U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. This combination of events has created uncertainty with respect to the validity and enforceability of patents, once obtained. Additionally, there have been recent proposals for additional changes to the patent laws of the United States and other countries that, if adopted, could impact our ability to enforce our proprietary technology. Depending on future actions by the U.S. Congress, the U.S. courts, the USPTO and the relevant law-making bodies in other countries, the laws and regulations governing patents could change in unpredictable ways that could have a material adverse effect on our existing patent portfolio and weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.
We may become involved in lawsuits or administrative disputes to protect or enforce our patents or other intellectual property, which could be expensive, time consuming and unsuccessful.
Competitors and other third parties may infringe, misappropriate or otherwise violate our patents, trademarks, copyrights, trade secrets or other intellectual property. To counter infringement, misappropriation or other violations, we may be required to file infringement, misappropriation or other violation claims, which can be expensive and time consuming and divert the time and attention of our management and business and scientific personnel. In addition, many of our adversaries in these proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions than we can.
Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe, misappropriate or otherwise violate their patents or their other intellectual property, in addition to counterclaims asserting that our patents are invalid or unenforceable, or both. In patent litigation in the United States, counterclaims challenging the validity, enforceability or scope of asserted patents are commonplace. Similarly, third parties may initiate legal proceedings against us seeking a declaration that certain of our intellectual property is non-infringed, invalid or unenforceable. The outcome of any such proceeding is generally unpredictable.
In any patent infringement proceeding, there is a risk that a court will decide that a patent of ours is invalid or unenforceable, in whole or in part, and that we do not have the right to stop the other party from using the invention at issue. There is also a risk that, even if the validity of such patents is upheld, the court will construe the patent’s claims narrowly or decide that we do not have the right to stop the other party from using the invention at issue on the grounds that our patent claims do not cover the invention. An adverse outcome in a litigation or proceeding involving our patents could limit our ability to assert our patents against those parties or other competitors, and may curtail or preclude our ability to exclude third parties from making and selling similar or competitive products. If a defendant were to prevail on a legal assertion of invalidity or unenforceability of our patents covering one of our product candidates, we could lose at least a part, and perhaps all, of the patent protection covering such a product candidate. Competing drugs may also be sold in other countries in which our patent coverage might not exist or be as strong. If we lose a foreign patent lawsuit, alleging our infringement of a competitor’s patents, we could be prevented from marketing our product candidates in one or more foreign countries. Any of these occurrences could adversely affect our competitive business position, business prospects and financial condition. Similarly, if we assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have asserted trademark infringement has superior rights to the marks in question. In this case, we could ultimately be forced to cease use of such trademarks.
Even if we establish infringement, the court may decide not to grant an injunction against further infringing activity and instead award only monetary damages, which may or may not be an adequate remedy. Furthermore,
 
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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 litigation. There could also 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 material adverse effect on the price of shares of our common stock. Moreover, there can be no assurance that we will have sufficient financial or other resources to file and pursue such infringement claims, which typically last for years before they are concluded. Even if we ultimately prevail in such claims, the monetary cost of such litigation and the diversion of the attention of our management and scientific personnel could outweigh any benefit we receive as a result of the proceedings.
Furthermore, third parties may also raise invalidity or unenforceability claims before administrative bodies in the United States or foreign authorities, even outside the context of litigation. Such mechanisms include re-examination, inter partes review, post-grant review, interference proceedings, derivation proceedings and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). Such proceedings could result in revocation, cancellation or amendment to our patents in such a way that they no longer cover and protect our product candidates. The outcome following legal assertions of invalidity and unenforceability is unpredictable. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, non-enablement or written description. Grounds for an unenforceability assertion could be an allegation that someone connected with the prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution of the patent. With respect to the validity of our patents, for example, we cannot be certain that there is no invalidating prior art of which we, our licensors, our patent counsel and the patent examiner were unaware during prosecution. Moreover, it is possible that prior art may exist that we are aware of but do not believe is relevant to our current or future patents, but that could nevertheless be determined to render our patents invalid. If a third party were to prevail on a legal assertion of invalidity or unenforceability, we could lose at least part, and perhaps all, of the patent protection on our lead product candidate. Any such loss of patent protection could have a material adverse impact on our business, financial condition, results of operations and prospects.
We may not be able to effectively protect or enforce our intellectual property and proprietary rights throughout the world.
Filing, prosecuting and defending patents with respect to our product candidates in all countries throughout the world would be prohibitively expensive, and the laws of other countries may not protect our rights to the same extent as the laws of the United States. The requirements for patentability may differ in certain countries, particularly in developing countries. In addition, any future intellectual property license agreements may not always include worldwide rights. Consequently, competitors and other third parties 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 may obtain patent protection, but where patent enforcement is not as strong as that in the United States and where our ability to enforce our patents to stop infringing activities may be inadequate. These products may compete with our products in such territories and in jurisdictions where we do not have any patent rights or where any future patent claims or other intellectual property or proprietary rights may not be effective or sufficient to prevent them from competing with us, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
Moreover, our ability to protect and enforce our intellectual property and proprietary rights may be adversely affected by unforeseen changes in foreign intellectual property laws. Additionally, the laws of some countries outside of the United States and Europe do not afford intellectual property protection to the same extent as the laws of the United States and Europe. Many companies have encountered significant problems in protecting and defending intellectual property and proprietary rights in certain jurisdictions. The legal systems of some countries, including, for example, India, China and other developing countries, do not view favorably the enforcement of patents and other intellectual property or proprietary rights, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement, misappropriation or other violation of our patents or other intellectual property or proprietary rights. For example, many countries have
 
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compulsory licensing laws under which a patent owner must grant licenses to third parties. Consequently, we may not be able to prevent third parties from practicing our inventions in certain countries outside the United States and Europe. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we are forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations, and prospects may be adversely affected. Proceedings to enforce our intellectual property and proprietary rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and resources from other aspects of our business, could put our patents, trademarks or other intellectual property and proprietary rights at risk of being invalidated or interpreted narrowly, could put 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. Furthermore, while we intend to protect our intellectual property and proprietary rights in major markets for our products, we cannot ensure that we will be able to initiate or maintain similar efforts in all jurisdictions in which we may wish to market our products. Accordingly, our efforts to protect our intellectual property and proprietary rights in such countries may be inadequate.
If we are sued for infringing, misappropriating or otherwise violating intellectual property or proprietary rights of third parties, such litigation or disputes could be costly and time consuming and could prevent or delay us from developing or commercializing our product candidates.
Our commercial success depends, in part, on our ability to develop, manufacture, market and sell our product candidates and use our proprietary technologies without infringing, misappropriating or otherwise violating the intellectual property and other proprietary rights of third parties. If any third-party patents, patent applications or other proprietary rights are found to cover our product candidates or any related companion diagnostics or their compositions, methods of use or manufacturing, we may be required to pay damages, which could be substantial, and we would not be free to manufacture or market our product candidates or to do so without obtaining a license, which may not be available on commercially reasonable terms, or at all.
We may in the future become party to, or threatened with, adversarial proceedings or litigation regarding intellectual property or proprietary rights with respect to our product candidates and technologies we use in our business. Our competitors or other third parties may assert infringement claims against us, alleging that our product candidates are covered by their patents. We cannot be certain that we do not infringe existing patents or that we will not infringe patents that may be granted in the future. Furthermore, because patent applications can take many years to issue and may be confidential for 18 months or more after filing, and because patent claims can be revised before issuance, there may be applications now pending which may later result in issued patents that may be infringed by the manufacture, use or sale of our product candidates. If a patent holder believes our product candidate infringes its patent rights, the patent holder may sue us even if we have received patent protection for our technology. Moreover, we may face patent infringement claims from non-practicing entities that have no relevant drug revenue and against whom our own patent portfolio may thus have no deterrent effect.
There is a substantial amount of intellectual property litigation in the biotechnology and biological product industries, and we may become party to, or threatened with, litigation or other adversarial proceedings regarding intellectual property or proprietary rights with respect to our product candidates, including interference proceedings before the USPTO. Third parties may assert infringement, misappropriation or other claims against us based on existing or future intellectual property or proprietary rights. The outcome of intellectual property litigation and other disputes is subject to uncertainties that cannot be adequately quantified in advance. The biological product and biotechnology industries have produced a significant number of patents, and it may not always be clear to industry participants, including us, which patents cover various types of products or methods of using or manufacturing products. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. If we were sued for patent infringement, we would need to demonstrate that our product candidates, products or methods of use, manufacturing or other applicable activities either do not infringe the patent claims of the relevant patent or that the patent claims are invalid or unenforceable, and we
 
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may not be successful in doing so. However, proving invalidity or unenforceability is difficult. For example, in the United States, proving invalidity requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents. Even if we believe third-party intellectual property claims are without merit, there is no assurance that a court would find in our favor on questions of infringement, validity, or enforceability. Even if we are successful in these proceedings, we may incur substantial costs and the time and attention of our management and business and scientific personnel could be diverted in pursuing these proceedings, which could significantly harm our business and operating results. In addition, we may not have sufficient resources to bring these actions to a successful conclusion.
If we are found to infringe, misappropriate or otherwise violate a third party’s intellectual property or proprietary rights and we are unsuccessful in demonstrating that such intellectual property or proprietary rights are invalid or unenforceable, we could be forced, including by court order, to cease developing, manufacturing or commercializing the infringing product candidate or product. Alternatively, we may be required to obtain a license from such third party in order to use the infringing technology and continue developing, manufacturing or marketing the infringing product candidate. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain such a license, it could be granted on non-exclusive terms, thereby giving our competitors and other third parties access to the same technologies licensed to us. In addition, we could be found liable for significant monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed such third-party patent rights. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business, financial condition, results of operations and prospects.
We may be subject to claims by third parties asserting that our employees or consultants or we have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.
Some of our employees and consultants are currently or have been previously employed at universities or at other biotechnology or biologics companies, including our competitors or potential competitors. These employees and consultants may have executed proprietary rights, non-disclosure and non-competition agreements, or similar agreements, in connection with such other current or previous employment. Although we try to ensure that our employees and consultants do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these individuals have used or disclosed intellectual property, including trade secrets or other proprietary information, of third parties. Litigation may be necessary to defend against such claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property or personnel or sustain damages. Such intellectual property could be awarded to a third party, and we could be required to obtain a license from such third party to commercialize our technology or products. Such a license may not be available on commercially reasonable terms or at all. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to our management. Any of the foregoing would have a material adverse effect on our business, financial condition, results of operations and prospects.
In addition, while it is our policy to require our employees, consultants and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own, which may result in claims by or against us related to the ownership of such intellectual property. In addition, such agreements may not be self-executing such that the intellectual property subject to such agreements may not be assigned to us without additional assignments being executed, and we may fail to obtain such assignments. In addition, such agreements may be breached. In addition, we have multiple sponsored research agreements relating to our lead product candidate with various academic institutions. Some of these academic institutions may not have intellectual property assignments or similar agreements with their employees and consultants, which may result in claims by or against us related to
 
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ownership of any intellectual property. Accordingly, we may be forced to bring claims against third parties, or defend claims that they may bring against us to determine the ownership of what we regard as our intellectual property. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to our senior management and scientific personnel, which would have a material adverse effect on our business, financial condition, results of operations and prospects.
Rights to improvements to our product candidates may be held by third parties, which could require us to obtain a license to such rights. Such a license may not be available on commercially reasonable terms, if at all.
We have entered into agreements with third parties to conduct clinical testing of our product candidates, which provide that improvements to our product candidates may be owned solely by a party or jointly between the parties. If we determine that rights to such improvements owned solely by a third party are necessary to commercialize our product candidates or maintain our competitive advantage, we may need to obtain a license from such third party in order to use the improvements and continue developing, manufacturing or marketing the product candidates. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain such a license, it could be granted on non-exclusive terms, thereby giving our competitors and other third parties access to the same technologies licensed to us. Failure to obtain a license on commercially reasonable terms or at all, or to obtain an exclusive license, could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business. If we determine that rights to improvements jointly owned between us and a third party are necessary to commercialize our product candidates or maintain our competitive advantage, we may need to obtain an exclusive license from such third party. If we are unable to obtain an exclusive license to any such third-party co-owners’ interest in such improvements, such co-owners may be able to license their rights to other third parties, including our competitors, and our competitors could market competing products and technology. In addition, we may need the cooperation of any such co-owners of our intellectual property in order to enforce such intellectual property against third parties, and such cooperation may not be provided to us. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and prospects.
We may be subject to claims challenging the inventorship of our patents and other intellectual property.
We or any future licensors may be subject to claims that former employees, collaborators or other third parties have an interest in our owned or in-licensed patents, trade secrets, or other intellectual property as an inventor or co-inventor. For example, we or any future licensors may have inventorship disputes arise from conflicting obligations of employees, consultants or others who are involved in developing our product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship or our or any future licensors’ ownership of our owned or in-licensed patents, trade secrets or other intellectual property. If we or any future licensors fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property that is important to our product candidates. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.
The term of our patents may be inadequate to protect our competitive position on our products.
Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. For example, our wholly owned patent portfolio includes a patent family with claims directed to antibodies and related compositions covering seribantumab, as well as methods of treating cancer using such antibodies and compositions. The family contains three U.S. patents directed to seribantumab which expire in February 2028 and a fourth U.S. patent which expires in October 2029 (including 614 days of Patent Term Adjustment), subject to
 
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any disclaimers or extensions. The family also contains a pending U.S. application, which if issued, would expire in February 2028, subject to any disclaimers or extensions. In addition, the above-discussed patent family includes granted patents in China, Europe, Hong Kong, Israel, and Japan with claims directed to compositions of matter covering seribantumab and related methods of therapy. These patents expire in February 2028, subject to any disclaimers or extensions. Depending upon the timing, duration and other factors relating to any FDA marketing approval we receive for our lead product candidate, 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 Action of 1984, or the Hatch-Waxman Amendments. We expect to seek extensions of patent terms in the United States and, if available, in other countries where we are prosecuting patents. In the United States, the Hatch-Waxman Amendments permit a patent term extension of up to five years beyond the normal expiration of the patent, limited to the approved indication (or any additional indications approved during the period of extension), as compensation for patent term lost to the regulatory review process during which the sponsor was unable to commercially market its new product. 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 applicable to an approved drug is eligible for the extension and only those claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended, and the application for the extension must be submitted prior to the expiration of the patent. However, the applicable authorities, including the FDA and the USPTO in the United States, and any equivalent regulatory authority in other countries, may not agree with our assessment of whether such extensions are available for our patents, may refuse to grant extensions to our patents, or may grant more limited extensions than we request. 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. If we are unable to obtain patent term extension or the term of any such extension is less than we request, our competitors and other third parties may be able to obtain approval of competing products following our patent expiration and take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case. Any of the foregoing would have a material adverse effect on our business, financial condition, results of operations and prospects.
Obtaining and maintaining our patent protection depends on compliance with various procedural, documentary, fee payment and other requirements imposed by governmental patent offices, and our patent protection could be reduced or eliminated for noncompliance with these requirements.
Periodic maintenance fees, renewal fees, annuity fees and various other government fees on any issued patent are due to be paid to the USPTO and patent offices in foreign countries in several stages over the lifetime of the patent. The USPTO and patent offices in foreign countries require compliance with a number of procedural, documentary, fee payment and other requirements during the patent application process. In the future, we may rely on licensing partners to pay these fees due to U.S. and non-U.S. patent agencies and to comply with these other requirements with respect to any future licensed patents and patent applications. While an inadvertent lapse can 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 a patent or patent rights in the relevant jurisdiction. Non-compliance 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 and other third parties might be able to enter the market with similar or identical products of technology, which would have a material adverse effect on our business, financial condition, results of operations and prospects.
If we are unable to protect the confidentiality of our trade secrets, the value of our technology could be materially adversely affected and our business would be harmed.
We rely on proprietary know-how and trade secret protection and confidentiality agreements to protect proprietary know-how or trade secrets that are not patentable or that we elect not to patent. We seek to protect our trade secrets and proprietary know-how in part by entering into non-disclosure and confidentiality agreements
 
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with parties who have access to such knowledge, such as our employees, consultants, independent contractors, advisors, CMOs, CROs, hospitals, independent treatment centers, suppliers, collaborators and other third parties. We also enter into confidentiality and invention or patent assignment agreements with employees and certain consultants. However, we cannot guarantee that we have entered into such agreements with each party that may have or have had access to our trade secrets or proprietary know-how. Additionally, our confidentiality agreements and other contractual protections may not be adequate to protect our intellectual property from unauthorized disclosure, third-party infringement or misappropriation. Any party with whom we have executed such an agreement may breach that agreement and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts in the United States and certain foreign jurisdictions are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, we would have no right to prevent such third party, or those to whom they communicate such technology or information, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor or other third party, our business, financial condition, results of operations and prospects our business and competitive position could be materially harmed.
Intellectual property rights do not necessarily address all potential threats.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage. For example:

others may be able to make products similar to any product candidates we may develop or utilize similarly related technologies that are not covered by the claims of the patents that we may license or may own in the future;

we, or any future license partners or current or future collaborators, might not have been the first to make the inventions covered by the issued patent or pending patent application that we license or may own in the future;

we, or any future license partners or current or future collaborators, might not have been the first to file patent applications covering certain of our or their inventions;

others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing, misappropriating or otherwise violating any of our owned or licensed intellectual property rights;

it is possible that our pending patent applications or those that we may own in the future will not lead to issued patents;

issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors or other third parties;

our competitors or other third parties might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;

we may not develop additional proprietary technologies that are patentable;

the patents of others may harm our business; and

we may choose not to file a patent in order to maintain certain trade secrets or know how, and a third party may subsequently file a patent covering such intellectual property.
Should any of these events occur, they could have a material adverse effect on our business, financial condition, results of operations and prospects.
 
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Risks Related to Our Common Stock and This Offering
No public market for our common stock currently exists, and an active and liquid trading market for our common stock may never develop. As a result, you may not be able to resell your shares of common stock at or above the initial public offering price.
Prior to this offering, no market for shares of our common stock existed and an active trading market for our shares may never develop or be sustained following this offering. The initial public offering price for our common stock has been determined through negotiations with the underwriters and the negotiated price may not be indicative of the market price of our common stock after this offering. The market value of our common stock may decrease from the initial public offering price. As a result of these and other factors, you may be unable to resell your shares of our common stock at or above the initial public offering price. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value of your shares. Furthermore, an inactive market may also impair our ability to raise capital by selling shares of our common stock and may impair our ability to enter into strategic collaborations or acquire companies or products by using our shares of common stock as consideration.
The market price of our common stock is likely to be highly volatile, which could result in substantial losses for purchasers of our common stock in this offering.
The market price of our common stock following this offering is likely to continue to be highly volatile and subject to wide fluctuations in response to various factors, some of which we cannot control. As a result of this volatility, investors may not be able to sell their common stock at or above the initial public offering price. The market price for our common stock may be influenced by many factors, including the other risks described in this section of the prospectus and the following:

enrollment or results of clinical trials of seribantumab or our future product candidates, or those of our competitors or our future collaborators, or changes in the development status of our product candidates;

regulatory or legal developments in the United States and other countries, especially changes in laws or regulations applicable to seribantumab or any future product candidate;

the success of competitive products or technologies;

introductions and announcements of new products by us, our future commercialization partners, or our competitors, and the timing of these introductions or announcements;

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

actual or anticipated variations in our financial results or those of companies that are perceived to be similar to us;

the success of our efforts to acquire or in-license additional technologies, products or product candidates;

developments concerning any future collaborations, including but not limited to those with development and commercialization partners;

market conditions in the biologics and biotechnology sectors;

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

developments or disputes concerning patents or other proprietary rights, including patents, litigation matters and our ability to obtain patent protection for seribantumab or any future product candidates;

our ability or inability to raise additional capital and the terms on which we raise it;

the recruitment or departure of key personnel;
 
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changes in the structure of healthcare payment systems;

actual or anticipated changes in earnings estimates or changes in stock market analyst recommendations regarding our common stock, other comparable companies or our industry generally;

our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market;

fluctuations in the valuation of companies perceived by investors to be comparable to us;

announcement and expectation of additional financing efforts;

speculation in the press or investment community;

share price and fluctuations of trading volume of our common stock;

sales of our common stock by us, insiders or our stockholders;

the concentrated ownership of our common stock;

changes in accounting principles;

terrorist acts, acts of war or periods of widespread civil unrest;

natural disasters and other calamities; and

general economic, industry and market conditions, or other events or factors, many of which are beyond our control, such as the recent COVID-19 pandemic.
In addition, the stock market in general, and the markets for pharmaceutical, biopharmaceutical and biotechnology stocks in particular, have experienced extreme price and volume fluctuations that have been often unrelated or disproportionate to the operating performance of the issuer. These broad market and industry factors may seriously harm the market price of our common stock, regardless of our actual operating performance. The realization of any of the above risks or any of a broad range of other risks, including those described in this “Risk Factors” section, could have a dramatic and adverse impact on the market price of our common stock.
In the past, securities class action litigation has often been brought against public companies following declines in the market price of their securities. This risk is especially relevant for biopharmaceutical companies, which have experienced significant stock price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and our resources, which could harm our business.
You will experience immediate and substantial dilution as a result of this offering and may experience additional dilution in the future.
You will suffer immediate and substantial dilution with respect to the common stock you purchase in this offering. If you purchase common stock in this offering, assuming an initial public offering price of $      per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, and assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and that the underwriters do not exercise their option to acquire additional common stock in this offering, you will incur immediate and substantial dilution of $      per share, representing the difference between the initial public offering price of $      per share and our pro forma as adjusted net tangible book value per share as of                   after giving effect to this offering and the conversion of all outstanding shares of our convertible preferred stock upon the completion of this offering. Following the completion of this offering, investors purchasing common stock in this offering will have contributed    % of the total amount invested by stockholders since Inception, but will only own    % of the shares of common stock outstanding.
Moreover, we issued options in the past to acquire common stock at prices significantly below the initial public offering price. As of March 31, 2021, there were 7,609,140 shares of common stock subject to outstanding options under our 2019 Stock Plan. To the extent that these outstanding options are ultimately exercised, you will incur further dilution. In addition, if the underwriters exercise their option to purchase additional shares, or outstanding
 
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options and warrants are exercised, you could experience further dilution. For a further description of the dilution that you will experience immediately after this offering, please refer to the section entitled “Dilution.”
Management will have broad discretion as to the use of proceeds from this offering and we may use the net proceeds in ways with which you may disagree, and its investment of these proceeds may not yield a favorable return.
Our management will have broad discretion in the application of the net proceeds from this offering, including for any of the purposes described in the section entitled “Use of Proceeds,” and you will not have the opportunity as part of your investment decision to assess whether the net proceeds are being used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. Our management might not apply our net proceeds in ways that ultimately increase the value of your investment. We expect to use the net proceeds from this offering to advance our lead product candidate, seribantumab, for potential expansion of our pipeline and other research and development activities, as well as for working capital and other general corporate purposes. The failure by our management to apply these funds effectively could harm our business. Pending their use, we plan to invest the net proceeds from this offering in short-term or long-term, investment-grade, interest-bearing securities. These investments may not yield a favorable return to our stockholders. If we do not invest or apply the net proceeds from this offering in ways that enhance stockholder value, we may fail to achieve expected financial results, which could cause our stock price to decline.
A sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.
Based on shares outstanding as of March 31, 2021, upon completion of this offering, we will have outstanding a total of           shares of common stock. Of these shares, only           shares of common stock sold in this offering, or                       shares if the underwriters exercise their option to purchase additional shares in full, will be freely tradable, without restriction, in the public market immediately after this offering. Each of our officers, directors and substantially all of our stockholders have entered into lock-up agreements with the underwriters that restrict their ability to sell or transfer their shares. The lock-up agreements pertaining to this offering will expire 180 days from the date of this prospectus. However, our underwriters may, in their sole discretion, permit our officers, directors and other current stockholders who are subject to the contractual lock-up to sell shares prior to the expiration of the lock-up agreements. After the lock-up agreements expire, based on shares outstanding as of March 31, 2021, up to an additional           shares of common stock will be eligible for sale in the public market, approximately           of which are held by our officers, directors and their affiliated entities, and will be subject to volume limitations under Rule 144 under the Securities Act of 1933, as amended, or the Securities Act. In addition, 7,609,140 shares of our common stock that are subject to outstanding options as of March 31, 2021 will become eligible for sale in the public market to the extent permitted by the provisions of various vesting agreements, the lock-up agreements and Rules 144 and 701 under the Securities Act.
After this offering, the holders of an aggregate of 67,743,889 shares of our outstanding common stock as of March 31, 2021 will have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or our stockholders. We also intend to register shares of common stock that we may issue under our equity incentive plans. Once we register these shares, they will be able to be sold freely in the public market upon issuance, subject to the 180-day lock-up period under the lock-up agreements described above and in the section entitled “Underwriting.”
We cannot predict what effect, if any, sales of our shares in the public market or the availability of shares for sale will have on the market price of our common stock. However, future sales of substantial amounts of our common stock in the public market, including shares issued upon exercise of our outstanding options, or the perception that such sales may occur, could adversely affect the market price of our common stock, even if our business is doing well.
 
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We also expect that significant additional capital may be needed in the future to continue our planned operations. To raise capital, we may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. To the extent that additional capital is raised through the sale and issuance of shares or other securities convertible into shares, our stockholders will be diluted. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock.
Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.
Based on the beneficial ownership of our common stock as of March 31, 2021, prior to this offering, our executive officers, directors, holders of 5% or more of our capital stock and their respective affiliates beneficially owned 80.7% of our voting stock and, upon the completion of this offering, that same group will hold    % of our outstanding voting stock (assuming no exercise of the underwriters’ option to purchase additional shares, no exercise of our outstanding warrant or options and no purchases of shares in this offering by any of this group), in each case assuming the conversion of all outstanding shares of our convertible preferred stock into shares of our common stock. As a result, these stockholders, if acting together, will continue to have significant control over the outcome of corporate actions requiring stockholder approval, including the election of directors, amendment of our organizational documents, any merger, consolidation or sale of all or substantially all of our assets and any other significant corporate transaction. The interests of these stockholders may not be the same as or may even conflict with your interests. For example, these stockholders could delay or prevent a change of control of our company, even if such a change of control would benefit our other stockholders, which could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company or our assets and might affect the prevailing market price of our common stock.
We are an “emerging growth company” and a “smaller reporting company” and we cannot be certain if the reduced reporting requirements applicable to “emerging growth companies” or “smaller reporting companies” will make our common stock less attractive to investors.
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. For as long as we continue to be an “emerging growth company,” we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including (i) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, (ii) reduced disclosure obligations regarding executive compensation in this prospectus as well as our periodic reports and proxy statements and (iii) exemptions from the requirements of holding nonbinding advisory stockholder votes on executive compensation and stockholder approval of any golden parachute payments not approved previously. In addition, as an “emerging growth company,” we are only required to provide two years of audited financial statements in this prospectus.
We could be an “emerging growth company” for up to five years following the completion of this offering, although circumstances could cause us to lose that status earlier, including if we are deemed to be a “large accelerated filer,” which occurs when the market value of our common stock that is held by non-affiliates equals or exceeds $700 million as of the prior June 30, or if we have total annual gross revenue of $1.07 billion or more during any fiscal year before that time, in which cases we would no longer be an “emerging growth company” as of the following December 31, or if we issue more than $1.0 billion in non-convertible debt during any three-year period before that time, in which case we would no longer be an “emerging growth company” immediately. Even after we no longer qualify as an “emerging growth company,” we may still qualify as a “smaller reporting company,” which would allow us to take advantage of many of the same exemptions from disclosure requirements, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, if our revenues remain less than $100.0 million, and reduced disclosure obligations regarding executive compensation in this prospectus as well as our periodic reports and proxy statements. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some
 
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investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our share price may be more volatile.
Under the JOBS Act, “emerging growth companies” can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards. Until the date that we are no longer an “emerging growth company” or affirmatively and irrevocably opt out of the exemption provided by Section 7(a)(2)(B) of the Securities Act, upon issuance of a new or revised accounting standard that applies to our financial statements and that has a different effective date for public and private companies, we will disclose the date on which adoption is required for non-emerging growth companies and the date on which we will adopt the recently issued accounting standard.
Anti-takeover provisions in our restated certificate of incorporation and bylaws and under Delaware law could prevent or delay an acquisition of us, which may be beneficial to our stockholders, and may prevent attempts by our stockholders to replace or remove our current management and, therefore, decrease the trading price of our common stock.
Our restated certificate of incorporation and our amended and restated bylaws that will be in effect upon completion of this offering contain provisions that could delay or prevent a change in control of our company. These provisions could also make it difficult for stockholders to elect directors who are not nominated by current members of our board of directors or take other corporate actions, including effecting changes in our management. These provisions:

establish a classified board of directors so that not all members of our board are elected at one time;

permit only the board of directors to establish the number of directors and fill vacancies on the board;

provide that directors may only be removed “for cause” and only with the approval of two-thirds of our stockholders;

require super-majority voting to amend some provisions in our amended and restated certificate of incorporation and amended and restated bylaws;

authorize the issuance of “blank check” preferred stock that our board could use to implement a stockholder rights plan;

eliminate the ability of our stockholders to call special meetings of stockholders;

prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;

prohibit cumulative voting; and

establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
In addition, Section 203 of the Delaware General Corporation Law, or DGCL, may discourage, delay or prevent a change in control of our company. Section 203 imposes certain restrictions on mergers, business combinations and other transactions between us and holders of 15% or more of our common stock.
Any provision of our restated certificate of incorporation, amended and restated bylaws or Delaware law that has the effect of delaying or preventing a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our capital stock and could also affect the price that some investors are willing to pay for our common stock.
The exclusive forum provision in our organizational documents may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, or other employees, which may discourage lawsuits with respect to such claims.
Our restated certificate of incorporation that will be in effect upon completion of this offering, to the fullest extent permitted by law, will provide that the Court of Chancery of the State of Delaware is the exclusive forum
 
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for: any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the DGCL, our restated certificate of incorporation, or our amended and restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. This exclusive forum provision does not apply to suits brought to enforce a duty or liability created by the Exchange Act. It could apply, however, to a suit that falls within one or more of the categories enumerated in the exclusive forum provision.
This choice of forum provision may result in increased costs for investors to bring a claim. Further, this choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, or other employees, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provisions contained in our restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations and financial condition.
Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all claims brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Our amended and restated bylaws will provide that the federal district courts of the United States of America will, to the fullest extent permitted by law, be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, or a Federal Forum Provision. Our decision to adopt a Federal Forum Provision followed a decision by the Supreme Court of the State of Delaware holding that such provisions are facially valid under Delaware law. While there can be no assurance that federal or state courts will follow the holding of the Delaware Supreme Court or determine that the Federal Forum Provision should be enforced in a particular case, application of the Federal Forum Provision means that suits brought by our stockholders to enforce any duty or liability created by the Securities Act must be brought in federal court and cannot be brought in state court.
Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. In addition, neither the exclusive forum provision nor the Federal Forum Provision applies to suits brought to enforce any duty or liability created by the Exchange Act. Accordingly, actions by our stockholders to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder must be brought in federal court.
Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder.
Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities shall be deemed to have notice of and consented to our exclusive forum provisions, including the Federal Forum Provision. These provisions may limit a stockholder’s ability to bring a claim in a judicial forum of their choosing for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees. If a court were to find either exclusive-forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could harm our business.
We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.
As a public company, we will incur significant legal, accounting, compliance and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the                 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, we expect these rules and regulations to substantially increase our legal and financial compliance costs and to make some activities more
 
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time consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain sufficient coverage. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers. The increased costs may require us to reduce costs in other areas of our business or increase the prices of our products once commercialized. Moreover, 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 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 are not currently required to comply with the SEC’s rules that implement Section 404 of the Sarbanes-Oxley Act, and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Pursuant to Section 404, we will be required to furnish a report by our management on our internal control over financial reporting. However, while we remain an “emerging growth company,” we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. In addition, for as long as we are a smaller reporting company with less than $100 million in annual revenue, we would be exempt from the requirement to obtain an external audit on the effectiveness of internal control over financial reporting provided in Section 404(b) of the Sarbanes-Oxley Act. To achieve compliance with Section 404 within the prescribed period, we will be 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. This process will be time-consuming, costly and complicated. 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, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. In addition, if we are not able to continue to meet these requirements, we may not be able to remain listed on the                 .
Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.
We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future. For a further description of our dividend policy, please refer to the section entitled “Dividend Policy.”
 
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General Risk Factors
If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If no or few securities or industry analysts commence or maintain coverage of us, the trading price for our common stock could be impacted negatively. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock performance, or if our preclinical studies and clinical trials and operating results fail to meet the expectations of analysts, our stock price would likely decline. If one or more of such analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause a decline in our stock price or trading volume.
Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
After the closing of this offering, we will be subject to the periodic reporting requirements of the Exchange Act. We have designed our disclosure controls and procedures to reasonably assure that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. However, any disclosure controls and procedures or internal controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be met.
These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. For example, our directors or executive officers could inadvertently fail to disclose a new relationship or arrangement causing us to fail to make required related party transaction disclosures. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in a control system, misstatements due to error or fraud may occur and not be detected. In addition, we do not have a risk management program or processes or procedures for identifying and addressing risks to our business in other areas.
Failure to establish and maintain an effective system of internal controls could result in material misstatements of our financial statements or cause us to fail to meet our reporting obligations or fail to prevent fraud in which case, our stockholders could lose confidence in our financial reporting and the market price of our common stock could decline.
After the closing of this offering, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of the Nasdaq Global Market. Under Section 404 of the Sarbanes-Oxley Act, we will be required to furnish a report by our management on our internal control over financial reporting beginning with our second annual report on Form 10-K. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. However, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting until our first annual report required to be filed with the SEC following the date we are no longer an EGC. At such time as we are required to obtain auditor attestation, if we then have a material weakness, we would receive an adverse opinion regarding our internal control over financial reporting from our independent registered accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be 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, including through hiring additional financial and accounting personnel, 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
 
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reporting. During our evaluation of our internal control, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal control over financial reporting is effective.
In addition, our internal control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.
Furthermore, in connection with the future attestation process by our independent registered public accounting firm, we may encounter problems or delays in completing the implementation of any requested improvements and receiving a favorable attestation. If we cannot favorably assess the effectiveness of our internal control over financial reporting, or if our independent registered public accounting firm is unable to provide an unqualified attestation report on our internal controls, our stockholders could lose confidence in our reporting and the market price of our common stock could decline. In addition, we could be subject to sanctions or investigations by the Nasdaq Global Market, the SEC or other regulatory authorities.
We may be subject to securities litigation, which is expensive and could divert management attention.
The market price of our common stock may be volatile. The stock market in general, and pharmaceutical and biologics companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.
 
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Special note regarding forward-looking statements
This prospectus, including the sections entitled “Prospectus summary,” “Risk factors,” “Use of proceeds,” “Management’s discussion and analysis of financial condition and results of operations,” and “Business,” contains forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect,” “predict,” “potential” and similar expressions that convey uncertainty of future events or outcomes, although not all forward-looking statements contain these words. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk factors” and elsewhere in this prospectus. Moreover, we operate in a competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. The forward-looking statements in this prospectus include, among other things, statements about:

our ability to develop, obtain regulatory approval and commercialize seribantumab and our future product candidates;

the timing of our preclinical studies and clinical trials for our product candidates;

estimates of our addressable market and market growth;

our expectations regarding demand for, and market acceptance of, our product candidates;

our ability to maintain and expand access to human genetics data;

our ability to compete effectively with existing competitors and new market entrants;

the potential effects of extensive government regulations relating to our industry;

our ability to obtain, maintain, and protect and enforce intellectual property and proprietary rights;

our ability to operate our business without infringing, misappropriating or otherwise violating the intellectual property rights and proprietary technology of third parties;

our ability to establish and maintain collaborations, including our existing joint ventures;

our ability to expand our pipeline of product candidates;

our ability to attract and retain key management and technical personnel;

the effects of the COVID-19 pandemic on any of the above or any other aspect of our business operations;

our expectations regarding expenses, future revenue, capital requirements, and our needs for additional financing; and

our expected use of the net proceeds from this offering.
The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in this prospectus. You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus to conform these statements to actual results or to changes in our expectations, except as required by law.
 
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You should read this prospectus and the documents that we reference in this prospectus and have filed with the SEC as exhibits to the registration statement of which this prospectus is a part with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.
In addition, you should refer to the “Risk factors” section of this prospectus for a discussion of other important factors that may cause actual results to differ materially from those expressed or implied by the forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this prospectus will prove to be accurate. Furthermore, if the forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. The forward-looking statements in this prospectus represent our views as of the date of this prospectus. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this prospectus. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
The market data and certain other statistical information used throughout this prospectus are based on independent industry publications, governmental publications, reports by market research firms or other independent sources that we believe to be reliable sources. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We are responsible for all of the disclosure contained in this prospectus, and we believe these industry publications and third-party research, surveys and studies are reliable. While we are not aware of any misstatements regarding any third-party information presented in this prospectus, their estimates, in particular, as they relate to projections, involve numerous assumptions, are subject to risks and uncertainties, and are subject to change based on various factors, including those discussed under the section entitled “Risk factors” and elsewhere in this prospectus. Some data are also based on our good faith estimates.
Market and industry data
This prospectus contains estimates and other statistical data made by independent parties and by us relating to our industry and the markets in which we operate, including our general expectations and market position, market opportunity, the incidence of certain medical conditions and other industry data. These data, to the extent they contain estimates or projections, involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates or projections. Industry publications and other reports we have obtained from independent parties generally state that the data contained in these publications or other reports have been obtained in good faith or from sources considered to be reliable, but they do not guarantee the accuracy or completeness of such data. The industry in which we operate is subject to risks and uncertainties due to a variety of factors, including those described in the section entitled “Risk factors.” These and other factors could cause results to differ materially from those expressed in these publications and reports.
 
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Use of proceeds
We estimate that the net proceeds from this offering will be approximately $      million, or approximately $      million if the underwriters exercise their option to purchase additional shares in full, assuming an initial public offering price of $      per share, which is the midpoint of the estimated price range set forth on the cover of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
Each $1.00 increase (decrease) in the assumed initial public offering price of $      per share, which is the midpoint of the estimated price range set forth on the cover of this prospectus, would increase (decrease) the net proceeds to us from this offering by $      million, assuming the number of shares offered, as set forth on the cover of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions. Similarly, each increase (decrease) of 1.0 million shares in the number of shares of our common stock offered would increase (decrease) the net proceeds that we receive from this offering by $      million, assuming that the assumed initial public offering price remains the same and after deducting the estimated underwriting discounts and commissions.
We currently intend to use the net proceeds we receive from this offering, together with our existing cash and cash equivalents, as follows:

approximately $      million to advance our lead product candidate, seribantumab through                 ; and

the remainder for potential expansion of our pipeline and other research and development activities, as well as for working capital and other general corporate purposes.
We may use a portion of the net proceeds of this offering to acquire or invest in complementary businesses, products, assets or technologies, or to obtain the right to use such complementary technologies. We periodically evaluate strategic opportunities, however, we have no current commitments with respect to any such transactions.
Based on our planned use of the net proceeds, we estimate such funds, together with our existing cash and cash equivalents, will be sufficient for us to fund our operating expenses and capital expenditure requirements through                 . We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development, and commercialization of pharmaceutical drugs, we are unable to estimate the exact amount of our working capital requirements.
The expected use of the net proceeds from this offering represents our intentions based upon our current plans and business conditions. The amounts we actually expend in these areas, and the timing thereof, may vary significantly from our current intentions and will depend on a number of factors, including the results of our ongoing clinical trials, the results and timing of any future preclinical studies and clinical trials, success of research and development efforts, the product approval process with the FDA and other regulatory agencies, any new collaborations or licenses we may enter into, cash generated from future operations and actual expenses to operate our business.
As a result, we cannot predict with any certainty all of the particular uses for the net proceeds or the amounts that we will actually spend on the uses set forth above. Accordingly, our management will have broad discretion in the application of the net proceeds, and investors will be relying on the judgment of our management regarding the application of the net proceeds of this offering.
The expected net proceeds of this offering is not expected to be sufficient for us to fund any of our current or future product candidates through regulatory approval, and we will need to raise substantial additional capital to complete the development and commercialization of any product candidates.
Pending the uses described above, we intend to invest the net proceeds from this offering in short term, investment-grade interest-bearing securities such as money market accounts, certificates of deposit, commercial paper and guaranteed obligations of the U.S. government.
 
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Dividend policy
We have never declared or paid cash dividends on our common stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any cash dividends on our common stock in the foreseeable future. Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our board of directors may deem relevant.
 
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Capitalization
The following table sets forth our cash and cash equivalents and capitalization as of March 31, 2021:

on an actual basis;

on a pro forma basis, giving effect to (i) the automatic conversion of all outstanding shares of our convertible preferred stock as of March 31, 2021 into an aggregate of 66,493,889 shares of our common stock immediately prior to the completion of this offering, as if such conversion had occurred on March 31, 2021, and the related reclassification of the carrying value of the convertible preferred stock to permanent equity immediately prior to the closing of this offering, and (ii) the filing and effectiveness of our restated certificate of incorporation in connection with the completion of this offering; and

on a pro forma as adjusted basis giving effect to (i) the pro forma adjustments described above, and (ii) the sale of                 shares of our common stock in this offering at an assumed initial public offering price of $      per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
The pro forma as adjusted information set forth below is illustrative only and will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing.
You should read this table together with the sections entitled “Management’s discussion and analysis of financial condition and results of operations” and our financial statements and related notes, each included elsewhere in this prospectus.
As of March 31, 2021
Actual
Pro Forma
Pro Forma as
Adjusted(1)
Cash and cash equivalents
$ 69,912 $ 69,912 $      
Convertible preferred stock (Series A and B), $0.0001 par value; 66,493,889 shares authorized, issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma; no shares authorized, issued or outstanding, pro forma as adjusted
97,188
Stockholders’ (deficit) equity:
Common stock, $0.0001 par value; 86,000,000 shares authorized,
3,533,333 shares issued and 3,400,000 shares outstanding, actual;
500,000,000 shares authorized, 70,027,222 shares issued and
69,893,889 issued and outstanding, pro forma; 500,000,000 shares
authorized,       shares issued and           shares outstanding,
pro forma as adjusted
7
Additional paid-in capital
133 97,314
Accumulated deficit
(28,238) (28,238)
Total stockholders’ (deficit) equity
(28,105) 69,083
Total capitalization
$ 69,083 $ 69,083 $
Each $1.00 increase (decrease) in the assumed initial public offering price of $      per share, which is the midpoint of the estimated price range set forth on the cover of this prospectus, would increase (decrease) each of our pro forma as adjusted cash and cash equivalents, additional paid-in-capital, total stockholders’ equity (deficit) and total capitalization by approximately $      million, assuming that the number of shares offered remains the same and after deducting the estimated underwriting discounts and commissions. Similarly, each increase (decrease) of 1.0 million shares in the number of shares of common stock offered would increase (decrease) each of our pro forma as adjusted cash and cash equivalents, additional paid-in-capital, total stockholders’ equity (deficit) and total capitalization by approximately $      million, assuming the assumed initial public offering price remains the same and after deducting the estimated underwriting discounts and commissions.
 
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The foregoing discussion and table above are based on 66,493,889 shares of common stock outstanding at March 31, 2021, and excludes the following shares:

7,609,140 shares of our common stock issuable upon the exercise of options to purchase shares of our common stock outstanding as of March 31, 2021 under our 2019 Plan, with a weighted-average exercise price of $0.23 per share;

2,546,428 shares of our common stock issuable upon the exercise of options to purchase shares of our common stock granted after March 31, 2021 under our 2019 Plan, with an exercise price of $0.73 per share; and

         shares of our common stock reserved for future issuance under our equity compensation plans, consisting of:

6,164,760 shares of our common stock reserved for future issuance under our 2019 plan as of March 31, 2021;

           shares of our common stock to be reserved for future issuance under our 2021 Plan, which will become effective immediately prior to the date of the effectiveness of the registration statement of which this prospectus forms a part; and

           shares of our common stock to be reserved for future issuance under our ESPP, which will become effective immediately prior to the date of the effectiveness of the registration statement of which this prospectus forms a part.
Our 2021 Plan and our ESPP provide for automatic annual increases in the number of shares of our common stock reserved thereunder, and our 2021 Plan provides for increases to the number of shares that may be granted thereunder based on shares under our 2019 Plan that expire, are tendered to or withheld by us for payment of an exercise price or for satisfying tax withholding obligations or are forfeited or otherwise repurchased by us. See the section entitled “Executive compensation — Equity compensation plans and other benefit plans” for additional information.
 
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Dilution
If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share of our common stock in this offering and the pro forma as adjusted net tangible book value per share of our common stock immediately after this offering.
Net tangible book deficit per share is determined by dividing our total tangible assets (which excludes deferred offering costs) less our total liabilities and convertible preferred stock by the number of shares of our common stock outstanding. Our historical net tangible book deficit as of March 31, 2021 was $(28.6) million, or $(8.11) per share, based on 3,533,333 shares of our common stock outstanding, which includes 133,333 shares of non-vested restricted common stock as of that date.
Our pro forma net tangible book value as of March 31, 2021 was $68.5 million, or $0.98 per share of our common stock. Our pro forma net tangible book value per share represents the amount of our total tangible assets (which excludes deferred offering costs) less our total liabilities and divided by the total number of shares of our common stock outstanding as of March 31, 2021, after giving effect to the automatic conversion of all outstanding shares of our convertible preferred stock into an aggregate of 66,493,889 shares of common stock immediately prior to the completion of this offering.
Net tangible book value dilution per share to new investors in this offering represents the difference between the initial public offering price per shares of our common stock and the pro forma as adjusted net tangible book value per share of our common stock immediately after completion of this offering. After giving effect to (i) the pro forma adjustments set forth above and (ii) our sale in this offering of                 shares of our common stock at an assumed initial public offering price of $      per share, which is the midpoint of the estimated price range set forth on the cover of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of March 31, 2021 would have been approximately $      million, or $      per share of our common stock. This represents an immediate increase in pro forma net tangible book value of $      per share to our existing stockholders and an immediate dilution of $      per share to new investors purchasing common stock in this offering.
Dilution per share to new investors is determined by subtracting pro forma as adjusted net tangible book value per share after this offering from the initial public offering price per share paid by new investors. The following table illustrates this dilution on a per share basis (without giving effect to any exercise by the underwriters of their option to purchase additional shares):
Assumed initial public offering price, per share
$       
Historical net tangible book deficit per share as of March 31, 2021
(8.11)
Increase attributable to pro forma adjustments
9.09
      
Pro forma net tangible book value per share as of March 31, 2021
0.98
Increase in pro forma net tangible book value per share attributable to new investors in
this offering
Pro forma as adjusted net tangible book value per share after this offering
Dilution per share to new investors in this offering
Each $1.00 increase (decrease) in the assumed initial public offering price of $      per share, which is the midpoint of the estimated price range set forth on the cover of this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value by $      million, or $      per share and the dilution in pro forma as adjusted net tangible book value per share to new investors in this offering by $      per share, assuming the number of shares offered, as set forth on the cover of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions. Similarly, each increase of 1.0 million shares in the number
 
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of shares of our common stock offered in this offering would increase our pro forma as adjusted net tangible book value by approximately $      million, or approximately $      per share, and would decrease dilution per share to new investors in this offering by approximately $      per share and each decrease of 1.0 million shares in the number of shares of our common stock offered in this offering would decrease our pro forma as adjusted net tangible book value by approximately $      million, or approximately $      per share, and would increase dilution per share to new investors in this offering by approximately $      per share, assuming the assumed initial public offering price per share remains the same and after deducting the estimated underwriting discounts and commissions. The pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing.
If the underwriters exercise their option in full to purchase additional shares of our common stock, the pro forma as adjusted net tangible book value per share after this offering would be $      per share, the increase in pro forma as adjusted net tangible book value per share to existing stockholders would be $      per share and the dilution to new investors in this offering would be $      per share.
The following table shows, as of March 31, 2021, on a pro forma as adjusted basis described above, the differences between the existing stockholders and the new investors purchasing shares in this offering with respect to the number of shares purchased from us, the total consideration paid, which includes net proceeds received from the issuance of common and convertible preferred stock, cash received from the exercise of stock options, and the value of any stock issued for services and the average price paid per share (in thousands, except share and per share amounts, and percentages):
Shares Purchased
Total Consideration
Weighted-Average
Price Per Share
Number
Percent
Amount
Percent
Existing stockholders
70,027,222     % $ 97,650 % $ 1.39
New investors
Total
100.0% $ 100.0%
Each $1.00 increase (decrease) in the assumed initial public offering price of $      per share, which is the midpoint of the estimated price range set forth on the cover of this prospectus, would increase (decrease) total consideration paid by new investors and total consideration paid by all stockholders by approximately $      million, assuming that the number of shares offered, as set forth on the cover of this prospectus, remains the same. Similarly, each increase (decrease) of 1.0 million shares in the number of shares of our common stock offered in this offering would increase (decrease) total consideration paid by new investors and total consideration paid by all stockholders by approximately $      million, assuming the assumed initial public offering price remains the same.
In addition, to the extent that any outstanding options are exercised, investors in this offering will experience further dilution. In addition, we may choose to raise additional capital because of market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. If we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.
Except as otherwise indicated, the above discussion and tables assume no exercise of the underwriters’ option to purchase additional shares of our common stock. If the underwriters exercise their option to purchase additional shares of our common stock in full, our existing stockholders would own    % and our new investors would own    % of the total number of shares of our common stock outstanding upon the completion of this offering.
The foregoing discussion and tables (other than the historical net tangible book value calculation) above are based on 70,027,222 shares of our common stock (after giving effect to the conversion of our convertible preferred stock) as of March 31, 2021, and excludes:

7,609,140 shares of our common stock issuable upon the exercise of options to purchase shares of our common stock outstanding as of March 31, 2021 under our 2019 Plan, with a weighted-average exercise price of $0.23 per share;
 
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2,546,428 shares of our common stock issuable upon the exercise of options to purchase shares of our common stock granted after March  31, 2021 under our 2019 Plan, with an exercise price of $0.73 per share; and

          shares of our common stock reserved for future issuance under our equity compensation plans, consisting of:

6,164,760 shares of our common stock reserved for future issuance under our 2019 plan as of March 31, 2021;

          shares of our common stock to be reserved for future issuance under our 2021 Plan, which will become effective immediately prior to the date of the effectiveness of the registration statement of which this prospectus forms a part; and

          shares of our common stock to be reserved for future issuance under our ESPP, which will become effective immediately prior to the date of the effectiveness of the registration statement of which this prospectus forms a part.
Our 2021 Plan and ESPP provide for automatic annual increases in the number of shares of our common stock reserved thereunder, and our 2021 Plan provides for increases to the number of shares that may be granted thereunder based on shares under our 2019 Plan that expire, are tendered to or withheld by us for payment of an exercise price or for satisfying tax withholding obligations or are forfeited or otherwise repurchased by us. See the section entitled “Executive compensation — Equity compensation plans and other benefit plans” for additional information.
 
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Management’s discussion and analysis of financial condition and results of operations
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this prospectus, 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 precision oncology company focused on the development of targeted therapeutics for the treatment of cancer in genomically-defined patient populations. Our vision is to elevate precision medicine to the forefront of every cancer treatment journey, as we believe that each patient living with cancer deserves the opportunity to benefit from a genomically-driven treatment decision. We utilize our deep expertise in developing drugs for rare, genomically-defined patient populations and strategic collaborations with our diagnostic collaborators to work towards a future where each tumor’s unique genomic test result can be matched with a purpose-built precision medicine.
We are focused on identifying oncogenic drivers that are known to be predominantly mutually exclusive with other driver alterations, and pursuing innovations and efficiencies in the conduct of clinical trials that we believe may enable development of targeted therapeutics against those oncogenic drivers.
Our lead program is focused on NRG1 fusions, which are rare genomic alterations that have recently been identified as oncogenic driver alterations and that we believe have the potential to be therapeutically actionable through targeted HER3 inhibition. We have designed and initiated our potentially registration-enabling Phase 2 CRESTONE trial to investigate the safety and efficacy of seribantumab, an anti-HER3 monoclonal antibody, in advanced solid tumors harboring an NRG1 fusion. We are conducting this trial in a tumor-agnostic fashion, such that any patient with a solid tumor that harbors an NRG1 fusion, regardless of the tissue of origin, may be eligible. We believe that the design and conduct of the CRESTONE trial has the possibility to produce results that may provide support for us to seek accelerated approval of seribantumab for patients with advanced solid tumors harboring an NRG1 fusion, subject to discussions with the FDA. Any accelerated marketing approval is subject to continued discussions with the FDA, and agreement on post-approval confirmatory trials to confirm an anticipated clinical benefit. If the CRESTONE trial meets its primary endpoint, and subject to continued discussions with the FDA, we anticipate submitting a BLA under an accelerated approval pathway for the treatment of patients with solid tumors harboring an NRG1 fusion. We expect data from the pre-planned interim analysis of CRESTONE in           and topline data from the full trial accrual in           .
We were incorporated in April 2019. We have devoted substantially all of our resources to developing our lead product candidate, initiating the CRESTONE clinical trial, building our intellectual property portfolio, business planning, raising capital and providing general and administrative support for these operations. To date, we have financed our operations through private placements of convertible preferred stock. Through March 31, 2021, we have received gross proceeds of approximately $97.4 million from sales of our convertible preferred stock.
Since Inception, we have incurred significant operating losses on an aggregate basis. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our current or future product candidates. Our net losses were $5.9 million and $17.3 million for the period from Inception through December 31, 2019 and for the year ended December 31, 2020, respectively, and $2.0 million and $5.1 million for the three months ended March 31, 2020 and 2021, respectively. As of March 31, 2021, we had an accumulated deficit of $28.2 million. These losses have resulted primarily from costs incurred in connection with research and development activities, acquisition, patent
 
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investment, and general and administrative costs associated with our operations. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years.
Our future capital requirements will depend on many factors, including:

the progress, timing and results of preclinical studies and clinical trials for our current or any future product candidates;

disruptions or delays in enrollment of our clinical trials due to the COVID-19 pandemic;

the extent to which we develop, in-license or acquire other pipeline product candidates or technologies;

the number and development requirements of other future product candidates that we may pursue, and other indications for our current product candidates that we may pursue;

the costs, timing and outcome of obtaining regulatory approvals of our current or future product candidates and any companion diagnostics we may pursue;

the scope and costs of making arrangements with third-party manufacturers, or establishing manufacturing capabilities, for both clinical and commercial supplies of our current or future product candidates;

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

the costs associated with commercializing any approved product candidates, including establishing sales, marketing and distribution capabilities;

the costs associated with completing any post-marketing studies or trials required by the Food and Drug Administration, or FDA, or other regulatory authorities;

the revenue, if any, received from commercial sales of seribantumab, if approved, or any other future product candidates that receive marketing approval;

the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims that we may become subject to, including any litigation costs and the outcome of such litigation;

the costs associated with potential product liability claims, including the costs associated with obtaining insurance against such claims and with defending against such claims; and

to the extent we pursue strategic collaborations, including collaborations to commercialize seribantumab or to develop any future product candidates, our ability to establish and maintain collaborations on favorable terms, if at all, as well as the timing and amount of any milestone or royalty payments we are required to make or are eligible to receive under such collaborations, if any.
We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for seribantumab or our other future product candidates. If we obtain regulatory approval for any of our product candidates, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing and distribution. Further, upon the closing of this offering, we expect to incur additional costs associated with operating as a public company.
As a result, we will need additional financing to support our continuing operations. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity or debt financings or other sources, which may include collaborations with third parties. Adequate additional financing may not be available to us on favorable terms, or at all. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. If we are unable to raise capital or debt when needed or on favorable terms, we could be forced to delay, reduce or eliminate our research and development programs, our commercialization plans or other operations.
 
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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 or maintain profitability. Even if we are able to generate revenue from product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
As of March 31, 2021, we had cash and cash equivalents of $69.9 million. We believe that the anticipated net proceeds from this offering, together with our existing cash and cash equivalents, will enable us to fund our operating expenses and capital expenditure requirements through                 . We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and going concern.” Based upon our cash and cash equivalents balance as of March 31, 2021 of $69.9 million, without giving effect to this offering, we do not have sufficient existing cash and cash equivalents to support operations for at least one year following the date that the unaudited condensed interim financial statements are issued. In its report on our financial statements for the year ended December 31, 2020, our independent registered public accounting firm included an explanatory paragraph stating that our recurring losses from operations since Inception and required additional funding to finance our operations raise substantial doubt about our ability to continue as a going concern. See “Risk Factors — Risks Related to Our Financial Position and Need for Additional Capital — Our recurring losses from operations could continue to raise substantial doubt regarding our ability to continue as a going concern. Our ability to continue as a going concern requires that we obtain sufficient funding to finance our operations.”
Impact of COVID-19
Since it was reported to have surfaced in December 2019, COVID-19 has spread across the world and has been declared a pandemic by the World Health Organization. Efforts to contain the spread of COVID-19 have intensified and the United States, Europe and Asia have implemented severe travel restrictions, social distancing requirements, stay-at-home orders and have delayed the commencement of non-COVID-19-related clinical trials, among other restrictions. As a result, the current COVID-19 pandemic has presented a substantial public health and economic challenge around the world and is affecting our employees, patients, communities and business operations, as well as contributing to significant volatility and negative pressure on the U.S. economy and in financial markets.
While we are currently continuing the clinical trials we have underway, COVID-19 precautions may directly or indirectly impact the timeline for some of our clinical trials. To date, we have been able to continue to enroll our patients in our Phase 2 CRESTONE clinical trial and currently do not anticipate any interruptions of clinical enrollment. However, we are continuing to assess the potential impact of the COVID-19 pandemic on our current and future business and operations, including our expenses and clinical trials, as well as on our industry and the healthcare system.
The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition, including expenses, clinical trials and research and development costs, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international markets.
Components of our Results of Operations
Operating Expenses
Research and Development Expenses
Our operating expenses since Inception have consisted solely of research and development costs and general and administrative costs. Research and development expenses consist primarily of costs incurred for our research activities, including the development of our product candidates, which include:

employee-related expenses, including salaries, related benefits, and stock-based compensation expense for employees engaged in research and development activities;
 
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external research and development expenses incurred in connection with the preclinical and clinical development of seribantumab, including expenses incurred under agreements with contract research organizations, and consultants;

costs incurred with contract manufacturing organizations that manufacture drug products for use in our preclinical studies and clinical trials of seribantumab;

fees paid to consultants for services directly related to our product development and regulatory efforts; and

costs related to compliance with regulatory requirements related to conducting our clinical activity.
Research and development costs consist of salaries and benefits, including associated stock-based compensation, and fees paid to other entities that conduct certain research and development activities on our behalf. Research and development costs are expensed as incurred. We estimate preclinical study and clinical trial expenses based on the services performed pursuant to contracts with research institutions and contract research organizations, and clinical manufacturing organizations that conduct and manage preclinical studies and clinical trials on our behalf based on actual time and expenses incurred by them. Further, we accrue expenses related to clinical trials based on the level of patient activity according to the related agreement. We monitor patient enrollment levels and related activity to the extent reasonably possible and adjust estimates accordingly.
To date, all of our research and development expenses have been incurred to advance our lead product candidate, seribantumab. Research and development expenses for the period ended December 31, 2019 include a one-time non-refundable payment to the previous sponsor in connection with the closing of the asset purchase agreement for $3.5 million. We expect that significant additional spending will be required to progress seribantumab through the remainder of its clinical development, as well as advance any future product candidate through clinical development. These expenses will primarily consist of expenses for the administration of clinical studies as well as manufacturing costs for clinical material supply. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our product candidates.
The following table provides a breakout of our research and development expenses by major categories of expense:
Inception
Through
December 31,
Year Ended
December 31,
Three months ended
March 31,
2019
2020
2020
2021
(in thousands)
Seribantumab $ 4,163 $ 12,387 $ 709 $ 3,327
Unallocated and other research and development
expenses
1,026 1,844 656 259
Unallocated personnel costs (including stock based compensation)
149 1,245 123 548
Total research and development expenses
$ 5,338 $ 15,476 $ 1,488 $ 4,134
The successful development and commercialization of seribantumab or our other future product candidates is highly uncertain. The success of seribantumab, or any other future product candidate will depend on several factors, including the following:

successful completion of preclinical studies and clinical trials, including our CRESTONE trial;

acceptance of a biologic license application, or BLA, by the FDA, or other similar clinical trial applications from foreign regulatory authorities for seribantumab and our future clinical trials for our future product candidates;

timely and successful enrollment of patients in, and completion of, clinical trials with favorable results;
 
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demonstration of safety, efficacy and acceptable risk-benefit profiles of our product candidates, including our lead product candidate, seribantumab, to the satisfaction of the FDA and foreign regulatory agencies;

our ability, or that of our collaborators, to develop and obtain clearance or approval of companion diagnostics, on a timely basis, or at all;

receipt and related terms of marketing approvals from applicable regulatory authorities, including the completion of any required post-marketing studies or trials;

raising additional funds necessary to complete clinical development of and commercialize our lead product candidate;

successfully identifying future acquisition, collaboration or in-license candidates to expand our product candidate pipeline;

obtaining and maintaining patent, trade secret and other intellectual property protection and regulatory exclusivity for our product candidates, including our lead product candidate, seribantumab;

making arrangements with third-party manufacturers, or establishing manufacturing capabilities, for both clinical and commercial supplies of our product candidates;

developing and implementing marketing and reimbursement strategies;

establishing sales, marketing and distribution capabilities and launching commercial sales of our products, if and when approved, whether alone or in collaboration with others;

acceptance of our products, if and when approved, by patients, the medical community and third-party payors;

effectively competing with other therapies;

obtaining and maintaining third-party payor coverage and adequate reimbursement;

protecting and enforcing our rights in our intellectual property portfolio; and

maintaining a continued acceptable safety profile of the products following approval.
Many of these factors are beyond our control, and it is possible that none of our product candidates, including our lead product candidate, seribantumab, will ever obtain regulatory approval even if we expend substantial time and resources seeking such approval. If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our product candidates, which would materially harm our business. For example, our business could be substantially harmed if results of our ongoing CRESTONE clinical trial of seribantumab vary adversely from our expectations.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive and administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters; professional fees for accounting, auditing, tax and consulting services; and insurance costs.
We anticipate that our general and administrative expenses will increase in the future as we support our continued research activities and development of our product candidates. We also anticipate that our general and administrative expenses will increase as a result of increased payroll, expanded infrastructure and higher consulting, legal and tax-related services associated with maintaining compliance with stock exchange listing and SEC requirements, accounting and investor relations costs, and director and officer insurance premiums associated with being a public company. In addition, if we obtain regulatory approval for seribantumab, or any of our future product candidates, we expect to incur significant expenses related to building a sales and marketing team to support product sales, and marketing and distribution activities, to the extent that such activities are not supported by one or more third-party collaborators.
 
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Results of Operations
Three months ended March 31, 2020 and 2021
The following table summarizes our results of operations for the three months ended March 31, 2020 and 2021:
Three months ended
March 31,
2020
2021
Change
(in thousands)
Operating expenses:
Research and development
$ 1,488 $ 4,134 $ 2,646
General and administrative
471 952 481
Total operating expenses
1,959 5,086 3,127
Loss from operations
(1,959) (5,086) (3,127)
Other income (expense), net
1 (5) (6)
Net loss
$ (1,958) $ (5,091) $ (3,133)
Research and Development Expenses
Research and development expenses were $1.5 million for the three months ended March 31, 2020, compared to $4.1 million for the three months ended March 31, 2021. The increase of $2.6 million was primarily due to a $1.3 million increase in costs related to manufacturing clinical supply of seribantumab for use in the CRESTONE clinical trial, a $1.1 million increase in clinical trial expenses associated with the CRESTONE clinical trial, and a $0.4 million increase in employee related costs, including stock-based compensation, partially offset by $0.2 million reduction in other consulting expenses.
General and Administrative Expenses
General and administrative expenses were $0.5 million for the three months ended March 31, 2020, compared to $1.0 million for the three months ended March 31, 2021. The increase of $0.5 million was primarily due to an increase of $0.2 million of professional fees and consulting, an increase of $0.1 million in personnel costs, including stock-based compensation, and an increase of $0.2 million in other expenses.
Results of operations
Inception through December 31, 2019 and year ended December 31, 2020
The following table summarizes our results of operations for the period from Inception to December 31, 2019 and for the year ended December 31, 2020:
Inception through
December 31, 2019
Year ended
December 31, 2020
Change
(in thousands)
Operating expenses:
Research and development
$ 5,338 $ 15,476 $ 10,138
General and administrative
544 1,800 1,256
Total operating expenses
5,882 17,276 11,394
Loss from operations
(5,882) (17,276) (11,394)
Other income, net
11 11
Net loss
$ (5,882) $ (17,265) $ (11,383)
 
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Research and Development Expenses
Research and development expenses were $5.3 million for the period ended December 31, 2019, compared to $15.5 million for the year ended December 31, 2020. Research and development expenses for the period ended December 31, 2019 includes a one-time non-refundable payment to the previous sponsor in connection with the closing of the asset purchase agreement for $3.5 million. The increase of $10.1 million was primarily due to (i) an $8.4 million increase in costs related to manufacturing clinical supply of seribantumab for use in the CRESTONE clinical trial, (ii) a $3.3 million increase in clinical trial expenses associated with the CRESTONE clinical trial that commenced in 2019, (iii) a $1.1 million increase in employee related costs, including stock-based compensation, resulting from an increase to our research and development headcount, and (iv) $0.8 million of other consulting expenses. These increases were partially offset by the one-time up-front payment of $3.5 million made to the previous sponsor and recognized as expense during the period ended December 31, 2019.
General and Administrative Expenses
General and administrative expenses were $0.5 million for the period ended December 31, 2019, compared to $1.8 million for the year ended December 31, 2020. The increase of $1.3 million was primarily due to an increase of $0.8 million of professional fees, $0.3 million of personnel costs, including stock-based compensation, and $0.2 million of other expenses.
Liquidity and Going Concern
Since Inception, we have not generated any revenue from product sales or any other sources and have incurred significant operating losses. We have not yet commercialized any products and we do not expect to generate revenue from sales of any product candidates for several years, if ever. To date, we have financed our operations through private placements of convertible preferred stock. Through March 31, 2021, we have received gross proceeds of $97.4 million from sales of our convertible preferred stock. We are subject to a number of risks, including the need for substantial additional capital for clinical research and product development. Based upon our $69.9 million in existing cash and cash equivalents as of March 31, 2021, we do not have sufficient existing cash and cash equivalents to support operations for at least one year following the date that the financial statements are issued. We believe that the anticipated net proceeds from this offering, together with our existing cash and cash equivalents, will enable us to fund our operating expenses and capital expenditure requirements through       .
The accompanying 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 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 the uncertainties described above.
Cash Flows
The following table summarizes our sources and uses of cash for each of the periods presented:
Inception Through
Year Ended
Three months ended
March 31,
December 31, 2019
December 31, 2020
2020
2021
(in thousands)
Statement of cash flows data:
Cash used in operating activities
$ (5,450) $ (12,298) $ (1,593) $ (9,477)
Cash used in investing activities
(71)
Cash provided by (used in) financing activities
7,190 90,029 25,183 (11)
Net increase (decrease) in cash and cash equivalents
$ 1,740 $ 77,660 $ 23,590 $ (9,488)
 
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Operating Activities
During the three months ended March 31, 2020, cash used in operating activities was $1.6 million, which consisted primarily of our net loss of $2.0 million, partially offset by $0.4 million of cash provided by changes in our operating assets and liabilities. During the three months ended March 31, 2021, cash used in operating activities was $9.5 million, which consisted primarily of our net loss of $5.1 million and $4.4 million of cash used in changes in our operating assets and liabilities. Net cash used in changes in our operating assets and liabilities consisted primarily of a decrease in accounts payable due to the timing of payments related to research and development costs.
During the year ended December 31, 2020, cash used in operating activities was $12.3 million, which consisted primarily of our net loss of $17.3 million, partially offset by $4.9 million of cash provided by changes in our operating assets and liabilities. Net cash provided by changes in our operating assets and liabilities of $4.9 million during the year ended December 31, 2020, consisted of an increase of $6.2 million in accounts payable and accrued expenses, partially offset by an increase of $1.3 million of prepaid expenses and other assets. The increase in accounts payable and accrued expenses was largely due to the timing of payments related to research and development costs.
During the period ended December 31, 2019, cash used in operating activities was $5.5 million, which consisted primarily of our net loss of $5.9 million, partially offset by $0.4 million of cash provided by changes in our operating assets and liabilities. Net cash provided by changes in our operating assets and liabilities of $0.4 million during the period ended December 31, 2019, consisted of an increase of $0.6 million in accounts payable and accrued expenses, partially offset by an increase of $0.2 million of prepaid expense and other assets. The increase in accounts payable and accrued expenses was largely due to the timing of payments related to research and development costs.
Investing Activities
During the three months ended March 31, 2020 and 2021, there was no cash used in or provided by investing activities.
During the year ended December 31, 2020, cash used in investing activities was $0.1 million, and consisted of purchases of property and equipment.
During the period ended December 31, 2019, there was no cash used in or provided by investing activities.
Financing Activities
During the three months ended March 31, 2020, cash provided by financing activities was $25.2 million, which consisted of net proceeds from the sale and issuance of our Series A convertible preferred stock. During the three months ended March 31, 2021, cash used in financing activities consisted of issuance costs related to the sale and issuance of for our Series B convertible preferred stock during the year ended December 31, 2020 that were paid in the year ending December 31, 2021.
During the year ended December 31, 2020 cash provided by financing activities was $90.0 million, which consisted primarily of net proceeds of $90.0 million from the sale and issuance of our Series A and Series B convertible preferred stock.
During the period ended December 31, 2019, cash provided by financing activities was $7.2 million, which consisted of net proceeds from the sale and issuance of our Series A convertible preferred stock.
 
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Funding Requirements
We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials for seribantumab, and seek to develop or acquire additional product candidates. In addition, upon the closing of this offering, we expect to incur additional costs associated with operating as a public company. The timing and amount of our operating expenditures will depend largely on:

the timing and progress of preclinical and clinical development activities;

successful enrollment in and completion of clinical trials, including CRESTONE;

the timing and outcome of regulatory review of our product candidates;

the cost to develop companion diagnostics as needed for each of our product candidates;

our ability to establish agreements with third-party manufacturers for clinical supply for our clinical trials and, if any of our product candidates are approved, commercial manufacturing;

addition and retention of key research and development personnel;

our efforts to enhance operational, financial and information management systems, and hire additional personnel, including personnel to support development of our product candidates;

the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product candidates for which we obtain marketing approval;

the legal patent costs involved in prosecuting patent applications and enforcing patent claims and other intellectual property claims; and

the terms and timing of any collaboration, license or other arrangement, including the terms and timing of any milestone payments thereunder.
Based upon our cash and cash equivalent balance as of March 31, 2021 of $69.9 million, we do not have sufficient existing cash and cash equivalents to support operations for at least the next year following the date that these financial statements are issued. We believe that the anticipated net proceeds from this offering, together with our existing cash and cash equivalents, will enable us to fund our operating expenses and capital expenditure requirements through        . We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. In its report on our financial statements for the year ended December 31, 2020, our independent registered public accounting firm included an explanatory paragraph stating that our recurring losses from operations since Inception and required additional funding to finance our operations raise substantial doubt about our ability to continue as a going concern. See “Risk Factors — Risks Related to Our Financial Position and Need for Additional Capital — Our recurring losses from operations could continue to raise substantial doubt regarding our ability to continue as a going concern. Our ability to continue as a going concern requires that we obtain sufficient funding to finance our operations.”
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. We do not currently have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required
 
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to delay, limit, reduce or terminate our research, product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Contractual Obligations and Commitments
We enter into contracts in the normal course of business with various third parties for clinical trials, preclinical research studies and testing, manufacturing and other services and products for operating purposes. These contracts do not contain any minimum purchase commitments and provide for termination upon notice. Payments due upon cancellation consist only of payments for services provided and expenses incurred up to the date of cancellation.
In May 2019, we entered into an asset purchase agreement with the previous sponsor, pursuant to which we acquired all rights and interest to patents, know-how, and inventory for assets related to seribantumab. If we are successful in developing and commercializing seribantumab, we may be obligated to pay the previous sponsor up to $54.5 million in development, regulatory and sales milestone payments pursuant to the terms of the asset purchase agreement. Additionally, in conjunction with the asset purchase agreement with the previous sponsor, we assumed the rights and obligations under certain collaboration and license agreements which may require the payment of milestones and/or royalties on future sales of seribantumab. We are currently unable to estimate the timing or likelihood of achieving these milestones or generating future product sales. See “Business — Asset purchase, licensing and collaboration agreements” for additional information about these license agreements, including with respect to potential payments thereunder.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of our financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are described in more detail in the notes to our financial statements appearing at the end of this prospectus, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.
Research and Development Costs and Accruals
Research and development costs consist of salaries and benefits, including associated stock-based compensation, and fees paid to other entities that conduct certain research and development activities on our behalf. Research and development costs are expensed as incurred. We estimate preclinical study and clinical trial expenses based on the services performed pursuant to contracts with research institutions and contract research organizations, and clinical manufacturing organizations that conduct and manage preclinical studies and clinical trials on our behalf based on actual time and expenses incurred by them. Further, we accrue expenses related to clinical trials based on the level of patient activity according to the related agreement. We monitor patient enrollment levels and related activity to the extent reasonably possible and adjusts estimates accordingly.
We account for nonrefundable advance payments for goods and services that will be used in future research and development activities as expenses when the services have been performed or when the goods have been received rather than when the payment is made.
 
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Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. To date, there have not been any material adjustments to our prior estimates of accrued research and development expenses.
Stock-Based Compensation Expense
We measure stock-based compensation expense at the accounting measurement date based on the fair value of the award and recognize the expense on a straight-line basis over the requisite service period of the award, which is typically the vesting period. Compensation expense is measured using the fair value of the award at the grant date and is adjusted to reflect actual forfeitures as they occur.
We estimate the fair value of stock options using the Black-Scholes option pricing model that takes into account the fair value of our common stock, the exercise price, the expected term of the option, the expected volatility of our common stock, expected dividends on our common stock, and the risk-free interest rate over the expected life of the option.
Expected term — We use the simplified method described in the Securities and Exchange Commission Staff Accounting Bulletin Topic 14.D.2 to calculate the expected term as we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term for options granted to employees.
Expected volatility — We are a private company and lack company-specific historical and implied volatility information. Therefore, we estimate expected volatility based on the historical volatility of publicly traded peer companies and expect to continue to do so until such time as we have adequate historical data regarding the volatility of our traded stock price.
Risk-free interest rate — The risk-free rate assumption is based on the U.S. Treasury yield curves whose terms are consistent with the expected term of the stock options.
Expected dividend — We have not issued any dividends and do not expect to issue dividends over the life of the options. As a result, we have estimated the dividend yield to be zero.
We classify stock-based compensation expense in our statement of operations in the same manner in which the award recipient’s payroll costs or service payments are classified.
Determination of the Fair Value of Common Stock
As there has been no public market for our common stock to date, the estimated fair value of our common stock has been determined by our board of directors as of the date of each option grant. In order to determine the fair value of our common stock, our board of directors considered, among other things, the prices at which we sold convertible preferred stock and valuations of our common stock prepared by an unrelated third-party valuation firm, with input from management, in accordance with the guidance provided by the American Institute of Certified Public Accountants Practice Guide, Valuation of Privately Held-Company Equity Securities Issued as Compensation.
Given the absence of a public trading market for our common stock, our board of directors exercised reasonable judgment and considered a number of objective and subjective factors to determine the best estimate of the fair value of our common stock, including (1) our stage of development and our business strategy; (2) the progress of our research and development programs; (3) the illiquid nature of our common stock; (4) the prices at which we sold convertible preferred stock and the superior rights and preferences of the convertible preferred stock relative to our common stock at the time of each grant; (5) external market conditions affecting the biotechnology industry, and trends within the biotechnology industry; (6) our financial position, including cash on hand, and our historical and forecasted performance and operating results; (7) the likelihood of achieving a liquidity event, such as an initial public offering, or IPO, or a sale of our company in light of prevailing market conditions; and (8) the analysis of IPOs and the market performance of similar companies in the biopharmaceutical industry.
 
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In valuing our common stock, our third-party valuations of our common stock utilize an option pricing method, or OPM, with input from management. The OPM is based upon the concept that the securities of a firm’s capital structure can be thought of as call options on the value of a firm. The OPM is appropriate to use when the range of possible future outcomes is difficult to predict and thus creates highly speculative forecasts. The valuations considered the implied total equity value of our company based on the price professional investors paid for preferred securities with consideration of the rights and preferences of each class of preferred security relative to common securities. A critical input into this analysis included management’s estimates related to the form and timing of various exit scenarios.
The assumptions underlying these valuations represented management’s best estimate, which involved inherent uncertainties and the application of management’s judgment. As a result, if we had used significantly different assumptions or estimates, the fair value of our common stock and our stock-based compensation expense could have been materially different.
Once a public trading market for our common stock has been established in connection with the completion of this offering, it will no longer be necessary for our board of directors to estimate the fair value of our common stock in connection with our accounting for granted stock options and other such awards we may grant, as the fair value of our common stock will be determined based on the quoted market price of our common stock.
Options Granted
The following table sets forth by grant date the number of shares subject to options granted from the date of our first option grant on September 17, 2019, the per share exercise price of the options, the fair value of common stock on each grant date, and the per share estimated fair value of the options:
Grant Date
Number of Shares
Subject to Options
Granted
Per Share
Exercise Price of
Options
Fair value of
common stock
per share on date of
option grant
September 17, 2019 – June 16, 2020
3,484,168 $ 0.10 $ 0.10
December 30, 2020
4,157,370 $ 0.32 $ 0.32
March 3, 2021
167,602 $ 0.32 $ 0.32
May 7, 2021
2,546,428 $ 0.73 $ 0.73
In April 2012, the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, was enacted. Section 107 of the JOBS Act provides that an “emerging growth company,” or an EGC, can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. Thus, an EGC can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period for new or revised accounting standards during the period in which we remain an emerging growth company; however, we may adopt certain new or revised accounting standards early.
We will remain an emerging growth company until the earliest to occur of: (1) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (2) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; (3) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period; and (4) the last day of the fiscal year ending after the fifth anniversary of our initial public offering.
We are also a “smaller reporting company” meaning that the market value of our stock held by non-affiliates plus the proposed aggregate amount of gross proceeds to us as a result of this offering is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company after this offering if either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. If we are
 
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a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission.
Recently Issued and Adopted Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our financial statements included elsewhere in this prospectus.
Quantitative and Qualitative Disclosures about Market Risks
All of our cash and money market funds are held with a single financial institution. Due to our size, we believe this financial institution represents a minimal credit risk. Our money market funds are invested in high grade U.S. Treasuries with maturities of 90 days or less. As a result, we believe our money market fund represents a minimal credit risk.
 
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Business
Overview
We are a precision oncology company focused on the development of targeted therapeutics for the treatment of cancer in genomically-defined patient populations. Our vision is to elevate precision medicine to the forefront of every cancer treatment journey, as we believe that each patient living with cancer deserves the opportunity to benefit from a genomically-driven treatment decision. We utilize our deep expertise in developing drugs for rare, genomically-defined patient populations and strategic collaborations with our diagnostic collaborators to work towards a future where each tumor’s unique genomic test result can be matched with a purpose-built precision medicine.
We are focused on identifying oncogenic drivers that are known to be predominantly mutually exclusive with other driver alterations and pursuing innovations and efficiencies in the conduct of clinical trials that we believe may enable development of targeted therapeutics against those oncogenic drivers.
Our lead program is focused on NRG1 fusions, which are rare genomic alterations that have recently been identified as oncogenic driver alterations and that we believe have the potential to be therapeutically actionable through targeted HER3 inhibition. We have designed and initiated our potentially registration-enabling Phase 2 CRESTONE trial to investigate the safety and efficacy of seribantumab, an anti-HER3 monoclonal antibody, in advanced solid tumors harboring an NRG1 fusion. We are conducting this trial in a tumor-agnostic fashion, such that any patient with a solid tumor that harbors an NRG1 fusion, regardless of the tissue of origin, may be eligible. If the CRESTONE trial meets its primary endpoint, and subject to continued discussions with the FDA, we anticipate submitting a BLA under an accelerated approval pathway for the treatment of patients with solid tumors harboring an NRG1 fusion. We expect data from the pre-planned interim analysis of CRESTONE in           and topline data from the full trial accrual in           .
Our Approach
Our collaborations with diagnostic leaders, academic researchers and community oncologists allow us to uncover genomic alterations that we believe are clear oncogenic drivers and potentially amenable to therapeutic inhibition. In contrast, genomic alterations that are overexpressed or amplified in tumors may be more common and they are also more likely to co-exist with other known genomic alterations. These are generally considered “passenger” alterations. We focus on genomic driver alterations that may be rare but are predominantly mutually exclusive with other known driver alterations. When such targets are found, they are likely to be the sole driver of the tumor’s growth and proliferation, making them a possible target for inhibition.
Subsequent to identifying compelling and actionable targets, we selectively in-license, acquire or discover assets that we believe have potential for a genomically-defined patient population. Through this flexible approach, we highlight the importance of matching the right drug with the right target, and the opportunity to leverage existing chemical matter for drug development in a rigorously selected patient population. In particular, we believe that by focusing our development on targeting predominantly mutually exclusive driver alterations in tumors that have no known competing oncogenic drivers, we may improve the potential for product candidates to achieve clinical benefit for patients as a monotherapy.
We aim to drive operational success by implementing process innovations that we believe may enable us to efficiently advance product candidates through clinical development in genomically-defined patient populations. Given these populations are often relatively rare, we have built an innovative model that recognizes the importance and impact of each individual patient. Where appropriate, we also employ innovations in trial design that, contingent upon continued discussion with the FDA, may support a potential registration through an accelerated approval pathway. For example, we believe rare, genomic driver alterations are good candidates for a tumor-agnostic development approach based on the growing recognition that tumors may be categorized by the actionability of their unique genomic signatures instead of by their tissue of origin. By enabling parallel investigation across a wide range of tumor types, we intend to rapidly enroll patients and generate a dataset in
 
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support of a potential accelerated approval registrational filing. We believe proactive implementation and advancement of processes designed specifically with rare, genomically-defined tumors in mind are needed to enable efficient development of therapies for all patient populations living with cancer, even down to the 0.1%.
Our Lead Program: NRG1 Fusions
Our lead program is focused on patients with advanced solid tumors harboring an NRG1 fusion. NRG1 fusions are oncogenic driver events that have been identified in over ten solid tumor types to date and occur in approximately 0.2% of all cancers, or approximately 3,200 new cases per year, in the United States. Importantly, NRG1 fusions are predominantly found to be mutually exclusive with other known driver alterations. There are no approved therapies specifically for the treatment of patients with tumors harboring an NRG1 fusion and the prognosis for these patients is poor.
NRG1 is the primary activating ligand of HER3. NRG1 fusions lead to the ligand-dependent activation of HER3 and the subsequent homo or heterodimerization of HER3 with HER2 or other ERBB family members, which results in activation of the PI3K/AKT and MAPK downstream signaling pathways, both of which are well-characterized drivers of cell proliferation and survival. We believe that direct inhibition of the NRG1 activation of HER3 with a monoclonal antibody approach may drive improved responses for these patients given its direct role in sustaining proliferation and survival of tumors harboring an NRG1 fusion.
We specifically selected and acquired seribantumab, an anti-HER3 monoclonal antibody, as a Phase 2 ready asset with existing clinical supply and data from over 800 patients with advanced solid tumors dosed across twelve prior Phase 1 and 2 trials. The majority of adverse events observed with seribantumab monotherapy were transient and mild to moderate in severity with no dose-limiting toxicity observed at the highest dose level. There was one SAE considered possibly related to seribantumab in the trial, a Grade 4 confusional state at the lowest dose level tested. An MTD of seribantumab monotherapy was not defined in the prior Phase 1 dose-escalation study.
We conducted targeted preclinical studies in NRG1 fusion PDX mouse models across multiple tissue types, where we demonstrated that seribantumab inhibits ligand-dependent activation of HER3 by NRG1 fusions, HER3 dimerization with HER2, and phosphorylation of all ERBB family members as well as downstream signaling pathway members. This inhibition resulted in robust reductions of growth for NRG1 fusion driven tumors at escalating doses of seribantumab. Importantly, these models identified a wide active dose range in mice that may correspond to clinically-achievable doses in humans.
Our preclinical characterization of seribantumab, coupled with its observed side effect profile in clinical trials to date, supports our belief that seribantumab has the potential to generate robust and durable responses for patients with tumors harboring an NRG1 fusion.
In July 2020, we initiated our Phase 2 CRESTONE trial following a Type C meeting with the FDA as the first clinical trial of seribantumab in patients with solid tumors driven by an NRG1 fusion. We have designed CRESTONE as a tumor-agnostic trial with the potential for registration through an accelerated approval pathway, subject to continued discussions with the FDA.
We have proactively included multiple design elements in the CRESTONE trial that we believe may optimize for efficient conduct and detection of clinical activity in the ITT population, in support of a potential registrational submission. These trial design elements include:

Allowance for enrollment screening based on local CLIA-certified testing for an NRG1 fusion to avoid delays in treatment.

Requirement of an additional central confirmatory test for an NRG1 fusion by RNA-based NGS to accurately enroll the appropriate patients in the ITT population that will be used for statistical analysis of the primary endpoint.

Proactive patient stratification to account for known factors that may confound the final statistical analysis, such as prior anti-ERBB therapy, presence of an NRG1 fusion that lacks an EGF-like domain, or co-expression of other known oncogenic drivers; these patients may be enrolled into exploratory cohorts and are not included in the ITT population.
 
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Central review of radiographic scans from the ITT population to reduce the variability in determination of the primary endpoint.
We are employing an innovative model as part of the conduct of our Phase 2 CRESTONE trial to address key risks in the development of therapies for genomically-defined patient populations while enhancing enrollment and trial conduct in a capital efficient manner. In addition to enrollment from our core sites at major academic and community medical centers, we have partnered with diagnostic providers such as Ashion Analytics (now Exact Sciences), NeoGenomics, and Strata Oncology that allow access to data generated using DNA- and RNA-based NGS assays for the presence of an NRG1 fusion. We have also partnered with diagnostic providers such as Caris Life Sciences and Tempus, and health networks like The US Oncology Network (through their Selected Trials for Accelerate Rollout program), giving us access to pre-qualified sites that can be quickly activated following the identification of a patient harboring an NRG1 fusion that meets trial entry criteria for CRESTONE. This innovative model grants us access to approximately 400 potential clinical trial sites to support enrollment into the CRESTONE trial.
We believe that the design and conduct of the CRESTONE trial has the possibility to produce results that may provide support for us to seek accelerated approval of seribantumab for patients with advanced solid tumors harboring an NRG1 fusion, subject to discussions with the FDA. Any accelerated marketing approval is subject to continued discussions with the FDA, and agreement on post-approval confirmatory trials to confirm an anticipated clinical benefit. Even if we seek an accelerated approval pathway, this may not lead to faster development, regulatory review, or approval. The accelerated approval pathway does not increase the likelihood that seribantumab will receive marketing approval.
We believe any future programs that we pursue will directly benefit from the innovative model we have established for efficient development in rare, genomically-defined cancers. As new potential targets emerge, we are committed to prioritizing the science first and believe that every oncogenic driver alteration deserves an actionable therapeutic — no matter how rare the population.
Our team and investors
Our approach is powered by an accomplished senior management team led by our Founder and Chief Executive Officer, Shawn Leland, PharmD, RPh, with a career in medical affairs and business development at Eli Lilly, ARIAD Pharmaceuticals, Argos Therapeutics and Verastem Oncology. Our Board of Directors is led by Steve Elms, Managing Partner at Aisling Capital, co-founder and Chair of Elevation Oncology, and previous Chair of the Board of Directors at LOXO Oncology, Inc. Together, our senior management team and Board of Directors combine extensive experience in the development of precision oncology therapeutics with recent experience in designing and operationalizing innovative development programs in rare, genomically-defined patient populations.
Our Scientific Advisory Board is chaired by Lori Kunkel, M.D., former Chief Medical Officer and Board Member of LOXO Oncology Inc., and includes academic researchers and industry experts at the forefront of identifying emergent and actionable genomic driver alterations. Many of our advisors also lead clinical units at renowned precision medicine cancer centers and are actively involved in our program selection and clinical development.
We are backed by a sophisticated group of investors that are highly experienced in precision oncology including Aisling Capital, Qiming Venture Partners USA, Vertex Ventures HC, Cormorant Asset Management, venBio Partners, BVF Partners and other top tier investors.
Our commitment
While each driver alteration may individually be rare, we believe that our combined efforts as part of a vibrant precision medicine community may enable a future where every patient’s cancer genomic test results in an actionable option for a precision treatment. To achieve our vision for the future, we actively advocate for and participate in industry-wide initiatives to improve access, awareness, and clarity around precision medicines for rare, genomically-defined cancers.
 
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This begins with advocating for the wide availability of genomic testing. To maximize testing sensitivity, we also work towards awareness of the importance of applying the appropriate diagnostic testing method for each actionable driver alteration. We collaborate with academic institutions, patient advocacy groups, medical education providers and associations and diagnostic companies to advocate for broad genomic testing of tumors, at all lines of therapy, to comprehensively identify all actionable genomic driver alterations present at each treatment decision timepoint. We recognize that continued adoption of broad genomic profiling is critical for identifying new targets, refining our understanding of genomic driver alterations, and ensuring that genomic testing is both time and cost-effective for patients. Finally, we advocate for industry-wide initiatives that remove the burden of responsibility from the patient to educate themselves, and move towards presenting a clear, united message that prioritizes patient benefit and well-being.
We believe that our focused drug development efforts combined with our active role in the broader precision medicine community contributes to a future where precision medicine can be elevated to the forefront of every cancer treatment journey.
Our strategy
Our goal is to translate advances in genomic testing and novel scientific insights related to oncogenic driver alterations into the development of targeted therapeutics for the treatment of patients with cancer. Key elements of our strategy include:

Prioritize oncogenic drivers that are predominantly mutually exclusive oncogenic alterations to maximize the probability of clinical success. We focus on true oncogenic driver events that are most often “mutually exclusive” within a tumor, meaning that co-expression with other known driver alterations is not observed. Our ability to identify and specifically target a mutually exclusive oncogenic driver alteration increases the likelihood of developing a therapy that achieves a clinical benefit for patients as a monotherapy. This approach has been successful in the development of multiple approved therapies targeting gene fusions, including for example larotrectinib and entrectinib for NTRK gene fusions, erdafitinib and pemigatinib for FGFR gene fusions and mutations, imatinib, dasatinib and others for BCR-ABL gene fusions, crizotinib, lorlatinib, alectinib, ceritinib and brigatinib for ALK translocations, and pralsetinib and selpercatinib for RET fusions, among others. Our lead program focuses on NRG1 gene fusions in solid tumors, which are known to be rare oncogenic drivers found to be predominantly mutually exclusive with other known oncogenic driver events.

Rapidly advance our lead product candidate seribantumab, an anti-HER3 monoclonal antibody, through late-stage clinical development for solid tumors harboring NRG1 gene fusions. The identification of NRG1 fusions in over ten solid tumor types may enable a tumor-agnostic development approach. There is a significant unmet need for an effective therapy for solid tumors driven by an NRG1 fusion: outcomes for cancers harboring NRG1 fusions have been poor, there are no agents specifically approved for patients with tumors harboring an NRG1 fusion and the current treatments that are used do not result in meaningful responses for patients with tumors harboring an NRG1 fusion. We believe that seribantumab’s mechanism of action and broad therapeutic window should translate into robust and durable responses at a dosing regimen optimized for the NRG1 fusion patient population. In July 2020, we initiated the Phase 2 CRESTONE trial at sites across the United States to assess the safety, tolerability, and anti-tumor activity of seribantumab in patients with tumors harboring an NRG1 fusion. We are conducting the CRESTONE trial with the intent to seek regulatory approval through the accelerated approval pathway, pending continued discussions with the FDA. We anticipate enrolling at least 55 patients with tumors that harbor a centrally confirmed NRG1 gene fusion. As of May 11, 2021, the planned safety run-in has been fully enrolled and two patients have been subsequently enrolled in Cohort 1 who may be eligible for inclusion in the ITT population following central confirmation of an NRG1 fusion by RNA-based NGS. We expect data from the pre-planned interim analysis on the first 20 patients from the ITT population within Cohort 1 from the CRESTONE trial in           and topline data from the full trial accrual of at least 55 patients from the ITT population within Cohort 1 in                 .

Expand our pipeline of drug candidates targeted against oncogenic driver alterations through strategic collaborations and/or external development. We intend to continue to expand our pipeline by leveraging our
 
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partnerships with NGS diagnostic providers, as well as our own internal expertise and capabilities, to potentially accelerate the identification of additional actionable oncogenic targets. We then expect to in-license, acquire or discover assets with potential against those identified oncogenic driver targets. We are focused on developing therapeutics that target specific genomic alterations that are unique drivers of cancer and are suitable for therapeutic intervention, with an agnostic view on the mechanism of action, therapeutic modality or stage of development.

Collaborate with diagnostic providers and NGS centers of excellence to identify patients with rare, genomically-defined cancers, starting with solid tumors harboring an NRG1 fusion. We have entered into multiple partnerships to date, including with Ashion Analytics (now Exact Sciences), Caris Life Sciences, NeoGenomics, Strata Oncology, Tempus and The US Oncology Network, to access patients identified through ongoing use of their diagnostic testing in their network who may be eligible for our Phase 2 CRESTONE trial. We strategically selected each partner for their ability to identify NRG1 gene fusions with high sensitivity, particularly through the use of RNA-based next generation sequencing. Through these collaborations, we are able to expand identification of patients with tumors harboring an NRG1 fusion who may be eligible for enrollment in our Phase 2 CRESTONE trial, beyond those patients who may be identified through our traditional core clinical trial sites.

Design and implement an innovative operational model tailored to the efficient development and potential regulatory approval of precision therapeutics for rare, genomically-defined cancers, beginning with the investigation of seribantumab for any solid tumor driven by an NRG1 fusion. We have designed our business model around genomically-defined cancers with smaller trial size requirements and the potential for accelerated approval. Rather than follow the traditional drug discovery path, we have focused on external development to identify potential assets that we can acquire at attractive economic terms and that will enable us to move efficiently through clinical development. We acquired seribantumab in July 2019 as a Phase 2 ready asset, enabling us to move rapidly into the potentially registration-enabling Phase 2 CRESTONE trial for patients with tumors harboring an NRG1 fusion within 12 months of our formation. We have also employed innovative models to enhance traditional patient enrollment into our Phase 2 CRESTONE trial with opportunity for enrollment not only at core sites, but also through referrals through our diagnostic partnerships, and a “just-in-time” site initiation model. The just-in-time model grants us access to approximately 400 sites through our partners Caris Life Sciences, Tempus and The US Oncology Network that can be activated in approximately 14 days or less following the identification of a patient with a tumor harboring an NRG1 fusion who may meet the enrollment criteria for CRESTONE. This enables us to reduce overhead costs for the trial and increase the availability of eligible patients, addressing two key risks in the development of therapies for a rare, genomically-defined patient population.

Evaluate strategic opportunities to potentially accelerate development timelines and enhance the commercial potential of our product candidates globally. We intend to build an integrated biopharmaceutical company focused on precision oncology with a broad portfolio of targeted therapies. We currently retain full global development and commercialization rights for seribantumab. We plan to commercialize our product candidates in key markets, either alone or with strategic partners, as well as invest in shaping the genomic testing landscape in order to maximize the worldwide commercial potential of our programs.

Actively advocate for and participate in industry-wide initiatives to improve access, awareness and clarity around precision medicines for rare, genomically-defined cancers. We envision a future where every patient with cancer has the option of a precision therapy matched to their tumor’s unique genomic driver. This begins with ensuring the wide availability of genomic testing that is able to identify the increasing number of biomarkers that can be paired with an investigational clinical trial or a commercially available targeted therapy. We aim to increase awareness on the importance of applying the appropriate diagnostic testing method for each actionable driver alteration. We collaborate with academic institutions, patient advocacy groups, medical education providers and associations, diagnostic companies, and community oncology practices to advocate for broad genomic testing of tumors, at all lines of therapy, and regardless of the stage of cancer. By comprehensively identifying all actionable genomic driver alterations present at each treatment decision timepoint, patients may dynamically benefit from the prognostic and therapeutically-predictive value of
 
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diagnostic tests as both their tumor and the treatment landscape evolve. Finally, we advocate for industry-wide initiatives that remove the burden of responsibility from the patient to educate themselves, and move towards presenting a clear, united message that prioritizes patient benefit and well-being.
Background
The rise of precision cancer therapeutics
Cancer is a heterogeneous group of diseases caused by alterations in cells that give rise to abnormal cell growth and proliferation. Many cancer therapeutics rely on the rapid growth dynamics of cancer cells to elicit a therapeutic effect; notably, most chemotherapeutics inhibit the replication of all cells in the body, but act preferentially to destroy cancer cells as they proliferate faster than non-cancer cells, resulting in significant toxicity. By contrast, targeted therapies are designed to interfere with, or target, the specific pathways within a cancer cell that contribute to the growth and survival of a tumor.
Cancer has also historically been diagnosed, classified and treated based in large part on a tumor’s organ site or tissue of origin, thus giving rise to therapeutics for lung cancer, breast cancer or other tissue-based designations. With advances in genomic testing there has been a widespread recognition that cancers may be defined by their unique genomic signatures, instead of tissue of origin, due to shared genomic alterations irrespective of their location in the body. This understanding has both been a result of, and driven by, an increased use of genomic sequencing to better understand the driving factors of each individual cancer. Over the last several years, the ability to conduct genomic profiling of an individual patient’s tumor has become more readily accessible and affordable. Our collective understanding of the genomic makeup of tumors has facilitated the development of precision therapeutics designed to specifically inhibit the underlying causes of tumor growth and proliferation.
With its supplemental approval by the FDA in 2017 for patients with unresectable or metastatic, microsatellite instability-high (MSI-H) or mismatch repair deficient (dMMR) solid tumors, pembrolizumab, or Keytruda, was the first targeted therapy approved for a solid tumor based on a molecular profile, regardless of the tumor’s site of origin, and was approved by the FDA in 2020 for patients with any tumor mutational burden-high solid tumors. In 2018, larotrectinib, or Vitrakvi, was approved by the FDA for neurotrophic tropomyosin receptor kinase, or NTRK, driven cancers, making it the first targeted therapy to be specifically developed and approved to treat a specific genomic alteration in a tissue agnostic fashion. In 2019, entrectinib, or Rozlytrek, was approved by the FDA for any adult or pediatric NTRK driven cancers. We believe that these approvals, and drugs that have been subsequently approved in a similar manner, represent a paradigm shift in the development of targeted therapies. Cancer is increasingly being characterized by the underlying genomic drivers of disease, rather than in a tissue-specific manner.
There are multiple methods available to characterize the genomic composition of tumors. These include techniques such as immunohistochemistry, or IHC, fluorescence in situ hybridization, or FISH, reverse transcriptase polymerase chain reaction, or RT-PCR, and next generation sequencing of DNA or RNA. Each of these testing methodologies has its own advantages and disadvantages. For instance, RNA-based NGS may be more sensitive than DNA-based NGS for detecting gene fusions with large intronic regions and variable fusion partners. Conversely, point mutations can be viably detected with DNA-based NGS, given the comparably short regions of DNA that are impacted. As the number of actionable biomarkers increases, it is important to consider the most appropriate diagnostic testing method or methods that should be applied to comprehensively identify all actionable driver alterations present in a tumor.
The precision oncology movement strives to improve patient outcomes by identifying the underlying oncogenic driver of each tumor through genomic testing, and matching it to a purpose-built targeted therapeutic. With each genomic test, we gain a better understanding as an industry of those genomic alterations that drive tumor growth, and therefore should be considered for viability as therapeutic targets. By precisely matching a therapeutic to a tumor’s genomic driver of disease, the hope is to achieve a deeper and more durable response with fewer off-target side effects for every cancer — no matter how rare.
 
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Genomic alterations fall on a spectrum of oncogenic potential
Cancer arises through a process whereby cells acquire a series of alterations that eventually precipitate unrestrained cell growth and division. The changes that accumulate in a cancer cell may encompass many distinct classes of genomic alterations, including:

overexpression or amplification of individual genes;

specific point mutations in a single gene; and

chromosomal translocations or fusions of genetic material.
These genomic alterations can be further characterized as driver or passenger alterations which fall on a spectrum of oncogenic potential (Figure 1). Oncogenic driver alterations confer growth and survival advantages to the cancer cells that may lead to oncogenesis and continued growth of a tumor. Passenger mutations, also known as bystander mutations, are those that arise within the cancer cell but are not the primary or underlying cause of oncogenesis and/or continued growth of a tumor.
Advances in genomic testing, including increases in the specificity and sensitivity of testing methods, have enabled improved identification of a wider range of genomic alterations. In particular, advancements in and wider availability of RNA-based NGS whole transcriptome sequencing has improved our ability to identify novel gene fusions. These “chimeric” genes arise from the re-combination of portions of two normally unrelated genes and are transcribed into corresponding fusion proteins which may retain functionalities related to either or both component proteins. If a tumor suppressor gene or oncogene is involved, the resulting fusion proteins frequently lead to unregulated cell growth and proliferation and are often the primary cause of tumor growth.
While gene fusions are generally rare, they have high oncogenic potential. Most importantly, they can appear in tumors as oncogenic drivers, predominantly mutually exclusive with any other known genomic driver alteration. Accordingly, these fusions represent important genomic alterations to identify and subsequently target with a precision therapy.
Figure 1. Oncogenic spectrum of genomic alterations.
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Different categories of genomic alterations may differ in prevalence, likely role in tumorigenesis, and probability of success as an actionable therapeutic target. Multiple recent FDA approvals of targeted therapies against less common events such as specific genetic mutations or larger structural variants suggests that targeting these oncogenic driver events may increase the potential for therapeutic success.
 
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The importance of targeting driver alterations
The importance of identifying and targeting genomic alterations that are drivers of disease is exemplified by the development of MET and FGFR inhibitors.
The MET and FGFR genes were first implicated in tumorigenesis in the 1980s and 1990s. Subsequent to these discoveries, MET and FGFR inhibitors were widely developed in tumors with MET or FGFR amplification or overexpression, but these early trials did not produce efficacy of levels that supported approval in these patient populations.
With the advent of next generation sequencing and the identification of genomic alterations with greater oncogenic potential, this quickly changed. In the early to mid 2000s, descriptions of an exon 14 skipping mutation in the MET gene began emerging in literature, followed by increasing reports of specific FGFR mutations and gene fusions beginning in the early 2010s.
By 2019, less than a decade after the first FGFR fusion was identified in 2012, Balversa (erdafitinib) became the first approved FGFR inhibitor, indicated for advanced bladder cancer with susceptible FGFR3 or FGFR2 genetic alterations. Accelerated approval contingent on a successful confirmatory trial was granted based upon a clinical trial of 87 patients, where treatment with erdafitinib demonstrated an objective response rate, or ORR, of 32.2% and median duration of response of 5.4 months.
A year later in 2020, Tabrecta (capmatinib) became the first approved MET inhibitor, indicated specifically for non-small cell lung cancer, or NSCLC, with a MET exon 14 skipping mutation. These approvals demonstrate the importance of patient selection and targeted therapy development driven by the identification of genomic driver alterations with higher oncogenic potential, such as specific mutations and gene fusions.
Regulatory precedent for approval of drugs targeting gene fusions
As of December 31, 2020, over a dozen therapies have been approved for tumors driven by various gene fusions (Figure 2), solidifying the importance of this class of genomic alterations in oncology.
Figure 2. FDA drug approvals in gene fusion-positive tumors (2001 — 2020).
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The identification of the BCR-ABL gene fusion as a genomic alteration in chronic myelogenous leukemia, or CML, led to the 2001 FDA approval of imatinib, the first targeted therapy for an oncogenic gene fusion. After a decade of research in hematologic malignancies, the ALK inhibitor, crizotinib, became the first approved targeted therapy for a gene fusion in a solid tumor in 2011. As of 2020, over a dozen different targeted therapies have been approved for hematologic and solid tumors driven by various gene fusions.
 
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In 20 years of active research and development, significant progress has been made not only in the sophistication of inhibitor design for gene fusions, but also in the genomic testing technologies available for identification of gene fusions. As a result, we are now able to uncover new gene fusions that are likely to be driver alterations, design therapies to target them and identify the patients that are most likely to benefit more quickly and efficiently than ever. Clinical trials can now be designed and efficiently enrolled for these specific, genomically-defined patient populations. By matching the right patient with the right therapeutic, we are now improving the low probability of technical success historically associated with oncology clinical trials. The result is a compelling string of advancements in targeted therapies.
In our view, robust identification of true genomic driver alterations is critical to the development of therapeutics that may lead to better patient outcomes. We believe that the future of cancer treatment will be defined by the ability to first fully characterize a patient’s tumor and to then match each identified genomic driver alteration with a purpose-built precision therapeutic.
Our Approach
We envision a future in which each tumor’s unique genomic test result can be matched with a purpose-built precision medicine. We employ a capital-efficient approach to identify true, druggable oncogenic driver alterations, and to acquire and develop drugs that specifically target them. We believe our approach may allow us to efficiently advance product candidates through clinical development in rare, genomically-defined patient populations.
Target Identification
We focus on identification of genetic alterations that are predominantly mutually exclusive oncogenic drivers. We have established industry-wide partnerships with NGS companies to enable the identification of actionable targets. We also collaborate with academic and clinical researchers, diagnostic leaders, and community oncology practices to evaluate emerging genomic research for potential targets.
Therapeutic Candidate Selection
Following target identification, we select attractive assets in a capital-efficient manner through a targeted search for the appropriate chemical matter to address the identified target. We start by assessing existing compounds based on their mechanistic properties, observed or predicted risk:benefit profile, chemical and manufacturing properties, intellectual property, and other parameters on a case-by-case basis. We then in-license, acquire, or when there is not suitable existing chemical matter, may embark upon a drug discovery campaign with collaborators to create an appropriate candidate for future drug development. These processes allow us to select the asset that we believe may have the highest probability of technical success for the treatment of patients with genomically-defined cancers.
Optimized Clinical Trial and Regulatory Execution
We aim to drive operational success by implementing process innovations that we believe may enable us to efficiently advance product candidates through clinical development in genomically-defined patient populations. Given these populations are often relatively rare, we have built an innovative clinical enrollment model that recognizes the importance and impact of each individual patient. We also seek to employ expedited regulatory strategies such as Breakthrough Therapy Designation, Fast Track Designation, Priority Review, Accelerated Approval, and other collaborative mechanisms with the FDA and regulatory agencies outside the United States to optimize clinical development where applicable. We utilize our robust network of strategic partnerships to enhance patient enrollment through real-time identification and referral of genomically-defined patient populations into clinical studies. Patients can be enrolled through identification at, or active referral to, core trial sites at academic medical institutions, and new trial sites can be rapidly activated through a process of “just-in-time” site initiation through a network of specialized community oncology centers. We have executed multiple strategic collaborations to support just-in-time site initiation to date. For example, through collaborations with Caris Life
 
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Sciences, Tempus, and The US Oncology Network we currently have access to approximately 400 clinical trial sites in support of our Phase 2 CRESTONE trial.
Our Lead Program
Seribantumab for solid tumors harboring an NRG1 fusion
Our lead program is focused on the identification of NRG1 gene fusions as an emergent genomic alteration that is predominantly mutually exclusive with other known driver alterations, the hallmark of a true oncogenic driver. Following our focused approach described above:

We confirmed that NRG1 fusions are likely to be a clinically actionable biomarker and identified HER3 inhibition with a monoclonal antibody as a selective targeted therapeutic approach for tumors driven by an NRG1 fusion.

The anti-HER3 monoclonal antibody seribantumab was specifically chosen as a therapeutic candidate with the potential to selectively target tumors harboring an NRG1 fusion and support an efficient development pathway as a Phase 2 ready asset.

We have designed the Phase 2 CRESTONE trial with “just-in-time” site initiation and early review of response signals, which we believe addresses risks and inefficiencies of clinical development within rare, genomically-defined patient populations, and potentially enables submission of a BLA pursuant to an accelerated approval pathway.
Target Identification:
NRG1 fusions and HER3 inhibition
HER3 (ERBB3) and the ERBB family
The ERBB family of proteins contains four members including epidermal growth factor receptor (EGFR; ERBB1; HER1), ERBB2 (HER2), ERBB3 (HER3), and ERBB4 (HER4). While EGFR, HER2, and HER4 are tyrosine kinases, HER3 is a pseudo-kinase meaning that HER3 does not have meaningful catalytic activity of its own.
When HER3 is activated by its ligand, NRG1, it is able to undergo an obligate pairing through homo- or heterodimerization with HER2 or other ERBB family members. The formation of these HER3-HER2 dimers and other ERBB family complexes leads to the downstream activation of PI3K/AKT as well as MAPK, key pathways that regulate cell growth and proliferation.
Alterations that disrupt signaling of ERBB and downstream signaling pathways through PI3K/AKT and MAPK are often identified in tumors.
Tumorigenesis driven by NRG1 fusions
NRG1 gene fusions are rare genomic alterations that arise when portions of the NRG1 gene are combined with portions of a second gene, known as its fusion partner. NRG1 gene fusions are transcribed by a cell into NRG1 fusion proteins. As long as the NRG1 portion of the fusion protein retains its active component, known as the EGF-like domain, the fusion protein can act like a normal NRG1 protein, and can induce signaling through the HER3 receptor. Based on current literature, it appears that nearly all NRG1 fusions contain the genomic region that encodes the EGF-like domain of the protein and therefore are able to bind to HER3 and activate downstream signaling pathways.
Production of the healthy NRG1 protein is normally tightly regulated by a cell to prevent uncontrolled cell growth and proliferation. Cells may not be able to regulate the aberrant NRG1 fusion proteins in the same way,
 
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and their production may lead to over-activation of HER3 and downstream PI3K/AKT and MAPK pathways leading to tumor growth and proliferation (Figure 3).
Figure 3. NRG1 fusions drive tumor growth & proliferation through HER3.
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[Left] The NRG1 gene encodes the NRG1 protein, which is a ligand for HER3. Ligand-induced activation of HER3 by NRG1 enables preferential dimerization with HER2 and activation of downstream PI3K/AKT and MAPK signaling pathways. Production of the NRG1 protein is tightly regulated by the cell to avoid overactivation of downstream pathways. [Right] Portions of the NRG1 gene may be aberrantly combined with portions of an unrelated gene, resulting in an NRG1 gene fusion. The resulting NRG1 fusion proteins may still act as ligands for HER3 if they retain an intact EGF-like domain. Cells may not be able to regulate production of NRG1 fusion proteins, leading to tumor growth and proliferation driven by overactivation of HER3 and downstream PI3K/AKT and MAPK pathways.
 
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Characteristics of NRG1 fusions
NRG1 fusion proteins contain components of both the NRG1 protein and the protein described by its fusion partner. At least 50% of known NRG1 fusions contain CD74, ATP1B1, SDC4, or RBPM5 as the fusion partner. It is not known at this time if there are any prognostic or functional differences between NRG1 fusions with different partners.
Figure 4. NRG1 fusions exhibit a variety of fusion partners.
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Pie chart showing the proportion and variety of fusion partners for NRG1 identified in a 2019 retrospective analysis by Jonna et al. of 21,858 tumor specimens from unique patients across more than 25 solid tumor types. The specific NRG1 fusion partners identified were variable within and across tumor types.
Importantly, when NRG1 fusions are found in a tumor, other known oncogenic drivers such as KRAS, EGFR, ALK, ROS1, and RET mutations are typically absent. Because of this, NRG1 fusions are considered oncogenic driver alterations given they are predominantly mutually exclusive when detected in patients with cancer. As a mutually exclusive oncogenic driver, we believe a targeted monotherapy approach has a strong potential to treat tumors that harbor an NRG1 fusion.
Incidence of NRG1 fusions
NRG1 fusions have been identified in more than ten unique solid tumor types to date in the published literature (Figure 5), and we expect that the reported number of tumor types harboring an NRG1 fusion will grow as research continues to advance.
To our knowledge, the most comprehensive assessment of the incidence rate of NRG1 fusions was published in 2019 by Jonna et al. in Clinical Cancer Research with an analysis of 21,858 samples and updated at the 2020 annual meeting of the American Society of Clinical Oncology, or ASCO, based on an updated analysis of 44,570 tumor samples. Based on the observed incidence rate of approximately 0.2% and the estimated number of
 
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new cancer cases in the United States in 2020 reported in Cancer Facts and Figures 2020 by the American Cancer Society, we estimate the incidence of new patients with tumors harboring an NRG1 fusion in the United States is approximately 3,200 per year.
Figure 5. NRG1 fusions have been identified in over 10 solid tumor types.
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In a 2019 retrospective analysis of 21,858 tumor specimens from unique patients by Jonna et al., the incidence of NRG1 fusions was approximately 0.2% (41/21,858). An updated analysis in 2020 included 44,570 tumor specimens with the incidence of NRG1 fusions remaining at approximately 0.2% (82/44,570). In these studies, NRG1 fusions were identified across over 10 solid tumor types at similar rates within each organ system of origin (range 0.1 — 0.5%). Separate reports in the published literature suggest that the prevalence of NRG1 fusions may be enriched in specific tumor subtypes; prevalence in IMA, a subtype of NSCLC, has been reported to be up to 27-31%; prevalence in pancreatic ductal adenocarcinoma, a subtype of pancreatic cancer, has been reported to be up to 6%.
NRG1 fusions have been reported to be more prevalent in certain subtypes of cancer, including a rare form of NSCLC known as invasive mucinous adenocarcinoma, or IMA, where an NRG1 fusion may occur in 27-31% of cases, and in KRAS wild type pancreatic ductal adenocarcinoma, or PDAC, where an NRG1 fusion may occur in up to 6% of cases.
The wide range of tumor types in which an NRG1 fusion has been identified make it a strong candidate for a tumor-agnostic development strategy.
NRG1 fusions lead to a poor prognosis
There are currently no approved therapeutics specifically targeting tumors harboring an NRG1 fusion. Evidence available to date suggests that patients with tumors harboring an NRG1 fusion have a poor prognosis and limited response to currently available therapies. A research report published in Oncotarget in 2016 by Shin et al. presented an analysis of disease-free survival, or DFS, and overall survival, or OS, in patients with tumors harboring an NRG1 fusion (Figure 6). In all patients analyzed (n=59) the presence of an NRG1 fusion resulted in inferior OS and a trend towards shorter DFS, compared to those without NRG1 fusions. To remove the confounding factor
 
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of stage of disease, a sub analysis was done on patients with stage 1 disease (n=45) where patients with tumors harboring an NRG1 fusion showed significantly inferior OS and DFS as compared to those with tumors without an NRG1 fusion.
Figure 6. NRG1 fusions have been associated with significantly
lower overall survival (OS) and disease-free survival (DFS)
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Shin, et al., Journal of Clinical Oncology
In a 2016 retrospective analysis by Shin et al. of 59 patients with IMA, a subtype of NSCLC, 16 NRG1 fusions were identified. Samples were obtained following curative surgical resection, and no further treatment was characterized in the trial. [Left] Comparison of OS according to the presence of NRG1 fusions showed that patients harboring NRG1 fusions had significantly inferior OS than those without NRG1 fusions (P = 0.019; hazard ratio = 0.286; 95% confidence interval, .094 to .865). Patients harboring tumors with NRG1 fusions also showed a trend towards shorter DFS, compared with those without NRG1 fusions. [Right] To exclude the impact of stage on survival, the authors compared OS and DFS only in patients with stage 1 disease. Patients with NRG1 fusions showed significantly inferior OS and DFS compared to those without NRG1 fusions (P = 0.009 and 0.013).
At ASCO 2019, Duruisseaux et al. reported an analysis from a global multicenter network of thoracic oncologists participating in an NRG1 fusion global registry trial, who identified 80 NSCLC patients with pathologically confirmed NRG1 fusions and evaluated their response to chemotherapy, chemotherapy plus immunotherapy, or off-label use of afatinib. They reported that 0-12% of patients achieved an objective response to chemotherapy or chemotherapy plus an immunotherapy, and only 18% of patients achieved an objective response to off-label afatinib. In this retrospective trial, it was determined that treatment with afatinib resulted in a median progression-free survival, or PFS, of 3.5 months. Limited durability is likely attributed to the fact that HER3 is a pseudo-kinase, and therefore inhibition of HER3 is not amenable to targeting by small molecule tyrosine kinase inhibitors, such as afatinib, which inhibits EGFR, HER2, and HER4. Given afatinib does not inhibit HER3, only partial inhibition of downstream signaling (PI3K/AKT and MAPK) is observed, which allows tumor cells harboring an NRG1 fusion to continue to grow and proliferate.
The collective evidence from the published literature indicates a poor prognosis for patients with tumors harboring an NRG1 fusion with the currently available standard of care treatments. Based upon the unmet clinical need that exists for patients with solid tumors harboring an NRG1 fusion, and the regulatory precedents seen with prior precision oncology accelerated approvals, we believe that a therapeutic agent for these patients should demonstrate a greater than 20-30% ORR and a Duration of Response, or DOR, of greater than 5 months.
Evidence that targeting HER3 may be an optimal approach for treating tumors harboring an NRG1 fusions
There have been several clinical case reports published or presented on the potential of ERBB-family inhibition as a therapeutic intervention for patients with tumors harboring an NRG1 fusion. These include reports on the
 
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off-label use of afatinib as well as a few cases with monoclonal antibodies and small molecule inhibitors targeting ERBB family members. Clinical activity, including objective responses, have been reported with varying durations of response.
As reported by Drilon et al. in a 2018 report in Cancer Discovery (Figure 7), small molecule inhibition of EGFR, HER2 and HER4 with afatinib was not as effective as the use of HER3-targeted therapy. The administration of afatinib in an in vivo NRG1 fusion model of ovarian cancer (OV-10-0050) with a CLU-NRG1 fusion resulted in a mixed response to treatment. A potential reason for the limited effect of afatinib observed is that treatment with afatinib did not result in complete shutdown of downstream signaling through the PI3K/AKT pathway.
In contrast, the specific inhibition of HER3 by the anti-HER3 monoclonal antibody (GSK2849330) induced complete, or near-complete, regressions and a near-complete suppression of downstream signaling in the same model.
Figure 7. Comparison of activity suggests targeting HER3 with a mAb may be optimal for NRG1 fusions.
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In a 2018 Cancer Discovery publication, Drilon et al. compared the activity of a pan-ERBB Tyrosine Kinase Inhibitor, or TKI, afatinib, to the activity of an anti-HER3 monoclonal antibody, GSK2849330, in a preclinical NRG1 fusion PDX model. The OV-10-0050 PDX model was derived from the tumor of an ovarian cancer patient containing a CLU-NRG1 fusion confirmed by RNA-based NGS. Female BALB/c nude mice were subcutaneously implanted with CLU-NRG1-rearranged tumors. Mice were treated with vehicle, afatinib, IgG control, or GSK2849330. Pharmacodynamic changes in tumor tissues were measured 4 hours after a single dose of treatment (n=3, each arm). [Left] Mice were treated with afatinib at 15 mg/kg daily for 28 days, resulting in a significant inhibition of tumor growth compared to the vehicle arm (n=6, each arm). Pharmacodynamic analysis showed low inhibition of phospho-HER3 with afatinib treatment relative to treatment with GSK2849330, and little to no change in phospho-AKT. [Right] The same PDX mouse model was treated with anti-ERBB3 monoclonal antibody, GSK2849330 at 25 mg/kg biweekly for 35 days, resulting in a dramatic response of complete tumor regression compared to vehicle- or IgG-treated controls (n=10, each arm). Pharmacodynamic analysis demonstrated near complete inhibition of phospho-HER3 and phospho-AKT relative to IgG control following treatment with GSK2849330. These results in aggregate suggest that targeting HER3 may be an optimal approach over targeting other members of the ERBB family for inhibiting growth of tumors with an NRG1 fusion.
Additionally described in the report, the only response observed in the Phase 1 clinical trial of GSK2849330 was in a patient with a NSCLC tumor harboring an NRG1 fusion who had been treated previously with several lines of systemic therapy (chemotherapy and immune therapy) with no response to any of these treatments. Targeted therapy with the anti-HER3 monoclonal antibody GSK2849330 resulted in a durable partial response of 19 months that exceeded the duration of disease control achieved on all prior systemic lines of therapy in aggregate (Figure 8).
 
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Figure 8. Clinical Case Study: IMA patient with NRG1 fusion treated with HER3 mAb GSK2849330.
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In a 2018 Cancer Discovery publication, Drilon et al. reported a case study on a never-smoker patient with advanced invasive mucinous adenocarcinoma (IMA). The patient was treated with four lines of systemic therapy (chemotherapy and immunotherapy) with no response to any of these treatments. The tumor was subsequently found to harbor an in-frame CD74-NRG1 fusion that includes the EGF-like extracellular domain which serves a binding site for HER3. Targeted therapy with GSK2849330, an anti-HER3 monoclonal therapeutic antibody, was initiated within a Phase 1 clinical trial. A durable (19 months) and confirmed partial response (RECIST version 1.1) was achieved, which exceeded the duration of disease control achieved on all four prior systemic therapy regimens, in aggregate.
This report concluded that EGFR, HER2 and HER4-directed therapy such as afatinib was not as effective as a HER3-directed therapy in tumors harboring an NRG1 fusion, that screening for NRG1 fusions should be performed and that the development of therapies targeting HER3 should evaluate dedicated cohorts of patients with NRG1 fusions.
Therapeutic Candidate Selection:
Seribantumab, an anti-HER3 monoclonal antibody
We acquired seribantumab (formerly MM-121) from the previous sponsor in July 2019 following robust evaluation of HER3 inhibitors and their potential for development specifically for patients with tumors harboring an NRG1 fusion.
Under the previous sponsor’s clinical development program, seribantumab has been studied in over 800 patients across twelve clinical trials as a monotherapy or in combination with other anti-cancer therapies and has been generally well-tolerated in clinical trials.
The clinical development program of seribantumab by the previous sponsor was focused on patients with overexpression or amplification of HER3 or NRG1, with limited anti-tumor efficacy. Importantly, patients with tumors harboring an NRG1 gene fusion were not specifically selected for inclusion in these studies. We believe that patients with tumors harboring an NRG1 fusion represent the most appropriate patient population to evaluate the potential of seribantumab and that our product candidate offers significant potential for efficacy in these patients.
We selected seribantumab for development in patients with tumors harboring an NRG1 fusion, in part due to the following key characteristics.

Seribantumab’s unique mechanism of action inhibits ligand-dependent activation of HER3, and likely through the inhibition of ERBB dimerization, destabilizes the entire ERBB family of proteins.
 
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Previous clinical studies in over 800 patients demonstrated that seribantumab had been generally well-tolerated in clinical trials with mostly Grade 1/2 adverse events.

We have determined the predicted active dose of seribantumab from preclinical models of tumors harboring an NRG1 fusion.

Seribantumab has a favorable pharmacokinetic profile that we believe is well-suited to optimized schedules that may provide a biologically effective dose in patients with tumors harboring an NRG1 fusion.

The manufacturing process for seribantumab has been shown to be commercially scalable.

Risks for development in a rare, genomically-defined patient population have the potential to be addressed through the design of the Phase 2 CRESTONE trial of seribantumab.
Mechanism of action
Seribantumab is a fully human IgG2 monoclonal antibody that binds to HER3 and competes with the NRG1 fusion protein, preventing activation of the HER3 signaling cascade that is believed to sustain proliferation and survival of tumor cells harboring an NRG1 fusion.
Seribantumab binds to a unique epitope on HER3 that prevents the ligand-induced activation of HER3, as well as disrupts the ability of HER3 to dimerize with HER2, and to a lesser extent, the other ERBB family members EGFR and HER4. By inhibiting the dimerization of HER3 with other ERBB family members, seribantumab reduces the activation of these receptors in addition to the ligand-dependent activation of HER3, and subsequent activation of the downstream PI3K/AKT and MAPK signaling pathways (Figure 9).
Figure 9. Seribantumab mechanism of action (anti-HER3 mAb).
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[Left] Seribantumab is a fully human IgG2 monoclonal anti-HER3 antibody. Seribantumab binds to a unique epitope on HER3 that prevents the ligand-induced activation of HER3, as well as disrupts the ability of HER3 to dimerize with HER2, and to a lesser extent, the other ERBB family members EGFR and HER4. [Right] NRG1 fusions may act as a ligand to HER3, allowing HER3 to dimerize to HER2 and other ERBB family members and subsequently over-activating the downstream PI3K/AKT and MAPK signaling pathways that are commonly implicated in tumor growth and proliferation. Seribantumab robustly inhibits HER3 and downstream signaling that can be over-activated by the presence of an NRG1 fusion.
Previous sponsor’s Phase 1 monotherapy trial NCT00734305 (safety and pharmacokinetics)
Seribantumab has been evaluated in over 800 patients across twelve previous Phase 1 and 2 studies, both as a monotherapy and in combination with various anticancer therapies in patients with advanced solid tumors. The
 
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initial monotherapy trial conducted by the previous sponsor was a Phase 1 open label, dose escalation trial in which six cohorts of patients were enrolled followed by an expansion cohort using a maximum loading dose of 40 mg/kg followed by weekly dosing at 20 mg/kg. Overall, a total of 43 patients were exposed to seribantumab in this initial safety and pharmacology trial.
All treatment-emergent adverse events, or TEAEs, observed in more than ten percent of patients in the dose-escalation and dose-expansion phases (Table 1, below), as well as all TEAEs observed in greater than ten percent of patients at the highest tested dose (Table 2, below) are shown below. The majority of adverse events observed in the monotherapy trial were transient and mild to moderate in severity. The most commonly reported adverse events were Grade 1 or 2 rash, nausea, diarrhea, and fatigue. Grade 1 hypomagnesemia was also observed. There was one SAE considered possibly related to seribantumab in the trial, a Grade 4 confusional state at the lowest dose level tested, 3.2 mg/kg. The event resolved after treatment discontinuation and no other DLTs were reported in this or other dose escalation cohorts in the phase 1 monotherapy study. An MTD was not determined in this trial.
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Our preclinical characterization
We sponsored a series of preclinical studies to determine the in vitro and in vivo properties of seribantumab specifically in NRG1 fusion models, some of which were published by Odintsov et al. in Clinical Cancer Research in 2021. Experiments were conducted in NRG1 fusion models, including PDX mouse models. Key findings from our preclinical testing of seribantumab include:

Inhibition of HER3 resulted in reduction of tumor growth in NRG1 fusion driven tumors.

Seribantumab reduced tumor growth to a greater extent than both clinically-achievable and supra-clinical doses of afatinib in multiple NRG1 fusion models of cancer.

Seribantumab inhibited ligand-dependent activation of HER3 and phosphorylation of all other ERBB family members.

Seribantumab inhibited HER3 dimerization with HER2 due to the unique epitope on HER3 to which seribantumab binds.

The active dose of seribantumab was determined and confirmed across multiple NRG1 fusion models.
This preclinical characterization was conducted in models of lung (LUAD-0061AS3), ovarian (OV-10-0050) and breast (MDA-MB-175-VII) cancer that harbor an NRG1 fusion, specifically an SLC3A2-NRG1 fusion, a CLU-NRG1 fusion and a DOC4-NRG1 fusion, respectively. Treatment with a single dose of seribantumab blocked ligand‑dependent activation of HER3 by NRG1 fusion proteins and subsequently reduced the phosphorylation and signaling of EGFR, HER2, HER3, and HER4. In addition, treatment with a single dose of seribantumab inhibited downstream PI3K/AKT signaling as evidenced by the reduction of AKT phosphorylation, and downstream MAPK signaling as evidenced by the reduction of ERK1/2 phosphorylation (Figure 10).
Treatment with seribantumab also reduced HER3 dimerization with HER2 in the MDA-MB-175-VII cell line (Figure 10, right).
Figure 10. Seribantumab inhibits signaling through HER3 and blocks HER3-HER2 dimerization.
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[Left] Treatment of the LUAD0061AS3 cell line (which has an SLC3A2-NRG1 fusion) with seribantumab showed dose-dependent inhibition of HER3, HER2, EGFR, HER4, and AKT phosphorylation in vitro. [Middle] Treatment of a LUAD0061AS3 PDX model confirmed reduction of HER3 and HER2 phosphorylation as well as reduction of phosphorylation of downstream AKT and ERK following a single flat dose of seribantumab (0.6 mg, 0.75 mg or 1 mg) in vivo. Tumors were removed at 2-, 24-, or 168-hours post-drug administration, to determine impact on signaling activity over time. All doses of seribantumab resulted in reduced phosphorylation of HER2, HER3, AKT, and ERK1/2 by the 2h time point, with higher doses being more effective at the longer time points. However, at the 24h and 168h time points, reactivation of HER3, AKT and ERK1/2 protein phosphorylation was observed,
 
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despite consistent inhibition of HER2. Figures reproduced with permission from Clinical Cancer Research. [Right] MDA-MB-175-VII is a breast cancer model with a DOC4-NRG1 fusion. Immunoprecipitation (IP) of HER3 was followed by immunoblot (IB, Western blot) analysis for HER2 or HER3. In this NRG1 fusion containing cell line, HER3-HER2 dimers were detected under serum-depleted conditions. Treatment with NRG1-ß1 ligand did not increase HER3-HER2 association beyond basal levels, suggesting near-maximum association. Reduced levels of HER2 in the HER3 precipitate extracted following treatment with seribantumab suggests that seribantumab is able to block HER3-HER2 dimerization.
In addition to the inhibitory effects of seribantumab on the activation of ERBB signaling pathways, treatment with seribantumab robustly reduced tumor growth, and resulted in extended duration of response, as compared to clinically-achievable doses of afatinib in both the lung cancer and ovarian cancer PDX models.
In the lung cancer model, seribantumab was tested at doses of 0.6 mg twice a week (BIW), 0.75 mg BIW, and 1 mg BIW (Figure 11). The comparator arms consisted of vehicle control or afatinib at 5 mg/kg daily (QD). In addition, afatinib was tested at doses of 10 mg/kg QD and 15 mg/kg QD, which, based on the human equivalent dose, as determined by allometric scaling, are above the approved 40 mg/kg QD clinical dose of afatinib due to the narrow therapeutic index that is associated with afatinib treatment.
Seribantumab inhibited tumor growth and extended the duration of response for treated mice in a dose-dependent fashion as compared to either vehicle or afatinib at 5mg/kg QD.
Figure 11. Preclinical proof of concept (in vivo):
Seribantumab drives tumor regression in a lung SLC3A2-NRG1 fusion PDX model (LUAD-0061AS3).
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The LUAD-0061AS3 PDX model was developed from a lung cancer specimen with an SLCA3A2/NRG1 fusion and was used to test repeat dosing of seribantumab in vivo. Notably, this specimen was derived from a patient who had progressed after prior standard therapy and progression on afatinib therapy. In this trial, PDX tumors (approximately 3 mm3) were implanted subcutaneously into the flanks of immunodeficient mice. Treatment was initiated when the tumors reached a volume of 150-200 mm3. Each treatment group consisted of 7 mice while 5 mice were used in the vehicle control group. Treatment started on day 14 of the experiment and consisted of vehicle (PBS), seribantumab (0.6, 0.75 or 1 mg per dose BIW, or afatinib (5, 10, or 15 mg/kg QD). A dose-related decline in tumor volume was observed across all doses of seribantumab, with the best response observed with the 1 mg/kg dose where maximal tumor regression was approximately 60%. Afatinib was not associated with tumor regression at 5 mg/kg; however tumor regression of approximately 30% was observed at a dose of 15 mg/kg, which is approximately 3-fold higher than the clinically achievable dose of 40 mg/day in humans.
In the ovarian cancer model, seribantumab was tested at doses of 1 mg BIW, 2.5 mg BIW, 5 mg BIW, and 10 mg BIW as compared to either vehicle control or afatinib at 5 mg/kg QD (Figure 12). This dosing schema was conducted to better understand the active dose range of seribantumab. In this model, seribantumab inhibited tumor
 
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growth and extended the duration of response for all treated mice as compared to vehicle or afatinib. All of the seribantumab-treated mice had complete or near-complete tumor regression.
Figure 12. Preclinical proof of concept (in vivo):
Seribantumab drives near-complete tumor regression in an ovarian CLU-NRG1 fusion PDX model (OV-10-0050).
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The OV-10-0050 PDX model was developed from an ovarian cancer specimen with a CLU-NRG1 fusion.Seribantumab at doses of 2.5 mg, 5 mg, and 10 mg BIW were tested. Near complete and complete tumor regressions were observed across the entire dose range, with complete tumor regressions observed in nearly all animals at the highest dose level of 10 mg BIW. Afatinib dosed at 5 mg/kg QD did not induce tumor regressions.
Based on the collective results from these studies, we believe that the active dose of seribantumab necessary to reduce HER3 and downstream ERBB signaling, reduce the growth of tumors, and extend the duration of response ranges from approximately 1 mg BIW and up to at least 10 mg BIW in these preclinical cancer models driven by an NRG1 fusion. The inhibitory capability of seribantumab was evident in tumor types with different tissues of origin (lung and ovarian) and different NRG1 fusion partners (SLCA32-NRG1 and CLU-NRG1, respectively).
Based on our allometric scaling calculations, the observed active dose range of 1 mg — 10 mg BIW is approximately equivalent to a 260 mg — 2.6 g fixed dose in humans. This is well within the clinically-achievable range of doses established for seribantumab.
Optimized Clinical Trial and Regulatory Execution:
Phase 2 Tumor-Agnostic CRESTONE trial (NCT04383210)
We initiated the CRESTONE trial in July 2020 as an open-label, international, multi-center, tumor-agnostic Phase 2 trial in adult patients with recurrent, locally-advanced or metastatic solid tumors, which harbor an NRG1 gene fusion and have progressed after at least one prior line of standard therapy. This is the first clinical trial of seribantumab in a patient population that has tumors harboring an NRG1 fusion.
We expect to complete enrollment for our pre-planned interim analysis of Cohort 1 from the CRESTONE trial in      , expect data from this interim analysis in           and topline data from the full trial accrual in the                 . We believe that the design and conduct of CRESTONE, subject to discussions with the FDA, may support submission of a BLA for accelerated approval in advanced solid tumors harboring an NRG1 fusion.
The CRESTONE trial design and protocol have been reviewed in a Type C meeting held in December 2019 with the FDA and refined in follow up correspondence including submission of the CRESTONE protocol prior to the initiation of the trial. Subsequent discussions have included submission of amendments following the pre-planned
 
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safety run-in and dose schedule optimization period to establish an Optimized Dosing Regimen for the NRG1 fusion population. Following receipt of data from the pre-planned interim analysis, we expect to hold an additional Type C meeting with the FDA.
CRESTONE schema and cohort design
CRESTONE has been designed to specifically evaluate the safety and efficacy of seribantumab as a monotherapy treatment for patients whose solid tumor is uniquely driven by an NRG1 fusion (Figure 13).
A cohort design has been introduced to proactively control for innate biological variability in NRG1 fusions, such as impact of the expression of an intact EGF-like domain, as well as potential variability in response due to prior treatment with other inhibitors of the ERBB family. Cohort 1 is designated as the pivotal cohort and therefore has the most stringent eligibility criteria. Cohorts 2 and 3 are exploratory in nature, and not intended to contribute to the ITT population supporting a potential registration application.
All patient tumors will be tested for an NRG1 fusion based on local CLIA-certified or similarly accredited lab testing of tumor tissue prior to initiating further screening procedures. All patients must have received at least one prior line of standard therapy. After all screening procedures and determination of eligibility for trial treatment (including a local NRG1 fusion positive testing result) have been completed, eligible patients will be assigned to the appropriate cohort based upon prior treatment history and local NRG1 fusion testing results.

Cohort 1 (Pivotal): At least 55 patients with a centrally confirmed NRG1 fusion who have not been previously treated with an EGFR, HER2 or HER3 directed therapy. Patients eligible for Cohort 1 must have a tumor with an NRG1 fusion with an intact EGF-like domain and no other known and actionable oncogenic driver alterations. All patients in the ITT population for the CRESTONE trial will be from Cohort 1.

Cohort 2 (Exploratory): Up to ten patients with tumors harboring an NRG1 fusion with an intact EGF-like domain and no other known and actionable oncogenic driver alterations, and who are relapsed/refractory to prior EGFR, HER2 or HER3 directed therapy.

Cohort 3 (Exploratory): Up to ten patients who have (i) tumors harboring an NRG1 fusion without an intact EGF-like domain, (ii) tumors with other NRG1 alterations, (iii) tumors with additional known alterations without standard treatment options, or (iv) insufficient tissue biopsies available for central confirmation of NRG1 fusion status.
Figure 13. CRESTONE trial schema.
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CRESTONE is an open-label, international, multi-center, tumor-agnostic Phase 2 trial in adult patients with recurrent, locally-advanced or metastatic solid tumors, which harbor an NRG1 gene fusion and have progressed after at least one prior line of standard therapy. NRG1 fusion status for patient
 
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screening can be determined by a local CLIA or similarly accredited lab. Patients will be enrolled into one of three cohorts depending on prior treatments received and the presence or absence of an NRG1 fusion with intact EGF-like domain that is mutually exclusive with any other actionable molecular alteration. The trial is designed as a potentially registrational trial, contingent on continued discussions with the FDA, based on an ITT population of ~55 patients from Cohort 1 with a centrally confirmed NRG1 fusion using RNA-based next-generation sequencing, and treated with the optimized dosing regimen.
The primary endpoint of the CRESTONE trial is to determine the ORR by independent radiologic review according to RECIST 1.1. Tumor assessments will be measured and recorded by the local radiologist beginning at week 6. Independent central review of scans will be conducted for patients enrolled in Cohort 1.
Key secondary endpoints include DOR, PFS, OS, Clinical Benefit Rate (CBR; CR, PR, SD > 24 weeks), and the safety profile of seribantumab in patients with a tumor harboring an NRG1 fusion. Patients are expected to be treated until investigator-assessed progressive disease or unacceptable toxicity.
As of May 11, 2021, the planned safety run-in has been fully enrolled and two patients have been subsequently enrolled in Cohort 1 who may be eligible for inclusion in the ITT population following central confirmation of an NRG1 fusion by RNA-based NGS.
CRESTONE dose and schedule optimization
The Phase 1 monotherapy trial conducted by the previous sponsor in a non-selected population used a variable, weight-based approach to calculate the dose of seribantumab to be administered. Subsequent dose simulation studies confirmed similar exposure would be expected between the 40 mg/kg dose and a 3 g fixed-dose, as well as the 20 mg/kg and a 1.5 g fixed-dose, in average weight (70 kg) patients. Seribantumab is given as an intravenous infusion over 60 minutes, and the observed half-life of seribantumab is approximately 100 hours.
Given that NRG1 fusions are often found in more aggressive tumor types, it is important to achieve steady state of seribantumab as quickly as possible for disease control. In prior clinical studies of seribantumab conducted by the previous sponsor, it was determined that it takes three to four doses to achieve steady state. Therefore, the CRESTONE trial was designed to initially optimize the dose and schedule of seribantumab along with showing that these doses and schedules are safe. A safety run-in and dose schedule optimization phase was conducted for the first 6-12 patients enrolled across all cohorts combined.
The dose and schedule optimization contains the following steps of increasing induction length:

Induction 1:   3 grams on week one, followed by 2 grams weekly for three weeks. This is followed by consolidation of 3 grams every two weeks for six weeks, and maintenance of 3 grams every three weeks thereafter.

Induction 2:   3 grams weekly for the first four weeks. This is followed by consolidation of 3 grams every two weeks for six weeks, and maintenance of 3 grams every three weeks thereafter.

Induction 3:   3 grams weekly for the first twelve weeks. This is followed by maintenance of 3 grams every two weeks thereafter.
The target optimized dosing schedule for CRESTONE is 3 grams fixed dosing to full duration of therapy, until progression or intolerance.
We established a safety review committee, or SRC, to monitor trial conduct and to assess the safety and tolerability of seribantumab. In early 2021, the SRC convened to assess the initial dose and schedule regimens of seribantumab and determined that there were no dose limiting toxicities and that the trial could continue to optimize the schedule.
The SRC further provided an assessment of the safety run-in, which confirmed that all twelve patients received 100% of the intended seribantumab exposure without treatment interruption, the observed AEs are consistent with prior seribantumab clinical experience, and the criteria of no more than 1 DLT was met in both of the initial safety run-in induction cohorts, supporting advancement towards 3 grams weekly for full duration of therapy.
 
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Key design components of CRESTONE
Several important design considerations have been built into the CRESTONE protocol that we believe may optimize for efficient conduct and a clean signal in the ITT population.

A tumor-agnostic trial design maximizes opportunity for patient eligibility in this rare, genomically-defined population.

To avoid introduction of delays in patient screening leading to delayed initiation of treatment in this aggressive disease, patient eligibility is based on readily accessible, local CLIA-certified testing including PCR, FISH, DNA or RNA-based NGS testing.

To control for variability introduced by screening through local CLIA-certified testing, all patients in Cohort 1 will also have a central confirmatory test by RNA-based NGS to confirm the presence of an NRG1 fusion to help rule out any false-positive test results that may come from their prior local CLIA-certified testing. Only patients with a centrally confirmed NRG1 fusion are included in the ITT population for statistical analysis.

Due to the currently limited understanding of clinical impact of prior exposure to anti-ERBB therapy, patients that have received prior anti-ERBB therapy are excluded from Cohort 1. These patients may be enrolled into Cohort 2.

The current literature suggests that an NRG1 fusion must retain a functional EGF-like binding domain to enable ligand-dependent HER3 signaling. Therefore, patients with an NRG1 fusion that lacks an EGF-like domain are excluded from Cohort 1. These patients may instead be enrolled in Cohort 3.

Patients with co-expression of other known oncogenic drivers are excluded from Cohort 1. We believe that seribantumab as a monotherapy has the greatest potential for positive clinical outcomes in tumors uniquely driven by an NRG1 fusion. Patients with co-expression of other known oncogenic drivers, where there is no suitable alternative therapy to target these oncogenic drivers, may instead be enrolled in Cohort 3.

Because NRG1 fusions are often found in more aggressive tumor types, it is important to achieve steady state of seribantumab as quickly as possible for disease control. The design of CRESTONE includes a proactive safety run-in and dose optimization phase to ensure that all subsequent patients comprising the ITT population are receiving an optimal dose specific to the NRG1 fusion population.
Patient identification and clinical conduct in CRESTONE
We proactively addressed key challenges in identifying and enrolling patients into trials for rare genomically-defined tumors. We are employing multiple innovative models designed to ensure Good Clinical Practice and enhance enrollment of our Phase 2 CRESTONE trial through real-time nationwide identification of patients with tumors harboring an NRG1 fusion from our academic core sites and within our partner networks, in a capital efficient manner. Through these mechanisms, we are rapidly alerted when any patient with an NRG1 fusion is identified across major diagnostic networks and have access to approximately 400 potential clinical trial sites in total.
Currently, patients may be enrolled onto CRESTONE via three mechanisms:

Enrollment at core sites: These clinical trial sites are located at major academic and community medical centers and are strategically selected due to their deep clinical trial experience and an existing ability to locally test for NRG1 fusions. These sites are activated on a permanent basis for the duration of the trial.

Referral to core sites from diagnostic partner networks: We have partnered with diagnostic providers such as Ashion Analytics (now Exact Sciences), NeoGenomics and Strata Oncology and anticipate the potential to engage in additional partnerships in the future. These partnerships allow us access to diagnostic data generated using comprehensive DNA- and RNA-based NGS assays for the presence of an NRG1 fusion. When a patient with a tumor that has an NRG1 fusion is identified in their networks, we are alerted and put in touch with the treating physician to determine if the patient is eligible for CRESTONE with the treating physician being notified of the most proximal CRESTONE site.
 
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“Just-in-time” site initiation: Our partnerships with diagnostic providers such as Caris Life Sciences and Tempus, and health networks like The US Oncology Network (through their Selected Trials for Accelerate Rollout program), give us access to pre-qualified sites that can be quickly activated in approximately 14 days or less following the identification of a patient with a tumor harboring an NRG1 fusion that meets trial entry criteria and qualifies for CRESTONE. These sites are in addition to the core sites participating in CRESTONE.
We believe that recent advances in genomic testing, and subsequent increased adoption of RNA-based NGS, will result in improved identification of patients with tumors harboring an NRG1 fusion. In addition to academic and community-based medical centers that are routinely conducting testing, there are multiple commercial diagnostic companies that include NRG1 fusions on their CLIA-certified testing panels. Some examples of these companies are: Ashion Analytics (now Exact Sciences), Caris, Illumina, Invitae (ArcherDx), NeoGenomics, Strata Oncology, Tempus and ThermoFisher, among others. In addition, Foundation Medicine can detect gene fusions potentially indicative of an NRG1 fusion through the identification of common NRG1 fusion partners, such as CD74. We anticipate partnering with a diagnostic provider to develop a companion diagnostic for seribantumab use in patients with tumors harboring an NRG1 fusion. This may be done in parallel to the CRESTONE trial or as a post-marketing commitment following a potential accelerated approval contingent upon continued discussion with the FDA.
We believe that the number of genomic tests that are conducted across tumor types, and the number of companies that include NRG1 fusions on their test panels, will continue to increase over time.
Manufacturing
We do not own or operate, and currently have no plans to establish, any manufacturing facilities. We rely, and expect to continue to rely, on third parties for the manufacturing of our product candidates for clinical testing, as well as for commercial manufacturing if any of our product candidates obtain marketing approval. We also rely, and expect to continue to rely, on third parties to package, label, store and distribute our investigational product candidates, as well as our commercial products if marketing approval is obtained. We believe that this strategy allows us to maintain a more efficient infrastructure by eliminating the need for us to invest in our own manufacturing facilities, equipment and personnel while also enabling us to focus our expertise and resources on the development of our product candidates.
We are currently party to a manufacturing agreement with Samsung Biologics Co., Ltd., or Samsung, for the manufacturing of seribantumab drug substance and the performance of associated quality related services. We do not currently have arrangements in place for redundant supply, but options for redundant or replacement supply are under active evaluation. Seribantumab is currently being manufactured at a scale appropriate for clinical trials and has previously been manufactured at a scale suitable for commercialization. To the extent we approach commercialization for seribantumab or any other product candidates, we expect that we would identify and qualify additional manufacturers to provide the drug substance and fill finish services as a part of such commercialization plans.
We generally expect to rely on third parties for the manufacturing of any companion diagnostics we may develop.
Competition
The pharmaceutical and biotechnology industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. While we believe that our technology, the expertise of our team, and our development experience and scientific knowledge provide us with competitive advantages, we face increasing competition from many different sources, including pharmaceutical and biotechnology companies, academic institutions, governmental agencies and public and private research institutions. Product candidates that we successfully develop and commercialize may compete with existing therapies and new therapies that may become available in the future.
We compete directly with companies that focus on oncology and companies dedicating their resources to cancer therapies. With the proliferation of new drugs and therapies into oncology, we expect to face increasingly intense
 
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competition as new technologies become available and new therapeutic candidates are clinically developed or approved therapies are explored for new indications. Any candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future.
Many of our competitors, either alone or with their collaborators, have significantly greater financial resources, established presence in the market, and expertise in research and development, manufacturing, preclinical and clinical testing, obtaining regulatory approvals and reimbursement and marketing approved products than we do. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. Additional mergers and acquisitions may result in even more resources being concentrated in our competitors.
The key competitive factors affecting the success of all of our therapeutic antibody candidates, if approved, are likely to be their efficacy, safety, dosing convenience, price, the effectiveness of companion diagnostics in guiding the use of related therapeutics, the level of generic competition and the availability of reimbursement from government and other third-party payors.
Our commercial potential could be reduced or eliminated if our competitors develop and commercialize products that are safer or more effective, have fewer or less severe side effects, and are more convenient or less expensive than products that we may develop. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we can, which could result in our competitors establishing a strong market position before we are able to enter the market or could otherwise make our development more complicated. We believe the key competitive factors affecting the success of all of our programs are likely to be efficacy, safety and patient convenience. Even if our antibody candidates achieve marketing approval, they may be priced at a significant premium over competitive products if any have been approved by then.
There are a number of biological and biotechnology companies that currently are pursuing the development of precision oncology therapies for patients with undrugged, genetically-defined cancers with high unmet need. In particular, we expect that our current lead product candidate, seribantumab, will compete against other ERBB or HER3 inhibitors that are in development for targeting tumors with an NRG1 fusion, including those of Merus N.V. (zenocutuzumab — MCLA-128), Rain Therapeutics, Inc. (tarloxotinib), Hummingbird Bioscience Ltd. (HMBD-001 — 10D1F), GamaMabs Pharma (9F7-F11), and AVEO Oncology (AV-203). We may face further competition from companies pursuing the development of product candidates that are ERBB or HER3 inhibitors not currently in defined clinical plans for targeting tumors with an NRG1 fusion, including ISU ABXIS, Daiichi Sankyo, Celldex, GlaxoSmithKline, Boehringer Ingelheim, or others. Development efforts and clinical results of these other future product candidates may be unsuccessful, which could result in a negative perception of HER3 inhibitors, for instance, and negatively impact the regulatory approval process of our lead product candidate, which could have a material and adverse effect on our business.
Asset purchase, licensing and collaboration agreements
Previous sponsor
In May 2019, we entered into an asset purchase agreement with the previous sponsor, pursuant to which we acquired the previous sponsor’s anti-HER3 antibody programs, or the Acquired Product Candidates, including seribantumab. Upon closing of the asset purchase agreement in July 2019, we paid the previous sponsor an upfront cash payment of $3.5 million. In addition to the foregoing payment, we may become obligated to pay the previous sponsor up to $54.5 million in additional potential development, regulatory approval and commercial-based milestone payments, consisting of:

$3.0 million for achievement of the primary endpoint in the first registrational clinical trial of any Acquired Product Candidate;
 
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up to $16.5 million in total payments for the achievement of various regulatory approval and reimbursement-based milestones in the United States, Europe and Japan; and

up to $35.0 million in total payments for achieving various cumulative worldwide net sales targets between $100.0 million and $300.0 million for the Acquired Product Candidates.
Dyax
Pursuant to the asset purchase agreement with the previous sponsor, and in connection with the closing of the asset purchase agreement, we (i) assumed all of the previous sponsor’s obligations and rights under the amended and restated collaboration agreement, or the Dyax collaboration agreement, between the previous sponsor and Dyax Corp., or Dyax, which was entered into in January 2007, including an exclusive, worldwide product license to clinically develop or commercialize seribantumab and (ii) agreed to be bound to the terms of a sublicense agreement between the previous sponsor and Dyax entered into in June 2008. Under the Dyax collaboration agreement, Dyax used its proprietary phage display technology to identify antibodies that bind to targets of interest to us as therapeutics or diagnostics. Seribantumab was identified through the Dyax collaboration agreement. In January 2016, Dyax was acquired by Shire plc, which was subsequently acquired by Takeda Pharmaceutical Company Limited in January 2019.
We may be required to make additional maximum aggregate development and regulatory milestone payments of up to approximately $9.3 million for seribantumab. In addition, Dyax is entitled to tiered mid single digit royalties based on net sales of seribantumab. Our obligation to pay royalties to Dyax continues on a country-by-country basis until the later of a specified number of years after the first commercial sale of seribantumab in such country and the expiration of the patent rights covering the product in such country. We are obligated to use commercially reasonable efforts to develop and commercialize the antibodies for which we obtain a commercial license.
This agreement will remain in effect, unless terminated earlier, for so long as we or any of our affiliates or sublicensees continue to develop or commercialize products that remain royalty-bearing under the agreement. Either party may terminate the agreement in the event of an uncured material breach by the other party. We also may terminate the agreement in its entirety or on a product-by-product basis at any time upon 90 days’ prior written notice.
Selexis
Pursuant to the asset purchase agreement with the previous sponsor, and in connection with the closing of the asset purchase agreement, we purchased from the previous sponsor all of the right, title and interest in and to the commercial license agreement between the previous sponsor and Selexis SA, or Selexis, for non-exclusive rights to technology for use in the manufacture of certain biologic products. Under this agreement, we are required to make aggregate milestone payments of up to €0.9 million, per licensed product, and pay royalties of less than one percent on net sales of product, which royalty payments expire in 2026. The obligation to pay royalties with respect to each product sold in a country continues until the expiration of the patent rights covering the product in such country. Either party may terminate the agreement in the event of an uncured material breach by the other party. We also have the right to terminate the agreement at any time upon 60 days’ prior written notice.
Intellectual property
We strive to protect the proprietary technologies that we believe are important to our business, including seeking and maintaining patent protection intended to cover the compositions of matter of our product candidate, its methods of use, and other inventions that are important to our business.
Our success will depend significantly on our ability to obtain and maintain patent and other proprietary protection for commercially important technology, inventions, and know-how related to our business, to defend and enforce our patents, to preserve the confidentiality of our trade secrets, and to operate without infringing valid and enforceable patents and other proprietary rights of third parties. We also rely on know-how and continuing technological innovation to develop, strengthen, and maintain our proprietary position in the field of precision oncology.
 
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Our wholly owned patent portfolio includes a patent family with claims directed to antibodies and related compositions covering seribantumab, as well as methods of treating cancer using such antibodies and compositions. The family contains three U.S. patents directed to seribantumab which expire in February 2028 and a fourth U.S. patent which expires in October 2029 (including 614 days of Patent Term Adjustment), subject to any disclaimers or extensions. The family also contains a pending U.S. application, which if issued, would expire in February 2028, subject to any disclaimers or extensions.
In addition, the above-discussed patent family includes granted patents in China, Europe, Hong Kong, Israel, and Japan with claims directed to compositions of matter covering seribantumab and related methods of therapy. These patents expire in February 2028, subject to any disclaimers or extensions.
Our patent portfolio further includes an additional early-stage, unpublished patent family specifically covering the use of seribantumab to treat patients harboring an NRG1 fusion according to our CRESTONE clinical trial dosing regimen. Any patents issuing from this family would expire in March 2042, subject to any disclaimers or extensions.
The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In the countries in which we file, the patent term is 20 years from the earliest non-provisional filing date, subject to any disclaimers or extensions. The term of a patent in the United States can be adjusted due to any failure of the United States Patent and Trademark Office following certain statutory and regulation deadlines for issuing a patent.
In the United States, the patent term of a patent that covers an FDA-approved drug may also be eligible for patent term extension, which permits patent term restoration as compensation for a portion of the patent term lost during the FDA regulatory review process. The Hatch-Waxman Act permits a patent term extension of up to five years beyond the original expiration of the patent. The protection provided by a patent varies from country to country, and is dependent on the type of patent granted, the scope of the patent claims, and the legal remedies available in a given country. Additionally, we expect seribantumab to be subject to biological exclusivity in the United States for twelve years from BLA approval under the Biologics Price Competition and Innovation Act of 2009. See “Government Regulation and Product Approval — Biosimilars.”
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 during the course of the individual’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.
Governmental Regulation and Product Approval
Government authorities in the United States, at the federal, state and local level, and in other countries and jurisdictions, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting, and import and export of pharmaceutical products. The processes for obtaining regulatory approvals in the United States and in foreign countries and jurisdictions, along with subsequent compliance with applicable statutes and regulations and other regulatory authorities, require the expenditure of substantial time and financial resources.
FDA Approval Process
In the United States, biological products are subject to extensive regulation by the FDA. The Federal Food, Drug, and Cosmetic Act, or the FDC Act, and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and
 
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marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of pharmaceutical products. Biological products used for the prevention, treatment, or cure of a disease or condition of a human being are subject to regulation under the FDC Act, with the exception that the section of the FDC Act that governs the approval of drugs via NDAs does not apply to the approval of biologics. In contrast, biologics are approved for marketing under provisions of the Public Health Service Act, or PHSA, via a BLA. However, the application process and requirements for approval of BLAs are very similar to those for NDAs. Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as clinical hold, FDA refusal to approve pending BLAs, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties, and criminal prosecution.
Biological product development for a new product in the United States typically involves preclinical laboratory and animal tests, the submission to the FDA of an IND, which must become effective before clinical testing may commence, and adequate and well-controlled clinical trials to establish the safety and effectiveness of the drug for each indication for which FDA approval is sought. Satisfaction of FDA pre-market approval requirements typically takes many years and the actual time required may vary substantially based upon the type, complexity, and novelty of the product or disease.
Preclinical tests include laboratory evaluation of product chemistry, formulation, and toxicity, as well as animal trials to assess the characteristics and potential safety and efficacy of the product. The conduct of the preclinical tests must comply with federal regulations and requirements, including Good Laboratory Practices. The results of preclinical testing are submitted to the FDA as part of an IND along with other information, including information about product chemistry, manufacturing and controls, and a proposed clinical trial protocol. Long-term preclinical tests, such as tests of reproductive toxicity and carcinogenicity in animals, may continue after the IND is submitted. A 30-day waiting period after the submission of each IND is required prior to the commencement of clinical testing in humans. If the FDA has neither commented on nor questioned the IND within this 30-day period, the clinical trial proposed in the IND may begin. Clinical trials involve the administration of the investigational drug or biologic to healthy volunteers or patients under the supervision of a qualified investigator. Clinical trials must be conducted: (i) in compliance with federal regulations; (ii) in compliance with Good Clinical Practice, or GCP, an international standard meant to protect the rights and health of patients and to define the roles of clinical trial sponsors, administrators, and monitors; as well as (iii) under protocols detailing the objectives of the trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. Each protocol involving testing on U.S. patients and subsequent protocol amendments must be submitted to the FDA as part of the IND.
The FDA may order the temporary or permanent discontinuation of a clinical trial at any time, or impose other sanctions, if it believes that the clinical trial either is not being conducted in accordance with FDA regulations or presents an unacceptable risk to the clinical trial patients. Imposition of a clinical hold may be full or partial. The study protocol and informed consent information for patients in clinical trials must also be submitted to an institutional review board, or IRB, for approval. The IRB will also monitor the clinical trial until completed. An IRB may also require the clinical trial at the site to be halted, either temporarily or permanently, for failure to comply with the IRB’s requirements, or may impose other conditions. Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This group provides authorization for whether a trial may move forward at designated checkpoints based on access to certain data from the trial.
Clinical trials to support BLAs for marketing approval are typically conducted in three sequential phases. In Phase 1, the initial introduction of the drug or biologic into patients, the product is tested to assess safety, dosage tolerance, metabolism, pharmacokinetics, pharmacological actions, side effects associated with drug exposure, and to obtain early evidence of a treatment effect if possible. Phase 2 usually involves trials in a limited patient population to determine the effectiveness of the biologic for a particular indication, determine optimal dose and regimen, and to identify common adverse effects and safety risks. If a compound demonstrates evidence of effectiveness and an acceptable safety profile in Phase 2 evaluations, Phase 3 trials are undertaken to obtain
 
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additional information about clinical effects and confirm efficacy and safety in a larger number of patients, typically at geographically dispersed clinical trial sites, to permit the FDA to evaluate the overall benefit-risk relationship of the biologic and to provide adequate information for the labeling of the product. In most cases, the FDA requires two adequate and well-controlled Phase 3 clinical trials to demonstrate the safety and efficacy of the biologic. In rare instances, a single Phase 3 trial may be sufficient when either (1) the trial is a large, multicenter trial demonstrating internal consistency and a statistically very persuasive finding of a clinically meaningful effect on mortality, irreversible morbidity or prevention of a disease with a potentially serious outcome and confirmation of the result in a second trial would be practically or ethically impossible or (2) the single trial is supported by other confirmatory evidence. Approval on the basis of a single trial may be subject to a requirement for additional post-approval studies.
These phases may overlap or be combined. For example, a Phase 1/2 clinical trial may contain both a dose-escalation stage and a dose-expansion stage, the latter of which may confirm tolerability at the recommended dose for expansion in future clinical trials (as in traditional Phase 1 clinical trials) and provide insight into the anti-tumor effects of the investigational therapy in selected subpopulation(s). Typically, during the development of oncology therapies, all subjects enrolled in Phase 1 clinical trials are disease-affected patients and, as a result, considerably more information on clinical activity may be collected during such trials than during Phase 1 clinical trials for non-oncology therapies.
In addition, the manufacturer of an investigational biologic in a Phase 2 or Phase 3 clinical trial for a serious or life-threatening disease is required to make available, such as by posting on its website, its policy on evaluating and responding to requests for expanded access to such investigational drug or biologic.
After completion of the required clinical testing, a BLA is prepared and submitted to the FDA. FDA approval of the BLA is required before marketing and distribution of the product may begin in the United States. The BLA must include the results of all preclinical, clinical, and other testing and a compilation of data relating to the product’s pharmacology, chemistry, manufacture, and controls. The cost of preparing and submitting a BLA is substantial. The submission of most BLAs is additionally subject to a substantial application user fee. Under an approved BLA, the applicant is also subject to an annual program fee. These fees typically increase annually. A BLA for a drug that has been designated as an orphan drug is not subject to an application fee, unless the BLA includes an indication for other than a rare disease or condition. The FDA has 60 days from its receipt of a BLA to determine whether the application will be filed based on the FDA’s determination that it is adequately organized and sufficiently complete to permit substantive review. Once the submission is filed, the FDA begins an in-depth review. The FDA has agreed to certain performance goals to complete the review of BLAs. Most applications are classified as Standard Review products that are reviewed within ten months of the date the FDA files the BLA; applications classified as Priority Review are reviewed within six months of the date the FDA files the BLA. A BLA can be classified for Priority Review when the FDA determines the biologic has the potential to treat a serious or life-threatening condition and, if approved, would be a significant improvement in safety or effectiveness compared to available therapies. The review process for both standard and priority reviews may be extended by the FDA for three or more additional months to consider certain late-submitted information, or information intended to clarify information already provided in the BLA submission.
The FDA may also refer applications for novel biologic products, as well as biologic products that present difficult questions of safety or efficacy, to be reviewed by an advisory committee — typically a panel that includes clinicians, statisticians and other experts — for review, evaluation, and a recommendation as to whether the BLA should be approved. The FDA is not bound by the recommendation of an advisory committee, but generally follows such recommendations. Before approving a BLA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. Additionally, the FDA will inspect the facility or the facilities at which the biologic product is manufactured. The FDA will not approve the product unless compliance with cGMP is satisfactory and the BLA contains data that provide substantial evidence that the drug is safe and effective, or the biologic is safe, pure, potent, and effective, in the respective claimed indication.
After the FDA evaluates the BLA and completes any clinical and manufacturing site inspections, it issues either an approval letter or a complete response letter. A complete response letter generally outlines the deficiencies in
 
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the BLA submission and may require substantial additional testing, or information, in order for the FDA to reconsider the application for approval. If, or when, those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the BLA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. An approval letter authorizes commercial marketing and distribution of the biologic with specific prescribing information for specific indications. As a condition of BLA approval, the FDA may require a risk evaluation and mitigation strategy, or REMS, to help ensure that the benefits of the biologic outweigh the potential risks to patients. A REMS can include medication guides, communication plans for healthcare professionals, and elements to assure a product’s safe use, or ETASU. An ETASU can include, but is not limited to, special training or certification for prescribing or dispensing the product, dispensing the product only under certain circumstances, special monitoring, and the use of patient-specific registries. The requirement for a REMS can materially affect the potential market and profitability of the product. Moreover, the FDA may require substantial post-approval testing and surveillance to monitor the product’s safety or efficacy.
Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing. Changes to some of the conditions established in an approved BLA, including changes in indications, product labeling, manufacturing processes or facilities, require submission and FDA approval of a new BLA, or supplement to an approved BLA, before the change can be implemented. A BLA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures and actions in reviewing BLA supplements as it does in reviewing original BLAs.
Fast Track Designation and Priority Review
FDA is required to facilitate the development, and expedite the review, of drugs or biologic products that are intended for the treatment of a serious or life-threatening disease or condition for which there is no effective treatment and which demonstrate the potential to address unmet medical needs for the condition. Fast track designation may be granted for products that are intended to treat a serious or life-threatening disease or condition for which there is no effective treatment and preclinical or clinical data demonstrate the potential to address unmet medical needs for the condition. Fast track designation applies to both the product and the specific indication for which it is being studied. Any product submitted to FDA for marketing, including under a fast track program, may be eligible for other types of FDA programs intended to expedite development and review, such as priority review.
Priority review may be granted for products that are intended to treat a serious or life-threatening condition and, if approved, would provide a significant improvement in safety and effectiveness compared to available therapies. FDA will attempt to direct additional resources to the evaluation of an application designated for priority review in an effort to facilitate the review.
Breakthrough Therapy Designation
FDA is also required to expedite the development and review of applications for approval of products that are intended to treat a serious or life-threatening disease or condition where preliminary clinical evidence indicates that the biologic may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. Under the breakthrough therapy program, the sponsor of a new product candidate may request that FDA designate the product candidate for a specific indication as a breakthrough therapy concurrent with, or after, the submission of the IND for the product candidate. FDA must determine if the product candidate qualifies for breakthrough therapy designation within 60 days of receipt of the sponsor’s request. The FDA may take certain actions with respect to breakthrough therapies, including holding meetings with the sponsor throughout the development process, providing timely advice to the product sponsor regarding development and approval, involving more senior staff in the review process, assigning a cross-disciplinary project lead for the review team and taking other steps to design the clinical studies in an efficient manner.
 
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Accelerated Approval
Accelerated approval may be granted for a product that is intended to treat a serious or life-threatening condition and that generally provides a meaningful therapeutic advantage to patients over existing treatments. A product eligible for accelerated approval may be approved on the basis of either a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity or prevalence of the condition and the availability or lack of alternative treatments. The accelerated approval pathway is most often used in settings in which the course of a disease is long, and an extended period of time is required to measure the intended clinical benefit of a product, even if the effect on the surrogate or intermediate clinical endpoint occurs rapidly. Thus, accelerated approval has been used extensively in the development and approval of products for treatment of a variety of cancers in which the goal of therapy is generally to improve survival or decrease morbidity and the duration of the typical disease course requires lengthy and sometimes large studies to demonstrate a clinical or survival benefit. The accelerated approval pathway is contingent on a sponsor’s agreement to conduct additional post-approval confirmatory studies to verify and describe the product’s clinical benefit. These confirmatory trials must be completed with due diligence and, in most cases, the FDA may require that the trial be designed, initiated, and/or fully enrolled prior to approval. Failure to conduct required post-approval studies, or to confirm a clinical benefit during post-marketing studies, would allow the FDA to withdraw the product from the market on an expedited basis. All promotional materials for product candidates approved under accelerated regulations are subject to prior review by the FDA.
Orphan Drugs
Under the Orphan Drug Act, FDA may grant orphan drug designation to products intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States but for which there is no reasonable expectation that the cost of developing and making the product for this type of disease or condition will be recovered from sales of the product in the United States.
Orphan drug designation must be requested before submitting a BLA. After FDA grants orphan drug designation, the identity of the drug and its potential orphan use are disclosed publicly by FDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.
The first BLA applicant to receive FDA approval for a particular active moiety to treat a rare disease for which it has such designation is entitled to a seven-year exclusive marketing period in the U.S. for that product, for that indication. During the seven-year exclusivity period, FDA may not approve any other applications to market the same drug for the same disease, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity by means of greater effectiveness, greater safety, or providing a major contribution to patient care, or in instances of drug supply issues. Orphan drug exclusivity does not prevent FDA from approving a different drug for the same disease or condition, or the same drug for a different disease or condition. Other benefits of orphan drug designation include tax credits for certain research and an exemption from the BLA application fee.
Disclosure of Clinical Trial Information
Sponsors of clinical trials of FDA-regulated products, including drugs and biologic products, are required to register and disclose certain clinical trial information on the website www.clinicaltrials.gov. Information related to the product, patient population, phase of investigation, trial sites and investigators, and other aspects of a clinical trial are then made public as part of the registration. Sponsors are also obligated to disclose the results of their clinical trials after completion. Disclosure of the results of clinical trials can be delayed in certain circumstances for up to two years after the date of completion of the trial. Competitors may use this publicly available information to gain knowledge regarding the progress of clinical development programs as well as clinical trial design.
 
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Pediatric Information
Under the Pediatric Research Equity Act, or PREA, BLAs, or supplements to BLAs must contain data to assess the safety and effectiveness of the biological product for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the biological product is safe and effective. The FDA may grant full or partial waivers, or deferrals, for submission of data. Unless otherwise required by regulation, PREA does not apply to any biological product with orphan product designation except a product with a new active ingredient that is a molecularly targeted cancer product intended for the treatment of an adult cancer and directed at a molecular target determined by FDA to be substantially relevant to the growth or progression of a pediatric cancer that is subject to a BLA submitted on or after August 18, 2020.
The Best Pharmaceuticals for Children Act, or BPCA, provides a six-month extension of any non-patent exclusivity for a biologic if certain conditions are met. Conditions for exclusivity include the FDA’s determination that information relating to the use of a new biologic in the pediatric population may produce health benefits in that population, FDA making a written request for pediatric studies, and the applicant agreeing to perform, and reporting on, the requested studies within the statutory timeframe. Applications under the BPCA are treated as priority applications, with all of the benefits that designation confers.
Additional Controls for Biologics
To help reduce the increased risk of the introduction of adventitious agents, the PHSA emphasizes the importance of manufacturing controls for products whose attributes cannot be precisely defined. The PHSA also provides authority to the FDA to immediately suspend biologics licenses in situations where there exists a danger to public health, to prepare or procure products in the event of shortages and critical public health needs, and to authorize the creation and enforcement of regulations to prevent the introduction or spread of communicable diseases within the United States.
After a BLA is approved, the product may also be subject to official lot release as a condition of approval. As part of the manufacturing process, the manufacturer is required to perform certain tests on each lot of the product before it is released for distribution. If the product is subject to official release by the FDA, the manufacturer submits samples of each lot of product to the FDA together with a release protocol showing a summary of the lot manufacturing history and the results of all of the manufacturer’s tests performed on the lot. The FDA may also perform certain confirmatory tests on lots of some products, such as viral vaccines, before allowing the manufacturer to release the lots for distribution. In addition, the FDA conducts laboratory research related to the regulatory standards on the safety, purity, potency, and effectiveness of biological products. As with drugs, after approval of a BLA, biologics manufacturers must address any safety issues that arise, are subject to recalls or a halt in manufacturing, and are subject to periodic inspection after approval.
Post-Approval Requirements
Once a BLA is approved, a product will be subject to certain post-approval requirements. For instance, the FDA closely regulates the post-approval marketing and promotion of biologics, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the Internet. Although physicians may prescribe legally available drugs for off-label uses, manufacturers may not market or promote such off-label uses. Biologics may be marketed only for the approved indications and in accordance with the provisions of the approved labeling.
Adverse event reporting and submission of periodic safety summary reports is required following FDA approval of a BLA. The FDA also may require post-marketing testing, known as Phase 4 testing, REMS, and surveillance to monitor the effects of an approved product, or the FDA may place conditions on an approval that could restrict the distribution or use of the product. In addition, quality control, biological product manufacture, packaging, and labeling procedures must continue to conform to cGMPs after approval. Biologics manufacturers and certain of their subcontractors are required to register their establishments with the FDA and certain state agencies. Registration with the FDA subjects entities to periodic unannounced inspections by the FDA, during which the
 
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agency inspects a biologic product’s manufacturing facilities to assess compliance with cGMPs. Accordingly, manufacturers must continue to expend time, money, and effort in the areas of production and quality-control to maintain compliance with cGMPs. Regulatory authorities may withdraw product approvals or request product recalls if a company fails to comply with required regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized problems are subsequently discovered.
Biosimilars
The Biologics Price Competition and Innovation Act of 2009, or BPCIA, creates an abbreviated approval pathway for biological products shown to be highly similar to or interchangeable with an FDA-licensed reference biological product. Biosimilarity sufficient to reference a prior FDA-approved product requires that there be no differences in conditions of use, route of administration, dosage form, and strength, and no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency. Biosimilarity must be shown through analytical trials, animal trials, and a clinical trial or trials, unless the Secretary of Health and Human Services waives a required element. A biosimilar product may be deemed interchangeable with a previously approved product if it meets the higher hurdle of demonstrating that it can be expected to produce the same clinical results as the reference product and, for products administered multiple times, the biologic and the reference biologic may be switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic. The first biosimilar was approved in 2015, and no interchangeable products have been approved under the BPCIA. Complexities associated with the larger, and often more complex, structures of biological products, as well as the process by which such products are manufactured, pose significant hurdles to biosimilar product implementation, which is still being evaluated by the FDA.
A reference biologic is granted 12 years of exclusivity from the time of first licensure, or BLA approval, of the reference product, and no application for a biosimilar can be submitted for four years from the date of licensure of the reference product. The first biologic product submitted under the biosimilar abbreviated approval pathway that is determined to be interchangeable with the reference product has exclusivity against a finding of interchangeability for other biologics for the same condition of use for the lesser of (i) one year after first commercial marketing of the first interchangeable biosimilar, (ii) 18 months after the first interchangeable biosimilar is approved if there is no patent challenge, (iii) eighteen months after resolution of a lawsuit over the patents of the reference biologic in favor of the first interchangeable biosimilar applicant, or (iv) 42 months after the first interchangeable biosimilar’s application has been approved if a patent lawsuit is ongoing within the 42-month period.
FDA Approval and Regulation of Companion Diagnostics
If safe and effective use of a product depends on an in vitro diagnostic, then the FDA generally will require approval or clearance of that diagnostic, known as a companion diagnostic, before or at the same time that the FDA approves the therapeutic product. In August 2014, the FDA issued final guidance clarifying the requirements that will apply to approval of therapeutic products and in vitro companion diagnostics. According to the guidance, if FDA determines that a companion diagnostic device is essential to the safe and effective use of a new therapeutic product or indication, FDA generally will not approve the therapeutic product or new therapeutic product indication if the companion diagnostic device is not approved or cleared for that indication.
Approval or clearance of the companion diagnostic device will ensure that the device has been adequately evaluated and has adequate performance characteristics in the intended population. The review of in vitro companion diagnostics in conjunction with the review of our products will, therefore, likely involve coordination of review by CDER and the FDA’s Office of In Vitro Diagnostics and Radiological Health. We anticipate partnering with a diagnostic provider to develop a companion diagnostic for seribantumab use in patients with tumors harboring an NRG1 fusion. This may be done in parallel to the CRESTONE trial or as a post-marketing commitment following a potential regulatory approval.
Under the FDC Act, in vitro diagnostics, including companion diagnostics, are regulated as medical devices. In the United States, the FDC Act and its implementing regulations, and other federal and state statutes and regulations
 
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govern, among other things, medical device design and development, preclinical and clinical testing, premarket clearance or approval, registration and listing, manufacturing, labeling, storage, advertising and promotion, sales and distribution, export and import, and post-market surveillance. Unless an exemption applies, diagnostic tests require marketing clearance or approval from the FDA prior to commercial distribution. The two primary types of FDA marketing authorization applicable to a medical device are premarket notification, also called 510(k) clearance, and premarket approval, or PMA approval. The vast majority of companion diagnostics require PMA approval.
The PMA process, including the gathering of clinical and preclinical data and the submission to and review by the FDA, can take several years or longer. It involves a rigorous premarket review during which the applicant must prepare and provide the FDA with reasonable assurance of the device’s safety and effectiveness and information about the device and its components regarding, among other things, device design, manufacturing and labeling. PMA applications are subject to an application fee. In addition, PMAs for certain devices must generally include the results from extensive preclinical and adequate and well-controlled clinical trials to establish the safety and effectiveness of the device for each indication for which FDA approval is sought. In particular, for a diagnostic, a PMA application typically requires data regarding analytical and clinical validation studies. As part of the PMA review, the FDA will typically inspect the manufacturer’s facilities for compliance with the Quality System Regulation, or QSR, which imposes elaborate testing, control, documentation and other quality assurance requirements.
PMA approval is not guaranteed, and the FDA may ultimately respond to a PMA submission with a not approvable determination based on deficiencies in the application and require additional clinical trial or other data that may be expensive and time-consuming to generate and that can substantially delay approval. If the FDA’s evaluation of the PMA application is favorable, the FDA typically issues an approvable letter requiring the applicant’s agreement to specific conditions, such as changes in labeling, or specific additional information, such as submission of final labeling, in order to secure final approval of the PMA. If the FDA’s evaluation of the PMA or manufacturing facilities is not favorable, the FDA will deny approval of the PMA or issue a not approvable letter. A not approvable letter will outline the deficiencies in the application and, where practical, will identify what is necessary to make the PMA approvable. The FDA may also determine that additional clinical trials are necessary, in which case the PMA approval may be delayed for several months or years while the trials are conducted and then the data submitted in an amendment to the PMA. If the FDA concludes that the applicable criteria have been met, the FDA will issue a PMA for the approved indications, which can be more limited than those originally sought by the applicant. The PMA can include post-approval conditions that the FDA believes necessary to ensure the safety and effectiveness of the device, including, among other things, restrictions on labeling, promotion, sale and distribution. Once granted, PMA approval may be withdrawn by the FDA if compliance with post approval requirements, conditions of approval or other regulatory standards are not maintained, or problems are identified following initial marketing.
After a device is placed on the market, it remains subject to significant regulatory requirements. Medical devices may be marketed only for the uses and indications for which they are cleared or approved. Device manufacturers must also register their establishments and list their devices with the FDA. A medical device manufacturer’s manufacturing processes and those of its suppliers are required to comply with the applicable portions of the QSR, which cover the methods and documentation of the design, testing, production, processes, controls, quality assurance, labeling, packaging and shipping of medical devices. Domestic and foreign facility records and manufacturing processes are subject to periodic unscheduled inspections by the FDA. The FDA also may inspect foreign facilities that export products into the United States.
Other Healthcare Laws
In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal laws have been applied to restrict certain general business and marketing practices in the pharmaceutical industry. These laws include anti-kickback, false claims, transparency and health information privacy laws and other healthcare laws and regulations.
 
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The federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce, or in return for, purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid, or other federally financed healthcare programs. The Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act, or the ACA, amended the intent element of the federal Anti-Kickback Statute so that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to commit a violation. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers, among others, on the other. Although there are a number of statutory exceptions and regulatory safe harbors protecting certain common activities from prosecution or other regulatory sanctions, the exceptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor. Additionally, the ACA amended the federal Anti-Kickback Statute such that a violation of that statute can serve as a basis for liability under the federal civil False Claims Act.
Federal civil and criminal false claims laws, including the federal civil False Claims Act, prohibit any person or entity from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to have a false claim paid. This includes claims made to programs where the federal government reimburses, such as Medicare and Medicaid, as well as programs where the federal government is a direct purchaser, such as when it purchases off the Federal Supply Schedule. Pharmaceutical and other healthcare companies have been prosecuted under these laws for, among other things, allegedly inflating drug prices they report to pricing services, which in turn were used by the government to set Medicare and Medicaid reimbursement rates, and for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. In addition, certain marketing practices, including off-label promotion, may also violate false claims laws. Most states also have statutes or regulations similar to the federal Anti-Kickback Statute and civil False Claims Act, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor.
Other federal statutes pertaining to healthcare fraud and abuse include the civil monetary penalties statute, which prohibits, among other things, the offer or payment of remuneration to a Medicaid or Medicare beneficiary that the offeror or payor knows or should know is likely to influence the beneficiary to order a receive a reimbursable item or service from a particular supplier, and the additional federal criminal statutes created by the Health Insurance Portability and Accountability Act of 1996, or HIPAA, which prohibit, among other things, knowingly and willfully executing or attempting to execute a scheme to defraud any healthcare benefit program or obtain by means of false or fraudulent pretenses, representations or promises any money or property owned by or under the control of any healthcare benefit program in connection with the delivery of or payment for healthcare benefits, items or services.
In addition, HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their respective implementing regulations, including the Final Omnibus Rule published on January 25, 2013, impose obligations on certain healthcare providers, health plans, and healthcare clearinghouses, known as covered entities, as well as their business associates and their subcontractors that perform certain services involving the storage, use or disclosure of individually identifiable health information, including mandatory contractual terms, with respect to safeguarding the privacy, security, and transmission of individually identifiable health information, and require notification to affected individuals and regulatory authorities of certain breaches of security of individually identifiable health information. HITECH increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions. In addition, many state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, and often are not pre-empted by HIPAA.
 
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Further, pursuant to the ACA, the Centers for Medicare & Medicaid Services, or CMS, issued a final rule that requires certain manufacturers of prescription drugs to collect and annually report information on certain payments or transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Beginning calendar year 2021, manufacturers must collect information regarding payments and other transfers of value to physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists, and certified nurse-midwives for reporting in 2022. The reported data is made available in searchable form on a public website on an annual basis. Failure to submit required information may result in civil monetary penalties.
Analogous state and foreign anti-kickback and false claims laws that may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non- governmental third-party payors, including private insurers, or that apply regardless of payor. In addition, several states now require prescription drug companies to report certain expenses relating to the marketing and promotion of drug products and to report gifts and payments to individual healthcare practitioners in these states. Other states prohibit various marketing-related activities, such as the provision of certain kinds of gifts or meals. Further, certain states require the posting of information relating to clinical studies and their outcomes. Some states require the reporting of certain drug pricing information, including information pertaining to and justifying price increases. In addition, certain states require pharmaceutical companies to implement compliance programs and/or marketing codes. Several additional states are considering similar proposals. Certain states and local jurisdictions also require the registration of pharmaceutical sales representatives. Additionally, we may also be subject to state and foreign laws governing the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
Efforts to ensure that business arrangements with third parties comply with applicable state, federal, and foreign healthcare laws and regulations involve substantial costs. If a drug company’s operations are found to be in violation of any such requirements, it may be subject to significant penalties, including civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, the curtailment or restructuring of its operations, loss of eligibility to obtain approvals from the FDA, exclusion from participation in government contracting, healthcare reimbursement or other federal or state government healthcare programs, including Medicare and Medicaid, integrity oversight and reporting obligations, imprisonment, and reputational harm. Although effective compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, these risks cannot be entirely eliminated. Any action for an alleged or suspected violation can cause a drug company to incur significant legal expenses and divert management’s attention from the operation of the business, even if such action is successfully defended.
U.S. Healthcare Reform
In the United States there have been, and continue to be, proposals by the federal government, state governments, regulators and third-party payors to control or manage the increased costs of health care and, more generally, to reform the U.S. healthcare system. The pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives. For example, in March 2010, the ACA was enacted, which intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms, substantially changed the way healthcare is financed by both governmental and private insurers, and significantly impacts the U.S. pharmaceutical industry. The ACA, among other things, (i) subjected therapeutic biologics to potential competition by lower-cost biosimilars by creating a licensure framework for follow-on biologic products, (ii) proscribed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs and therapeutic biologics that are inhaled, infused, instilled, implanted or injected, (iii) increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled in Medicaid managed
 
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care organizations, (iv) established annual nondeductible fees and taxes on manufacturers of certain branded prescription drugs and therapeutic biologics, apportioned among these entities according to their market share in certain government healthcare programs, (v) established a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% (now 70%) point of-sale discounts off negotiated prices of applicable brand drugs and therapeutic biologics to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs and therapeutic biologics to be covered under Medicare Part D, (vi) expanded eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers’ Medicaid rebate liability, (vii) expanded the entities eligible for discounts under the Public Health program (viii) created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research, and (ix) established a Center for Medicare and Medicaid Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.
There have been executive, legislative and judicial efforts to modify, repeal, or otherwise invalidate all, or certain provisions of, the ACA. For example, the Tax Cuts and Jobs Act, among other things, included a provision that repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” In November 2020, the United States Supreme Court held oral arguments on the U.S. Court of Appeals for the Fifth Circuit’s decision that held that the individual mandate is unconstitutional. Although the Supreme Court has not yet ruled on the constitutionality of the ACA, on January 28, 2021, President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through May 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructs certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is uncertain how the United States Supreme court ruling, other such litigation, or the healthcare measures of the Biden administration will impact the ACA and our business.
Other legislative changes have been proposed and adopted in the United States since the ACA was enacted to reduce healthcare expenditures. United States federal government agencies also currently face potentially significant spending reductions, which may further impact healthcare expenditures. On August 2, 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. This includes aggregate reductions of Medicare payments to providers of 2% per fiscal year. These reductions went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, including the BBA, will remain in effect through 2030, with the exception of a temporary suspension from May 1, 2020 through March 31, 2021 due to the COVID-19 pandemic, unless additional Congressional action is taken. Moreover, on January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. If federal spending is further reduced, anticipated budgetary shortfalls may also impact the ability of relevant agencies, such as the FDA or the National Institutes of Health to continue to function at current levels. Amounts allocated to federal grants and contracts may be reduced or eliminated. These reductions may also impact the ability of relevant agencies to timely review and approve research and development, manufacturing, and marketing activities, which may delay our ability to develop, market and sell any products we may develop.
Recently, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several presidential executive orders, Congressional inquiries
 
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and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. At the federal level, the Trump administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives. For example, on July 24, 2020 and September 13, 2020, the Trump administration announced several executive orders related to prescription drug pricing that seek to implement several of the administration’s proposals. As a result, the FDA also released a final rule on September 24, 2020 providing guidance for states to build and submit importation plans for drugs from Canada. The Trump and Biden administrations both issued executive orders intended to favor government procurement from domestic manufacturers. In addition, the Trump administration issued an executive order specifically aimed at the procurement of pharmaceutical products, which instructed the federal government to develop a list of “essential” medicines and then buy those and other medical supplies that are manufactured, including the manufacture of the active pharmaceutical ingredient, in the United States. It is unclear whether this executive order or something similar will be implemented by the Biden Administration.
Further, on November 20, 2020, the U.S Department of Health and Human Services, or 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 rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers. CMS also published an interim final rule that establishes a Most Favored Nation, or MFN, Model for Medicare Part B drug payment. This regulation would substantially change the drug reimbursement landscape as it bases Medicare Part B payment for 50 selected drugs on prices in foreign countries instead of average sales price, or ASP, and establishes a fixed add-on payment in place of the current 6 percent (4.3 percent after sequestration) of ASP. The MFN drug payment amount is expected to be lower than the current ASP-based limit because U.S. drug prices are generally the highest in the world. On December 28, 2020, the United States District Court in Northern California issued a nationwide preliminary injunction against implementation of the interim final rule, and it faces uncertain prospects for implementation.
Additionally, on May 30, 2018, the Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try Act of 2017 was signed into law. The law, among other things, provides a federal framework for certain patients to access certain investigational new drug products that have completed a Phase 1 clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA authorization under an FDA expanded access program; however, manufacturers are not obligated to provide investigational new drug products under the current federal right to try law.
At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
We expect that additional state and federal healthcare reform measures will be adopted in the future. Further, it is possible that additional governmental action is taken in response to the COVID-19 pandemic.
Coverage and Reimbursement
Patients in the United States and elsewhere generally rely on third-party payors to reimburse part or all of the costs associated with their prescription drugs. Accordingly, market acceptance of our drug products is dependent on the extent to which third-party coverage and reimbursement is available from government health administration authorities (including in connection with government healthcare programs, such as Medicare and Medicaid in the United States), private healthcare insurers and other healthcare funding organizations. Significant uncertainty exists as to the coverage and reimbursement status of any drug products for which we may obtain regulatory approval. Coverage decisions may not favor new drug products when more established or
 
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lower-cost therapeutic alternatives are already available. Patients are unlikely to use our products unless reimbursement is adequate to cover all or a significant portion of the cost of our drug products.
Coverage and reimbursement policies for drug products can differ significantly from payor to payor as there is no uniform policy of coverage and reimbursement for drug products among third-party payors in the United States. There may be significant delays in obtaining coverage and reimbursement as the process of determining coverage and reimbursement is often time-consuming and costly which will require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage or adequate reimbursement will be obtained. It is difficult to predict at this time what government authorities and third-party payors will decide with respect to coverage and reimbursement for our drug products. Additionally, we may develop, either by ourselves or with collaborators, companion diagnostic tests for our product candidates for certain indications. We, or our collaborators, if any, will be required to obtain coverage and reimbursement for these tests separate and apart from the coverage and reimbursement we seek for our product candidates, once approved.
The market for our product candidates will depend significantly on access to third-party payors’ drug formularies or lists of medications for which third-party payors provide coverage and reimbursement. Competition to be included in such formularies often leads to downward pricing pressures. In particular, third-party payors may refuse to include a particular reference listed drug in their formularies or otherwise restrict patient access to a reference listed drug when a less costly generic equivalent or other alternative is available.
The U.S. government, state legislatures and foreign governmental entities have shown significant interest in implementing cost containment programs to limit the growth of government-paid healthcare costs, including price controls, restrictions on reimbursement and coverage and requirements for substitution of generic products for branded prescription drugs. Adoption of government controls and measures and tightening of restrictive policies in jurisdictions with existing controls and measures, could exclude or limit our drugs products from coverage and limit payments for pharmaceuticals.
In addition, we expect that the increased emphasis on managed care and cost containment measures in the United States by third-party payors and government authorities to continue and will place pressure on pharmaceutical pricing and coverage. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more drug products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
Employees and human capital resources
As of March 31, 2021, we had eight full-time employees. Of these employees, three held Ph.D. or Pharm.D degrees, and eight were engaged in research, development and technical operations. From time to time, we also retain independent contractors and consultants to support our organization. None of our employees are represented by a labor union or covered by collective bargaining agreements, and we believe our relationship with our employees is good.
Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and additional employees. The principal purpose of our incentive share plan is to attract, retain and motivate selected employees, consultants and directors through the granting of incentive share-based compensation awards and cash-based performance bonus awards.
Facilities
We are a remote-first company, meaning that substantially all of our employees work remotely. As a result of this strategy, we do not maintain a corporate headquarters or lease any corporate facilities. We believe that our facilities are adequate to meet our needs for the immediate future, and that, should we need additional physical office space, suitable additional space will be available in the future on commercially reasonable terms.
 
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Legal proceedings
From time to time, we may be involved in legal proceedings arising in the ordinary course of our business. We are not presently a party to any legal proceedings that, in the opinion of management, would have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity and reputational harm, and other factors.
 
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Management
Executive officers and directors
The following table provides information, including ages as of June 4, 2021, regarding our executive officers and directors:
Name
Age
Position
Executive Officers:
Shawn Leland, Pharm.D, R.Ph.
37
President, Chief Executive Officer and Director
Eric J. Hall
66
Interim Chief Financial Officer
Non-Employee Directors:
Steven A. Elms
57
Chairman of the Board, Director
R. Michael Carruthers
63
Director
Timothy Clackson, Ph.D.
55
Director
Richard Gaster, M.D., Ph.D.
37
Director
Lori Hu
36
Director
Andrew Phillips, Ph.D.(4)
50
Director
Colin Walsh, Ph.D.
36
Director
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
(3) Member of the Nominating and Governance Committee.
(4) Dr. Phillips has notified us that he will resign from our board of directors effective immediately prior to the effectiveness of the registration statement of which this prospectus forms a part.
Executive officers
Shawn Leland, Pharm.D., R.Ph. has served as our President and Chief Executive Officer since November 2020 and a member of our board of directors since May 2019. Dr. Leland previously served as our Chief Business Officer from May 2019 to November 2020. Dr. Leland has served as an Expert Oncology Consultant to Catenion GmbH, a biopharmaceutical research and development strategy consulting firm, since March 2016. Prior to founding Elevation Oncology, Dr. Leland served as Vice President, Business Development at Verastem Oncology, a biopharmaceutical company, from September 2017 to August 2019. Dr. Leland previously served as Senior Director, Corporate Development and Strategy at Argos Therapeutics, Inc., an immune-oncology company, from November 2013 to September 2017, and as an Oncology Medical Science Liaison at ARIAD Pharmaceuticals, Inc., an integrated oncology company acquired by Takeda Pharmaceuticals in February 2017, from November 2012 to November 2013. Prior to joining ARIAD, Dr. Leland served in a number of roles at Eli Lilly and Company, a commercial pharmaceutical company, from May 2009 to November 2012. Dr. Leland holds a Pharm.D. in Pharmacy from the Albany College of Pharmacy and Health Sciences. Dr. Leland’s experience in medical affairs and business development in the pharmaceutical and biotechnology industries equip him to serve as a director on our board of directors.
Eric J. Hall has served as our interim Chief Financial Officer since March 2021 through his capacity as a partner at FLG Partners, LLC, or “FLG Partners”, a Silicon Valley chief financial officer services firm. Mr. Hall has served as a partner at FLG Partners since 2004. In his capacity as a partner at FLG Partners, Mr. Hall has served as interim Chief Financial Officer of Connect Biopharma Holdings Ltd, a pharmaceutical company, since August 2020, as advisor to Erisyon, a medical device company, since May 2020, and as advisor of RTI, Inc. an IoT software company, since July 2020. He served as advisor to the Managing Member at Foresite Labs, a venture capital life sciences incubator, from November 2019 to August 2020. He also previously served as interim Chief Financial Officer of RAPT Therapeutics, Inc., a biotechnology company from March 2019 to December 2019, as Chief Financial Officer at: ALX Oncology Inc., a biotechnology company from October 2018 to December 2019; 4Info, Inc., an advertising company, from April 2018 to November 2019; uBiome, Inc., or “uBiome”, a biotechnology
 
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company, from September 2018 to December 2018; Peninsula Clean Energy, from August 2018 to October 2018; Lightning Bolt Solutions, Inc., a software company, from May 2018 to January 2019; E2 Consulting Engineers, Inc., an engineering services company, from August 2017 to March 2018; and Singulex, Inc., a medical equipment company, from February 2016 to December 2017. Mr. Hall has been a Chartered Financial Analyst (CFA) charterholder since 1990. Mr. Hall obtained an M.B.A. in Finance from Vanderbilt University and an A.B. in Economics from the University of California, Davis.
Non-employee directors
Steven A. Elms has served as the chairman of our board of directors since May 2019 and served as our Chief Executive Officer from May 2019 until November 2020. Mr. Elms currently serves as a Managing Partner of Aisling Capital LLC/Aisling Capital Management LP, a life sciences investment firm, which he joined in 2000. Prior to joining Aisling, Mr. Elms served as a principal in the life sciences investment banking group of Chase H&Q (formerly Hambrecht and Quist Group Inc.). Mr. Elms has served as a director for Zosano Pharma Corp, a clinical stage biopharmaceutical company, since May 2018, Marker Therapeutics, Inc., a clinical-stage immuno-oncology company, since August 2019, and ADMA Biologics, Inc., a commercial biopharmaceutical company, since July 2007. Previously, Mr. Elms served on the board of directors of Loxo Oncology, Inc. from July 2013 to February 2019, Ambit Biosciences Corp. from 2001 to 2014, MAP Pharmaceuticals, Inc. from 2004 to 2011 and has served on the boards of directors of a number of private companies. Mr. Elms received a B.A. in Human Biology from Stanford University and a M.B.A. from the Kellogg School of Management at Northwestern University. We believe that Mr. Elms’s extensive financial services background and experience in the pharmaceutical and healthcare industries equip him to serve on our Board of Directors.
R. Michael Carruthers has served as a member of our board of directors since May 2021. Mr. Carruthers has served as Chief Financial Officer of Edgewise Therapeutics, Inc., a clinical-stage biopharmaceutical company, since September 2020 and has consulted as Chief Financial Officer of OnKure Therapeutics, Inc., a cancer treatment company, since March 2019 until joining the board of directors of OnKure in May 2021. Mr. Carruthers previously consulted as Chief Financial Officer of Brickell Biotech, Inc., a clinical-stage pharmaceutical company focused on treatment of skin diseases, from December 2017 to October 2020, and ClinOne, Inc., clinical trial management company, from August 2018 to May 2020. He also served as Interim President of Nivalis Therapeutics, Inc., a clinical-stage pharmaceutical company, from January 2017 to August 2017 and Chief Financial Officer and Secretary from February 2015 to August 2017. From December 1998 to February 2015, Mr. Carruthers served as Chief Financial Officer for Array BioPharma Inc. Prior to Array, he served as Chief Financial Officer of Sievers Instruments, Inc., a water purification technology company, Treasurer and Controller for the Waukesha division of Dover Corporation, a global manufacturing company, and an accountant with Coopers & Lybrand, LLP. Mr. Carruthers studied accounting at Western Colorado University, and received a B.S. in accounting from the University of Colorado Boulder and a M.B.A. from the University of Chicago. We believe Mr. Carruthers is qualified to serve on our board of directors because of his financial expertise, education and industry background.
Richard Gaster, M.D., Ph.D. has served as a member of our board of directors since November 2020. Dr. Gaster is currently a partner at venBio LLC, which he joined in April 2017. Prior to joining venBio, Dr. Gaster served as the Head of Translational Medicine at Pliant Therapeutics, Inc., a clinical stage biopharmaceutical company, from February 2016 to April 2017. Dr. Gaster previously served as a senior associate at Third Rock Ventures from January 2015 to June 2016 and as a resident physician in Harvard’s Plastic and Reconstructive Surgery Program from 2013 to 2015. Dr. Gaster currently serves as a director on the boards of numerous private biopharmaceutical companies. Dr. Gaster holds a B.S.E., summa cum laude, in Bioengineering from the University of Pennsylvania and he received his M.D. and Ph.D. in Bioengineering from Stanford University in the Medical Scientist Training Program. We believe that Dr. Gaster is qualified to serve on our board of directors because of his experience in the biopharmaceutical industry as a physician, entrepreneur, and life sciences investor and his service on the boards of directors of other biopharmaceutical companies.
Lori Hu Lori Hu has served as a member of our board of directors since July 2019. Ms. Hu currently serves as a Managing Director of Vertex Ventures HC, a healthcare investment firm, which she joined in August 2015. Prior to
 
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joining Vertex, Ms. Hu served as an Associate Director in Business Development at Bristol-Myers Squibb Company from January 2012 to May 2013 and as a Management Consultant focused on health and life sciences at Accenture plc from August 2007 to December 2011. Ms. Hu currently serves as a director and board observer for a number of private biotechnology and biopharmaceutical companies. Ms. Hu received a B.S.E. in Biomedical Engineering from Duke University, an M.A. in International Studies from the University of Pennsylvania and an M.B.A. from The Wharton School of the University of Pennsylvania. We believe that Ms. Hu’s experience in the pharmaceutical and healthcare industries and her service on the boards of directors of other biopharmaceutical companies equip her to serve on our board of directors.
Andrew Phillips, Ph.D. has served as a member of our board of directors since November 2020. Dr. Phillips currently serves as a Managing Director of Cormorant Asset Management, LP, a hedge fund focused on investments in the biotechnology and life sciences marketplace, which he joined in August 2020. Prior to joining Cormorant Asset Management, Dr. Phillips held various roles of increasing responsibility at C4 Therapeutics, Inc., a biopharmaceutical company, including as Chief Scientific Officer from Jan 2016 to May 2018, President from September 2016 to March 2020, and Chief Executive Officer from May 2018 to March 2020. Dr. Phillips previously served as a Senior Director, Center for Development of Therapeutics at the Broad Institute of MIT and Harvard from July 2014 to January 2016 and as a Professor of Chemistry at Yale University from June 2010 to January 2015. Prior to joining Yale, Dr. Phillips taught Chemistry and Biochemistry at the University of Colorado as an Assistant, Associate Professor and Professor from 2001 to 2010. Dr. Phillips currently serves as a director and board observer for a number of private biotechnology and biopharmaceutical companies. Dr. Phillips holds a B.Sc. Hons. in Biochemistry and a Ph.D. in Biochemistry and Chemistry from the University of Canterbury in Christchurch, New Zealand, and Dr. Phillips was a postdoctoral fellow in Organic Chemistry at the University of Pittsburgh. We believe that Dr. Phillips is qualified to serve on our board of directors because of his deep experience and fieldwork in the biotechnology and life sciences industries, including as an educator and life sciences investor and his service on the boards of directors of other biopharmaceutical companies.
Colin Walsh, Ph.D. has served as a member of our board of directors since August 2019. Dr. Walsh currently serves as a partner at Qiming Venture Partners USA, a healthcare-focused venture capital firm, which he joined in April 2019. Before joining Qiming, Dr. Walsh was a Vice President on the life science investment team at ND Capital, a nanotechnology and life sciences venture capital firm, from January 2014 to April 2019. Prior to joining ND Capital, Dr. Walsh held a number of roles as an early employee at Precision NanoSystems, Inc., a biotech company, from June 2012 to September 2015. Dr. Walsh currently serves as a director for a number of private biotechnology companies. Dr. Walsh holds a PhD from the UC Berkeley — UCSF Graduate Program in Bioengineering, a Management of Technology certificate from the UC Berkeley Haas School of Business, and a dual B.S. with Honors in Chemical Engineering and Biochemistry from the University of Massachusetts, Amherst. We believe that Dr. Walsh’s investment experience, knowledge of our industry, and educational background in biochemistry and bioengineering equips him to serve on our board of directors.
Timothy Clackson, Ph.D. has served as a member of our board of directors since May 2020. Dr. Clackson currently serves as President and Chief Executive Officer of Theseus Pharmaceuticals, Inc., which he joined in April 2021. From May 2018 until April 2021, Dr. Clackson was President, Chief Technology Officer and Executive Vice President of Research and Development at Xilio Therapeutics Inc., a privately-held oncology company. Prior to joining Xilio, Dr. Clackson served as President of Research and Development and Chief Scientific Officer at ARIAD Pharmaceuticals, Inc., an integrated oncology company acquired by Takeda Pharmaceutical Company Limited in February 2017, from June 2010 to May 2017. Prior to that, Dr. Clackson served as ARIAD’s Senior Vice President and Chief Scientific Officer from 2003, and in other roles from December 1994. Dr. Clackson has served as a member of the board of directors of Forma Therapeutics, a clinical-stage biopharmaceutical company since March 2018, and during the past five years, Dr. Clackson has served as a member of the board of directors of publicly-traded biotechnology company Spring Bank Pharmaceuticals, Inc. Dr. Clackson holds a B.A., with honors, in Biochemistry from Oxford University and a Ph.D. in Biology from Cambridge University. We believe that Dr. Clackson’s extensive leadership experience in our industry and his educational background in biology and biochemistry qualify him to serve on our board of directors.
 
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Election of Executive Officers
Our executive officers are appointed by, and serve at the discretion of, our board of directors.
Family relationships
There are no family relationships among any of our executive officers or directors.
Board composition
Our board of directors currently consists of eight members and following completion of this offering will consist of           members.                 of our directors are independent within the meaning of the independent director guidelines of the Nasdaq Global Market. Pursuant to our current certificate of incorporation and our current voting agreement, Dr. Leland, Mr. Elms, Ms. Hu, Dr. Walsh, Dr. Gaster, Dr. Phillips, Mr. Carruthers and Dr. Clackson have been designated to serve as members of our board of directors. The voting agreement and the provisions of our current certificate of incorporation that govern the election and designation of our directors will terminate in connection with this offering, after which no contractual obligations will concern the election of our directors.
Classified board of directors
In accordance with the terms of our restated certificate of incorporation and restated bylaws that will become effective upon the completion of this offering, our board of directors will be divided into three staggered classes of directors. At each annual meeting of our stockholders, a class of directors will be subject to re-election for a three-year term. As a result, only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. Our directors will be divided among the three classes as follows:

the Class I directors will be Shawn Leland, Richard Gaster and R. Michael Carruthers and their terms will expire at the first annual meeting of our stockholders held following the completion of the offering;

the Class II directors will be Colin Walsh and Steven A. Elms their terms will expire at the second annual meeting of our stockholders held following the completion of the offering; and

the Class III directors will be Lori Hu and Timothy Clackson and their terms will expire at the third annual meeting of our stockholders held following the completion of the offering.
Each director’s term continues until the election and qualification of his or her successor, or his or her earlier death, resignation or removal. Our restated certificate of incorporation and restated bylaws that will be in effect upon the completion of this offering authorize only our board of directors to fill vacancies on our board of directors. Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. This classification of our board of directors may have the effect of delaying or preventing changes in control of our company. See the section entitled “Description of capital stock — Anti-takeover provisions — Restated certificate of incorporation and restated bylaw provisions” for additional information.
Director independence
In connection with this offering, we have applied to list our common stock on the Nasdaq Global Market. Under the rules of the Nasdaq Global Market, independent directors must comprise a majority of a listed company’s board of directors within a specified period following the completion of this offering. In addition, the rules of the Nasdaq Global Market require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and governance committees be independent. Under the rules of the Nasdaq Global Market, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
 
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Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended, or the Exchange Act. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors or any other board committee: (i) accept, directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries or (ii) be an affiliated person of the listed company or any of its subsidiaries. We intend to satisfy the audit committee independence requirements of Rule 10A-3 as of the completion of this offering. Additionally, compensation committee members must not have a relationship with us that is material to the director’s ability to be independent from management in connection with the duties of a compensation committee member.
Our board of directors has undertaken a review of the independence of each director and considered whether each director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, our board of directors determined that all of our directors, except for                      , are “independent directors” as defined under the current Nasdaq Global Market listing standards and SEC rules and regulations. In making these determinations, our board of directors reviewed and discussed information provided by the directors and us with regard to each director’s business and personal activities and relationships as they may relate to us and our management, including the beneficial ownership of our capital stock by each non-employee director and the transactions involving them as described in the section entitled “Certain relationships and related party transactions.”
Committees of the board of directors
Our board of directors has an audit committee, a compensation committee and a nominating and governance committee, each of which will have the composition and responsibilities described below as of the completion of this offering. Each of the below committees has a written charter approved by our board of directors. Upon completion of this offering, copies of each charter will be posted on the investor relations page of our website. Members that serve on these committees will serve until their resignation or until otherwise determined by our board of directors.
Audit committee
Effective upon the effectiveness of the registration statement of which this prospectus is a part, our audit committee will be composed of                      ,                       and                      , with                       as the chairperson of our audit committee. Our board of directors has determined that the composition of our audit committee meets the requirements for independence under the current Nasdaq Global Market listing standards and SEC rules and regulations, and that each member of our audit committee is financially literate. In addition, our board of directors has determined that                       is an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K promulgated under the Securities Act. This designation does not impose on him or her any duties, obligations or liabilities that are greater than are generally imposed on members of our audit committee and our board of directors. Our audit committee is directly responsible for, among other things:

selecting and hiring our independent registered public accounting firm;

the qualifications, independence and performance of our independent registered public accounting firm;

the preparation of the audit committee report to be included in our annual proxy statement;

our compliance with legal and regulatory requirements;

our accounting and financial reporting processes, including our financial statement audits and the integrity of our financial statements; and

reviewing and approving related-person transactions.
Compensation committee
Effective upon the effectiveness of the registration statement of which this prospectus is a part, our compensation committee will be composed of                      ,                       and                      , with                       as the chairperson of
 
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our compensation committee. Our board of directors has determined that each member of our compensation committee is a non-employee director, as defined by Rule 16b-3 promulgated under the Exchange Act, and meets the requirements for independence under the current Nasdaq Global Market listing standards and SEC rules and regulations. Our compensation committee is responsible for, among other things:

evaluating, recommending, approving and reviewing executive officer compensation arrangements, plans, policies and programs;

evaluating and recommending non-employee director compensation arrangements for determination by our board of directors;

administering our cash-based and equity-based compensation plans; and

overseeing our compliance with regulatory requirements associated with the compensation of directors, executive officers and employees.
Nominating and governance committee
Effective upon the effectiveness of the registration statement of which this prospectus is a part, our nominating and governance committee will be composed of                      ,                       and                      , with                       as the chairperson of our nominating and governance committee. Our board of directors has determined that each member of our nominating and governance committee meets the requirements for independence under the current Nasdaq Global Market listing standards. Our nominating and governance committee is responsible for, among other things:

identifying, considering and recommending candidates for membership on our board of directors;

overseeing the process of evaluating the performance of our board of directors; and

advising our board of directors on other corporate governance matters.
Compensation committee interlocks and insider participation
None of the members of our compensation committee has been an officer or employee of our company. None of our executive officers currently serves, or in the past year has served, as a member of the board of directors or compensation committee (or other board committee performing equivalent functions) of any entity that has one or more of its executive officers serving on our board of directors or compensation committee. See the section entitled “Certain relationships and related party transactions” for additional information. Prior to establishing the compensation committee, our full board of directors made decisions relating to the compensation of our officers.
Code of business conduct and ethics
Prior to the completion of this offering, our board of directors will adopt a code of business conduct and ethics that applies to all of our employees, officers and directors, including our President and Chief Executive Officer and other executive and senior officers. The full text of our code of business conduct and ethics will be posted on the investor relations page of our website. The reference to our website address in this prospectus does not include or incorporate by reference the information on our website into this prospectus. We intend to disclose future amendments to certain provisions of our code of business conduct and ethics, or waivers of these provisions, on our website or in public filings to the extent required by the applicable rules.
Non-employee director compensation
Our employee directors have not received any compensation or reimbursement of any expenses (other than customary expenses in connection with the attendance of meetings of our board of directors) for their services as directors for the year ended December 31, 2020.
 
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The following table sets forth information concerning the compensation paid to certain of our non-employee directors for the year ended December 31, 2020.
Name
Fees Earned
or Paid
in Cash ($)
Option
Awards ($)(1)
All other
compensation ($)
Total ($)
Steven A. Elms
Timothy Clackson, Ph.D.
10,008 10,008
Richard Gaster, M.D., Ph.D.
Lori Hu
Andrew Phillips, Ph.D.
Colin Walsh, Ph.D.
(1) Amounts reflect the full grant date fair value of awards of stock or options granted during 2020 computed in accordance with ASC Topic 718, rather than the amounts paid to or realized by the named individual. As of December 31, 2020, Dr. Clackson held 150,000 shares of restricted stock subject to our right of repurchase as to the unvested portion, received upon early exercise of stock options granted in 2020 under the 2019 Plan. Dr. Clackson’s award vests in equal quarterly installments over 12 quarters commencing after May 13, 2020, subject to Dr. Clackson’s continued service to us.
Non-employee director compensation policy
Prior to this offering, we did not have a formal policy to provide any cash or equity compensation to our non-employee directors for their service as directors. In connection with this offering, our board of directors expects to approve annual non-employee director compensation, which will take effect following the completion of this offering.
 
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Executive compensation
The following tables and accompanying narrative disclosure set forth information about the compensation earned by our named executive officers during the year ended December 31, 2020. Our named executive officers for 2020 were Shawn Leland, Pharm.D., R.Ph., President and Chief Executive Officer; and Steven A. Elms, our Chief Executive Officer until November 13, 2020. Mr. Hall has served as our Interim Chief Financial Officer since March 2021.
Summary compensation table
The following table presents summary information regarding the total compensation for services rendered in all capacities that was awarded to, earned by or paid to our named executive officers for the year ended December 31, 2020.
Name and Principal Position
Salary ($)
Non-equity
incentive plan
compensation
($)(1)
Option
Awards
($)(2)
All Other
Compensation
($)(3)
Total ($)
Shawn Leland, Pharm.D., R.Ph.(4)
President and Chief Executive Officer
315,000 135,847 571,367 1,895 1,024,109
Steven A. Elms(5)
Former Chief Executive Officer
(1) For additional information regarding the non-equity incentive plan compensation, see the section entitled “Annual performance-based bonuses.”
(2) Represents the grant date fair value of options awarded during the year ended December 31, 2020 as computed in accordance with FASB ASC Topic 718. The assumptions used in calculating the grant date fair value of the stock options reported in the Options Award column are set forth in Note 8 to our financial statements included elsewhere in this prospectus. Note that the amounts reported in this column reflect the aggregate accounting cost for these awards, and do not necessarily correspond to the actual economic value that may be received by each named executive officer from the options.
(3) The amount reported in the All Other Compensation column reflects reimbursement of cell phone-related costs.
(4) Shawn Leland was appointed as the Company’s President and Chief Executive Officer on November 13, 2020.
(5) Steven A. Elms previously served as the Company’s President and Chief Executive Officer from May 23, 2019 to November 13, 2020. Mr. Elms did not receive any compensation for his service as our Chief Executive Officer.
Annual performance-based bonuses
Annual bonuses for our executive officers are based on the achievement of corporate and individual performance objectives. For the 2020 bonuses, the corporate performance objectives included certain development goals and milestones. The 2020 target bonus amounts, expressed as a percentage of annual base salary, for Dr. Leland was 40%. In January 2021, our compensation committee met to review performance against the 2020 bonus goals and approved cash bonuses for the named executive officers in the amounts set forth in the “Non-equity incentive plan compensation” column of the “Summary compensation table” above.
 
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Outstanding equity awards at 2020 fiscal year-end table
The following table summarizes the number of shares of common stock underlying outstanding equity incentive plan awards for each of our named executive officers as of December 31, 2020.
Option Awards
Name
Grant
Date(1)
Number of
Securities
Underlying
Unexercised
Options
Exercisable
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
Option
Exercise
Price ($)
Option
Expiration
Date
Shawn Leland, Pharm.D., R.Ph.
President and Chief Executive Officer
09/17/2019(2) 529,479 965,521 0.10 09/16/2029
12/30/2020(3) 0 2,276,050 0.32 12/29/2030
12/30/2020(4) 0 419,006 0.32 12/29/2030
Steven A. Elms
Former Chief Executive Officer
(1) All outstanding equity awards were granted under the 2019 Plan.
(2) Represents an option subject to a vesting schedule, which is as follows: 25% of the shares subject to the option vesting and becoming exercisable on July 1, 2020 and the remaining shares vesting and becoming exercisable in equal monthly installments for the 36 months thereafter, subject to Dr. Leland’s continued service to us.
(3) Represents an option subject to a vesting schedule, which is as follows: 25% of the shares subject to the option vesting and becoming exercisable on November 10, 2021 and the remaining shares vesting and becoming exercisable in equal monthly installments for the 36 months thereafter, subject to Dr. Leland’s continued service to us.
(4) Represents an option subject to a vesting schedule, which is as follows: 25% of the shares subject to the option vesting and becoming exercisable upon the earlier to occur of (i) our initial public offering that satisfies certain criteria, and (ii) certain clinical milestones for new product candidates and the remaining shares vesting and becoming exercisable in equal monthly installments for the 36 months thereafter, subject to Dr. Leland’s continued service to us.
Employment agreements
We intend to enter into new employment agreements with certain senior management personnel in connection with this offering, including our named executive officers. We expect that each of these agreements will provide for at-will employment and include each officer’s base salary, a discretionary annual incentive bonus opportunity and standard employee benefit plan participation. We also expect these agreements to provide for severance benefits upon termination of employment or a change in control of our company.
Equity compensation plans and other benefit plans
We believe that our ability to grant equity-based awards is a valuable compensation tool that enables us to attract, retain, and motivate our employees, consultants, and directors by aligning their financial interests with those of our stockholders. The principal features of our equity plans are summarized below. These summaries are qualified in their entirety by reference to the actual text of the plans, which are filed as exhibits to the registration statement of which this prospectus is a part.
2019 Stock Incentive Plan
Our 2019 Plan was adopted by our board of directors in May 2019, and was subsequently approved by our stockholders. We will cease issuing awards under our 2019 Plan upon the implementation of our 2021 Equity Incentive Plan. As a result, we will not grant any additional awards under the 2019 Plan following the date of this prospectus, and the 2019 Plan will terminate at that time. However, any outstanding awards granted under the 2019 Plan will remain outstanding, subject to the terms of our 2019 Plan and award agreements, until any such outstanding options are exercised or the awards terminate or expire by their terms.
The 2019 Plan provides for the grant of incentive stock options, or ISOs, nonqualified stock options, or NSOs, restricted stock awards, restricted stock units, or RSUs, and other stock-based awards. ISOs may be granted only to our employees, including our officers, and the employees of any parent or subsidiary. All other awards may
 
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be granted to our employees, including our officers, our non-employee directors and consultants, and the employees and consultants of our affiliates.
Common stock purchased upon the exercise of an option granted under the 2019 Plan can be paid for in cash, by check, by cashless exercise, by delivery of shares, or by any combination of the foregoing or other consideration permitted by our Board.
The exercise price of each stock option must be at least equal to the fair market value of our common stock on the date of grant, unless the Board specifically determines that the exercise price is intended to be less than such fair market value. The maximum permitted term of options granted under our 2019 Plan is ten years. Options generally vest subject to continued service and cease to vest on the date a participant ceases to provide services to us and all then unvested options will be forfeited. Our board of directors, or a committee thereof, may provide for options to be exercised only as they vest or to be immediately exercisable with any shares issued on exercise being subject to our right of repurchase that lapses as the shares vest. Stock options granted under the 2019 Plan generally may be exercised, to the extent vested as of the date of termination, for a period of three months after the termination of the optionee’s service to us or for a period of 12 months in the case of death or disability or such longer or shorter period as our compensation committee may provide, but in any event no later than the expiration date of the stock option. The right to exercise an option shall terminate immediately on a termination for “cause” ​(as defined in the 2019 Plan) or if we determine, within 30 days after the optionee’s resignation or termination other than for cause, that discharge for cause was warranted.
We have a standard practice of providing for 100% double-trigger vesting acceleration if an optionee is terminated without cause (as defined in the 2019 Plan) within 12 months of the date of a change in control (as defined in the 2019 Plan) in which his or her option has been assumed or substituted for a substantially equivalent award.
Our 2019 Plan is currently administered by our board of directors. The board of directors has the authority to construe and interpret our 2019 Plan and any agreement or document executed pursuant to the plan, grant awards, and make all other determinations necessary or advisable for the administration of the plan.
Our 2019 Plan will terminate ten years from the earlier of the date our board of directors approved the plan and the date our stockholders approved the plan, unless terminated earlier by our board of directors. Our board of directors may amend or terminate our 2019 Plan at any time, but such amendment or termination may not materially and adversely affect any shares previously issued or any award previously granted under the plan. If our board of directors amends our 2019 Plan, it does not need to ask for stockholder approval of the amendment unless required by applicable law.
In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, the board will adjust (i) the number and class of securities and exercise price per share of each outstanding option, (ii) the number and class of securities and exercise price per share of each outstanding option, (iii) the number of shares subject to and the repurchase price per share subject to each outstanding restricted stock awards, and (iv) the terms of each other outstanding award.
In the event of a “change in control” ​(as such term is defined in the 2019 Plan), the 2019 Plan provides that awards other than restricted stock awards may be assumed, substituted, terminated for no consideration (following the provision of notice to the award holders), cashed out for a payment equal to the “acquisition price” ​(as defined in the 2019 Plan) less any applicable exercise price, or any combination of the foregoing. Our board of directors, in its sole discretion, may provide for the accelerated vesting of awards. An option is considered assumed if, following the consummation of the “change in control,” the option confers the right to purchase the consideration (whether cash, securities, or other property) received as a result of the change in control by holders of common stock. If the consideration received as a result of the change in control is not solely common stock of the acquiring or succeeding corporation, we may provide, subject to the consent of the acquiring entity, for the consideration to be received upon the exercise of options to consist solely of common stock of the acquiring
 
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or succeeding entity. As to restricted stock awards, any repurchase rights or other rights of the Company will inure to the benefit of the acquiring entity or any cash/shares/consideration paid in settlement of such awards in the change in control.
Awards granted under our 2019 Plan generally may not be transferred in any manner other than by will or by the laws of descent and distribution, unless otherwise permitted by the administrator; except that certain awards may be transferred to family members (as defined under Rule 701 of the Securities Act) by gift or pursuant to domestic relations orders.
As of December 31, 2020, we had reserved 13,973,900 shares of our common stock for issuance under our 2019 Plan. As of December 31, 2020, options to purchase 7,441,538 shares of our common stock remained outstanding, 200,000 shares have been issued pursuant to restricted stock purchase agreements and 6,332,362 shares of our common stock remained available for future grant. The stock options outstanding as of December 31, 2020 had a weighted-average exercise price of $0.22 per share.
2021 Equity Incentive Plan
We intend to adopt our 2021 Plan that will become effective on the date of the effectiveness of the registration statement for which this prospectus form a part and will serve as the successor to our 2019 Plan. Our 2021 Plan authorizes the award of stock options, RSAs, SARs, RSUs, cash awards, performance awards and stock bonus awards. We have initially reserved                 shares of our common stock, plus any reserved shares not issued or subject to outstanding grants under the 2019 Plan on the effective date of the 2021 Plan, for issuance pursuant to awards granted under our 2021 Plan. The number of shares reserved for issuance under our 2021 Plan will increase automatically on January 1 of each of 2022 through 2031 by the number of shares equal to the lesser of    % of the aggregate number of outstanding shares of our common stock as of the immediately preceding December 31, or a number as may be determined by our board of directors.
In addition, the following shares will again be available for issuance pursuant to awards granted under our 2021 Plan:

shares subject to options or SARs granted under our 2021 Plan that cease to be subject to the option or SAR for any reason other than exercise of the option or SAR;

shares subject to awards granted under our 2021 Plan that are subsequently forfeited or repurchased by us at the original issue price;

shares subject to awards granted under our 2021 Plan that otherwise terminate without such shares being issued;

shares subject to awards granted under our 2021 Plan that are surrendered, cancelled or exchanged for cash or a different award (or combination thereof);

shares issuable upon the exercise of options or subject to other awards granted under our 2019 Plan that cease to be subject to such options or other awards, by forfeiture or otherwise, after the termination of the 2019 Plan;

shares of common stock subject to awards granted prior to the effectiveness of the 2019 Plan that are forfeited to or otherwise repurchased by us;

shares subject to awards granted under our 2019 Plan that are forfeited or repurchased by us at the original price after the termination of the 2019 Plan; and

shares subject to awards under our 2019 Plan or our 2021 Plan that are used to pay the exercise price of an option or withheld to satisfy the tax withholding obligations related to any award.
Administration. Our 2021 Plan is expected to be administered by our compensation committee, all of the members of which are outside directors as defined under applicable federal tax laws, or by our board of directors acting in place of our compensation committee. Subject to the terms and conditions of the 2021 Plan, the
 
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compensation committee will have the authority, among other things, to select the persons to whom awards may be granted, construe and interpret our 2021 Plan as well as to determine the terms of such awards and prescribe, amend and rescind the rules and regulations relating to the plan or any award granted thereunder. The 2021 Plan provides that the board of directors or compensation committee may delegate its authority, including the authority to grant awards, to one or more executive officers to the extent permitted by applicable law, provided that awards granted to non-employee directors may only be determined by our board of directors.
Eligibility. Our 2021 Plan provides for the grant of awards to our employees, directors, consultants, independent contractors and advisors.
Options. The 2021 Plan provides for the grant of both incentive stock options intended to qualify under Section 422 of the Code, and non-statutory stock options to purchase shares of our common stock at a stated exercise price. Incentive stock options may only be granted to employees, including officers and directors who are also employees. The exercise price of stock options granted under the 2021 Plan must be at least equal to the fair market value of our common stock on the date of grant. Incentive stock options granted to an individual who holds, directly or by attribution, more than ten percent of the total combined voting power of all classes of our capital stock must have an exercise price of at least 110% of the fair market value of our common stock on the date of grant. Subject to stock splits, dividends, recapitalizations or similar events, no more than                 shares may be issued pursuant to the exercise of incentive stock options granted under the 2021 Plan.
Options may vest based on service or achievement of performance conditions. Our compensation committee may provide for options to be exercised only as they vest or to be immediately exercisable, with any shares issued on exercise being subject to our right of repurchase that lapses as the shares vest. The maximum term of options granted under our 2021 Plan is ten years from the date of grant, except that the maximum permitted term of incentive stock options granted to an individual who holds, directly or by attribution, more than ten percent of the total combined voting power of all classes of our capital stock is five years from the date of grant.
Restricted stock awards. An RSA is an offer by us to sell shares of our common stock subject to restrictions, which may lapse based on the satisfaction of service or achievement of performance conditions. The price, if any, of an RSA will be determined by the compensation committee. Holders of RSAs will have the right to vote and any dividends or stock distributions paid pursuant to unvested RSAs will be accrued and paid when the restrictions on such shares lapse. Unless otherwise determined by the compensation committee at the time of award, vesting will cease on the date the participant no longer provides services to us and unvested shares may be forfeited to or repurchased by us.
Stock appreciation rights. A SAR provides for a payment, in cash or shares of our common stock (up to a specified maximum of shares, if determined by our compensation committee), to the holder based upon the difference between the fair market value of our common stock on the date of exercise and a predetermined exercise price, multiplied by the number of shares. The exercise price of a SAR must be at least the fair market value of a share of our common stock on the date of grant. SARs may vest based on service or achievement of performance conditions, and may not have a term that is longer than ten years from the date of grant.
Restricted stock units. RSUs represent the right to receive shares of our common stock at a specified date in the future, and may be subject to vesting based on service or achievement of performance conditions. Payment of earned RSUs will be made as soon as practicable on a date determined at the time of grant, and may be settled in cash, shares of our common stock or a combination of both. No RSU may have a term that is longer than ten years from the date of grant.
Performance awards. Performance awards granted to pursuant to the 2021 Plan may be in the form of a cash bonus, or an award of performance shares or performance units denominated in shares of our common stock that may be settled in cash, property or by issuance of those shares subject to the satisfaction or achievement of specified performance conditions.
Stock bonus awards. A stock bonus award provides for payment in the form of cash, shares of our common stock or a combination thereof, based on the fair market value of shares subject such award as determined by our
 
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compensation committee. The awards may be granted as consideration for services already rendered, or at the discretion of the compensation committee, may be subject to vesting restrictions based on continued service or performance conditions.
Cash awards. A cash award is an award that is denominated in, or payable to an eligible participant solely in, cash.
Dividend equivalents rights. Dividend equivalent rights may be granted at the discretion of our compensation committee, and represent the right to receive the value of dividends, if any, paid by us in respect of the number of shares of our common stock underlying an award. Dividend equivalent rights will be subject to the same vesting or performance conditions as the underlying award and will be paid only at such time as the underlying award has become fully vested. Dividend equivalent rights may be settled in cash, shares or other property, or a combination of thereof as determined by our compensation committee.
Change of control. Our 2021 Plan provides that, in the event of a corporate transaction, as defined in the 2021 Plan, outstanding awards under our 2021 Plan shall be subject to the agreement evidencing the corporate transaction, any or all outstanding awards may be (a) continued by us, if we are the successor entity; or (b) assumed or substituted by the successor corporation, or a parent or subsidiary of the successor corporation, for substantially equivalent awards (including, but not limited to, a payment in cash or the right to acquire the same consideration paid to the stockholders of the company pursuant to the corporate transaction); (c) substituted by successor corporation of equivalent awards with substantially the same terms for such outstanding awards; (d) accelerated in full or in part as to the exercisability or vesting; (e) settled in the full value of such outstanding award in cash, cash equivalents, or securities of the successor entity (or its parent, if any) with a fair market value equal to the required amount, followed by the cancellation of such awards; or (f) cancelled for no consideration. If applicable, the number and kind of shares and exercise prices of awards being continued, assumed, or substituted shall be adjusted pursuant to the terms of the 2021 Plan.
Adjustment. In the event of a change in the number of outstanding shares of our common stock without consideration by reason of a stock dividend, extraordinary dividend or distribution, recapitalization, stock split, reverse stock split, subdivision, combination, consolidation reclassification, spin-off or similar change in our capital structure, appropriate proportional adjustments will be made to the number and class of shares reserved for issuance under our 2021 Plan; the exercise prices, number and class of shares subject to outstanding options or SARs; the number and class of shares subject to other outstanding awards; and any applicable maximum award limits with respect to incentive stock options.
Exchange, repricing and buyout of awards. Our compensation committee may, with the consent of the respective participants, issue new awards in exchange for the surrender and cancelation of any or all outstanding awards. Our compensation committee may also reduce the exercise price of options or SARs or buy an award previously granted with payment in cash, shares or other consideration, in each case, subject to the terms of the 2021 Plan.
Director compensation limits. No non-employee director may receive awards under our 2021 Plan with a grant date value that when combined with cash compensation received for his or her service as a director, exceeds $      in a calendar year or $      in the calendar year of his or her initial service.
Clawback; transferability. All awards will be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by our board of directors (or a committee thereof) or required by law during the term of service of the award holder, to the extent set forth in such policy or applicable agreement. Except in limited circumstances, awards granted under our 2021 Plan may generally not be transferred in any manner prior to vesting other than by will or by the laws of descent and distribution.
Amendment and termination. Our board of directors may amend our 2021 Plan at any time, subject to stockholder approval as may be required. Our 2021 Plan will terminate ten years from the date our board of directors adopts the plan, unless it is terminated earlier by our board of directors. No termination or amendment of the 2021 Plan may adversely affect any then-outstanding award without the consent of the affected participant, except as is necessary to comply with applicable laws.
 
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2021 Employee Stock Purchase Plan
We intend to adopt our ESPP that will become effective on the date of the effectiveness of the registration statement of which this prospectus forms a part in order to enable eligible employees to purchase shares of our common stock with accumulated payroll deductions at a discount beginning on a date to be determined by our board of directors or our compensation committee. Our ESPP is intended to qualify under Section 423 of the Code.
Shares available. We have initially reserved                 shares of our common stock for sale under our ESPP. The aggregate number of shares reserved for sale under our ESPP will increase automatically on January 1st of each of 2022 through 2031 by the number of shares equal to the lesser of    % of the total outstanding shares of our common stock as of the immediately preceding December 31 (rounded to the nearest whole share) or a number of shares as may be determined by our board of directors in any particular year. The aggregate number of shares issued over the term of our ESPP, subject to stock-splits, recapitalizations or similar events, may not exceed                 shares of our common stock.
Administration. Our ESPP is expected to be administered by our compensation committee, or by our board of directors acting in place of our compensation committee. Among other things, the administrator will have the authority to determine eligibility for participation in the ESPP, designate separate offerings under the plan, and construe, interpret and apply the terms of the plan.
Eligibility. Employees eligible to participate in any offering pursuant to the ESPP generally include any employee that is employed by us or certain of our designated subsidiaries at the beginning of the offering period. However, our compensation committee may determine that employees who are customarily employed for 20 hours or less per week or for five months or less in a calendar year may not be eligible to participate in the ESPP. In addition, any employee who owns (or is deemed to own as a result of attribution) 5% or more of the total combined voting power or value of all classes of our capital stock, or the capital stock of one of our qualifying subsidiaries, or who will own such amount as a result of participation in the ESPP, will not be eligible to participate in the ESPP. Our compensation committee may impose additional restrictions on eligibility from time to time.
Offerings. Under our ESPP, eligible employees will be offered the option to purchase shares of our common stock at a discount over a series of offering periods. Each offering period may itself consist of one or more purchase periods. No offering period may be longer than 27 months.
Participation. Participating employees will be able to purchase the offered shares of our common stock by accumulating funds through payroll deductions. Participants may select a rate of payroll deduction between 1% and 15% of their compensation. However, a participant may not purchase more than                 shares during any one purchase period, and may not subscribe for more than $      in fair market value of shares of our common stock (determined as of the date the offering period commences) in any calendar year in which the offering is in effect. The administrator, in its discretion, may set a lower maximum amount of shares which may be purchased.
The purchase price for shares of our common stock purchased under the ESPP will be 85% of the lesser of the fair market value of our common stock on (i) the first trading day of the applicable offering period or (ii) the last trading day of each purchase period in the applicable offering period.
Once an employee becomes a participant in an offering period, the participant will be automatically enrolled in each subsequent offering period at the same contribution level. A participant may reduce his or her contribution in accordance with procedures set forth by the compensation committee and may withdraw from participation in the ESPP at any time prior the end of an offering period, or such other time as may be specified by the compensation committee. Upon withdrawal, the accumulated payroll deductions will be returned to the participant without interest.
Adjustments upon recapitalization. If the number of outstanding shares of our common stock is changed by stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change
 
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in our capital structure without consideration, then our compensation committee will proportionately adjust the number and class of common stock that is available under the ESPP, the purchase price and number of shares any participant has elected to purchase as well as the maximum number of shares which may be purchased by participants.
Change of control. If we experience a change of control transaction, any offering period that commenced prior to the closing of the proposed change of control transaction will be shortened and terminated on a new purchase date. The new purchase date will occur on or prior to the closing of the proposed change of control transaction, and our ESPP will then terminate on the closing of the proposed change of control.
Transferability. A participant may not assign, transfer, pledge or otherwise dispose of payroll deductions credited to his or her account, or any rights with regard to an election to purchase shares pursuant to the ESPP other than by will or the laws of descent or distribution.
Amendment; Termination. The administrator may amend, suspend or terminate the ESPP at any time without stockholder consent, except as required by law. Our ESPP will continue until the earlier to occur of (a) termination of the ESPP by our board of directors, (b) issuance of all of the shares reserved for issuance under the ESPP, or (c) the tenth anniversary of the effective date under the ESPP.
401(k) plan
We sponsor a retirement savings plan that is intended to qualify for favorable tax treatment under Section 401(a) of the Code and contains a cash or deferred feature that is intended to meet the requirements of Section 401(k) of the Code. Participants may make pre-tax and certain after-tax (Roth) salary deferral contributions to the plan from their eligible earnings up to the statutorily prescribed annual limit under the Code. Participants who are projected to reach 50 years of age or older during a calendar year may contribute additional amounts based on the statutory limits for catch-up contributions. Participant contributions are held in trust as required by law.
Other benefits
Our named executive officers are eligible to participate in our employee benefit plans on the same basis as our other employees, including our health and welfare plans.
Limitations on liability and indemnification matters
Our restated certificate of incorporation that will become effective in connection with the completion of this offering contains provisions that limit the liability of our directors for monetary damages to the fullest extent permitted by the DGCL. Consequently, our directors will not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duties as directors, except liability for:

any breach of the director’s duty of loyalty to us or our stockholders;

any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL; or

any transaction from which the director derived an improper personal benefit.
Our restated certificate of incorporation and our restated bylaws that will become effective in connection with the completion of this offering require us to indemnify our directors and executive officers to the maximum extent not prohibited by the DGCL and allow us to indemnify other employees and agents as set forth in the DGCL.
We have entered, and intend to continue to enter, into separate indemnification agreements with our directors, executive officers and certain of our key employees, in addition to the indemnification provided for in our restated certificate of incorporation and restated bylaws. These agreements, among other things, require us to indemnify our directors, executive officers and key employees for certain expenses, including attorneys’ fees, judgments,
 
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penalties, fines and settlement amounts actually incurred by these individuals in any action or proceeding arising out of their service to us or any of our subsidiaries or any other company or enterprise to which these individuals provide services at our request. Subject to certain limitations, our indemnification agreements also require us to advance expenses incurred by our directors, officers and key employees for the defense of any action for which indemnification is required or permitted.
We believe that these indemnification provisions and agreements are necessary to attract and retain qualified directors, executive officers and key employees. We also maintain directors’ and officers’ liability insurance.
The limitation of liability and indemnification provisions in our restated certificate of incorporation and restated bylaws may discourage stockholders from bringing a lawsuit against our directors and officers for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and executive officers as required by these indemnification provisions.
At present, there is no pending litigation or proceeding involving any of our directors or executive officers as to which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
 
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Certain relationships and related party transactions
In addition to the compensation arrangements, including any employment, termination of employment and change in control arrangements, with our directors and executive officers, including those discussed in the sections entitled “Management” and “Executive compensation,” the following is a description of each transaction since Inception and each currently proposed transaction in which:

we have been or are to be a participant;

the amounts involved exceeded or will exceed the lesser of $120,000 and 1.0% of our total assets; and

any of our directors, executive officers or holders of more than 5.0% of our capital stock, or an affiliate or immediate family member of the foregoing persons, had or will have a direct or indirect material interest.
Other than as described below, there have not been, nor are there any currently proposed, transactions or series of similar transactions to which we have been or will be a party other than compensation arrangements, which are described where required under the section entitled “Executive compensation.”
Series A Preferred Stock financing
From July 2019 through January 2020, we sold an aggregate of 32,450,000 shares of our Series A Preferred Stock, at a purchase price of $1.00 per share for total gross proceeds of $32.5 million. Each share of our Series A Preferred Stock will automatically convert into           shares of our common stock immediately prior to the completion of this offering. Pursuant to our amended and restated investors’ rights agreement, or IRA, holders of our Series A Preferred Stock are entitled to certain registration rights. See the section titled “Description of capital stock — Registration rights” for additional information.
The following table summarizes the Series A Preferred Stock purchased by members of our board of directors or their affiliates and holders of more than 5% of our outstanding capital stock. The terms of these purchases were the same for all purchasers of our Series A Preferred Stock. Please refer to the section entitled “Principal stockholders” for additional information regarding the shares held by these entities.
Name of Stockholder
Shares of Series A
Preferred Stock
Total
Purchase Price ($)
Aisling Capital IV, LP(1)
8,000,000 8,000,000
Qiming U.S. Healthcare Fund II, L.P.(2)
7,000,000 7,000,000
Vertex Global HC Fund II Pte. Ltd.(3)
7,000,000 7,000,000
Entities affiliates with BVF(4)
3,870,947 3,870,947
(1) Consists of shares purchased by Aisling Capital IV, LP, which holds more than 5% of our outstanding capital stock. Steven A. Elms, a member of our board of directors, is affiliated with Aisling Capital IV, LP.
(2) Consists of shares purchased by Qiming U.S. Healthcare Fund II, L.P., which holds more than 5% of our outstanding capital stock. Colin Walsh, Ph.D., a member of our board of directors, is affiliated with Qiming U.S. Healthcare Fund II, L.P.
(3) Consists of shares purchased by Vertex Global HC Fund II Pte. Ltd., which holds more than 5% of our outstanding capital stock. Lori Hu, a member of our board of directors, is affiliated with Vertex Global HC Fund II Pte. Ltd.
(4) Consists of shares purchased by Biotechnology Value Fund, LP, Biotechnology Value Fund II, LP and Biotechnology Value Trading Fund OS, L.P., or BVF collectively, which holds more than 5% of our outstanding capital stock.
 
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Series B Preferred Stock financing
In November 2020, we sold an aggregate of 34,043,889 shares of our Series B Preferred Stock, at a price per share of $1.9093 for total gross proceeds of $65.0 million. Each share of our Series B Preferred Stock will automatically convert into           shares of our common stock immediately prior to the completion of this offering. Pursuant to the IRA, holders of our Series B Preferred Stock are entitled to certain registration rights. See the section entitled “Description of capital stock — Registration rights” for additional information.
The following table summarizes the Series B Preferred Stock purchased by members of our board of directors or their affiliates and holders of more than 5% of our outstanding capital stock. The terms of these purchases were the same for all purchasers of our Series B Preferred Stock. Please refer to the section entitled “Principal stockholders” for additional information regarding the shares held by these entities.
Name of Stockholder
Shares of Series B
Preferred Stock
Total Cash
Purchase Price ($)
venBio Global Strategic Fund III, L.P.(1)
8,380,034 15,999,999
Entities affiliated with Cormorant Asset Management(2)
8,380,034 15,999,999
Aisling Capital IV, LP(3)
1,936,834 3,697,997
Qiming U.S. Healthcare Fund II, L.P.(4)
1,694,730 3,235,748
Vertex Global HC Fund II Pte. Ltd.(5)
1,694,730 3,235,748
Entities affiliated with BVF(6)
968,417 1,848,999
(1) Consists of shares purchased by venBio Global Strategic Fund III, L.P., which holds more than 5% of our outstanding capital stock. Richard Gaster, M.D., Ph.D., a member of our board of directors, is affiliated with venBio Global Strategic Fund III, L.P..
(2) Consists of shares purchased by Cormorant Global Healthcare Master Fund, LP, Cormorant Private Healthcare Fund III, LP and CRMA SPV, L.P., or Cormorant Asset Management. Cormorant Asset Management collectively holds more than 5% of our outstanding capital stock. Andrew Phillips, Ph.D., a member of our board of directors, is affiliated with Cormorant Asset Management.
(3) Consists of shares purchased by Aisling Capital IV, LP, which holds more than 5% of our outstanding capital stock. Steven A. Elms, a member of our board of directors, is affiliated with Aisling Capital IV, LP.
(4) Consists of shares purchased by Qiming U.S. Healthcare Fund II, L.P., which holds more than 5% of our outstanding capital stock. Colin Walsh, Ph.D., a member of our board of directors, is affiliated with Qiming U.S. Healthcare Fund II, L.P.
(5) Consists of shares purchased by Vertex Global HC Fund II Pte. Ltd., which holds more than 5% of our outstanding capital stock. Lori Hu, a member of our board of directors, is affiliated with Vertex Global HC Fund II Pte. Ltd.
(6) Consists of shares purchased by Biotechnology Value Fund, LP, Biotechnology Value Fund II, LP and Biotechnology Value Trading Fund OS, L.P., which collectively hold more than 5% of our outstanding capital stock.
In connection with our Series B Preferred Stock financing, we also entered into an amended and restated right of first refusal and co-sale agreement, or the Co-Sale Agreement, and an amended and restated voting agreement, or the Voting Agreement with certain holders of our convertible preferred stock. The Co-Sale Agreement provides us and certain holders with the right to purchase all or any portion of shares of transferred stock and provides a right of co-sale and participation in proposed transfers by certain holders. The agreement will terminate upon completion of this offering. The Voting Agreement provides certain of our stockholders with the right to designate representatives to our Board of Directors. The voting agreement will terminate upon the completion of this offering, and members previously elected to our board of directors pursuant to this agreement will continue to serve as directors until they resign, are removed or their successors are duly elected by the holders of our common stock. The composition of our board of directors after this offering is described in more detail under “Management — Board composition.”
 
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Investors’ Rights Agreement
In November, 2020, we entered into the IRA with certain holders of our convertible preferred stock, including entities with which certain of our directors are affiliated and who hold more than 5% of our outstanding capital stock. Pursuant to the IRA, these stockholders are entitled to rights with respect to the registration of their shares under the Securities Act following this offering. See the section entitled “Description of capital stock — Registration rights” for additional information.
Public Offering Participation Rights
We entered into letter agreements in November 2020 with certain of our investors, including venBio Global Strategic Fund III, L.P. and BVF, each a beneficial owner of more than 5% of our capital stock. The letter agreements grant such investor a participation right to purchase a specified percentage of shares of common stock in this offering at the public offering price, subject to compliance with applicable securities laws.
Common Stock Issuances to Founders
On May 13, 2019, we issued 2,083,333 shares of our common stock to Shawn Leland, our President and Chief Executive Officer and a member of our board of directors, and 1,250,000 shares of our common stock to Aisling, a holder of more than 5% of our capital stock, for aggregate purchase prices of $208.33 and $125.00, respectively.
Equity grants to executive officers and directors
We have granted stock options to our executive officers and certain directors, as more fully described in the sections entitled “Executive compensation” and “Management — Non-employee director compensation,” respectively.
Director and executive officer compensation
See the sections entitled “Management — Non-employee director compensation” and “Executive compensation” for additional information.
Employment-related agreements
We have entered into employment offer letters with certain of our executive officers, and we intend to enter into amended and restated employment offer letters or agreements with our executive officers prior to the completion of this offering. See the section titled “Executive compensation — Employment arrangements with our named executive officers” for additional information.
Indemnification agreements
In connection with this offering, we intend to enter into new indemnification agreements with each of our directors and executive officers. The indemnification agreements, our restated certificate of incorporation and our restated bylaws will require us to indemnify our directors to the fullest extent not prohibited by Delaware law. Subject to certain limitations, our restated bylaws also require us to advance expenses incurred by our directors and executive officers. See the section entitled “Executive compensation — Limitations on liability and indemnification matters” for additional information.
 
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Policies and procedures for related party transactions
In connection with this offering, we intend to adopt a written related person transactions policy that provides that our executive officers, directors, nominees for election as a director, beneficial owners of more than 5% of our common stock, and any members of the immediate family of and any entity affiliated with any of the foregoing persons, are not permitted to enter into a material related person transaction with us without the review and approval of our audit committee, or a committee composed solely of independent directors in the event it is inappropriate for our audit committee to review such transaction due to a conflict of interest. We expect the policy to provide that any request for us to enter into a transaction with an executive officer, director, nominee for election as a director, beneficial owner of more than 5% of our common stock or with any of their immediate family members or affiliates in which the amount involved exceeds $120,000 will be presented to our audit committee (or the committee composed solely of independent directors, if applicable) for review, consideration and approval. In approving or rejecting any such proposal, we expect that our audit committee (or the committee composed solely of independent directors, if applicable) will consider the relevant facts and circumstances available and deemed relevant to the audit committee (or the committee composed solely of independent directors, if applicable), including, but not limited to, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction.
 
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Principal stockholders
The following table and accompanying footnotes set forth certain information with respect to the beneficial ownership of shares of our common stock as of March 31, 2021, and as adjusted to reflect the shares of our common stock to be issued and sold in this offering, for:

each of our directors;

each of our named executive officers;

all of our current directors and executive officers as a group; and

each person, or group of affiliated persons, known by us to be the beneficial owner of more than 5% of the outstanding shares of our common stock.
We have determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, to our knowledge, the persons and entities named in the table below have sole voting and sole investment power with respect to all shares of our common stock that they beneficially owned, subject to applicable community property laws.
Beneficial ownership prior to this offering is based on 70,027,222 shares of our common stock outstanding as of March 31, 2021, assuming the automatic conversion of all outstanding shares of our convertible preferred stock into shares of our common stock immediately prior to the completion of this offering. Beneficial ownership after this offering is based on                 shares of our common stock outstanding, assuming (i) the automatic conversion of all outstanding shares of our convertible preferred stock into shares of our common stock outstanding as described above and (ii)           shares of our common stock issued by us in this offering, assuming that the underwriters do not exercise their option to purchase up to an additional           shares of our common stock from us in part or in full. In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, we deemed to be outstanding all shares of common stock subject to stock options held by that person or entity that are currently exercisable or that will become exercisable within 60 days of March 31, 2021. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person.
The following table does not reflect any potential purchases by these persons or entities or their affiliated entities, nor does it give effect to any shares that may be acquired by our stockholders, directors or executive officers pursuant to the directed share program. If any shares are purchased by our existing principal stockholders, directors or their affiliated entities, the number and percentage of shares of our common stock beneficially owned by them after this offering will differ from those set forth in the following table.
Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Elevation Oncology, Inc., 888 Seventh Ave., 12th Floor, New York, New York 10106.
Number of shares
beneficially owned
Percentage of shares
beneficially owned (%)
Name of beneficial owner
Before
offering
After
offering
Directors and Named Executive Officers:
Shawn Leland, Pharm.D., R.Ph.(1)
2,768,541 3.9
Steven A. Elms(2)
11,186,834 16.0
Eric J. Hall
Richard Gaster, M.D., Ph.D.(3)
Lori Hu(4)
Andrew Phillips, Ph.D.(5)
Colin Walsh, Ph.D.(6)
Timothy Clackson, Ph.D.(7)
200,000 *
 
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Number of shares
beneficially owned
Percentage of shares
beneficially owned (%)
Name of beneficial owner
Before
offering
After
offering
All executive officers and directors as a group (8 persons)
14,155,375 20.0
Other 5% stockholders:
Aisling Capital IV, LP(8)
11,186,834 16.0
Entities affiliates with BVF(9)
4,839,364 6.9
Entities affiliated with Cormorant Asset Management(10)
8,380,034 12.0
Qiming U.S. Healthcare Fund II, L.P.(11)
8,694,730 12.4
venBio Global Strategic Fund III, L.P.(12)
8,380,034 12.0
Vertex Global HC Fund II Pte. Ltd.(13)
8,694,730 12.4
Boxer Capital, LLC and affiliated entities(14)
3,928,141 5.6
* Represents beneficial ownership of less than one percent.
(1) Consists of 685,208 shares underlying options to purchase common stock that are exercisable within 60 days of March 31, 2021.
(2) Consists of shares held directly by Aisling Capital IV, LP. (“Aisling”). Steven A. Elms is a Managing Partner of Aisling and may be deemed to beneficially own the shares held by Aisling. Mr. Elms disclaims beneficial ownership of the securities held by Aisling except to the extent of his or its pecuniary interest therein. See footnote (8) below for further information regarding Aisling.
(3) Richard Gaster is a Partner of venBio Partners LLC whom disclaims beneficial ownership of the securities held by venBio Global Strategic Fund III, L.P. except to the extent of his or its pecuniary interest therein. See footnote (12) below for further information regarding venBio Global Strategic Fund III, L.P..
(4) Lori Hu is a Managing Director of Vertex Global HC Fund II Pte. Ltd whom disclaims beneficial ownership of the securities held by Vertex Global HC Fund II Pte. Ltd. except to the extent of her pecuniary interest therein. See footnote (13) below for further information regarding Vertex Global HC Fund II Pte. Ltd.
(5) Andrew Phillips is a Managing Director of Cormorant Asset Management, LP whom disclaims beneficial ownership of the securities held by entities affiliated with Cormorant Asset Management except to the extent of his pecuniary interest therein. See footnote (10) below for further information regarding entities affiliated with Cormorant Asset Management.
(6) Colin Walsh is a partner at Qiming Venture Partners USA whom disclaims beneficial ownership of the securities held by Qiming U.S. Healthcare Fund II, L.P. except to the extent of his pecuniary interest therein. See footnote (11) below for further information regarding Qiming U.S. Healthcare Fund II, L.P.
(7) Represents 200,000 shares of common stock, of which 133,333 are unvested and subject to repurchase if Timothy Clackson ceases to provide services to the Company prior to the vesting of the shares.
(8) The securities are directly held by Aisling, and may be deemed to be beneficially owned by Aisling Capital Partners IV, LP (“Aisling GP”), as general partner of Aisling, Aisling Capital Partners IV LLC (“Aisling Partners”), as general partner of Aisling GP, and each of the individual managing members and partners (collectively, the “Managers”) of Aisling GP and Aisling Partners. The Managers of Aisling Partners are Dr. Andrew Schiff and Steve Elms. The address for Aisling is located at 888 Seventh Avenue, 12th Floor, New York, NY 10106.
(9) Consists of 1) 2,470,516 shares held by Biotechnology Value Fund, L.P. (“BVF”), 2) 2,021,890 shares held by Biotechnology Value Fund II, L.P. (“BVF2”) and 3) 346,958 shares held by Biotechnology Value Trading OS LP Trading Fund OS (“Trading Fund OS”). BVF I GP L.L.C. (“BVF GP”), as the general partner of BVF, may be deemed to beneficially own the shares beneficially owned by BVF. BVF II GP L.L.C. (“BVF2 GP”), as the general partner of BVF2, may be deemed to beneficially own the shares beneficially owned by BVF2. BVF Partners OS Ltd. (“Partners OS”), as the general partner of Trading Fund OS, may be deemed to beneficially own the shares beneficially owned by Trading Fund OS. BVF GP Holdings L.L.C. (“BVF GPH”), as the sole member of each of BVF GP and BVF2 GP, may be deemed to beneficially own the shares beneficially owned in the aggregate by BVF and BVF2. BVF Partners L.P. (“Partners”), as the general partner of BVF and BVF2, the sole member of Partners OS, and the investment manager of Trading Fund OS, may be deemed to beneficially own the shares beneficially owned in the aggregate by BVF, BVF2, Trading Fund OS and MSI. BVF Inc., as the general partner of Partners, may be deemed to beneficially own the shares beneficially owned by Partners. Mark Lampert, as a director and officer of BVF Inc. may be deemed to beneficially own the shares beneficially owned by BVF Inc. The address for the BVF entities is located at 44 Montgomery Street, 40th Floor, San Francisco, CA 94104.
(10) Consists of 1) 1,703,661 shares held by Cormorant Global Healthcare Master Fund, LP (the “Master Fund”), 2) 6,544,807 shares held by Cormorant Private Healthcare Fund II, LP (“Fund II”) and 3) 131,566 shares held by CRMA SPV, L.P. Cormorant Asset Management, LP (‘‘Cormorant Asset Management’’) serves as the investment manager of the Master Fund and Fund II. Bihua Chen, as founder of Cormorant Asset Management may be deemed to share voting and dispositive power over securities held by the Master Fund, Fund II and CRMA SPV, L.P. The address for the entities affiliated with Cormorant Asset Management is located at 200 Clarendon Street, 52nd Floor, Boston, MA 02116.
(11) Consists of 8,694,730 shares held by Qiming U.S. Healthcare Fund II, LP. (‘‘Qiming’’). Qiming U.S. Healthcare GP II, LLC (‘‘Qiming GP’’) is the General Partner of Qiming, and may deem beneficial ownership of shares held by Qiming, and includes Gary Rieschel, as Managing Member of Qiming GP, and Mark McDade, Co-Founder, and Partner of Qiming, that each may share voting and investment power of the shares held by Qiming. The address for Qiming U.S. Healthcare Fund II, L.P. is located at 350 106th Avenue NE, 1st Floor, Bellevue, WA 98004.
(12) Consists of 8,380,034 shares held by venBio Global Strategic Fund III, L.P. (‘‘venBio Fund’’). venBio Partners LLC serves as the investment manager of venBio Fund. The General Partners of venBio Partners LLC include Aaron Royston, Rob Adelman and Corey Goodman and may share voting and dispositive power over securities held by venBio Fund. The address for venBio Fund is located at 1700 Owens Street, Suite 595, San Francisco, CA 94158.
(13) Consists of 8,694,730 shares held by Vertex Global HC Fund II Pte. Ltd. (‘‘Vertex’’). Lori Hu, a member of our board of directors, is affiliated with Vertex but disclaims beneficial ownership except to the extent of her beneficial interest therein. Vertex is managed by Vertex Venture Management Pte.
 
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Ltd. (‘‘Vertex Venture’’) and is deemed to have voting and dispositive power that requires unanimous approval of the investment committee members of Vertex Venture relative to shares held by Vertex. The address for Vertex Global HC Fund II Pte. Ltd. is located at 250 North Bridge Road, #11-01 Raffles City Tower, Singapore 179101.
(14) Consists of 1) 240,140 shares held by MVA Investors, LLC (“MVA Investors”), and 2) 3,688,001 shares held by Boxer Capital, LLC (“Boxer Capital”), which may be deemed to be a member of a group consisting of (i) Braslyn Ltd. (“Braslyn”), (ii) Boxer Capital, (iii) Boxer Asset Management Inc. (“Boxer Management”), (iv) MVA Investors, (v) Lockend Five, LLC (“Lockend Five”), (vi) Joe Lewis, (vii) Ivan M. Lieberburg, (viii) Aaron I. Davis, (ix) Shehan B. Dissanayake, and (x) Christopher Fuglesang (collectively, the “Boxer Group), and indirectly by Braslyn, Boxer Management and Messrs. Lewis, Fuglesang, Lieberburg, Dissanayake and Davis, by virtue of their ownership in Boxer Capital and may share voting and dispositive power over securities held by Boxer Capital, LLC. The address for Boxer Capital, LLC is located at 12860 El Camino Real, Suite 300, San Diego, CA 92130.
 
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Description of capital stock
The following description summarizes the most important terms of our capital stock, as will be in effect following this offering. Because it is only a summary, it does not contain all the information that may be important to you. We expect to adopt a restated certificate of incorporation and restated bylaws that will become effective upon the completion of this offering, and this description summarizes provisions that are expected to be included in these documents. For a complete description, you should refer to our restated certificate of incorporation and restated bylaws, which are included as exhibits to the registration statement of which this prospectus forms a part, and to the applicable provisions of Delaware law.
General
Upon the completion of this offering, our authorized capital stock will consist of 500,000,000 shares of our common stock, $0.0001 par value per share, and 10,000,000 shares of our undesignated preferred stock, $0.0001 par value per share.
Pursuant to the provisions of our current certificate of incorporation, all of our Series A Preferred Stock and Series B Stock will automatically convert into common stock in connection with the completion of this offering. Our Series A Preferred Stock will convert at a ratio of           and our Series B Preferred Stock will convert at a ratio of           . Assuming the effectiveness of this conversion as of March 31, 2021, there were           shares of our common stock issued, held by approximately           stockholders of record, and no shares of our convertible preferred stock outstanding. Our board of directors is authorized, without stockholder approval, to issue additional shares of our capital stock.
Common stock
Dividend rights
Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of our common stock are entitled to receive dividends out of funds legally available if our board of directors, in its discretion, determines to issue dividends and then only at the times and in the amounts that our board of directors may determine. See the section entitled “Dividend Policy” for additional information.
Voting rights
Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders. We have not provided for cumulative voting for the election of directors in our restated certificate of incorporation, which means that holders of a majority of the shares of our common stock will be able to elect all of our directors. Our restated certificate of incorporation will establish a classified board of directors, to be divided into three classes with staggered three-year terms. Only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms.
No preemptive or similar rights
Our common stock is not entitled to preemptive rights, and is not subject to conversion, redemption or sinking fund provisions.
Right to receive liquidation distributions
Upon our liquidation, dissolution or winding-up, the assets legally available for distribution to our stockholders would be distributable ratably among the holders of our common stock and any participating preferred stock outstanding at that time, subject to prior satisfaction of all outstanding debt and liabilities and the preferential rights of and the payment of liquidation preferences, if any, on any outstanding shares our of preferred stock.
 
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Preferred stock
After the completion of this offering, no shares of our preferred stock will be outstanding. Pursuant to our restated certificate of incorporation that will become effective immediately prior to the completion of this offering, our board of directors will be authorized, subject to limitations prescribed by Delaware law, to issue preferred stock in one or more series, to establish from time to time the number of shares to be included in each series and to fix the designation, powers, preferences and rights of the shares of each series and any of their qualifications, limitations or restrictions, in each case without further vote or action by our stockholders. Our board of directors will also be able to increase or decrease the number of shares of any series of preferred stock, but not below the number of shares of that series then outstanding and not above the number of shares of that series authorized, without any further vote or action by our stockholders. Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of our common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in control of our company and might adversely affect the market price of our common stock and the voting and other rights of the holders of our common stock. We have no current plan to issue any shares of preferred stock.
Stock options
As of March 31, 2021, we had outstanding options to purchase an aggregate 7,609,140 shares of our common stock, with a weighted-average exercise price of $0.23 per share under our 2019 Plan.
Registration rights
Pursuant to the terms of the IRA, immediately following this offering, the holders of 66,493,889 shares of our common stock will be entitled to rights with respect to the registration of these shares under the Securities Act as described below. We refer to these shares collectively as registrable securities.
Demand registration rights
Beginning from the earlier of three years after November 10, 2020 or 180 days after the completion of this offering, the holders of not less than 50% of the then-outstanding registrable securities may make a request to us for the registration under the Securities Act of at least 40% of the registrable securities then outstanding if the anticipated aggregate offering price, net of selling expenses, would exceed $10.0 million. Within 10 days after the date such request is given, we are obligated to provide notice of such request to all holders of registrable securities and, as soon as practicable and in any event within 60 days after the date such request is given, to file a Form S-1 registration statement under the Securities Act covering all registrable securities that the initiating holders requested to be registered and any additional registrable securities requested to be included in such registration by any other holders. We are only required to file two registration statements that are declared effective upon exercise of these demand registration rights. We may postpone taking action with respect to such filing not more than twice during any 12-month period for a total period of not more than 120 days, if after receiving a request for registration, we furnish to the holders requesting such registration a certificate signed by our Chief Executive Officer stating that, in the good faith judgment of our board of directors, it would be materially detrimental to us and our stockholders; provided that we may not register any securities for our own account or that of any other stockholder during such 120-day period other than under certain circumstances.
Form S-3 registration rights
The holders of at least 10% of the then-outstanding registrable securities can request that we register all or part of their shares on Form S-3 if we are eligible to file a registration statement on Form S-3 and if the aggregate price to the public of the shares offered, net of selling expenses, is at least $5.0 million. Within ten days after such request is given, we are obligated to provide notice of such request to all holders of registrable securities and as soon as practicable and in any event within 45 days, file a Form S-3 registration statement, covering all registrable
 
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securities that the initiating holders requested to be registered and any additional registrable securities requested to be included in such registration by any other holders. We are only required to file two registration statements on Form S-3 in a 12-month period. We may postpone taking action with respect to such filing not more than twice during any 12-month period for a period of not more than 120 days, if after receiving a request for registration, we furnish to the holders requesting such registration a certificate signed by our Chief Executive Officer stating that, in the good faith judgment of our board of directors, it would be materially detrimental to us and our stockholders; provided that we may not register any securities for our own account or that of any other stockholder during such 120-day period other than under certain circumstances.
Piggyback registration rights
If we register any of our securities for public sale, holders of then-outstanding registrable securities or their permitted transferees will have the right to include their registrable securities in the registration statement. However, this right does not apply to a registration related to any employee benefit plan or a corporate reorganization or other transaction covered by Rule 145 promulgated under the Securities Act or a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of our common stock. The underwriters of any underwritten offering will have the right to limit the number of shares registered by these holders if they determine that marketing factors require limitation, in which case the number of shares to be registered will be apportioned pro rata among these holders, according to the total number of registrable securities originally requested by such holders to be included in the registration statement. However, the number of shares to be registered by these holders cannot be reduced below 20% of the registrable securities such holders requested to be included in such offering.
Expenses of registration rights
We will pay all expenses, other than underwriting discounts and selling commissions incurred in connection with each of the registrations described above, including the reasonable fees and disbursements, not to exceed $50,000, of one counsel for the selling holders selected by holders of a majority of the registrable securities to be registered, provided however that the registrations described above are not subsequently withdrawn at the request of the holders of a majority in interest of the registerable securities (in which case all selling holders shall bear such expenses pro rata based upon the number of registrable securities that were to be included in the withdrawn registration) unless the holders of a majority of the registrable securities agree to forfeit their right to a registration as described above and provided further that if, at the time of such withdrawal, the holders of these rights shall have learned of a material adverse change in the condition, business, or prospects of the company from that known to the holders at the time of their request and have withdrawn the request with reasonable promptness after learning such information then the holders shall not be required to pay any of such expenses and shall not forfeit their rights. All underwriting discounts and selling commissions shall be borne and paid by the holders pro rata on the basis of the number of registrable securities registered on their behalf.
Expiration of registration rights
The registration rights described above will expire, with respect to any particular holder of these rights, on the earliest to occur of (i) the closing of a deemed liquidation event, as defined in our restated certificate of incorporation or (ii) such time after this offering as the registerable securities held by such holder may be sold within any three-month period without restriction pursuant to Rule 144 or a similar exemption under the Securities Act.
Anti-takeover provisions
The provisions of the DGCL, our restated certificate of incorporation and our restated bylaws, as we expect they will be in effect upon the completion of this offering, could have the effect of delaying, deferring or discouraging another person from acquiring control of our company. These provisions, which are summarized below, may have the effect of discouraging takeover bids. They are also designed, in part, to encourage persons seeking to acquire control of us to negotiate first with our board of directors. We believe that the benefits of increased
 
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protection of our potential ability to negotiate with an unfriendly or unsolicited acquirer outweigh the disadvantages of discouraging a proposal to acquire us because negotiation of these proposals could result in an improvement of their terms.
Delaware law
We are subject to the provisions of Section 203 of the DGCL regulating corporate takeovers. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years following the date on which the person became an interested stockholder unless:

prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;

the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding, but not the outstanding voting stock owned by the interested stockholder, (i) shares owned by persons who are directors and also executive officers and (ii) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

at or subsequent to the date of the transaction, the business combination is approved by the board of directors of the corporation and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66.67% of the outstanding voting stock that is not owned by the interested stockholder.
Generally, a business combination includes a merger, asset or stock sale, or other transaction or series of transactions together resulting in a financial benefit to the interested stockholder. An interested stockholder is a person who, together with affiliates and associates, owns or, within three years prior to the determination of interested stockholder status, did own 15% or more of a corporation’s outstanding voting stock. We expect the existence of this provision to have an anti-takeover effect with respect to transactions our board of directors does not approve in advance. We also anticipate that Section 203 may also discourage attempts that might result in a premium over the market price for the shares of common stock held by stockholders.
Restated certificate of incorporation and restated bylaw provisions
Our restated certificate of incorporation and our restated bylaws, as we expect they will be in effect upon the completion of this offering, include a number of provisions that could deter hostile takeovers or delay or prevent changes in control of our company, including the following:

Board of directors vacancies. Our restated certificate of incorporation and restated bylaws will authorize only our board of directors to fill vacant directorships, including newly created seats. In addition, the number of directors constituting our board of directors is permitted to be set only by a resolution adopted by a majority vote of our entire board of directors. These provisions would prevent a stockholder from increasing the size of our board of directors and then gaining control of our board of directors by filling the resulting vacancies with its own nominees. This makes it more difficult to change the composition of our board of directors but promotes continuity of management.

Classified board. Our restated certificate of incorporation and restated bylaws will provide that our board of directors is classified into three classes of directors, each with staggered three-year terms. A third party may be discouraged from making a tender offer or otherwise attempting to obtain control of us as it is more difficult and time consuming for stockholders to replace a majority of the directors on a classified board of directors. See the section entitled “Management — Board Composition” for additional information.

Stockholder action; special meetings of stockholders. Our restated certificate of incorporation will provide that our stockholders may not take action by written consent but may only take action at annual or special meetings of our stockholders. As a result, a holder controlling a majority of our capital stock would not be able to
 
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amend our restated bylaws or remove directors without holding a meeting of our stockholders called in accordance with our restated bylaws. Further, our restated bylaws will provide that special meetings of our stockholders may be called only by a majority of our board of directors, the chairperson of our board of directors, our Chief Executive Officer or our President, thus prohibiting a stockholder from calling a special meeting. These provisions might delay the ability of our stockholders to force consideration of a proposal or for stockholders controlling a majority of our capital stock to take any action, including the removal of directors.

Advance notice requirements for stockholder proposals and director nominations. Our restated bylaws will provide advance notice procedures for stockholders seeking to bring business before our annual meeting of stockholders or to nominate candidates for election as directors at our annual meeting of stockholders. Our restated bylaws also will specify certain requirements regarding the form and content of a stockholder’s notice. These provisions might preclude our stockholders from bringing matters before our annual meeting of stockholders or from making nominations for directors at our annual meeting of stockholders if the proper procedures are not followed. We expect that these provisions might also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.

No cumulative voting. The DGCL provides that stockholders are not entitled to the right to cumulate votes in the election of directors unless a corporation’s certificate of incorporation provides otherwise. Our restated certificate of incorporation and restated bylaws will not provide for cumulative voting.

Directors removed only for cause. Our restated certificate of incorporation will provide that stockholders may remove directors only for cause and only by the affirmative vote of the holders of at least two-thirds of our outstanding common stock.

Amendment of charter provisions. Any amendment of the above expected provisions in our restated certificate of incorporation will require approval by the holders of at least two-thirds of our outstanding common stock.

Issuance of undesignated preferred stock. Our board of directors has the authority, without further action by the stockholders, to issue up to                 shares of undesignated preferred stock with rights and preferences, including voting rights, designated from time to time by our board of directors. The existence of authorized but unissued shares of preferred stock would enable our board of directors to render more difficult or to discourage an attempt to obtain control of us by merger, tender offer, proxy contest or other means.

Choice of forum. Our restated certificate of incorporation will provide that, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware will be the exclusive forum for any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the DGCL, our restated certificate of incorporation or our restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. Our restated bylaws will provide that the federal district courts of the United States of America will, to the fullest extent permitted by law, be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, which we refer to as a Federal Forum Provision. Our decision to adopt a Federal Forum Provision followed a decision by the Supreme Court of the State of Delaware holding that such provisions are facially valid under Delaware law. While there can be no assurance that federal courts or state courts will follow the holding of the Delaware Supreme Court or determine that the Federal Forum Provision should be enforced in a particular case, application of the Federal Forum Provision means that suits brought by our stockholders to enforce any duty or liability created by the Securities Act must be brought in federal court and cannot be brought in state court. While neither the exclusive forum provision nor the Federal Forum Provision applies to suits brought to enforce any duty or liability created by the Exchange Act, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Accordingly, actions by our stockholders to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder also must be brought in federal court. Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder. Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities shall be deemed to have notice of and consented to our exclusive forum provisions,
 
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including the Federal Forum Provision. These provisions may limit a stockholder’s ability to bring a claim in a judicial forum of their choosing for disputes with us or our directors, executive officers or other employees, which may discourage lawsuits against us and our directors, executive officers, and other employees.
Transfer agent and registrar
Upon the completion of this offering, the transfer agent and registrar for our common stock will be American Stock Transfer & Trust Company, LLC. The transfer agent and registrar’s address is 6201 15 th Avenue, Brooklyn, New York, 11219.
The Nasdaq Global Market listing
We have applied to list our common stock on the Nasdaq Global Market under the symbol “ELEV.”
Limitations of liability and indemnification matters
For a discussion of liability and indemnification, see “Executive compensation.”
 
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Shares eligible for future sale
Prior to this offering, there has been no public market for our common stock, and we cannot predict the effect, if any, that market sales of shares of our common stock or the availability of shares of our common stock for sale will have on the market price of our common stock prevailing from time to time. Nevertheless, sales of our common stock, including shares issued upon exercise of outstanding options, in the public market following this offering could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through the sale of our equity securities.
Upon the completion of this offering, we will have a total of                 shares of our common stock outstanding, assuming (i) the automatic conversion of all outstanding shares of our convertible preferred stock into an aggregate of 66,493,889 shares of our common stock and (ii) the issuance of           shares of common stock in this offering. Of these outstanding shares, all of the shares of our common stock sold in this offering will be freely tradable, except that any shares purchased in this offering by our affiliates, as that term is defined in Rule 144 under the Securities Act can only be sold in compliance with the Rule 144 limitations described below.
The remaining outstanding shares of our common stock will be, and shares subject to stock options will be upon issuance, deemed “restricted securities” as defined in Rule 144. Restricted securities may be sold in the public market only if they are registered under the Securities Act or if they qualify for an exemption from registration under Rule 144 or Rule 701 promulgated under the Securities Act, which rules are summarized below. In addition, substantially all of our security holders have, or will have, entered into market standoff agreements with us or lock-up agreements with the underwriters under which they have agreed, subject to specific exceptions, not to sell any of our stock for at least 180 days following the date of this prospectus, as described below.
Lock-up and market standoff agreements
All of our directors and officers and substantially all of our security holders are, or will be, subject to lock-up agreements or market standoff provisions that prohibit them from offering for sale, selling, contracting to sell, granting any option for the sale of, transferring or otherwise disposing of any shares of our common stock or options to acquire shares of our common stock or any security or instrument related to our common stock, or entering into any swap, hedge or other arrangement that transfers any of the economic consequences of ownership of our common stock, for a period of 180 days following the date of this prospectus without the prior written consent of J.P. Morgan Securities LLC, Cowen and Company, LLC and SVB Leerink LLC, subject to certain exceptions. See the section entitled “Underwriting” for additional information.
Rule 144
In general, Rule 144 provides that once we have been subject to public company reporting requirements of Section 13 or Section 15(d) of the Exchange Act for at least 90 days, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during the 90 days preceding a sale and who has beneficially owned the shares of our common stock proposed to be sold for at least six months, including the holding period of any prior owner other than our affiliates, is entitled to sell those shares without complying with the manner of sale, volume limitation or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than our affiliates, then that person would be entitled to sell those shares without complying with any of the requirements of Rule 144.
In general, Rule 144 provides that our affiliates or persons selling shares of our common stock on behalf of our affiliates are entitled to sell upon expiration of the lock-up and market standoff agreements described above, within any three-month period, a number of shares of our common stock that does not exceed the greater of:

1% of the number of shares of our common stock then outstanding, which will equal approximately            shares immediately after the completion of this offering; or
 
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the average reported weekly trading volume of share of our common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to that sale.
Sales under Rule 144 by our affiliates or persons selling shares of our common stock on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.
Rule 701
Rule 701 generally allows a stockholder who purchased shares of our common stock pursuant to a written compensatory plan or contract and who is not deemed to have been an affiliate of our company during the immediately preceding 90 days to sell these shares in reliance upon Rule 144, but without being required to comply with the public information, holding period, volume limitation or notice provisions of Rule 144. Rule 701 also permits affiliates of our company to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. All holders of Rule 701 shares, however, are required to wait until 90 days after the date of this prospectus before selling those shares pursuant to Rule 701 and are subject to the lock-up and market standoff agreements described above.
Form S-8 registration statement
In connection with this offering, we intend to file a registration statement on Form S-8 under the Securities Act covering all of the shares of our common stock subject to outstanding options, outstanding shares of restricted stock and the shares of our common stock reserved for issuance under our stock plans. We expect to file this registration statement as soon as permitted under the Securities Act. However, the shares registered on Form S-8 may be subject to the volume limitations and the manner of sale, notice and public information requirements of Rule 144 and will not be eligible for resale until expiration of the lock-up and market standoff agreements to which they are subject. Of the 7,609,140 shares of our common stock that were subject to options outstanding as of March 31, 2021, options to purchase 1,023,615 shares of common stock were vested as of March 31, 2021. Shares of our common stock underlying outstanding options will not be eligible for sale until the expiration of the 180-day lock-up and market standoff agreements to which they are subject.
Registration rights
We have granted demand, piggyback and Form S-3 registration rights to certain of our stockholders to sell our common stock. Registration of the sale of these shares under the Securities Act would result in these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration, except for shares purchased by affiliates. See the section entitled “Description of capital tock — Registration rights” for additional information.
 
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Material U.S. federal income tax consequences to Non-U.S. holders
The following summary describes the material U.S. federal income tax consequences of the acquisition, ownership and disposition of shares of our common stock acquired in this offering by Non-U.S. Holders (as defined below). This discussion does not address all aspects of U.S. federal income taxes, does not discuss the potential application of the alternative minimum tax, special accounting rules under Section 451(b) of the Code or Medicare contribution tax on net investment income and does not deal with state or local tax laws, U.S. federal gift and estate tax laws, except to the limited extent provided below, or any non-U.S. tax laws that may be relevant to Non-U.S. Holders in light of their particular circumstances.
Special rules different from those described below may apply to certain Non-U.S. Holders that are subject to special treatment under the Code, such as:

insurance companies, banks, investment funds and other financial institutions;

tax-exempt organizations (including private foundations) and tax-qualified retirement plans;

foreign governments and international organizations;

broker-dealers and traders in securities;

U.S. expatriates and certain former citizens or long-term residents of the United States;

“qualified foreign pension funds” as defined in Section 897(l)(2) of the Code and entities all of the interests of which are held by qualified foreign pension funds;

persons that own, or are deemed to own, more than 5% of our capital stock;

“controlled foreign corporations,” “passive foreign investment companies” and corporations that accumulate earnings to avoid U.S. federal income tax;

persons that hold our common stock as part of a “straddle,” “hedge,” “conversion transaction,” “synthetic security” or integrated investment or other risk reduction strategy;

persons who do not hold our common stock as a capital asset within the meaning of Section 1221 of the Code (generally, for investment purposes); and

partnerships and other entities or arrangements treated as pass-through or disregarded entities for U.S. federal income tax purposes, and investors in such entities (regardless of their places of organization or formation).
Such Non-U.S. Holders are urged to consult their own tax advisors to determine the U.S. federal, state, local and other tax consequences that may be relevant to them.
Furthermore, the discussion below is based upon the provisions of the Code, and U.S. Treasury Regulations, rulings and judicial decisions thereunder as of the date hereof, and such authorities may be repealed, revoked or modified, possibly retroactively, or could be subject to differing interpretations which could result in U.S. federal income tax consequences different from those discussed below. We have not requested a ruling from the Internal Revenue Service, or the IRS, with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS will not take a contrary position regarding the tax consequences described herein, or that any such contrary position would not be sustained by a court.
PERSONS CONSIDERING THE PURCHASE OF OUR COMMON STOCK PURSUANT TO THIS OFFERING SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF ACQUIRING, OWNING AND DISPOSING OF OUR COMMON STOCK IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION, INCLUDING ANY STATE, LOCAL OR NON-U.S. TAX CONSEQUENCES OR ANY U.S. FEDERAL NON-INCOME TAX CONSEQUENCES, AND THE POSSIBLE APPLICATION OF TAX TREATIES.
 
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For the purposes of this discussion, a “Non-U.S. Holder” is a beneficial owner of common stock, other than a partnership or other entity or arrangement treated as a pass-through entity that is not, for U.S. federal income tax purposes, (a) an individual who is a citizen or resident of the United States, (b) a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes), created or organized in or under the laws of the United States, any state thereof or the District of Columbia, (c) an estate, the income of which is subject to U.S. federal income taxation regardless of its source, or (d) a trust if it (1) is subject to the primary supervision of a court within the United States and one or more U.S. persons (within the meaning of Section 7701(a)(30) of the Code) have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person.
If you are an individual Non-U.S. citizen, you may, in some cases, be deemed to be a resident alien (as opposed to a nonresident alien) by virtue of being present in the United States for at least 31 days in the calendar year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year. Generally, for this purpose, all the days present in the current year, one-third of the days present in the immediately preceding year, and one-sixth of the days present in the second preceding year, are counted.
Resident aliens are generally subject to U.S. federal income tax as if they were U.S. citizens. Individuals who are uncertain of their status as resident or nonresident aliens for U.S. federal income tax purposes are urged to consult their own tax advisors regarding the U.S. federal income tax consequences of the ownership or disposition of our common stock.
Distributions
We do not expect to make any distributions on our common stock in the foreseeable future. If we do make distributions on our common stock, however, such distributions will constitute dividends for U.S. tax purposes to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Distributions in excess of our current and accumulated earnings and profits will constitute a return of capital that is applied against and reduces, but not below zero, a Non-U.S. Holder’s adjusted tax basis in our common stock. Any remaining excess will be treated as gain realized on the sale or exchange of our common stock as described below under the section entitled “Material U.S. federal income tax consequences to Non-U.S. holders — Gain on disposition of our common stock.”
Any distribution on our common stock that is treated as a dividend paid to a Non-U.S. Holder that is not effectively connected with the non-U.S. Holder’s conduct of a trade or business in the United States will generally be subject to U.S. federal withholding tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty between the United States and the Non-U.S. Holder’s country of residence. To obtain a reduced rate of withholding under a treaty, a Non-U.S. Holder generally will be required to provide us and/or the applicable withholding agent with a properly executed IRS Form W-8BEN, IRS Form W-8BEN-E or other appropriate form, certifying the Non-U.S. Holder’s entitlement to benefits under that treaty. Such form must be provided prior to the payment of dividends and generally must be updated periodically. If a Non-U.S. Holder holds stock through a financial institution or other agent acting on the holder’s behalf, the holder will be required to provide appropriate documentation to such agent. The holder’s agent may then be required to provide certification to us and/or the applicable withholding agent, either directly or through other intermediaries. If you are eligible for a reduced rate of U.S. withholding tax under an income tax treaty, you should consult with your own tax advisor to determine if you are able to obtain a refund of any excess amounts withheld by timely filing an appropriate claim for a refund with the IRS.
We generally are not required to withhold tax on dividends paid to a Non-U.S. Holder that are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment that the holder maintains in the United States) if a properly executed IRS Form W-8ECI, stating that the dividends are so connected, is furnished to the applicable withholding agent. In general, such effectively connected dividends will be subject to U.S. federal income tax on a net income basis at the same rates applicable to U.S. persons. A corporate Non-U.S. Holder receiving effectively connected dividends may also be subject to an additional “branch profits tax,” which
 
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is imposed, under certain circumstances, at a rate of 30% (or such lower rate as may be specified by an applicable treaty) on the corporate Non-U.S. Holder’s effectively connected earnings and profits, subject to certain adjustments.
See the section entitled “Material U.S. federal income tax consequences to non-U.S. holders — Foreign accounts” for additional information on withholding rules that may apply to dividends paid to certain foreign financial institutions or non-financial entities.
Gain on disposition of our common stock
Subject to the discussions below under the sections entitled “Material U.S. federal income tax consequences to non-U.S. holders — Backup withholding and information reporting” and “— Foreign accounts,” a Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax with respect to gain realized on a sale or other disposition of our common stock unless (a) the gain is effectively connected with a trade or business of the Non-U.S. Holder in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment that the holder maintains in the United States), (b) the Non-U.S. Holder is a nonresident alien who is an individual and is present in the United States for 183 or more days in the taxable year of the disposition and certain other conditions are met, or (c) we are or have been a “United States real property holding corporation” within the meaning of Code Section 897(c)(2) (“USRPHC”) at any time within the shorter of the five-year period preceding such disposition or the Non-U.S. Holder’s holding period in the common stock.
If you are a Non-U.S. Holder described in (a) above, you will be required to pay tax on the net gain derived from the sale at the same U.S. federal income tax rates applicable to U.S. persons. Corporate Non-U.S. Holders described in (a) above may also be subject to the additional branch profits tax at a 30% rate (or such lower rate as may be specified by an applicable income tax treaty) of its effectively connected earnings and profits for the taxable year, as adjusted for certain items. If you are an individual Non-U.S. Holder described in (b) above, you will be required to pay a flat 30% tax on the gain derived from the sale, which gain may be offset by certain U.S. source capital losses (even though you are not considered a resident of the United States), provided you have timely filed U.S. federal income tax returns with respect to such losses. With respect to (c) above, in general, we would be a United States real property holding corporation if U.S. real property interests as defined in the Code and the U.S. Treasury Regulations comprised (by fair market value) at least half of our worldwide real property interests plus our other assets used or held for use in a trade or business. We believe that we are not, and do not anticipate becoming, a USRPHC. However, there can be no assurance that we will not become a USRPHC in the future. Even if we were to be treated as a USRPHC, gain realized by a Non-U.S. Holder on a disposition of our common stock would not be subject to U.S. federal income tax so long as (1) the Non-U.S. Holder owned, directly, indirectly or constructively, no more than five percent of our common stock at all times within the shorter of (i) the five-year period preceding the disposition or (ii) the Non-U.S. Holder’s holding period and (2) our common stock is regularly traded on an established securities market. There can be no assurance that our common stock will qualify as regularly traded on an established securities market.
U.S. federal estate tax
The estates of nonresident alien individuals generally are subject to U.S. federal estate tax on property with a U.S. situs. Because we are a U.S. corporation, our common stock will be U.S. situs property and, therefore, will be included in the taxable estate of a nonresident alien decedent, unless an applicable estate tax treaty between the United States and the decedent’s country of residence provides otherwise. The terms “resident” and “nonresident” are defined differently for U.S. federal estate tax purposes than for U.S. federal income tax purposes. Investors are urged to consult their own tax advisors regarding the U.S. federal estate tax consequences of the ownership or disposition of our common stock.
Backup withholding and information reporting
Generally, we or certain financial middlemen must report information to the IRS with respect to any distributions we pay on our common stock including the amount of any such distributions, the name and address of the
 
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recipient, and the amount, if any, of tax withheld. A similar report is sent to the holder to whom any such dividends are paid. Pursuant to tax treaties or certain other agreements, the IRS may make its reports available to tax authorities in the recipient’s country of residence.
Dividends paid by us (or our paying agents) to a Non-U.S. Holder may also be subject to U.S. federal backup withholding. U.S. federal backup withholding generally will not apply to a Non-U.S. Holder who provides a properly executed IRS Form W-8BEN, IRS Form W-8BEN-E, or IRS Form W-8 ECI, as applicable, or otherwise establishes an exemption, provided that the applicable withholding agent does not have actual knowledge or reason to know the holder is a U.S. person.
Under current U.S. federal income tax law, U.S. information reporting and backup withholding requirements generally will apply to the proceeds of a disposition of our common stock effected by or through a U.S. broker or a U.S. office of any broker, U.S. or non-U.S., unless the Non-U.S. Holder provides a properly executed IRS Form W-8BEN or IRS Form W-8BEN-E, or IRS Form W-8 ECI, as applicable, or otherwise establishes an exemption. Generally, U.S. information reporting and backup withholding requirements will not apply to a payment of disposition proceeds to a Non-U.S. Holder where the transaction is effected outside the United States through a non-U.S. office of a non-U.S. broker. Information reporting and backup withholding requirements may, however, apply to a payment of disposition proceeds if the broker has actual knowledge, or reason to know, that the holder is, in fact, a U.S. person. For information reporting purposes, certain brokers with substantial U.S. ownership or operations will generally be treated in a manner similar to U.S. brokers.
Backup withholding is not an additional tax. If backup withholding is applied to you, you should consult with your own tax advisor to determine whether you have overpaid your U.S. federal income tax, and whether you are able to obtain a tax refund or credit of the overpaid amount.
Foreign accounts
In addition, U.S. federal withholding taxes may apply under the Foreign Account Tax Compliance Act, or FATCA, on certain types of payments, including dividends paid to non-U.S. financial institutions and certain other non-U.S. entities. Specifically, a 30% withholding tax may be imposed on dividends on our common stock paid to a “foreign financial institution” or a “non-financial foreign entity” ​(each as defined in the Code), unless (1) the foreign financial institution agrees to undertake certain diligence and reporting obligations, (2) the non-financial foreign entity either certifies it does not have any “substantial United States owners” ​(as defined in the Code) or furnishes identifying information regarding each substantial United States owner, or (3) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. The 30% federal withholding tax described in this paragraph cannot be reduced under an income tax treaty with the United States. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in (1) above, it must enter into an agreement with the U.S. Department of the Treasury requiring, among other things, that it undertake to identify accounts held by certain “specified United States persons” or “United States-owned foreign entities” ​(each as defined in the Code), annually report certain information about such accounts, and withhold 30% on certain payments to non-compliant foreign financial institutions and certain other account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules. Under the applicable Treasury Regulations and administrative guidance, withholding under FATCA generally also would apply to payments of gross proceeds from the sale or other disposition of common stock. Under proposed regulations, however, no withholding will apply with respect to payments of gross proceeds. The preamble to the proposed regulations specifies that taxpayers are permitted to rely on such proposed regulations pending finalization.
Prospective investors should consult their tax advisors regarding the potential application of withholding under FATCA to their investment in our common stock.
EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF OUR COMMON STOCK, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAW, AS WELL AS TAX CONSEQUENCES ARISING UNDER ANY STATE, LOCAL, NON-U.S. OR U.S. FEDERAL NON-INCOME TAX LAWS SUCH AS ESTATE AND GIFT TAX OR UNDER ANY APPLICABLE TAX TREATY.
 
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Underwriting
We are offering the shares of common stock described in this prospectus through a number of underwriters. J.P. Morgan Securities LLC, Cowen and Company, LLC and SVB Leerink LLC are acting as lead book-running managers of the offering, Wedbush Securities Inc. is acting as co-manager of the offering and J.P. Morgan Securities LLC, Cowen and Company, LLC and SVB Leerink LLC are acting as representatives of the underwriters. We have entered into an underwriting agreement with the underwriters. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to the underwriters, and each underwriter has severally agreed to purchase, at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus, the number of shares of common stock listed next to its name in the following table:
Name
Number of
Shares
J.P. Morgan Securities LLC
      
Cowen and Company, LLC
SVB Leerink LLC
Wedbush Securities Inc.
Total
The underwriters are committed to purchase all the common shares offered by us if they purchase any shares. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may also be increased or the offering may be terminated.
The underwriters propose to offer the common shares directly to the public at the initial public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $      per share. Any such dealers may resell shares to certain other brokers or dealers at a discount of up to $      per share from the initial public offering price. After the initial offering of the shares to the public, if all of the shares of common stock are not sold at the initial public offering price, the underwriters may change the offering price and the other selling terms. Sales of any shares made outside of the United States may be made by affiliates of the underwriters.
The underwriters have an option to buy up to           additional shares of common stock from us to cover sales of shares by the underwriters which exceed the number of shares specified in the table above. The underwriters have 30 days from the date of this prospectus to exercise this option to purchase additional shares. If any shares are purchased with this option to purchase additional shares, the underwriters will purchase shares in approximately the same proportion as shown in the table above. If any additional shares of common stock are purchased, the underwriters will offer the additional shares on the same terms as those on which the shares are being offered.
The underwriting fee is equal to the public offering price per share of common stock less the amount paid by the underwriters to us per share of common stock. The underwriting fee is $      per share. The following table shows the per share and total underwriting discounts and commissions to be paid to the underwriters assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares.
Without option to
purchase additional
shares exercise
With full option to
purchase additional
shares exercise
Per Share
$          $         
Total
$ $
We estimate that the total expenses of this offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding the underwriting discounts and commissions, will be
 
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approximately $      . We have agreed to reimburse the underwriters for expenses relating to the clearance of this offering with the Financial Industry Regulatory Authority, Inc. in an amount up to $      .
A prospectus in electronic format may be made available on the web sites maintained by one or more underwriters, or selling group members, if any, participating in the offering. The underwriters may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters and selling group members that may make Internet distributions on the same basis as other allocations.
We have agreed that we will not (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, or submit to or file with the Securities and Exchange Commission a registration statement under the Securities Act relating to, any shares of our common stock or securities convertible into or exercisable or exchangeable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, loan, disposition or filing, or (ii) enter into any swap or other arrangement that transfers all or a portion of the economic consequences associated with the ownership of any shares of common stock or any such other securities (regardless of whether any of these transactions are to be settled by the delivery of shares of common stock or such other securities, in cash or otherwise), in each case without the prior written consent of J.P. Morgan Securities LLC, Cowen and Company, LLC and SVB Leerink LLC for a period of 180 days after the date of this prospectus, other than the shares of our common stock to be sold in this offering.
The restrictions on our actions, as described above, do not apply to certain transactions, including (i) the issuance of shares of common stock or securities convertible into or exercisable for shares of our common stock pursuant to the conversion or exchange of convertible or exchangeable securities or the exercise of warrants or options (including net exercise) or the settlement of RSUs (including net settlement), in each case outstanding on the date of the underwriting agreement and described in this prospectus; (ii) grants of stock options, stock awards, restricted stock, RSUs, or other equity awards and the issuance of shares of our common stock or securities convertible into or exercisable or exchangeable for shares of our common stock (whether upon the exercise of stock options or otherwise) to our employees, officers, directors, advisors, or consultants pursuant to the terms of an equity compensation plan in effect as of the closing of this offering and described in this prospectus, provided that such recipients enter into a lock-up agreement with the underwriters; or (iii) our filing of any registration statement on Form S-8 relating to securities granted or to be granted pursuant to any plan in effect on the date of the underwriting agreement and described in this prospectus or any assumed benefit plan pursuant to an acquisition or similar strategic transaction.
Our directors and executive officers, and substantially all of our shareholders (such persons, the “lock-up parties”) have entered into lock-up agreements with the underwriters prior to the commencement of this offering pursuant to which each lock-up party, with limited exceptions, for a period of 180 days after the date of this prospectus (such period, the “restricted period”), may not (and may not cause any of their direct or indirect affiliates to), without the prior written consent of J.P. Morgan Securities LLC, Cowen and Company, LLC and SVB Leerink LLC, (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any shares of our common stock or any securities convertible into or exercisable or exchangeable for our common stock (including, without limitation, common stock or such other securities which may be deemed to be beneficially owned by such lock-up parties in accordance with the rules and regulations of the SEC and securities which may be issued upon exercise of a stock option or warrant (collectively with the common stock, the “lock-up securities”)), (2) enter into any hedging, swap or other agreement or transaction that transfers, in whole or in part, any of the economic consequences of ownership of the lock-up securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of common stock or any other lock-up securities, in cash or otherwise, (3) make any demand for, or exercise any right with respect to, the registration of any lock-up securities, or (4) publicly disclose the intention to do any of the foregoing. Such persons or entities have further acknowledged that these undertakings preclude them from engaging in any hedging or other transactions or arrangements (including, without limitation, any short sale or the purchase or sale of, or entry
 
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into, any put or call option, or combination thereof, forward, swap or any other derivative transaction or instrument, however described or defined) designed or intended to lead to or result in a sale or disposition or transfer (by any person or entity, whether or not a signatory to such agreement) of any economic consequences of ownership, in whole or in part, directly or indirectly, of any lock-up securities, whether any such transaction or arrangement (or instrument provided for thereunder) would be settled by delivery of our common stock or other securities, in cash or otherwise. Lock-up parties have also acknowledged that they have furnished the representatives with the details of any transaction any such persons or entities, or any of their affiliates, is a party to as of the date of the lock-up agreement, which transaction would have been restricted by the lock-up agreement if it had been entered into by such lock-up party during the restricted period.
The restrictions described in the immediately preceding paragraph and contained in the lock-up agreements between the underwriters and the lock-up parties do not apply, subject in certain cases to various conditions, to certain transactions, including (a) transfers or dispositions of lock-up securities (i) as bona fide gifts, including bona fide gifts to a charity or educational institution, or for bona fide estate planning purposes, (ii) by will, other testamentary document or intestacy, (iii) to any trust for the direct or indirect benefit of the lock-up party or any immediate family member, (iv) to any corporation, partnership, limited liability company or other entity of which the lock-up party or its immediate family members are the legal and beneficial owner of all of the outstanding equity securities or similar interests, (v) to a nominee or custodian of a person or entity to whom a disposition or transfer would be permissible under clauses (i) through (iv), (vi) in the case of a corporation, partnership, limited liability company, trust or other business entity, (A) to another corporation, partnership, limited liability company, trust or other business entity that is an affiliate of the lock-up party, or to any investment fund or other entity controlling, controlled by, managing or managed by or under common control with the lock-up party or its affiliates or (B) as part of a distribution to stockholders, partners, members or other equity holders of the lock-up party; (vii) by operation of law, (viii) to us (A) from an employee or other service provider upon death, disability or termination of employment or service of such employee or other service provider or (B) pursuant to a right of first refusal that we have with respect to transfers of such shares of common stock or other securities, (ix) as part of a sale of lock-up securities acquired in this offering or in open market transactions after the completion of this offering, (x) to us in connection with the vesting, settlement or exercise of restricted stock units, options, warrants or other rights to purchase shares of our common stock (including “net” or “cashless” exercise), including for the payment of exercise price and tax and remittance payments, or (xi) pursuant to a bona fide third-party tender offer, merger, consolidation or other similar transaction approved by our board of directors and made to all shareholders involving a change in control, provided that if such transaction is not completed, all such lock-up securities would remain subject to the restrictions in the immediately preceding paragraph; (b) exercise of the options, settlement of RSUs or other equity awards or exercise warrants pursuant to plans described in in this prospectus, provided that any lock-up securities received upon such exercise, vesting or settlement would be subject to restrictions similar to those in the immediately preceding paragraph; (c) the conversion of outstanding preferred stock, warrants to acquire preferred stock, or convertible securities into shares of common stock or warrants to acquire shares of our common stock, provided that any common stock or warrant received upon such conversion would be subject to restrictions similar to those in the immediately preceding paragraph; and (d) the establishment by lock-up parties of trading plans under Rule 10b5-1 under the Exchange Act, provided that such plan does not provide for the transfer of lock-up securities during the restricted period.
J.P. Morgan Securities LLC, Cowen and Company, LLC and SVB Leerink LLC in their sole discretion, may release the securities subject to any of the lock-up agreements with the underwriters described above, in whole or in part at any time.
We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act.
We have applied to have our common stock approved for listing/quotation on the Nasdaq Global Market under the symbol “ELEV.”
 
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In connection with this offering, the underwriters may engage in stabilizing transactions, which involves making bids for, purchasing and selling shares of common stock in the open market for the purpose of preventing or retarding a decline in the market price of the common stock while this offering is in progress. These stabilizing transactions may include making short sales of common stock, which involves the sale by the underwriters of a greater number of shares of common stock than they are required to purchase in this offering, and purchasing shares of common stock on the open market to cover positions created by short sales. Short sales may be “covered” shorts, which are short positions in an amount not greater than the underwriters’ option to purchase additional shares referred to above, or may be “naked” shorts, which are short positions in excess of that amount. The underwriters may close out any covered short position either by exercising their option to purchase additional shares, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market compared to the price at which the underwriters may purchase shares through the option to purchase additional shares. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market that could adversely affect investors who purchase in this offering. To the extent that the underwriters create a naked short position, they will purchase shares in the open market to cover the position.
The underwriters have advised us that, pursuant to Regulation M of the Securities Act, they may also engage in other activities that stabilize, maintain or otherwise affect the price of the common stock, including the imposition of penalty bids. This means that if the representatives of the underwriters purchase common stock in the open market in stabilizing transactions or to cover short sales, the representatives can require the underwriters that sold those shares as part of this offering to repay the underwriting discount received by them.
These activities may have the effect of raising or maintaining the market price of the common stock or preventing or retarding a decline in the market price of the common stock, and, as a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If the underwriters commence these activities, they may discontinue them at any time. The underwriters may carry out these transactions on the                 , in the over-the-counter market or otherwise.
Prior to this offering, there has been no public market for our common stock. The initial public offering price will be determined by negotiations between us and the representatives of the underwriters. In determining the initial public offering price, we and the representatives of the underwriters expect to consider a number of factors including:

the information set forth in this prospectus and otherwise available to the representatives;

our prospects and the history and prospects for the industry in which we compete;

an assessment of our management;

our prospects for future earnings;

the general condition of the securities markets at the time of this offering;

the recent market prices of, and demand for, publicly traded common stock of generally comparable companies; and

other factors deemed relevant by the underwriters and us.
Neither we nor the underwriters can assure investors that an active trading market will develop for our common stock, or that the shares will trade in the public market at or above the initial public offering price.
Other relationships
Certain of the underwriters and their affiliates have provided in the past to us and our affiliates and may provide from time to time in the future certain commercial banking, financial advisory, investment banking and other services for us and such affiliates in the ordinary course of their business, for which they have received and may
 
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continue to receive customary fees and commissions. In addition, from time to time, certain of the underwriters and their affiliates may effect transactions for their own account or the account of customers, and hold on behalf of themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future.
Selling Restrictions
Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
Certain of the underwriters and their affiliates have provided in the past to us and our affiliates and may provide from time to time in the future certain commercial banking, financial advisory, investment banking and other services for us and such affiliates in the ordinary course of their business, for which they have received and may continue to receive customary fees and commissions. In addition, from time to time, certain of the underwriters and their affiliates may effect transactions for their own account or the account of customers, and hold on behalf of themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future.
Notice to Prospective Investors in Canada
The shares may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the shares must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
Notice to Prospective Investors in the European Economic Area
In relation to each Member State of the European Economic Area (each a Relevant State), no shares have been offered or will be offered pursuant to the offering to the public in that Relevant State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Relevant State or, where appropriate, approved in another Relevant State and notified to the competent authority in that Relevant State, all in accordance with the Prospectus Regulation, except that the shares may be offered to the public in that Relevant State at any time:
(a) to any legal entity which is a qualified investor as defined under Article 2 of the Prospectus Regulation;
(b) to fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of the Prospectus Regulation), subject to obtaining the prior consent of representatives for any such offer; or
 
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(c) in any other circumstances falling within Article 1(4) of the Prospectus Regulation,
provided that no such offer of the shares shall require us or any of the representatives to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation.
For the purposes of this provision, the expression an “offer to the public” in relation to the shares in any Relevant State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to enable an investor to decide to purchase or subscribe for any shares, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129.
Notice to Prospective Investors in the United Kingdom
No shares have been offered or will be offered pursuant to the offering to the public in the United Kingdom prior to the publication of a prospectus in relation to the Shares which has been approved by the Financial Conduct Authority, except that the shares may be offered to the public in the United Kingdom at any time:
(a) to any legal entity which is a qualified investor as defined under Article 2 of the UK Prospectus Regulation;
(b) to fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of the UK Prospectus Regulation), subject to obtaining the prior consent of the representatives for any such offer; or
(c) in any other circumstances falling within Section 86 of the FSMA.
provided that no such offer of the shares shall require the Issuer or any Manager to publish a prospectus pursuant to Section 85 of the FSMA or supplement a prospectus pursuant to Article 23 of the UK Prospectus Regulation. For the purposes of this provision, the expression an “offer to the public” in relation to the shares in the United Kingdom means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to enable an investor to decide to purchase or subscribe for any shares and the expression “UK Prospectus Regulation” means Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018.
Notice to Prospective Investors in Switzerland
The shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or SIX or on any other stock exchange or regulated trading facility in Switzerland. This document does not constitute a prospectus within the meaning of, and has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering or marketing material relating to the offering, the Company or the shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, and the offer of shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes, or CISA. The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of shares.
Notice to Prospective Investors in the Dubai International Financial Centre
This document relates to an Exempt Offer in accordance with the Markets Rules 2012 of the Dubai Financial Services Authority, or DFSA. This document is intended for distribution only to persons of a type specified in the Markets Rules 2012 of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus supplement nor taken steps to verify the information set forth herein and has no
 
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responsibility for this document. The securities to which this document relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the securities offered should conduct their own due diligence on the securities. If you do not understand the contents of this document, you should consult an authorized financial advisor.
In relation to its use in the Dubai International Financial Centre, or DIFC, this document is strictly private and confidential and is being distributed to a limited number of investors and must not be provided to any person other than the original recipient, and may not be reproduced or used for any other purpose. The interests in the securities may not be offered or sold directly or indirectly to the public in the DIFC.
Notice to Prospective Investors in the United Arab Emirates
The shares have not been, and are not being, publicly offered, sold, promoted or advertised in the United Arab Emirates (including the DIFC) other than in compliance with the laws of the United Arab Emirates (and the DIFC) governing the issue, offering and sale of securities. Further, this prospectus does not constitute a public offer of securities in the United Arab Emirates (including the DIFC) and is not intended to be a public offer. This prospectus has not been approved by or filed with the Central Bank of the United Arab Emirates, the Securities and Commodities Authority or the DFSA.
Notice to Prospective Investors in Australia
This prospectus:

does not constitute a disclosure document or a prospectus under Chapter 6D.2 of the Corporations Act 2001, or the Corporations Act;

has not been, and will not be, lodged with the Australian Securities and Investments Commission, or ASIC, as a disclosure document for the purposes of the Corporations Act and does not purport to include the information required of a disclosure document for the purposes of the Corporations Act; and

may only be provided in Australia to select investors who are able to demonstrate that they fall within one or more of the categories of investors, available under section 708 of the Corporations Act, or Exempt Investors.
The shares may not be directly or indirectly offered for subscription or purchased or sold, and no invitations to subscribe for or buy the shares may be issued, and no draft or definitive offering memorandum, advertisement or other offering material relating to any shares may be distributed in Australia, except where disclosure to investors is not required under Chapter 6D of the Corporations Act or is otherwise in compliance with all applicable Australian laws and regulations. By submitting an application for the shares, you represent and warrant to us that you are an Exempt Investor.
As any offer of shares under this document will be made without disclosure in Australia under Chapter 6D.2 of the Corporations Act, the offer of those securities for resale in Australia within 12 months may, under section 707 of the Corporations Act, require disclosure to investors under Chapter 6D.2 if none of the exemptions in section 708 applies to that resale. By applying for the shares you undertake to us that you will not, for a period of 12 months from the date of issue of the shares, offer, transfer, assign or otherwise alienate those shares to investors in Australia except in circumstances where disclosure to investors is not required under Chapter 6D.2 of the Corporations Act or where a compliant disclosure document is prepared and lodged with ASIC.
Notice to Prospective Investors in Japan
The shares have not been and will not be registered pursuant to Article 4, Paragraph 1 of the Financial Instruments and Exchange Act. Accordingly, none of the shares nor any interest therein may be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any “resident” of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to or for the benefit of a resident of Japan, except pursuant
 
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to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Act and any other applicable laws, regulations and ministerial guidelines of Japan in effect at the relevant time.
Notice to Prospective Investors in Hong Kong
The shares have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong), or the SFO, of Hong Kong and any rules made thereunder; or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong, or the CO or which do not constitute an offer to the public within the meaning of the CO. No advertisement, invitation or document relating to the shares has been or may be issued or has been or may be in the possession of any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the SFO and any rules made thereunder.
Notice to Prospective Investors in Singapore
Each Joint Lead Manager has acknowledged that this prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, each Joint Lead Manager has represented and agreed that it has not offered or sold any shares or caused the shares to be made the subject of an invitation for subscription or purchase and will not offer or sell any shares or cause the shares to be made the subject of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, this prospectus or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares, whether directly or indirectly, to any person in Singapore other than:
(a) to an institutional investor (as defined in Section 4A of the Securities and Futures Act (Chapter 289) of Singapore, as modified or amended from time to time, or the SFA) pursuant to Section 274 of the SFA;
(b) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA; or
(c) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, securities or securities-based derivatives contracts (each term as defined in Section 2(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the shares pursuant to an offer made under Section 275 of the SFA except:
(i) to an institutional investor or to a relevant person, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;
(ii) where no consideration is or will be given for the transfer;
(iii) where the transfer is by operation of law;
(iv) as specified in Section 276(7) of the SFA; or
 
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(v) as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) Regulations 2018.
Singapore SFA Product Classification — In connection with Section 309B of the SFA and the CMP Regulations 2018, unless otherwise specified before an offer of Notes, we have determined, and hereby notify all relevant persons (as defined in Section 309A(1) of the SFA), that the shares are “prescribed capital markets products” ​(as defined in the CMP Regulations 2018) and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).
Notice to Prospective Investors in Bermuda
Shares may be offered or sold in Bermuda only in compliance with the provisions of the Investment Business Act of 2003 of Bermuda which regulates the sale of securities in Bermuda. Additionally, non-Bermudian persons (including companies) may not carry on or engage in any trade or business in Bermuda unless such persons are permitted to do so under applicable Bermuda legislation.
Notice to Prospective Investors in Saudi Arabia
This document may not be distributed in the Kingdom of Saudi Arabia except to such persons as are permitted under the Offers of Securities Regulations as issued by the board of the Saudi Arabian Capital Market Authority, or CMA pursuant to resolution number 2-11-2004 dated 4 October 2004 as amended by resolution number 1-28-2008, as amended. The CMA does not make any representation as to the accuracy or completeness of this document and expressly disclaims any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this document. Prospective purchasers of the securities offered hereby should conduct their own due diligence on the accuracy of the information relating to the securities. If you do not understand the contents of this document, you should consult an authorized financial adviser.
Notice to Prospective Investors in the British Virgin Islands
The shares are not being and may not be offered to the public or to any person in the British Virgin Islands for purchase or subscription by or on our behalf. The shares may be offered to companies incorporated under the BVI Business Companies Act, 2004 (British Virgin Islands), or BVI Companies, but only where the offer will be made to, and received by, the relevant BVI Company entirely outside of the British Virgin Islands.
Notice to Prospective Investors in China
This prospectus will not be circulated or distributed in the PRC and the shares will not be offered or sold, and will not be offered or sold to any person for re-offering or resale directly or indirectly to any residents of the PRC except pursuant to any applicable laws and regulations of the PRC. Neither this prospectus nor any advertisement or other offering material may be distributed or published in the PRC, except under circumstances that will result in compliance with applicable laws and regulations.
Notice to Prospective Investors in Korea
The shares have not been and will not be registered under the Financial Investments Services and Capital Markets Act of Korea and the decrees and regulations thereunder, or the FSCMA, and the shares have been and will be offered in Korea as a private placement under the FSCMA. None of the shares may be offered, sold or delivered directly or indirectly, or offered or sold to any person for re-offering or resale, directly or indirectly, in Korea or to any resident of Korea except pursuant to the applicable laws and regulations of Korea, including the FSCMA and the Foreign Exchange Transaction Law of Korea and the decrees and regulations thereunder, or the FETL. The shares have not been listed on any of securities exchanges in the world including, without limitation, the Korea Exchange in Korea. Furthermore, the purchaser of the shares shall comply with all applicable regulatory requirements (including but not limited to requirements under the FETL) in connection with the purchase of the shares. By the purchase of the shares, the relevant holder thereof will be deemed to represent and warrant that if it is in Korea or is a resident of Korea, it purchased the shares pursuant to the applicable laws and regulations of Korea.
 
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Notice to Prospective Investors in Malaysia
No prospectus or other offering material or document in connection with the offer and sale of the shares has been or will be registered with the Securities Commission of Malaysia, or Commission, for the Commission’s approval pursuant to the Capital Markets and Services Act 2007. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Malaysia other than (i) a closed end fund approved by the Commission; (ii) a holder of a Capital Markets Services Licence; (iii) a person who acquires the shares, as principal, if the offer is on terms that the shares may only be acquired at a consideration of not less than RM250,000 (or its equivalent in foreign currencies) for each transaction; (iv) an individual whose total net personal assets or total net joint assets with his or her spouse exceeds RM3 million (or its equivalent in foreign currencies), excluding the value of the primary residence of the individual; (v) an individual who has a gross annual income exceeding RM300,000 (or its equivalent in foreign currencies) per annum in the preceding twelve months; (vi) an individual who, jointly with his or her spouse, has a gross annual income of RM400,000 (or its equivalent in foreign currencies), per annum in the preceding twelve months; (vii) a corporation with total net assets exceeding RM10 million (or its equivalent in a foreign currencies) based on the last audited accounts; (viii) a partnership with total net assets exceeding RM10 million (or its equivalent in foreign currencies); (ix) a bank licensee or insurance licensee as defined in the Labuan Financial Services and Securities Act 2010; (x) an Islamic bank licensee or takaful licensee as defined in the Labuan Financial Services and Securities Act 2010; and (xi) any other person as may be specified by the Commission; provided that, in the each of the preceding categories (i) to (xi), the distribution of the shares is made by a holder of a Capital Markets Services Licence who carries on the business of dealing in securities. The distribution in Malaysia of this prospectus is subject to Malaysian laws. This prospectus does not constitute and may not be used for the purpose of public offering or an issue, offer for subscription or purchase, invitation to subscribe for or purchase any securities requiring the registration of a prospectus with the Commission under the Capital Markets and Services Act 2007.
Notice to Prospective Investors in Taiwan
The shares have not been and will not be registered with the Financial Supervisory Commission of Taiwan pursuant to relevant securities laws and regulations and may not be sold, issued or offered within Taiwan through a public offering or in circumstances which constitutes an offer within the meaning of the Securities and Exchange Act of Taiwan that requires a registration or approval of the Financial Supervisory Commission of Taiwan. No person or entity in Taiwan has been authorized to offer, sell, give advice regarding or otherwise intermediate the offering and sale of the shares in Taiwan.
Notice to Prospective Investors in South Africa
Due to restrictions under the securities laws of South Africa, no “offer to the public” ​(as such term is defined in the South African Companies Act, No. 71 of 2008 (as amended or re-enacted), or the South African Companies Act) is being made in connection with the issue of the shares in South Africa. Accordingly, this document does not, nor is it intended to, constitute a “registered prospectus” ​(as that term is defined in the South African Companies Act) prepared and registered under the South African Companies Act and has not been approved by, and/or filed with, the South African Companies and Intellectual Property Commission or any other regulatory authority in South Africa. The shares are not offered, and the offer shall not be transferred, sold, renounced or delivered, in South Africa or to a person with an address in South Africa, unless one or other of the following exemptions stipulated in section 96 (1) applies:
Section 96(1) (a) the offer, transfer, sale, renunciation or delivery is to:
(i) persons whose ordinary business, or part of whose ordinary business, is to deal in securities, as principal or agent;
(ii) the South African Public Investment Corporation;
 
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(iii) persons or entities regulated by the Reserve Bank of South Africa;
(iv) authorised financial service providers under South African law;
(v) financial institutions recognised as such under South African law;
(vi) a wholly-owned subsidiary of any person or entity contemplated in (c), (d) or (e), acting as agent in the capacity of an authorised portfolio manager for a pension fund, or as manager for a collective investment scheme (in each case duly registered as such under South African law); or
(vii) any combination of the person in (i) to (vi); or
Section 96(1) (b) the total contemplated acquisition cost of the securities, for any single addressee acting as principal is equal to or greater than ZAR1,000,000 or such higher amount as may be promulgated by notice in the Government Gazette of South Africa pursuant to section 96(2)(a) of the South African Companies Act.
Information made available in this prospectus should not be considered as “advice” as defined in the South African Financial Advisory and Intermediary Services Act, 2002.
 
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Legal matters
The validity of the shares of our common stock offered by this prospectus will be passed upon for us by Fenwick & West LLP, San Francisco, California. Cooley LLP, San Diego, California is acting as counsel for the underwriters in connection with this offering.
Experts
CohnReznick LLP, independent registered public accounting firm, has audited our financial statements as of and for the years ended December 31, 2019, and 2020, as set forth in their report, which includes an explanatory paragraph regarding Elevation Oncology Inc.’s ability to continue as a going concern. We have included our financial statements in this prospectus and elsewhere in the registration statement in reliance on CohnReznick LLP’s report, given on their authority as experts in accounting and auditing.
Where you can find additional information
We have filed with the SEC a registration statement on Form S-1 (File Number 333-           ) under the Securities Act with respect to the shares of our common stock offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits filed therewith. For further information about us and the common stock offered hereby, reference is made to the registration statement and the exhibits filed therewith. Statements contained in this prospectus concerning the contents of any contract or any document that has been filed for the complete contents of that contract or document. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit. The exhibits to the registration statement should be reviewed for the complete contents of these contracts and documents.
We currently do not file periodic reports with the SEC. Upon the completion of this offering, we will be required to file periodic reports, proxy statements and other information with the SEC pursuant to the Exchange Act. The SEC maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the website is www.sec.gov.
We also maintain a website at https://elevationoncology.com/. Upon completion of this offering, you may access these materials at our website free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The information contained on, or that can be accessed through, our website is not part of, and is not incorporated into, this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.
 
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Index to Financial Statements
Page(s)
Audited financial statements from Inception through December 31, 2019 and for the year ended December 31, 2020:
F-2
Financial Statements
F-3
F-4
F-5
F-6
F-7−F-21
Unaudited condensed interim financial statements for the three months ended March 31, 2020
and 2021:
F-22
F-23
F-24
F-25
F-26−F-35
 
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Elevation Oncology, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Elevation Oncology, Inc. (the “Company”) as of December 31, 2019 and 2020, and the related statements of operations, convertible preferred stock and stockholders’ deficit and cash flows for the period from April 29, 2019 (Inception) through December 31, 2019, and the year ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2020 and the results of its operations and its cash flows for the period from April 29, 2019 (Inception) through December 31, 2019, and the year ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
The Company’s Ability to Continue as a Going Concern
The financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred losses from operations since Inception and will need additional capital to fund future operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ CohnReznick LLP
We have served as the Company’s auditor since 2020
Tysons, Virginia
April 9, 2021
 
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ELEVATION ONCOLOGY, INC.
Balance Sheets
(in thousands, except share and per-share information)
December 31,
2019
2020
Assets
Current assets:
Cash and cash equivalents
$ 1,740 $ 79,400
Prepaid expenses and other current assets
174 1,386
Total current assets
1,914 80,786
Property and equipment, net
56
Other assets, net
65
Total assets
$ 1,914 $ 80,907
Liabilities, Convertible Preferred Stock and Stockholders’ Deficit
Current liabilities:
Accounts payable
$ 460 $ 5,679
Accrued expenses
137 1,106
Total current liabilities
597 6,785
Non-current liabilities:
Restricted stock repurchase liability
15
Total liabilities
597 6,800
Commitments and contingencies
Series A convertible preferred stock, $0.0001 par value; 32,450,000 authorized as of
December 31, 2019 and 2020; 7,266,750 and 32,450,000 issued and outstanding
as of December 31, 2019 and 2020, respectively; aggregate liquidation preference of
$7,267 and $32,450 as of December 31, 2019 and 2020, respectively
7,190 32,373
Series B convertible preferred stock, $0.0001 par value; 0 and 34,043,889 authorized,
issued and outstanding as of December 31, 2019 and 2020, respectively; aggregate
liquidation preference of $0 and $65,000 as of December 31, 2019 and 2020,
respectively
64,815
Stockholders’ deficit:
Common stock, $0.0001 par value; 50,000,000 and 86,000,000 shares authorized as of December 31, 2019 and 2020, respectively; 3,333,333 and 3,533,333 issued at December 31, 2019 and 2020, respectively; 3,333,333 and 3,383,333 outstanding at December 2019 and 2020, respectively
Additional paid-in capital
9 66
Accumulated deficit
(5,882) (23,147)
Total stockholders’ deficit
(5,873) (23,081)
Total liabilities, convertible preferred stock and stockholders’ deficit
$ 1,914 $ 80,907
See accompanying notes to the financial statements.
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ELEVATION ONCOLOGY, INC.
Statements of Operations
(in thousands, except share and per-share information)
Inception Through
December 31, 2019
Year Ended
December 31, 2020
Operating expenses:
Research and development
$ 5,338 $ 15,476
General and administrative
544 1,800
Total operating expenses
5,882 17,276
Loss from operations
(5,882) (17,276)
Other income, net
11
Net loss
$ (5,882) $ (17,265)
Net loss per share, basic and diluted
$ (1.87) $ (5.16)
Weighted average common shares outstanding, basic and diluted
3,143,631 3,345,901
See accompanying notes to the financial statements.
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ELEVATION ONCOLOGY, INC.
Statements of Convertible Preferred Stock and Stockholders’ Deficit
(in thousands, except share information)
Series A Convertible
Preferred Stock
Series B Convertible
Preferred Stock
Common Stock
Additional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders’
Deficit
Shares
Amount
Shares
Amount
Shares
Amount
Issuance of Series A
convertible preferred stock,
net of issuance costs of $77
7,266,750 $ 7,190 $ $ $ $ $
Stock-based compensation
9 9
Founders' shares
3,333,333
Net loss
(5,882) (5,882)
Balance at December 31, 2019
7,266,750 7,190 3,333,333 9 (5,882) (5,873)
Issuance of Series A
convertible preferred stock,
net of issuance costs of $0
25,183,250 25,183
Issuance of Series B
convertible preferred stock,
net of issuance costs of
$185
34,043,889 64,815
Stock-based compensation
52 52
Vesting of restricted common
stock
50,000 5 5
Net loss
(17,265) (17,265)
Balance at December 31, 2020
32,450,000 $ 32,373 34,043,889 $ 64,815 3,383,333 $ $ 66 $ (23,147) $ (23,081)
See accompanying notes to the financial statements.
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ELEVATION ONCOLOGY, INC.
Statements of Cash Flows
(in thousands)
Inception through
December 31, 2019
Year ended
December 31, 2020
Operating activities
Net loss
$ (5,882) $ (17,265)
Reconciliation of net loss to net cash used in operating activities:
Stock-based compensation
9 52
Depreciation expense
15
Changes in operating assets and liabilities:
Prepaid expenses and other current assets
(174) (1,212)
Other assets, net
(65)
Accounts payable
460 5,219
Accrued expenses
137 958
Net cash used in operating activities
(5,450) (12,298)
Investing activities
Purchases of property and equipment
(71)
Net cash used in investing activities
(71)
Financing activities
Proceeds from the issuance of restricted common stock
20
Proceeds from the issuance of convertible preferred stock
7,267 90,183
Cash paid for issuance costs of convertible preferred stock
(77) (174)
Net cash provided by financing activities
7,190 90,029
Increase in cash and cash equivalents
1,740 77,660
Cash and cash equivalents, beginning of period and year
1,740
Cash and cash equivalents, end of period and year
$ 1,740 $ 79,400
Supplemental disclosure of non-cash financing activities
Issuance costs in accrued expenses
$ $ 11
See accompanying notes to the financial statements.
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ELEVATION ONCOLOGY, INC.
Notes to the Financial Statements
(in thousands, except share and per-share information)
1. NATURE OF BUSINESS
Elevation Oncology, Inc. (the “Company” or “Elevation”), which was formerly known as 14ner, Inc., was incorporated under the laws of Delaware on April 29, 2019 (“Inception”). The Company is a clinical-stage biopharmaceutical company focused on the development of precision medicines for patients with genomically-defined cancers. The Company acquired its lead product candidate, seribantumab, pursuant to an asset purchase agreement executed with Merrimack Pharmaceuticals, Inc. (the “previous sponsor”) during the period ended December 31, 2019 (see Note 9). Seribantumab inhibits tumor growth driven by NRG1 fusions and is currently being tested in the Company’s Phase 2 CRESTONE clinical trial for patients with tumors of any origin that have an NRG1 fusion. The Company is actively evaluating opportunities for pipeline expansion, prioritizing targeted therapy approaches in tumor types defined by genomic driver alterations.
Risks and Uncertainties
The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure, and extensive compliance-reporting capabilities.
There can be no assurance that the Company’s research and development of its product candidates will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies.
On March 10, 2020, the World Health Organization characterized the novel COVID-19 virus as a global pandemic. There is significant uncertainty as to the likely effects of this disease which may, among other things, materially impact the Company’s ongoing clinical trial, and planned future clinical trials. This pandemic or outbreak could result in difficulty securing clinical trial site locations, contract research organizations, and/or trial monitors and other critical vendors and consultants supporting the trial. These situations, or others associated with COVID-19, could cause delays in the Company’s clinical trial plans, could increase expected costs, and impact the ability to raise additional capital, all of which could have a material adverse effect on the Company’s business and its financial condition. COVID-19 has not had a significant impact on the operations or financial results of the Company to date.
Liquidity and Going Concern
The Company has historical losses from operations and anticipates that it will continue to incur losses for the foreseeable future as it continues the research and development of its product candidates. The Company incurred net losses of $5,882 and $17,265 for the period from Inception through December 31, 2019 and the year ended December 31, 2020, respectively, and had an accumulated deficit of $23,147 as of December 31, 2020. Through December 31, 2020, the Company has funded its operations with proceeds from the sale of convertible preferred stock.
As of December 31, 2020, the Company had cash and cash equivalents of $79,400. Without additional funding, the Company believes that it will not have sufficient funds to support its operations for at least one year following
 
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the date of issuance of these financial statements. The Company plans to obtain additional funding through equity financings, debt offerings, or other capital sources, including collaborations with other companies or other strategic transactions. There is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all. If the Company is unable to obtain funding, the Company may be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations. The circumstances described above raise substantial doubt about the Company’s ability to continue as a going concern as of the date the financial statements are issued. The accompanying 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 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 the uncertainties described above.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”).
Use of Estimates
The preparation of financial statements in accordance with GAAP requires the use of estimates and assumptions, based on judgments considered reasonable, which affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. The Company bases its estimates and assumptions on known trends and events and various other factors that management believes to be 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. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, the accruals for research and development expenses, the valuation of common stock and the assumptions used in the valuation of share-based compensation awards. Changes in estimates are recorded in the period in which they become known. Due to the risks and uncertainties involved in the Company’s business and evolving market conditions and, given the subjective element of the estimates and assumptions made, actual results may differ from estimated results.
Segment Information
Operating segments are defined as components of an enterprise about which separate discrete information is available and regularly reviewed by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one operating segment, which is the development of precision medicines for patients with genomically-defined cancers. All material long-lived assets of the Company reside in the United States.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. As of December 31, 2020, cash equivalents consisted of money-market funds. As of December 31, 2019, the Company has no cash equivalents reported in its balance sheet. The Company places its cash with a high-credit-quality financial institution domiciled in the United States.
Concentrations of Credit Risk and Significant Suppliers
Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents. The Company’s money market funds are invested in highly rated funds. Periodically, the Company
 
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maintains deposits in accredited financial institutions in excess of federally insured limits. The Company has not experienced any losses on its deposits of cash and cash equivalents and does not believe that it is exposed to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships.
The Company is dependent on third-party manufacturers to supply products for research and development activities of its programs, including preclinical and clinical testing. These programs could be adversely affected by a significant interruption in the supply of such drug substance and drug products. As of December 31, 2019, the Company had one vendor that accounted for approximately 47% of the total accounts payable. During the year ended December 31, 2020, the Company had one vendor that accounted for approximately 46% of its research and development expense. The same vendor also accounted for approximately 95% of the total accounts payable as of December 31, 2020.
Property and Equipment
Property and equipment consist of computer software that is recorded at cost and depreciated on a straight-line basis over the estimated useful lives of the assets. Upon retirement or sale, the cost of the disposed asset and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized.
The Company reviews its long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying value of assets may not be recoverable. Recoverability is measured by comparison of the asset’s book value to future net undiscounted cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the book value of the assets exceed their fair value, which is measured based on the projected discounted future net cash flows arising from the assets. No impairment losses have been recorded through December 31, 2020.
Cloud Computing Arrangements
The Company defers implementation costs incurred in cloud computing hosting arrangements in accordance with Accounting Standards Update (“ASU”), 2018-15 and amortizes these costs over the noncancelable term of the cloud computing arrangement, plus any optional renewal periods (1) that are reasonably certain to be exercised by the Company or (2) for which exercises of the renewal option is controlled by the cloud service provider. Costs incurred during the application development stage are capitalized within either prepaid expenses and other current assets, or in other assets, net on the Company’s balance sheet. Amortization of implementation costs are on a straight-line basis over the related hosting arrangement term and is reflected in research and development expenses in the statement of operations for the year ended December 31, 2020.
Classification and Accretion of Convertible Preferred Stock
The Company’s convertible preferred stock is classified outside of stockholders’ deficit on the balance sheets because the holders of such shares have liquidation rights in the event of a deemed liquidation that, in certain situations, are not solely within the control of the Company and would require the redemption of the then-outstanding convertible preferred stock. The convertible preferred stock is not redeemable, except in the event of a deemed liquidation (see Note 6). Because the occurrence of a deemed liquidation event is not currently probable, the carrying values of the convertible preferred stock are not being accreted to their redemption values. Subsequent adjustments to the carrying values of the convertible preferred stock would be made only when a deemed liquidation event becomes probable.
Fair Value Measurements
Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in
 
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one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

Level 3—Non-observable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.
The carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, prepaid expenses and other current assets and accounts payable, approximate fair value due to the short-term nature of these items.
Patent Costs
The legal and professional costs incurred by the Company to maintain its patent rights have been expensed as part of general and administrative expenses since Inception. As of December 31, 2019 and 2020, the Company has determined that these expenses have not met the criteria to be capitalized. Intellectual property-related expenses for the period from Inception through December 31, 2019 and for the year ended December 31, 2020 were $86 and $148, respectively.
Research and Development Costs
Research and development costs consist of salaries and benefits, including associated stock-based compensation, and fees paid to other entities that conduct certain research and development activities on the Company’s behalf. Research and development costs are expensed as incurred. The Company estimates preclinical study and clinical trial expenses based on the services performed pursuant to contracts with research institutions and contract research organizations and clinical manufacturing organizations that conduct and manage preclinical studies and clinical trials on the Company’s behalf based on actual time and expenses incurred by them. Further, the Company accrues expenses related to clinical trials based on the level of patient activity according to the related agreement. The Company monitors patient enrollment levels and related activity to the extent reasonably possible and adjusts estimates accordingly.
The Company accounts for nonrefundable advance payments for goods and services that will be used in future research and development activities as expenses when the services have been performed or when the goods have been received rather than when the payment is made.
Although the Company does not expect its estimates to be materially different from amounts actually incurred, its understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. To date, there have not been any material adjustments to the Company’s prior estimates of accrued research and development expenses.
Stock-Based Compensation
The Company measures stock-based compensation cost at the accounting measurement date based on the fair value of the award and recognizes the expense on a straight-line basis over the requisite service period of the award, which is typically the vesting period. Compensation expense is measured using the fair value of the award at the grant date and is adjusted to reflect actual forfeitures as they occur.
The Company estimates the fair value of stock options using the Black-Scholes option pricing model that takes into account the exercise price, the fair value of the Company’s common stock, the expected term of the option,
 
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the expected volatility of the Company’s common stock, expected dividends on the Company’s common stock, and the risk-free interest rate over the expected life of the option.
Fair value of common stock—The Company values its common stock by taking into consideration its most recently available valuation of common shares performed by management and the board of directors, as well as additional factors which may have changed since the date of the most recent contemporaneous valuation through the date of grant.
Expected term—The Company uses the simplified method described in the Securities and Exchange Commission Staff Accounting Bulletin Topic 14.D.2 to calculate the expected term as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term for options granted to employees.
Expected volatility—The Company is a private company and lacks Company-specific historical and implied volatility information. Therefore, the Company estimates expected volatility based on the historical volatility of publicly traded peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its traded stock price.
Risk-free interest rate—The risk-free rate assumption is based on the U.S. Treasury yield curves whose terms are consistent with the expected term of the stock options.
Expected dividend—The Company has not issued any dividends and does not expect to issue dividends over the life of the options. As a result, the Company has estimated the dividend yield to be zero.
The Company classifies stock-based compensation expense in its statement of operations in the same manner in which the award recipient’s payroll costs or service payments are classified.
Net Loss per Common Share
The Company’s net loss is equivalent to net loss attributable to common stockholders for all periods presented. Basic net loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed using the sum of the weighted average number of common shares outstanding during the period and the effect of dilutive securities.
The Company applies the two-class method to calculate its basic and diluted net loss per share as the Company has issued shares that meet the definition of participating securities. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common stockholders. The Company’s participating securities contractually entitle the holders of such shares to participate in dividends; but do not contractually require the holders of such shares to participate in losses of the Company. Accordingly, in periods in which the Company reports a net loss, diluted net loss per share is the same as basic net loss per share, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.
Income Taxes
The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the financial statements or in the Company’s tax returns. Deferred tax assets and liabilities are determined on the basis of the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes.
The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense.
 
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The Company accounts for uncertainty in income taxes recognized. If the tax position is deemed more likely than not to be sustained, it would then be assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. To date the Company has no uncertain tax positions and there have been no interest and penalties.
Recently Adopted Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (“FASB”), issued ASU 2016-02, Leases, which supersedes the lease accounting requirements in ASC Topic 840, Leases, and most industry-specific guidance with ASC Topic 842, Leases (“ASC 842”). ASU 2016-02 requires the identification of arrangements that should be accounted for as leases by lessees. In general, for lease arrangements exceeding a 12-month term, these arrangements must now be recognized as assets and liabilities on the balance sheet of the lessee. Under ASU 2016-02, a right-of-use asset and lease obligation will be recorded for all leases, whether operating or financing, while the income statement will reflect lease expense for operating leases and amortization and interest expense for financing leases. The balance sheet amount recorded for existing leases at the date of adoption of ASU 2016-02 must be calculated using the applicable incremental borrowing rate at the date of adoption. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which provides entities with relief from the costs of implementing certain aspects of ASU 2016-02. Under the amendments in ASU 2018-11, entities may elect not to restate the comparative periods presented when transitioning to ASC 842 (optional transition method) and lessors may elect not to separate lease and non-lease components when certain conditions are met (lessor relief practical expedient). The optional transition method applies to entities that have not yet adopted ASU 2016-02, which is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020, with early adoption permitted.
The Company adopted ASC 842 using the optional transition method outlined in ASU 2018-11, effective January 1, 2020. Upon adoption, the Company considered all arrangements and concluded that it did not have any operating or capital leases as defined by ASC 842.
In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for the Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. ASU 2018-15 amends ASC 350-40 to address a customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The amendments in the update are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other entities, the amendments in the update are effective for annual reporting periods beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021, with early adoption permitted. The Company early adopted ASU 2018-15 effective January 1, 2020, and recorded $110 in prepaid expenses and other current assets and other assets, net on the balance sheet as of December 31, 2020. The Company recorded $17 of amortization expense for the year ended December 31, 2020.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates certain disclosure requirements for fair value measurements for all entities, requires public entities to disclose certain new information and modifies some disclosure requirements. ASU 2018-13 is effective for all entities for fiscal years beginning after December 15, 2019. The Company adopted ASU 2018-13 effective January 1, 2020. The adoption of this standard did not have a material impact on the Company’s disclosures.
Recently Issued Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. Among other items, the amendments in ASU 2019-12 simplify the accounting treatment of tax law
 
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changes and year-to-date losses in interim periods. An entity generally recognizes the effects of a change in tax law in the period of enactment; however, there is an exception for tax laws with delayed effective dates. Under current guidance, an entity may not adjust its annual effective tax rate for a tax law change until the period in which the law is effective. This exception was removed under ASU 2019-12, thereby providing that all effects of a tax law change are recognized in the period of enactment, including adjustment of the estimated annual effective tax rate. Regarding year-to-date losses in interim periods, an entity is required to estimate its annual effective tax rate for the full fiscal year at the end of each interim period and use that rate to calculate its income taxes on a year-to-date basis. However, current guidance provides an exception that when a loss in an interim period exceeds the anticipated loss for the year, the income tax benefit is limited to the amount that would be recognized if the year-to-date loss were the anticipated loss for the full year. ASU 2019-12 removes this exception and provides that in this situation, an entity would compute its income tax benefit at each interim period based on its estimated annual effective tax rate. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The Company has not elected to early adopt ASU 2019-12 and is currently evaluating the impact the adoption of the standard will have on its financial statements and related disclosures.
3. FAIR VALUE MEASUREMENTS OF FINANCIAL ASSETS
The Company’s financial assets subject to fair value measurements on a recurring basis and the level of inputs used for such measurements were as follows:
As of December 31, 2020
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
Money market funds included in cash and cash equivalents
$ 76,013 $ $ $ 76,013
As of December 31, 2020
Level 1
Level 2
Level 3
Total
Money market funds included in cash and cash equivalents
$ 76,013 $ $ $ 76,013
As of December 31, 2019, the Company did not have financial assets subject to fair value measurement on a recurring basis. During the year ended December 31, 2020, the Company had no transfers between Level 1, Level 2 or Level 3 financial assets.
4. PROPERTY AND EQUIPMENT, NET
Property and equipment, net, consisted of the following:
December 31,
Estimated
Useful Life
2019
2020
Computer software
4 years $ $ 71
Less: Accumulated depreciation
(15)
Property and equipment, net
$ $ 56
The Company recorded $15 of depreciation expense during the year ended December 31, 2020.
5. ACCRUED EXPENSES
Accrued expenses consist of the following:
December 31,
2019
2020
Accrued preclinical and clinical trial costs
$ 12 $ 505
 
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December 31,
2019
2020
Accrued compensation
125 429
Accrued consulting
127
Accrued professional services
28
Accrued other
17
Total accrued expenses
$ 137 $ 1,106
6. CONVERTIBLE PREFERRED STOCK
The Company has issued Series A and Series B convertible preferred stock (collectively, the “Convertible Preferred Stock”). As of December 31, 2020, the Company’s certificate of incorporation, as amended and restated, authorized the Company to issue 66,493,889 shares of $0.0001 par value convertible preferred stock, of which 32,450,000 are designated as Series A convertible preferred stock (“Series A”) and 34,043,889 are designated as Series B convertible preferred stock (“Series B”). All of the Company’s Convertible Preferred Stock is classified outside of stockholders’ deficit because the shares contain deemed liquidation rights that are a contingent redemption feature not solely within the control of the Company.
Series A
On July 12, 2019, the Company sold 5,450,000 shares of Series A at a price of $1.00 per share (“Series A Original Issue Price”) pursuant to the Series A stock purchase agreement (the “Series A Purchase Agreement”), for gross proceeds of $5,450. On August 7, 2019, investors purchased an additional 1,816,750 shares of Series A at the Series A Original Issue Price, for gross proceeds of $1,817.
Upon achievement of the Milestone Closing (as defined in the Series A Purchase Agreement) and approval by the Company’s board of directors, the Company issued an additional 25,183,250 shares of Series A at the Series A Original Issue Price on January 9, 2020 for gross proceeds of $25,183.
Series B
On November 10, 2020, the Company sold 34,043,889 shares of Series B at a price of $1.9093 per share, (“Series B Original Issue Price”), pursuant to the Series B stock purchase agreement for gross proceeds of $65,000.
The following tables summarize the Company’s outstanding Convertible Preferred Stock as of December 31, 2019 and 2020:
December 31, 2019
Shares
Authorized
Shares Issued
and
Outstanding
Carrying Value
Liquidation
preference
Conversion
Price (per
share)
Series A
32,450,000       7,266,750 $ 7,190 $ 7,267 $ 1.00
Balance at December 31, 2019
32,450,000       7,266,750 $ 7,190 $ 7,267
December 31, 2020
Shares
Authorized
Shares Issued
and
Outstanding
Carrying Value
Liquidation
Preference
Conversion
Price (per
share)
Series A
32,450,000 32,450,000 $ 32,373 $ 32,450 $ 1.00
Series B
34,043,889 34,043,889 64,815 65,000 $ 1.9093
Balance at December 31, 2020
66,493,889 66,493,889 $ 97,188 $ 97,450
 
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Convertible Preferred Stock Rights and Preferences
The holders of the Convertible Preferred Stock have the following rights and preferences as of December 31, 2020:
Dividends—The holders of Series A accrue dividends at the rate per annum of $0.08 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A (the “Series A Accruing Dividend”). The holders of Series B accrue dividends at the rate per annum of $0.1528 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series B (the “Series B Accruing Dividend”, and together with the Series A Accruing Dividend, the “Accruing Dividends”).
Accruing Dividends shall accrue day-to-day from issuance whether or not declared by the board of directors, and shall be cumulative. The Accruing Dividends shall be payable only when, as, and if declared by the board of directors and the Company is under no obligation to pay such Accruing Dividends.
In the case that the board of directors approves dividends on common stock or other classes of capital stock, holders of the Convertible Preferred Stock shall first receive or simultaneously receive, on a pari passu basis, a dividend on each outstanding share of Convertible Preferred Stock in an amount equal to (i) the greater of the amount of the aggregate Accruing Dividend then accrued on such share of Convertible Preferred Stock not previously paid and (ii):
(a)
In the case of a dividend on common stock or any class of stock that is convertible into common stock, the product of the dividend payable on each share or series as if all shares of such class or series had been converted into common stock, and the number of common stock issuable upon conversion of a share of such series of Convertible Preferred Stock; or
(b)
In the case of a dividend on any class or series that is not convertible into common stock, the amount determined by dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series, and multiplying such fraction by an amount equal to, in the case of the Series A, the Series A Original Issue Price or, in the case of the Series B, the Series B Original Issue Price.
Liquidation—Upon any voluntary or involuntary liquidation, dissolution, winding up, certain mergers, consolidations, and sale of assets (“Deemed Liquidation Event”), the holders of Convertible Preferred Stock shall receive, in preference to any payments to holders of common shares, on a pari passu basis, an amount equal to one times the Series A Original Issue Price or the Series B Original Issue Price, plus any dividends declared but unpaid (“Deemed Liquidation Amount”). If the assets available for distribution are insufficient to pay the Convertible Preferred Stockholders the full amount they are entitled to, then such stockholders shall share ratably in any distribution of those assets available for distribution in proportion to their respective amounts which would otherwise be payable. In the event that the amount of assets available for distribution is greater than the amount required to pay the preferential amounts due to the Convertible Preferred Stockholders, then the remaining assets shall be distributed among the holders of the Convertible Preferred Stock and the common stock, pro rata based upon the number of shares held by each such holder, on an as converted to common stock basis immediately prior to such liquidation, dissolution or winding up of the Company.
Voting—Holders of Convertible Preferred Stock are entitled to cast the number of votes equal to the number of whole shares of common stock into which the shares of Convertible Preferred Stock held by such holder are convertible into as of the record date for determining stockholders entitled to vote on such matter.
The holders of the shares of Series A, exclusively and as a separate class, shall be entitled to elect three directors of the Company. The holders of the shares of Series B, exclusively and as a separate class, shall be entitled to elect two directors of the Company. And, holders of the shares of common stock and Convertible Preferred Stock, exclusively and voting together as a single class, shall be entitled to elect two directors of the Company.
 
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Conversion rights—Each share of Convertible Preferred Stock shall be convertible, at the option of the holder at any time, into such number of common shares determined by dividing the original issue price of the Convertible Preferred Stock by the respective conversion price. As of December 31, 2020, the conversion price for the Series A is $1.00 and the conversion price for the Series B is $1.9093.
The Company shall at all times when the Convertible Preferred Stock are issued and outstanding, maintain sufficient shares of common stock authorized but unissued to affect a conversion of all Convertible Preferred Stock then outstanding.
Mandatory conversion—Upon either the closing of the sale of shares of common stock to the public pursuant to an effective registration statement resulting in $75,000 in net proceeds at a price of at least $1.9093 per share, or the vote or written consent of at least the majority of the then outstanding Convertible Preferred Stockholders and a majority of the Series B stockholders, all outstanding Convertible Preferred Stock shall automatically be converted into shares of common stock at the then effective conversion price.
Anti-dilution—Holders of the Convertible Preferred Stock are afforded anti-dilution protection with respect to corporate events such as stock splits and recapitalizations.
Redemption—In the event of a Deemed Liquidation Event, if the Company does not effect a dissolution of the corporation under Delaware General Corporation Law within 90 days, then the Company shall send a written notice to each holder of Convertible Preferred Stock advising such holders of their right to require the redemption of such shares of Convertible Preferred Stock. If holders of at least sixty-seven percent of the outstanding shares of Convertible Preferred Stock make a request in writing within 120 days after a Deemed Liquidation Event, the Company shall use the net consideration received from such Deemed Liquidation Event, together with any other assets of the Company available for distribution, to redeem all outstanding shares of Convertible Preferred Stock at a price per share equal to the Deemed Liquidation Amount.
In anticipation of the closing of the Series B in November 2020, the Company amended its certificate of incorporation and certain rights and preferences pertaining to the Series A. The amendment to the certificate of incorporation (1) revised the mandatory conversion feature (2) revised the liquidation preference for the Series A holders and (3) revised the protective voting rights of the Series A shares. The Company assessed each of the revisions made to the Series A pursuant to the amended certificate of incorporation and concluded that they should be accounted for as modifications to the terms of the Series A and that there was no transfer of value to be recorded in the Company’s balance sheet as of December 31, 2020.
7. COMMON STOCK
As of December 31, 2020, the Company’s certificate of incorporation, as amended and restated, authorized the Company to issue 86,000,000 shares of $0.0001 par value common stock.
Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. However, common stockholders shall not be entitled to vote on any amendments to the certificate of incorporation that relate to the terms of the Convertible Preferred Stock. Common stockholders are entitled to receive dividends, as may be declared by the board of directors, if any, subject to the preferential dividend rights of the Convertible Preferred Stock.
As of December 31, 2020, 3,533,333 and 3,383,333 shares of common stock were issued and outstanding, respectively, including 3,333,333 shares issued to founders. The Company has reserved a total of 83,801,122 shares of common stock as of December 31, 2020 for common stock outstanding, the conversion of the outstanding shares of Convertible Preferred Stock, the exercise of outstanding stock options and the number of shares remaining available for future grant under the Company’s 2019 Stock Incentive Plan.
 
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8. STOCK-BASED COMPENSATION
Stock-based compensation expense as reflected in the Company’s statements of operations was as follows:
Inception
Through
December 31,
2019
Year Ended
December 31,
2020
Research and development
$ 2 $ 24
General and administrative
7 28
Stock-based compensation expense included in operating expenses
$ 9 $ 52
2019 Stock Incentive Plan
The Company has one stock-based compensation plan under which it is able to issue equity to employees, board members, consultants and advisors—the 2019 Stock Incentive Plan (the “Plan”). The Plan provides for the issuance of incentive stock options or non-qualified stock options, restricted stock awards, unrestricted stock awards, restricted stock units, or any combination of the foregoing.
The Plan is administered by the board of directors, or at the discretion of the board of directors, by a committee of the board. The exercise prices, vesting and other restrictions are determined at the discretion of the board of directors, or their committee if so delegated, except that the exercise price per share of stock options may not be less than 100% of the fair market value of a share of common stock on the date of grant and the term of a stock option may not be greater than ten years. The Company generally grants stock-based awards with service conditions only. Stock options granted under the Plan generally vest over four years and expire after ten years, although options have been granted with vesting terms less than four years.
The total number of shares of common stock that may be issued under the Plan was 8,333,333 shares when the Plan was adopted. In December 2019 and November 2020, the Company increased the number of shares of common stock reserved for issuance under the Plan by 612,500 shares and 5,028,067 shares, respectively. Shares underlying any awards that are forfeited, canceled, or reacquired by the Company prior to vesting, satisfied without the issuance of stock or otherwise terminated and shares that are withheld upon exercise of an option or settlement of an award to cover the exercise price or tax withholding shall be added back to the shares available for issuance under the Plan. The total number of shares of common stock that may be issued under the Plan as of December 31, 2020 was 13,973,900, of which 6,332,362 shares remained available for future grant.
Stock Options
A summary of stock option activity for employee and nonemployee awards under the Plan is presented below:
Options
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term (years)
Aggregate
Intrinsic Value
Granted
1,942,292 $ 0.10
Outstanding at December 31, 2019
1,942,292 $ 0.10 9.72 $
Granted
5,699,246 $ 0.26
Early exercise
(200,000) 0.10
Outstanding at December 31, 2020
7,441,538 $ 0.22 9.54 $ 723
Vested at December 31, 2020
678,576 $ 0.10 9.72 $ 149
Vested and expected to vest at December 31, 2020
7,022,532 $ 0.22 9.51 $ 723
 
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The weighted average grant-date fair value of stock options granted during the period from Inception through December 31, 2019 and the year ended December 31, 2020 was $0.06 and $0.17 per share, respectively. The fair value of each stock option was estimated using a Black-Scholes option-pricing model with the following assumptions:
Inception
Through
December 31,
2019
Year Ended
December 31,
2020
Risk-free interest rate
1.71%
0.2%−0.75%
Volatility
72%
74%−79%
Dividend yield
0.00%
0.00%
Expected term (years)
6
3−6
The fair value of options that vested for the period from Inception through December 31, 2019 and the year ended December 31, 2020 was $0 and $44, respectively.
Early Exercise of Employee Options
The terms of the Plan permit certain option holders to exercise options before their options are vested, subject to certain limitations. Upon early exercise, the awards become subject to a restricted stock agreement and are subject to the same vesting provisions in the original stock option awards. Shares issued as a result of early exercise that have not vested are subject to repurchase by the Company upon termination of the purchaser’s employment, at the lesser of the price paid by the purchaser or the fair value of the shares at the time of repurchase. Such shares are not deemed to be issued for accounting purposes until they vest and are therefore excluded from shares outstanding until the repurchase right lapses and the shares are no longer subject to the repurchase feature. The liability is reclassified into common stock and additional paid-in capital as the shares vest and the repurchase right lapses. Accordingly, the Company has recorded the unvested portion of the exercise proceeds of $15 as a liability from the early exercise in the accompanying balance sheet as of December 31, 2020.
The Company recorded stock-based compensation expense associated with stock-based awards of $9 and $52 during the period from Inception through December 31, 2019 and for the year ended December 31, 2020, respectively. On December 31, 2020, there was $954 of total unrecognized compensation cost related to unvested stock-based awards, which the Company expects to recognize over a remaining weighted-average period of 3.7 years.
9. ASSET PURCHASE AND LICENSE AGREEMENTS
In May 2019, the Company entered into an asset purchase agreement with the previous sponsor, pursuant to which it acquired all rights and interest to patents, know-how, and inventory for assets related to seribantumab, a fully humanized immunoglobulin G2 monoclonal antibody against HER3.
Pursuant to the asset purchase agreement, the Company made an upfront, non-refundable payment of $3,500 at closing. If the Company succeeds in developing and commercializing seribantumab, the Company may be obligated to pay the previous sponsor up to $54,500 in development, regulatory and sales milestone payments.
Under the terms of the asset purchase agreement, the Company assumed the rights and obligations of the following collaboration and license agreements previously held by the previous sponsor:

Dyax—The Company assumed all rights and obligations provided for under the amended and restated collaboration agreement executed between Dyax Corp. (“Dyax”) and the previous sponsor (the “Dyax Agreement”). Pursuant to the Dyax Agreement, Dyax utilized its proprietary phage technology to identify antibodies that would bind to targets of interest to the previous sponsor. Additionally, Dyax granted to the previous sponsor a world-wide, non-exclusive, royalty free right to use and make any and all of the
 
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antibodies identified by Dyax for certain research purposes. Seribantumab was identified as a result of the research activities performed under the Dyax Agreement.
Pursuant to the terms of the Dyax Agreement, the Company may be obligated to pay Dyax milestone payments of up to approximately $9,300 if certain development and regulatory milestones are achieved. In addition, Dyax is entitled to mid-single digit royalties based on net sales of seribantumab. The Company’s obligation to pay royalties to Dyax continues on a product-by-product and country-by-country basis until the later of a specified number of years after the first commercial sale in such country and the expiration of the patent rights covering seribantumab in such country.
The Dyax Agreement will remain in effect, unless earlier terminated, for so long as the Company continues to develop or commercialize seribantumab. Either party may terminate the agreement in the event of an uncured material breach by the other party. The Company also has the right to terminate the agreement in its entirety or on a product-by-product basis at any time upon 90 days’ prior written notice.

Selexis—The Company assumed all rights and obligations provided for under the amended commercial license agreement executed between Selexis SA (“Selexis”) and the previous sponsor (the “Selexis Agreement”). Pursuant to the Selexis Agreement, the Company received non-exclusive rights to technology for use in the manufacture of seribantumab and may be required to make milestone payments of up to approximately €900, per licensed product, if certain development and regulatory milestones are achieved. Additionally, Selexis may have the right to obtain a royalty of the greater of €200 annually and less than one percent on net sales of seribantumab. The obligation to pay royalties with respect to each product sold in a country continues until the expiration of the patent rights covering the product in such country. Either party may terminate the agreement in the event of an uncured material breach by the other party. The Company also has the right to terminate the agreement at any time upon 60 days’ prior written notice.

National Institute of Health—The Company assumed all rights and obligations provided for under the amended commercial license agreement executed between the U.S. Public Health Service, a division of the U.S. Department of Health and Human Services (the “NIH”) and the previous sponsor (the “NIH Agreement”). Pursuant to the NIH Agreement, the Company received non-exclusive rights in the United States to patents related to certain antibodies associated with seribantumab. If certain development and regulatory milestones are achieved, the Company may be obligated to pay NIH additional milestone payments of up to approximately $350 per licensed product.
The Company evaluated the asset purchase agreement with the previous sponsor under ASC Topic 805, Business Combinations, and concluded that the transaction did not meet the requirements to be accounted for as a business combination and therefore was accounted for as an asset acquisition. Accordingly, the upfront payment of $3,500 was expensed as research and development expenses in the statement of operations for the period from Inception through December 31, 2019. Additionally, the Company concluded that all consideration to be paid under the asset purchase agreement is contingent in nature and will be recognized when the respective contingency is resolved. The Company assessed the contingent events which would result in the payment of a milestone as of December 31, 2019 and 2020, and concluded no such payments were required.
10. COMMITMENTS AND CONTINGENCIES
The Company, from time to time, may be involved in legal proceedings, regulatory actions, claims and litigation arising in the ordinary course of business. The Company was not a defendant in any lawsuits from Inception to the date of these financial statements.
11. INCOME TAXES
No provision for income taxes was recorded for the period from Inception through December 31, 2019 and for the year ended December 31, 2020. The Company has incurred net pre-tax losses in the United States only for all periods presented. The Company has not reflected any benefit of such net operating loss (“NOL”) carryforwards
 
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in the accompanying financial statements. The provision for income taxes differs from the amount expected by applying the federal statutory rate to the loss before taxes as follows:
Inception
Through
December 31,
2019
Year Ended
December 31,
2020
Profit before tax at federal statutory rate
21.0% 21.0%
State tax benefit, net of federal benefit
0.0% 0.3%
Research and development credit carryovers
0.0% 1.7%
Permanent differences
(0.7)% (0.6)%
Change in valuation allowance
(20.3)% (22.4)%
Effective income tax rate
0.0% 0.0%
In assessing the realizability of the net deferred tax assets, the Company considers all relevant positive and negative evidence in determining whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The realization of the gross deferred tax assets is dependent on several factors, including the generation of sufficient taxable income prior to the expiration of the NOL carryforwards. The Company has recorded a valuation allowance against its deferred tax assets on December 31, 2019 and 2020 because the Company’s management believes that it is more likely than not that these assets will not be fully realized in the near future. The increase in the valuation allowance of approximately $4,571 in the year ended December 31, 2020 primarily relates to the generation of net operating losses and research and development credits.
As of December 31, 2020, the Company had federal NOL carryforwards of approximately $19,435, all of which can be carried forward indefinitely, and state NOL carryforwards of $1,147, which begin to expire in 2040. The Company also has federal tax credits of $295 which may be used to offset future tax liabilities and will begin to expire in 2040. NOL and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities.
Net deferred tax asset (liability) in the accompanying balance sheets consists of the following:
December 31,
2019
2020
Deferred tax assets and (liabilities)
Net operating losses
$ 545 $ 4,138
Research and development credit
295
Intangible assets
664
Gross deferred tax asset
545 5,097
Valuation allowance
(512) (5,083)
Net deferred tax asset
33 14
Stock-based compensation
(2)
Intangible assets
(33)
Fixed assets
(12)
Deferred tax liabilities
(33) (14)
Net deferred tax asset (liability)
$ $
Subsequent ownership changes may further affect the limitation in future years. The Company has not conducted a study to assess whether a change of ownership has occurred or whether there have been multiple changes of ownership since Inception due to the significant complexity and cost associated with such a study. If the Company has experienced a change of ownership, as defined by Section 382 and 383 of the Internal Revenue Code, at
 
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any time since Inception, utilization of the NOL carryforwards or research and development tax credit carryforwards would be subject to the annual limitations under Section 382 and 383 of the Internal Revenue Code.
The Company will recognize both accrued interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2020, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s statements of operations. Since the Company is in a loss carryforward position, the Company is generally subject to examination by the U.S. federal, state and local income tax authorities for all tax years in which a loss carryforward is available. As of December 31, 2020 all tax returns remain open.
In response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security Act (“the CARES Act”), was signed into law in March 2020. The CARES Act lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017 (“2017 Tax Act”). Corporate taxpayers may carryback NOLs originating during 2018 through 2020 for up to five years, which was not previously allowed under the 2017 Tax Act. The CARES Act also eliminates the 80% of taxable income limitations by allowing corporate entities to fully utilize NOL carryforwards to offset taxable income in 2018, 2019 or 2020. Taxpayers may generally deduct interest up to the sum of 50% of adjusted taxable income plus business interest income (30% limit under the 2017 Tax Act) for tax years beginning January 1, 2019 and 2020. The CARES Act allows taxpayers with alternative minimum tax credits to claim a refund in 2020 for the entire amount of the credits instead of recovering the credits through refunds over a period of years, as originally enacted by the 2017 Tax Act. The Company notes that these provisions did not have a material impact to the amounts recorded within this footnote.
12. NET LOSS PER SHARE
The following table summarizes the computation of basic and diluted net loss per share of the Company:
Inception
Through
December 31,
2019
Year Ended
December 31,
2020
Net loss
$ (5,882) $ (17,265)
Weighted average common stock outstanding, basic and diluted
3,143,631 3,345,901
Net loss per share, basic and diluted
$ (1.87) $ (5.16)
The Company’s potentially dilutive securities, which include convertible preferred stock, options to purchase common stock and unvested restricted stock, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share is the same. The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:
December 31,
2019
2020
Convertible preferred shares
      7,266,750       66,493,889
Outstanding stock options
      1,942,292 7,441,538
Unvested restricted stock
150,000
      9,209,042 74,085,427
13. SUBSEQUENT EVENTS
The Company has performed an evaluation of subsequent events through April 9, 2021, which is the date the financial statements were issued. The Company is not aware of any material subsequent events that require disclosure.
 
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Elevation Oncology, Inc.
CONDENSED INTERIM BALANCE SHEETS
(in thousands, except share and per share data)
December 31,
March 31,
2020
2021
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$ 79,400 $ 69,912
Prepaid expenses and other current assets
1,386 1,198
Total current assets
80,786 71,110
Property and equipment, net
56 52
Other non-current assets
65 600
Total assets
$ 80,907 $ 71,762
Liabilities, Convertible Preferred Stock and Stockholders’ Deficit
Current liabilities:
Accounts payable
$ 5,679 $ 672
Accrued expenses
1,106 1,994
Total current liabilities
6,785 2,666
Non-current liabilities:
Restricted stock repurchase liability
15 13
Total liabilities
6,800 2,679
Commitments and contingencies
Series A convertible preferred stock, $0.0001 par value; 32,450,000 authorized,
issued and outstanding as of December 31, 2020 and March 31, 2021; aggregate
liquidation preference of $32,450 as of December 31, 2020 and March 31, 2021
32,373 32,373
Series B convertible preferred stock, $0.0001 par value; 34,043,889 authorized,
issued and outstanding as of December 31, 2020 and March 31, 2021; aggregate
liquidation preference of $65,000 as of December 31, 2020 and March 31, 2021
64,815 64,815
Stockholders’ deficit:
Common stock, $0.0001 par value; 86,000,000 shares authorized as of December 31, 2020 and March 31, 2021; 3,533,333 issued as of December 31, 2020 and March 31, 2021; 3,383,333, and 3,400,000 outstanding as of December 31, 2020 and March 31, 2021, respectively
Additional paid-in capital
66 133
Accumulated deficit
(23,147) (28,238)
Total stockholders’ deficit
(23,081) (28,105)
Total liabilities, convertible preferred stock and stockholders’ deficit
$ 80,907 $ 71,762
 
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Elevation Oncology, Inc.
CONDENSED INTERIM STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
Three months ended March 31,
2020
2021
(unaudited)
Operating expenses:
Research and development
$ 1,488 $ 4,134
General and administrative
471 952
Total operating expenses
1,959 5,086
Loss from operations
(1,959) (5,086)
Other income (expense), net
1 (5)
Net loss
$ (1,958) $ (5,091)
Net loss per share, basic and diluted
$ (0.59) $ (1.50)
Weighted average common shares outstanding, basic and diluted
3,333,333 3,383,333
 
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Elevation Oncology, Inc.
Condensed Interim Statements of Convertible Preferred Stock and Stockholders’ Deficit
(in thousands, except share and per share data)
Series A Convertible
Preferred Stock
Series B Convertible
Preferred Stock
Common Stock
Additional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders’
Deficit
Shares
Amount
Shares
Amount
Shares
Amount
Balance at
December 31, 2019
7,266,750 $ 7,190 $ 3,333,333 $ $ 9 $ (5,882) $ (5,873)
Issuance of Series A convertible preferred stock, net of issuance costs of $0
25,183,250 25,183
Stock based compensation
9 9
Net loss
(1,958) (1,958)
Balance at March 31, 2020 (unaudited)
32,450,000 $ 32,373 $ 3,333,333 $ $ 18 $ (7,840) $ (7,822)
Balance at
December 31, 2020
32,450,000 $ 32,373 34,043,889 $ 64,815 3,383,333 $ $ 66 $ (23,147) $ (23,081)
Stock based compensation
65 65
Vesting of restricted common
stock
16,667 2 2
Net loss
(5,091) (5,091)
Balance at March 31, 2021 (unaudited)
32,450,000 $ 32,373 34,043,889 $ 64,815 3,400,000 $ $ 133 $ (28,238) $ (28,105)
 
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Elevation Oncology, Inc.
CONDENSED INTERIM STATEMENT OF CASH FLOWS
(in thousands, except share and per share data)
Three months ended March 31,
2020
2021
(unaudited)
Operating activities
Net loss
$ (1,958) $ (5,091)
Reconciliation of net loss to net cash used in operating activities:
Stock based compensation
9 65
Depreciation expense
4
Changes in operating assets and liabilities:
Prepaid expenses and other assets
127 (347)
Accounts payable
209 (5,007)
Accrued expenses
20 899
Net cash used in operating activities
(1,593) (9,477)
Financing activities
Proceeds from the issuance of convertible preferred stock
25,183
Cash paid for issuance costs of convertible preferred stock
(11)
Net cash provided by (used in) financing activities
25,183 (11)
Increase (decrease) in cash and cash equivalents
23,590 (9,488)
Cash and cash equivalents, beginning of period
1,740 79,400
Cash and cash equivalents, end of period
$ 25,330 $ 69,912
Supplemental disclosure of non-cash financing activities
Deferred offering costs in accrued expenses
$ $ 448
 
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Elevation Oncology, Inc.
Notes to the condensed interim financial statements
(in thousands, except share and per-share information)
1. Nature of business
Elevation Oncology, Inc. (the “Company” or “Elevation”), which was formerly known as 14ner, Inc., was incorporated under the laws of Delaware on April 29, 2019 (“Inception”). The Company is a clinical-stage biopharmaceutical company focused on the development of precision medicines for patients with genomically- defined cancers. The Company acquired its lead product candidate, seribantumab, pursuant to an asset purchase agreement executed with Merrimack Pharmaceuticals, Inc. (the “previous sponsor”) during the period ended December 31, 2019 (see Note 9). Seribantumab inhibits tumor growth driven by NRG1 fusions and is currently being tested in the Company’s Phase 2 CRESTONE clinical trial for patients with tumors of any origin that have an NRG1 fusion. The Company is actively evaluating opportunities for pipeline expansion, prioritizing targeted therapy approaches in tumor types defined by genomic driver alterations.
Risks and uncertainties
The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure, and extensive compliance-reporting capabilities.
There can be no assurance that the Company’s research and development of its product candidates will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies.
On March 10, 2020, the World Health Organization characterized the novel COVID-19 virus as a global pandemic. There is significant uncertainty as to the likely effects of this disease which may, among other things, materially impact the Company’s ongoing clinical trial, and planned future clinical trials. This pandemic or outbreak could result in difficulty securing clinical trial site locations, contract research organizations, and/or trial monitors and other critical vendors and consultants supporting the trial. These situations, or others associated with COVID-19, could cause delays in the Company’s clinical trial plans, could increase expected costs, and impact the ability to raise additional capital, all of which could have a material adverse effect on the Company’s business and its financial condition. COVID-19 has not had a significant impact on the operations or financial results of the Company to date.
Liquidity and going concern
The Company has historical losses from operations and anticipates that it will continue to incur losses for the foreseeable future as it continues the research and development of its product candidates. The Company incurred net losses of $1,958 and $5,091 for the three months ended March 31, 2020 and 2021, respectively, and had an accumulated deficit of $28,238 as of March 31, 2021. Through March 31, 2021, the Company has funded its operations with proceeds from the sale of convertible preferred stock.
As of March 31, 2021, the Company had cash and cash equivalents of $69,912. Without additional funding, the Company believes that it will not have sufficient funds to support its operations for at least one year following the date of issuance of these financial statements. The Company plans to obtain additional funding through equity
 
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financings, debt offerings, or other capital sources, including collaborations with other companies or other strategic transactions. There is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all. If the Company is unable to obtain funding, the Company may be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations. The circumstances described above raise substantial doubt about the Company’s ability to continue as a going concern as of the date the financial statements are issued. The accompanying 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 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 the uncertainties described above.
2. Summary of significant accounting policies
Significant accounting policies
The Company’s significant accounting policies are disclosed in the audited financial statements for the year ended December 31, 2020, included elsewhere in this prospectus. Since the date of those financial statements, there have been no changes to its significant accounting policies except as noted below.
Basis of presentation
The accompanying unaudited condensed interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In management’s opinion, the accompanying unaudited condensed interim financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly the Company’s financial position, results of operations, and cash flows. The unaudited condensed interim results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to instructions, rules, and regulations prescribed by the United States Securities and Exchange Commission (“SEC”). Management believes that the disclosures provided herein are adequate to make the information presented not misleading when these unaudited condensed interim financial statements are read in conjunction with the audited financial statements and notes thereto as of and for the year ended December 31, 2020.
Deferred offering costs
The Company capitalizes certain legal, accounting and other third-party fees that are directly associated with in-process preferred stock or common stock financings as deferred offering costs until such financings are consummated. After consummation of the equity financing, these costs are recorded as a reduction to the carrying value of convertible preferred stock or in stockholders’ equity (deficit) as a reduction of additional paid-in capital generated as a result of the offering. Should a planned equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the statements of operations. The Company had $535 of deferred offering costs as of March 31, 2021.
Concentrations of credit risk and significant suppliers
Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents. The Company’s money market funds are invested in highly rated funds. Periodically, the Company maintains deposits in accredited financial institutions in excess of federally insured limits. The Company has not experienced any losses on its deposits of cash and cash equivalents and does not believe that it is exposed to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships.
The Company is dependent on third-party manufacturers to supply products for research and development activities of its programs, including preclinical and clinical testing. These programs could be adversely affected
 
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by a significant interruption in the supply of such drug substance and drug products. During the three months ended March 31, 2020, the Company had three vendors that, combined, represented approximately 46% of its research and development expense. As of and during the three months ended March 31, 2021, the Company had two vendors that, combined, represented approximately 56% and 23% of its research and development expense and total accounts payable, respectively.
3. Fair value measurements of financial assets
The Company’s financial assets subject to fair value measurements on a recurring basis and the level of inputs used for such measurements were as follows:
As of March 31, 2021
Cost
Unrealized
gains
Unrealized
losses
Fair value
Money market funds included in cash and cash equivalents
$ 69,514 $ $ $ 69,514
As of December 31, 2020
Cost
Unrealized
gains
Unrealized
losses
Fair value
Money market funds included in cash and cash equivalents
$ 76,013 $ $ $ 76,013
As of March 31, 2021
Level 1
Level 2
Level 3
Total
Money market funds included in cash and cash equivalents
$ 69,514 $ $ $ 69,514
As of December 31, 2020
Level 1
Level 2
Level 3
Total
Money market funds included in cash and cash equivalents
$ 76,013 $ $ $ 76,013
During the year ended December 31, 2020 and the three months ended March 31, 2021, the Company had no transfers between Level 1, Level 2 or Level 3 financial assets.
4. Property and equipment, net
Property and equipment, net, consisted of the following:
Estimated
useful life
December 31,
2020
March 31,
2021
Computer software
4 years
$ 71 $ 71
Less: Accumulated depreciation
(15) (19)
Property and equipment, net
$ 56 $ 52
The Company recorded $0 and $4 of depreciation expense during the three months ended March 31, 2020 and 2021, respectively.
 
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5. Accrued expenses
Accrued expenses consist of the following:
December 31,
2020
March 31,
2021
Accrued preclinical and clinical trial costs
$ 505 $ 1,285
Accrued compensation
429 165
Accrued consulting
127 51
Accrued professional services
28 491
Accrued other
17 2
Total accrued expenses
$ 1,106 $ 1,994
6. Convertible preferred stock
The Company has issued Series A and Series B convertible preferred stock (collectively, the “Convertible Preferred Stock”). As of March 31, 2021, the Company’s certificate of incorporation, as amended and restated, authorized the Company to issue 66,493,889 shares of $0.0001 par value convertible preferred stock, of which 32,450,000 are designated as Series A convertible preferred stock (“Series A”) and 34,043,889 are designated as Series B convertible preferred stock (“Series B”). All of the Company’s Convertible Preferred Stock is classified outside of stockholders’ deficit because the shares contain deemed liquidation rights that are a contingent redemption feature not solely within the control of the Company.
Series A
On July 12, 2019, the Company sold 5,450,000 shares of Series A at a price of $1.00 per share (“Series A Original Issue Price”) pursuant to the Series A stock purchase agreement (the “Series A Purchase Agreement”), for gross proceeds of $5,450. On August 7, 2019, investors purchased an additional 1,816,750 shares of Series A at the Series A Original Issue Price, for gross proceeds of $1,817.
Upon achievement of the Milestone Closing (as defined in the Series A Purchase Agreement) and approval by the Company’s board of directors, the Company issued an additional 25,183,250 shares of Series A at the Series A Original Issue Price on January 9, 2020 for gross proceeds of $25,183.
Series B
On November 10, 2020, the Company sold 34,043,889 shares of Series B at a price of $1.9093 per share, (“Series B Original Issue Price”), pursuant to the Series B stock purchase agreement for gross proceeds of $65,000.
The following tables summarize the Company’s outstanding Convertible Preferred Stock as of December 31, 2020 and March 31, 2021:
As of March 31, 2021
Shares
authorized
Shares
issued and
outstanding
Carrying value
Liquidation
preference
Conversion
price (per
share)
Series A
32,450,000 32,450,000 $ 32,373 $ 32,450 $ 1.00
Series B
34,043,889 34,043,889 64,815 65,000 $ 1.9093
Balance as of March 31, 2021
66,493,889 66,493,889 $ 97,188 $ 97,450
 
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December 31, 2020
Shares
Authorized
Shares Issued
and
Outstanding
Carrying Value
Liquidation
Preference
Conversion
Price (per
share)
Series A
32,450,000 32,450,000 $ 32,373 $ 32,450 $ 1.00
Series B
34,043,889 34,043,889 64,815 65,000 $ 1.9093
Balance at December 31, 2020
66,493,889 66,493,889 $ 97,188 $ 97,450
Convertible preferred stock rights and preferences
The holders of the Convertible Preferred Stock have the following rights and preferences as of March 31, 2021:
Dividends—The holders of Series A accrue dividends at the rate per annum of $0.08 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A (the “Series A Accruing Dividend”). The holders of Series B accrue dividends at the rate per annum of $0.1528 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series B (the “Series B Accruing Dividend”, and together with the Series A Accruing Dividend, the “Accruing Dividends”).
Accruing Dividends shall accrue day-to-day from issuance whether or not declared by the board of directors, and shall be cumulative. The Accruing Dividends shall be payable only when, as, and if declared by the board of directors and the Company is under no obligation to pay such Accruing Dividends.
In the case that the board of directors approves dividends on common stock or other classes of capital stock, holders of the Convertible Preferred Stock shall first receive or simultaneously receive, on a pari passu basis, a dividend on each outstanding share of Convertible Preferred Stock in an amount equal to (i) the greater of the amount of the aggregate Accruing Dividend then accrued on such share of Convertible Preferred Stock not previously paid and (ii):
a.
In the case of a dividend on common stock or any class of stock that is convertible into common stock, the product of the dividend payable on each share or series as if all shares of such class or series had been converted into common stock, and the number of common stock issuable upon conversion of a share of such series of Convertible Preferred Stock; or
b.
In the case of a dividend on any class or series that is not convertible into common stock, the amount determined by dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series, and multiplying such fraction by an amount equal to, in the case of the Series A, the Series A Original Issue Price or, in the case of the Series B, the Series B Original Issue Price.
Liquidation—Upon any voluntary or involuntary liquidation, dissolution, winding up, certain mergers, consolidations, and sale of assets (“Deemed Liquidation Event”), the holders of Convertible Preferred Stock shall receive, in preference to any payments to holders of common shares, on a pari passu basis, an amount equal to one times the Series A Original Issue Price or the Series B Original Issue Price, plus any dividends declared but unpaid (“Deemed Liquidation Amount”). If the assets available for distribution are insufficient to pay the Convertible Preferred Stockholders the full amount they are entitled to, then such stockholders shall share ratably in any distribution of those assets available for distribution in proportion to their respective amounts which would otherwise be payable. In the event that the amount of assets available for distribution is greater than the amount required to pay the preferential amounts due to the Convertible Preferred Stockholders, then the remaining assets shall be distributed among the holders of the Convertible Preferred Stock and the common stock, pro rata based upon the number of shares held by each such holder, on an as converted to common stock basis immediately prior to such liquidation, dissolution or winding up of the Company.
 
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Voting—Holders of Convertible Preferred Stock are entitled to cast the number of votes equal to the number of whole shares of common stock into which the shares of Convertible Preferred Stock held by such holder are convertible into as of the record date for determining stockholders entitled to vote on such matter.
The holders of the shares of Series A, exclusively and as a separate class, shall be entitled to elect three directors of the Company. The holders of the shares of Series B, exclusively and as a separate class, shall be entitled to elect two directors of the Company. And, holders of the shares of common stock and Convertible Preferred Stock, exclusively and voting together as a single class, shall be entitled to elect two directors of the Company.
Conversion rights—Each share of Convertible Preferred Stock shall be convertible, at the option of the holder at any time, into such number of common shares determined by dividing the original issue price of the Convertible Preferred Stock by the respective conversion price. As of December 31, 2020 and March 31, 2021, the conversion price for the Series A is $1.00 and the conversion price for the Series B is $1.9093.
The Company shall at all times when the Convertible Preferred Stock are issued and outstanding, maintain sufficient shares of common stock authorized but unissued to affect a conversion of all Convertible Preferred Stock then outstanding.
Mandatory conversion—Upon either the closing of the sale of shares of common stock to the public pursuant to an effective registration statement resulting in $75,000 in net proceeds at a price of at least $1.9093 per share, or the vote or written consent of at least the majority of the then outstanding Convertible Preferred Stockholders and a majority of the Series B stockholders, all outstanding Convertible Preferred Stock shall automatically be converted into shares of common stock at the then effective conversion price.
Anti-dilution—Holders of the Convertible Preferred Stock are afforded anti-dilution protection with respect to corporate events such as stock splits and recapitalizations.
Redemption—In the event of a Deemed Liquidation Event, if the Company does not effect a dissolution of the corporation under Delaware General Corporation Law within 90 days, then the Company shall send a written notice to each holder of Convertible Preferred Stock advising such holders of their right to require the redemption of such shares of Convertible Preferred Stock. If holders of at least sixty-seven percent of the outstanding shares of Convertible Preferred Stock make a request in writing within 120 days after a Deemed Liquidation Event, the Company shall use the net consideration received from such Deemed Liquidation Event, together with any other assets of the Company available for distribution, to redeem all outstanding shares of Convertible Preferred Stock at a price per share equal to the Deemed Liquidation Amount.
In anticipation of the closing of the Series B in November 2020, the Company amended its certificate of incorporation and certain rights and preferences pertaining to the Series A. The amendment to the certificate of incorporation (1) revised the mandatory conversion feature (2) revised the liquidation preference for the Series A holders and (3) revised the protective voting rights of the Series A shares. The Company assessed each of the revisions made to the Series A pursuant to the amended certificate of incorporation and concluded that they should be accounted for as modifications to the terms of the Series A and that there was no transfer of value to be recorded in the Company’s balance sheet as of December 31, 2020.
7. Common stock
As of March 31, 2021, the Company’s certificate of incorporation, as amended and restated, authorized the Company to issue 86,000,000 shares of $0.0001 par value common stock.
Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. However, common stockholders shall not be entitled to vote on any amendments to the certificate of incorporation that relate to the terms of the Convertible Preferred Stock. Common stockholders are entitled to receive dividends, as may be declared by the board of directors, if any, subject to the preferential dividend rights of the Convertible Preferred Stock.
 
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As of December 31, 2020, 3,533,333 and 3,383,333 shares of common stock were issued and outstanding, respectively, including 3,333,333 shares issued to founders. As of March 31, 2021, 3,533,333 and 3,400,000 shares of common stock were issued and outstanding, respectively, including 3,333,333 shared issued to founders. The Company has reserved a total of 83,801,122 shares of common stock as of March 31, 2021 for common stock outstanding, the conversion of the outstanding shares of Convertible Preferred Stock, the exercise of outstanding stock options and the number of shares remaining available for future grant under the Company’s 2019 Stock Incentive Plan.
8. Stock-based compensation
Stock-based compensation expense as reflected in the Company’s statements of operations was as follows:
Three months ended March 31,
2020
2021
Research and development
$ 3 $ 27
General and administrative
6 38
Share-based compensation expense included in operating expenses
$ 9 $ 65
2019 Stock incentive plan
The Company has one stock-based compensation plan under which it is able to issue equity to employees, board members, consultants and advisors—the 2019 Stock Incentive Plan (the “Plan”). The Plan provides for the issuance of incentive stock options or non-qualified stock options, restricted stock awards, unrestricted stock awards, restricted stock units, or any combination of the foregoing.
The Plan is administered by the board of directors, or at the discretion of the board of directors, by a committee of the board. The exercise prices, vesting and other restrictions are determined at the discretion of the board of directors, or their committee if so delegated, except that the exercise price per share of stock options may not be less than 100% of the fair market value of a share of common stock on the date of grant and the term of a stock option may not be greater than ten years. The Company generally grants stock-based awards with service conditions only. Stock options granted under the Plan generally vest over four years and expire after ten years, although options have been granted with vesting terms less than four years.
The total number of shares of common stock that may be issued under the Plan was 8,333,333 shares when the Plan was adopted. In December 2019 and November 2020, the Company increased the number of shares of common stock reserved for issuance under the Plan by 612,500 shares and 5,028,067 shares, respectively. Shares underlying any awards that are forfeited, canceled, or reacquired by the Company prior to vesting, satisfied without the issuance of stock or otherwise terminated and shares that are withheld upon exercise of an option or settlement of an award to cover the exercise price or tax withholding shall be added back to the shares available for issuance under the Plan. The total number of shares of common stock that may be issued under the Plan as of December 31, 2020 and March 31, 2021 was 13,973,900. As of December 31, 2020 and March 31, 2021, 6,332,362 and 6,164,760 shares remained available for future grant, respectively.
 
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Stock options
The following is a summary of the Company’s stock option activity for the three months ended March 31, 2021:
Options
Weighted-
average
exercise
price
Weighted-
average
remaining
contractual
term (years)
Aggregate
intrinsic value
Outstanding at December 31, 2020
7,441,538 $ 0.22 9.54 $ 723
Granted
167,602 0.32
Outstanding at March 31, 2021
7,609,140 0.23 9.30 $ 3,842
Vested at March 31, 2021
1,023,615 0.10 8.57 $ 645
Vested and expected to vest at March 31, 2021
7,190,134 $ 0.22 9.28 $ 3,670
The following is a summary of the Company’s stock option activity for the three months ended March 31, 2020:
Options
Weighted-
average
exercise
price
Weighted-
average
remaining
contractual
term (years)
Aggregate
intrinsic value
Outstanding at December 31, 2019
1,942,292 $ 0.10 9.72 $
Granted
894,584 0.10
Outstanding at March 31, 2020
2,836,876 0.10 9.62 $
Vested at March 31, 2020
$
Vested and expected to vest at March 31, 2020
2,836,876 $ 0.10 9.62 $
The weighted average grant-date fair value of stock options granted during the three months ended March 31, 2020 and 2021 was $0.07 and $0.21 per share, respectively. The fair value of each stock option was estimated using a Black-Scholes option-pricing model with the following assumptions:
Three months ended March 31,
2020
2021
Risk-free interest rate
0.75% 0.95%
Volatility
75% 77%
Dividend yield
0.00% 0.00%
Expected term (years)
6 6
The fair value of options that vested during the three months ended March 31, 2020 and 2021 was $0 and $22, respectively.
Early exercise of employee options
The terms of the Plan permit certain option holders to exercise options before their options are vested, subject to certain limitations. Upon early exercise, the awards become subject to a restricted stock agreement and are subject to the same vesting provisions in the original stock option awards. Shares issued as a result of early exercise that have not vested are subject to repurchase by the Company upon termination of the purchaser’s employment, at the lesser of the price paid by the purchaser or the fair value of the shares at the time of repurchase. Such shares are not deemed to be issued for accounting purposes until they vest and are therefore excluded from shares outstanding until the repurchase right lapses and the shares are no longer subject to the repurchase feature. The liability is reclassified into common stock and additional paid-in capital as the shares vest and the repurchase
 
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right lapses. Accordingly, the Company has recorded the unvested portion of the exercise proceeds of $15 and $13 as a liability from the early exercise in the accompanying balance sheet as of December 31, 2020 and March 31, 2021, respectively.
The Company recorded stock-based compensation expense associated with stock-based awards of $9 and $65 during the three months ended March 31, 2020 and 2021, respectively. On March 31, 2021, there was $924 of total unrecognized compensation cost related to unvested stock-based awards, which the Company expects to recognize over a remaining weighted-average period of 3.5 years.
9. Asset purchase and license agreements
In May 2019, the Company entered into an asset purchase agreement with the previous sponsor, pursuant to which it acquired all rights and interest to patents, know-how, and inventory for assets related to seribantumab, a fully humanized immunoglobulin G2 monoclonal antibody against HER3.
Pursuant to the asset purchase agreement, the Company made an upfront, non-refundable payment of $3,500 at closing. If the Company succeeds in developing and commercializing seribantumab, the Company may be obligated to pay the previous sponsor up to $54,500 in development, regulatory and sales milestone payments.
Under the terms of the asset purchase agreement, the Company assumed the rights and obligations of the following collaboration and license agreements previously held by the previous sponsor:

Dyax—The Company assumed all rights and obligations provided for under the amended and restated collaboration agreement executed between Dyax Corp. (“Dyax”) and the previous sponsor (the “Dyax Agreement”). Pursuant to the Dyax Agreement, Dyax utilized its proprietary phage technology to identify antibodies that would bind to targets of interest to the previous sponsor. Additionally, Dyax granted to the previous sponsor a world-wide, non-exclusive, royalty free right to use and make any and all of the antibodies identified by Dyax for certain research purposes. Seribantumab was identified as a result of the research activities performed under the Dyax Agreement.
Pursuant to the terms of the Dyax Agreement, the Company may be obligated to pay Dyax milestone payments of up to approximately $9,300 if certain development and regulatory milestones are achieved. In addition, Dyax is entitled to mid-single digit royalties based on net sales of seribantumab. The Company’s obligation to pay royalties to Dyax continues on a product-by-product and country-by-country basis until the later of a specified number of years after the first commercial sale in such country and the expiration of the patent rights covering seribantumab in such country.
The Dyax Agreement will remain in effect, unless earlier terminated, for so long as the Company continues to develop or commercialize seribantumab. Either party may terminate the agreement in the event of an uncured material breach by the other party. The Company also has the right to terminate the agreement in its entirety or on a product-by-product basis at any time upon 90 days’ prior written notice.

Selexis—The Company assumed all rights and obligations provided for under the amended commercial license agreement executed between Selexis SA (“Selexis”) and the previous sponsor (the “Selexis Agreement”). Pursuant to the Selexis Agreement, the Company received non-exclusive rights to technology for use in the manufacture of seribantumab and may be required to make milestone payments of up to approximately €900, per licensed product, if certain development and regulatory milestones are achieved. Additionally, Selexis may have the right to obtain a royalty of the greater of €200 annually and less than one percent on net sales of seribantumab. The obligation to pay royalties with respect to each product sold in a country continues until the expiration of the patent rights covering the product in such country.
Either party may terminate the agreement in the event of an uncured material breach by the other party. The Company also has the right to terminate the agreement at any time upon 60 days’ prior written notice.

National Institute of Health—The Company assumed all rights and obligations provided for under the amended commercial license agreement executed between the U.S. Public Health Service, a division of the
 
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U.S. Department of Health and Human Services (the “NIH”) and the previous sponsor (the “NIH Agreement”). Pursuant to the NIH Agreement, the Company received non-exclusive rights in the United States to patents related to certain antibodies associated with seribantumab. If certain development and regulatory milestones are achieved, the Company may be obligated to pay NIH additional milestone payments of up to approximately $350 per licensed product.
The Company evaluated the asset purchase agreement with the previous sponsor under ASC Topic 805, Business Combinations, and concluded that the transaction did not meet the requirements to be accounted for as a business combination and therefore was accounted for as an asset acquisition. Accordingly, the upfront payment of $3,500 was expensed as research and development expenses in the statement of operations for the period from Inception through December 31, 2019. Additionally, the Company concluded that all consideration to be paid under the asset purchase agreement is contingent in nature and will be recognized when the respective contingency is resolved. The Company assessed the contingent events which would result in the payment of a milestone during the three months ended March 31, 2020 and 2021, and concluded no such payments were required.
10. Net loss per share
The following table summarizes the computation of basic and diluted net loss per share of the Company:
Three months ended March 31,
2020
2021
Net loss
$ (1,958) $ (5,091)
Weighted average common stock outstanding, basic and diluted
3,333,333 3,383,333
Net loss per share, basic and diluted
$ (0.59) $ (1.50)
The Company’s potentially dilutive securities, which include convertible preferred stock, options to purchase common stock and unvested restricted stock, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share is the same. The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:
March 31,
2020
2021
Convertible preferred shares
32,450,000 66,493,889
Outsanding stock options
2,836,876 7,609,140
Unvested restricted stock
133,333
35,286,876 74,236,362
11. Subsequent events
The Company has performed an evaluation of subsequent events through June 4, 2021, which is the date the financial statements were issued. The Company is not aware of any material subsequent events that require disclosure.
 
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                 shares
[MISSING IMAGE: lg_elevation-4clr.jpg]
Elevation Oncology, Inc.
Common stock
Preliminary Prospectus
J.P. Morgan
Cowen
SVB Leerink
Wedbush PacGrow
                 , 2021

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Part II
Information not required in prospectus
Item 13.   Other expenses of issuance and distribution.
The following table sets forth all costs and expenses, other than underwriting discounts and commissions, paid or payable by the Registrant in connection with the sale of the common stock being registered. All amounts shown are estimates except for the SEC registration fee, the FINRA filing fee and the stock exchange listing fee:
Amount
Paid or
To Be Paid
SEC registration fee
$ 10,910
FINRA filing fee
15,500
Stock exchange listing fee
*
Printing and engraving expenses
*
Legal fees and expenses
*
Accounting fees and expenses
*
Blue Sky, qualification fees and expenses
*
Transfer agent and registrar fees and expenses
*
Miscellaneous expenses
*
Total
$     *
*
To be completed by amendment.
Item 14.   Indemnification of directors and executive officers.
Section 145 of the DGCL, authorizes a court to award, or a corporation’s board of directors to grant, indemnity to directors and executive officers under certain circumstances and subject to certain limitations. The terms of Section 145 of the DGCL are sufficiently broad to permit indemnification under certain circumstances for liabilities, including reimbursement of expenses incurred, arising under the Securities Act.
As permitted by the DGCL, the registrant’s restated certificate of incorporation to be effective in connection with the completion of this offering contains provisions that eliminate the personal liability of its directors for monetary damages for any breach of fiduciary duties as a director, except liability for the following:

any breach of the director’s duty of loyalty to the registrant or its stockholders;

acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;

under Section 174 of the DGCL (regarding unlawful dividends and stock purchases); or

any transaction from which the director derived an improper personal benefit.
As permitted by the DGCL, the registrant’s restated bylaws to be effective in connection with the completion of this offering, provide that:

the registrant is required to indemnify its directors and executive officers to the fullest extent permitted by the DGCL, subject to limited exceptions;

the registrant may indemnify its other employees and agents as set forth in the DGCL;

the registrant is required to advance expenses, as incurred, to its directors and executive officers in connection with a legal proceeding to the fullest extent permitted by the DGCL, subject to limited exceptions; and
 
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the rights conferred in the restated bylaws are not exclusive.
Prior to the completion of this offering, the registrant intends to enter into indemnification agreements with each of its current directors and executive officers to provide these directors and executive officers additional contractual assurances regarding the scope of the indemnification set forth in the registrant’s restated certificate of incorporation and restated bylaws and to provide additional procedural protections. There is no pending litigation or proceeding involving a director or executive officer of the registrant for which indemnification is sought. Reference is also made to the underwriting agreement to be filed as Exhibit 1.1 to this registration statement, which provides for the indemnification of executive officers, directors and controlling persons of the registrant against certain liabilities. The indemnification provisions in the registrant’s restated certificate of incorporation, restated bylaws and the indemnification agreements entered into or to be entered into between the registrant and each of its directors and executive officers may be sufficiently broad to permit indemnification of the registrant’s directors and executive officers for liabilities arising under the Securities Act.
The registrant has directors’ and officers’ liability insurance for securities matters.
Item 15.   Recent sales of unregistered securities.
The following lists set forth information regarding all securities sold or granted by the registrant from April 29, 2019 through June 4, 2021 that were not registered under the Securities Act, and the consideration, if any, received by the registrant for such securities:
(a) Equity grants
Stock Option Grants.   From April 29, 2019 and through June 4, 2021, the registrant has granted to its employees, directors, consultants and other service providers options to purchase an aggregate of 10,335,568 shares of our common stock under the 2019 Plan, with exercise prices ranging from $0.10 to $0.73 per share. The issuances of the securities described above were deemed to be exempt from registration pursuant to Section 4(a)(2) of the Securities Act or Rule 701 promulgated under the Securities Act as transactions pursuant to compensatory benefit plans. The shares of our common stock issued upon the exercise of options are deemed to be restricted securities for purposes of the Securities Act.
(b) Common stock
From April 29, 2019 and through June 4, 2021, we issued an aggregate of 3,333,333 shares of restricted common stock, for cash with a purchase price of $0.10 per share, pursuant to restricted stock purchase agreements, to our employees, directors, advisors and consultants pursuant to our 2019 Plan.
The issuances of shares of common stock described in this section (b) of Item 15 were issued pursuant to either (i) restricted stock purchase agreements, pursuant to Section 4(a)(2) under the Securities Act or (ii) written compensatory plans or arrangements with our employees, directors, advisors and consultants, in reliance on the exemption provided by Rule 701 promulgated under the Securities Act or pursuant to Section 4(a)(2) under the Securities Act. All recipients either received adequate information about our company or had access, through employment or other relationships, to such information.
(c) Preferred stock
From July 2019 through January 2020, the registrant sold an aggregate of 32,450,000 shares of our Series A Preferred Stock, at a purchase price of $1.00 per share for total gross proceeds of $32.5 million. These transactions were exempt from the registration requirements of the Securities Act in reliance upon Section 4(a)(2) of the Securities Act or Regulation D promulgated under the Securities Act.
In November 2020, the registrant sold an aggregate of 34,043,889 shares of our Series B Preferred Stock, at a price per share of $1.9093 for total gross proceeds of $65.0 million. These transactions were exempt from the registration requirements of the Securities Act in reliance upon Section 4(a)(2) of the Securities Act or Regulation D promulgated under the Securities Act.
 
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None of the foregoing transactions involved any underwriters, underwriting discounts or commissions or any public offering, and the registrant believes each transaction was exempt from the registration requirements of the Securities Act as stated above. All recipients of the foregoing transactions either received adequate information about the registrant or had access, through their relationships with the registrant, to such information. Furthermore, the registrant affixed appropriate legends to the share certificates and instruments issued in each foregoing transaction setting forth that the securities had not been registered and the applicable restrictions on transfer.
Item 16.   Exhibits and financial statement schedules.
(a) Exhibits.
Exhibit
Number
Description of Document
1.1*  Form of Underwriting Agreement.
3.1
3.2
3.3
3.4
4.1*  Form of Common Stock Certificate.
4.2
5.1*  Opinion of Fenwick & West LLP.
10.1*  Form of Indemnity Agreement.
10.2
10.3*  2021 Equity Incentive Plan, to become effective on the date the registration statement is declared effective, and forms of award agreements.
10.4*  2021 Employee Stock Purchase Plan, to become effective on the date the registration statement is declared effective, and forms of award agreements.
10.5^†
10.6^†
10.7^†
10.8
10.9*  Form of Executive Officer Employment Agreement
23.1 
23.2*  Consent of Fenwick & West LLP (included in Exhibit 5.1).
24.1 
*
To be filed by amendment.
^
Registrant has omitted portions of the exhibit as permitted under Item 601(b)(10) of Regulations S-K.

Registrant has omitted schedules and exhibits pursuant to Item 601(a)(5) of Regulation S-K. The Registrant agrees to furnish supplementally a copy of the omitted schedules and exhibits to the SEC upon request.
(b) Financial statement schedules.
No financial statement schedules are provided because the information called for is not required or is shown either in the financial statements or notes.
 
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Item 17.   Undertakings.
The undersigned registrant hereby undertakes to provide to the underwriters at the completion specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1)   For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2)   For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
 
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TABLE OF CONTENTS
 
Signatures
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on the fourth day of June, 2021.
ELEVATION ONCOLOGY, INC.
By:
/s/ Shawn Leland
Shawn Leland, Pharm.D., R.Ph.
President and Chief Executive Officer
 
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TABLE OF CONTENTS
 
Power of Attorney
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Shawn Leland, Pharm.D., R.Ph. and Eric J. Hall, and each one of them, as his or her true and lawful attorneys-in-fact, proxies and agents, each with full power of substitution and resubstitution and full power to act without the other, for him or her in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments or any abbreviated registration statement and any amendments thereto filed pursuant to Rule 462(b) increasing the number of securities for which registration is sought), and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, proxies and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact, proxies and agents, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement on Form S-1 has been signed by the following persons in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Shawn Leland, Pharm.D., R.Ph.
Shawn Leland, Pharm.D., R.Ph.
President, Chief Executive Officer and Director
(Principal Executive Officer)
June 4, 2021
/s/ Eric J. Hall
Eric J. Hall
(Principal Accounting and Financial Officer)
June 4, 2021
/s/ Steven A. Elms
Steven A. Elms
Chairman of the Board
June 4, 2021
/s/ R. Michael Carruthers
R. Michael Carruthers
Director
June 4, 2021
/s/ Timothy Clackson, Ph.D.
Timothy Clackson, Ph.D.
Director
June 4, 2021
/s/ Richard Gaster, M.D., Ph.D.
Richard Gaster, M.D., Ph.D.
Director
June 4, 2021
/s/ Lori Hu
Lori Hu
Director
June 4, 2021
/s/ Andrew Phillips, Ph.D.
Andrew Phillips, Ph.D.
Director
June 4, 2021
/s/ Colin Walsh, Ph.D.
Colin Walsh, Ph.D.
Director
June 4, 2021
 
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Exhibit 3.1

 

SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ELEVATION ONCOLOGY, INC.

 

(Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware)

 

Elevation Oncology, Inc., a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “General Corporation Law”),

 

DOES HEREBY CERTIFY:

 

1.            That the name of this corporation is Elevation Oncology, Inc., and that this corporation was originally incorporated pursuant to the General Corporation Law on April 29, 2019 under the name 14ner Oncology, Inc.

 

2.            That the Board of Directors duly adopted resolutions proposing to amend and restate the Certificate of Incorporation of this corporation, declaring said amendment and restatement to be advisable and in the best interests of this corporation and its stockholders, and authorizing the appropriate officers of this corporation to solicit the consent of the stockholders therefor, which resolution setting forth the proposed amendment and restatement is as follows:

 

RESOLVED, that the Certificate of Incorporation of this corporation be amended and restated in its entirety to read as follows:

 

First: The name of this corporation is Elevation Oncology, Inc. (the “Corporation”).

 

Second: The address of the registered office of the Corporation in the State of Delaware is 2140 S. DuPont Highway, Camden, Kent County, Delaware 19934. The name of its registered agent at such address is Paracorp Incorporated.

 

Third: The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law.

 

Fourth: The total number of shares of all classes of stock which the Corporation shall have authority to issue is (i) 86,000,000 shares of Common Stock, $0.0001 par value per share (“Common Stock”) and (ii) 66,493,889 shares of Preferred Stock, $0.0001 par value per share (“Preferred Stock”).

 

The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation.

 

A.            COMMON STOCK

 

1.            General. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock set forth herein.

 

2.            Voting. The holders of the Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders (and written actions in lieu of meetings); provided, however, that, except as otherwise required by law, holders of Common Stock, as such, shall not be entitled to vote on any amendment to this Second Amended and Restated Certificate of Incorporation (the “Restated Certificate”) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Restated Certificate or pursuant to the General Corporation Law. There shall be no cumulative voting. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by (in addition to any vote of the holders of one or more series of Preferred Stock that may be required by the terms of this Restated Certificate) the affirmative vote of the holders of shares of capital stock of the Corporation representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law. 

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B.            PREFERRED STOCK

 

32,450,000 shares of the authorized Preferred Stock of the Corporation are hereby designated “Series A Preferred Stock” with the following rights, preferences, powers, privileges and restrictions, qualifications and limitations. 34,043,889 shares of the authorized and unissued Preferred Stock of the Corporation are hereby designated “Series B Preferred Stock” with the following rights, preferences, powers, privileges and restrictions, qualifications and limitations. Unless otherwise indicated, references to “sections” or “subsections” in this Part B of this Article Fourth refer to sections and subsections of Part B of this Article Fourth. References to “Preferred Stock” mean, collectively, the Series A Preferred Stock and the Series B Preferred Stock.

 

1.            Dividends.

 

From and after the date of the issuance of any shares of Series A Preferred Stock, dividends at the rate per annum of $0.08 per share shall accrue on such shares of Series A Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Preferred Stock) and from and after the date of the issuance of any shares of Series B Preferred Stock, dividends at the rate per annum of $0.1528 per share shall accrue on such shares of Series B Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series B Preferred Stock) (the “Accruing Dividends”). Accruing Dividends shall accrue from day to day, whether or not declared, and shall be cumulative; provided, however, that except as set forth in the following sentence of this Section 1, such Accruing Dividends shall be payable only when, as, and if declared by the Board of Directors and the Corporation shall be under no obligation to pay such Accruing Dividends. The Corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in this Restated Certificate) the holders of the Preferred Stock then outstanding shall first receive, or simultaneously receive, on a pari passu basis, a dividend on each outstanding share of Preferred Stock in an amount at least equal to the greater of (i) the amount of the aggregate Accruing Dividends then accrued on such share of Preferred Stock and not previously paid and (ii) (A) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per share of Preferred Stock as would equal the product of (1) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (2) the number of shares of Common Stock issuable upon conversion of a share of such series of Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend or (B) in the case of a dividend on any class or series that is not convertible into Common Stock, at a rate per share of Preferred Stock determined by (1) dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series of capital stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such class or series) and (2) multiplying such fraction by an amount equal to the applicable Original Issue Price (as defined below); provided that if the Corporation declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of capital stock of the Corporation, the dividend payable to the holders of Preferred Stock pursuant to this Section 1 shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest Series A or Series B Preferred Stock dividend, respectively. The “Series A Original Issue Price” shall mean $1.00 per share and the “Series B Original Issue Price” shall mean $1.9093 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Preferred Stock. 

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2.            Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Asset Sales.

 

2.1           Preferential Payments to Holders of Preferred Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of Preferred Stock then outstanding shall be entitled, on a pari passu basis, to be paid out of the assets of the Corporation available for distribution to its stockholders or, in the case of a Deemed Liquidation Event (as defined below), out of the consideration payable to stockholders in such Deemed Liquidation Event or the Available Proceeds (as defined below), as applicable, before any payment shall be made to the holders of Common Stock or any other class or series of equity securities of the Corporation ranking junior to the Series A Preferred Stock and Series B Preferred Stock with respect to liquidation, by reason of their ownership thereof, an amount per share equal to one times the Series A Original Issue Price or the Series B Original Issue Price, as applicable, plus any dividends declared but unpaid thereon. If upon any such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Preferred Stock the full amount to which they shall be entitled under this Subsection 2.1, the holders of shares of Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. The aggregate amount which a holder of a share of Series A Preferred Stock is entitled to receive under Subsections 2.1 is hereinafter referred to as the “Series A Liquidation Amount.” The aggregate amount which a holder of a share of Series B Preferred Stock is entitled to receive under Subsections 2.1 is hereinafter referred to as the “Series B Liquidation Amount.”

 

2.2           Distribution of Remaining Assets. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, after the payment in full of all Series A Liquidation Amounts and Series B Liquidation Amounts required to be paid to the holders of shares of Series A Preferred Stock and Series B Preferred Stock, respectively, the remaining assets of the Corporation available for distribution to its stockholders or, in the case of a Deemed Liquidation Event, the consideration not payable to the holders of shares of Preferred Stock pursuant to Section 2.1 or the remaining Available Proceeds, as the case may be, shall be distributed among the holders of the shares of Preferred Stock and Common Stock, pro rata based on the number of shares held by each such holder, treating for this purpose all such securities as if they had been converted to Common Stock pursuant to the terms of this Restated Certificate immediately prior to such liquidation, dissolution or winding up of the Corporation.  

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2.3           Deemed Liquidation Events.

 

2.3.1        Definition. Each of the following events shall be considered a “Deemed Liquidation Event” unless the holders of a sixty-seven percent (67%) of the outstanding shares of Preferred Stock voting together as a single class and on an as-converted to Common Stock basis (the “Requisite Holders”) elect otherwise by written notice sent to the Corporation at least ten (10) days prior to the effective date of any such event:

 

(a)            a merger or consolidation in which

 

(i)the Corporation is a constituent party or

 

(ii)a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such merger or consolidation,

 

except any such merger or consolidation involving the Corporation or a subsidiary in which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (1) the surviving or resulting corporation; or (2) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation; or

 

(b)            (i) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole, or (ii) the sale or disposition (whether by merger, consolidation or otherwise, and whether in a single transaction or a series of related transactions) of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Corporation.

 

2.3.2        Effecting a Deemed Liquidation Event.

 

(a)              The Corporation shall not have the power to effect a Deemed Liquidation Event referred to in Subsection 2.3.1(a)(i) unless the agreement or plan of merger or consolidation for such transaction (the “Merger Agreement”) provides that the consideration payable to the stockholders of the Corporation in such Deemed Liquidation Event shall be allocated to the holders of capital stock of the Corporation in accordance with Subsections 2.1 and 2.2.

 

(b)             In the event of a Deemed Liquidation Event referred to in Subsection 2.3.1(a)(ii) or 2.3.1(b), if the Corporation does not effect a dissolution of the Corporation under the General Corporation Law within ninety (90) days after such Deemed Liquidation Event, then (i) the Corporation shall send a written notice (the “Redemption Notice”) to each holder of Preferred Stock no later than the ninetieth (90th) day after the Deemed Liquidation Event advising such holders of their right (and the requirements to be met to secure such right) pursuant to the terms of the following clause; (ii) to require the redemption of such shares of Preferred Stock, and (iii) if the Requisite Holders so request in a written instrument delivered to the Corporation not later than one hundred twenty (120) days after such Deemed Liquidation Event, the Corporation shall use the consideration received by the Corporation for such Deemed Liquidation Event (net of any retained liabilities associated with the assets sold or technology licensed, as determined in good faith by the Board of Directors of the Corporation), together with any other assets of the Corporation available for distribution to its stockholders, all to the extent permitted by Delaware law governing distributions to stockholders (the “Available Proceeds”), on the one hundred fiftieth (150th) day after such Deemed Liquidation Event (the “Redemption Date”), to redeem all outstanding shares of Preferred Stock at a price per share determined in accordance with the provisions of Section 2. Notwithstanding the foregoing, in the event of a redemption pursuant to the preceding sentence, if the Available Proceeds are not sufficient to redeem all outstanding shares of Preferred Stock, the Corporation shall redeem a pro rata portion of each holder’s shares of Preferred Stock to the fullest extent of such Available Proceeds based on the respective amounts which would otherwise be payable in respect of the shares to be redeemed if the Available Proceeds were sufficient to redeem all such shares, and shall redeem the remaining shares as soon as it may lawfully do so under Delaware law governing distributions to stockholders. Prior to the distribution or redemption provided for in this Subsection 2.3.2(b), the Corporation shall not expend or dissipate the consideration received for such Deemed Liquidation Event, except to discharge expenses incurred in connection with such Deemed Liquidation Event or in the ordinary course of business. 

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(c)              Each Redemption Notice shall state: (1) the number of shares and series of Preferred Stock held by the holder that the Corporation shall redeem; (2) the Redemption Date and the amount to be paid to such holder; and (3) for holders of shares in certificated form, that the holder is to surrender to the Corporation, in the manner and at the place designated, his, her or its certificate or certificates representing the shares of Preferred Stock to be redeemed.

 

(d)             On or before the Redemption Date, each holder of shares of Preferred Stock to be redeemed shall surrender the certificate or certificates representing such shares (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation, in the manner and at the place designated in the Redemption Notice, and thereupon the Available Proceeds for such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof.

 

2.3.3        Amount Deemed Paid or Distributed. The amount deemed paid or distributed to the holders of capital stock of the Corporation upon any such merger, consolidation, sale, transfer, exclusive license, other disposition or redemption shall be the cash or the value of the property, rights or securities to be paid or distributed to such holders pursuant to such Deemed Liquidation Event. The value of such property, rights or securities shall be determined in good faith by the Board of Directors of the Corporation.

 

2.3.4        Allocation of Escrow and Contingent Consideration. In the event of a Deemed Liquidation Event, if any portion of the consideration payable to the stockholders of the Corporation is payable only upon satisfaction of contingencies (the “Additional Consideration”), the definitive agreement governing such Deemed Liquidation Event shall provide that (a) the portion of such consideration that is not Additional Consideration (such portion, the “Initial Consideration”) shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1 and 2.2 as if the Initial Consideration were the only consideration payable in connection with such Deemed Liquidation Event; and (b) any Additional Consideration which becomes payable to the stockholders of the Corporation upon satisfaction of such contingencies shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1 and 2.2 after taking into account the previous payment of the Initial Consideration as part of the same transaction. For the purposes of this Subsection 2.3.4, consideration placed into escrow or retained as a holdback to be available for satisfaction of indemnification or similar obligations in connection with such Deemed Liquidation Event shall be deemed to be Initial Consideration. 

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3.            Voting.

 

3.1           General. On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Except as provided by law or by the other provisions of this Restated Certificate, holders of Preferred Stock shall vote together with the holders of Common Stock as a single class and on an as-converted to Common Stock basis.

 

3.2           Election of Directors. The holders of record of the shares of Series A Preferred Stock, exclusively and as a separate class, shall be entitled to elect three (3) directors of the Corporation (the “Series A Directors”), the holders of record of the shares of Series B Preferred Stock, exclusively and as a separate class, shall be entitled to elect two (2) directors of the Corporation (the “Series B Directors,” and together with the Series A Directors, the “Preferred Directors”), the holders of record of the shares of Common Stock, exclusively and as a separate class, shall be entitled to elect two (2) directors of the Corporation and the holders of record of the shares of Common Stock and Preferred Stock, exclusively and voting together as a single class, shall be entitled to elect two (2) directors of the Corporation; provided, however, for administrative convenience, the initial Series B Preferred Directors may also be appointed by the Board of Directors in connection with the approval of the initial issuance of Series B Preferred Stock without a separate action by the holders of Preferred Stock. Any director elected as provided in the preceding sentence may be removed without cause by, and only by, the affirmative vote of the holders of the shares of the class or series of capital stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of such stockholders. If the holders of shares of Series A Preferred Stock, Series B Preferred Stock or Common Stock, as the case may be, fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors, voting exclusively and as a separate class, pursuant to the first sentence of this Subsection 3.2, then any directorship not so filled shall remain vacant until such time as the holders of the Series A Preferred Stock, Series B Preferred Stock or Common Stock, as the case may be, elect a person to fill such directorship by vote or written consent in lieu of a meeting; and no such directorship may be filled by stockholders of the Corporation other than by the stockholders of the Corporation that are entitled to elect a person to fill such directorship, voting exclusively and as a separate class. The holders of record of the shares of Common Stock and of any other class or series of voting stock (including the Preferred Stock), exclusively and voting together as a single class, shall be entitled to elect the balance of the total number of directors of the Corporation. At any meeting held for the purpose of electing a director, the presence in person or by proxy of the holders of a majority of the outstanding shares of the class or series entitled to elect such director shall constitute a quorum for the purpose of electing such director. Except as otherwise provided in this Subsection 3.2, a vacancy in any directorship filled by the holders of any class or series shall be filled only by vote or written consent in lieu of a meeting of the holders of such class or series or by any remaining director or directors elected by the holders of such class or series pursuant to this Subsection 3.2.

 

3.3           Preferred Stock Protective Provisions. At any time when shares of Preferred Stock are outstanding, the Corporation shall not, nor shall it permit any subsidiary to, either directly or indirectly by amendment, merger, consolidation, recapitalization, reclassification or otherwise, do any of the following without (in addition to any other vote required by law or this Restated Certificate) the written consent or affirmative vote of the Requisite Holders given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect. 

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3.3.1        liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any merger or consolidation or any other Deemed Liquidation Event, or consent to any of the foregoing;

 

3.3.2        amend, alter or repeal any provision of this Restated Certificate or Bylaws of the Corporation in a manner that adversely affects the powers, preferences or rights of the Preferred Stock (for clarification, the creation or issuance of any additional class or series of capital stock that ranks junior to the Preferred Stock shall not be deemed to adversely affect the powers, rights or preferences of the Preferred Stock);

 

3.3.3        create, or authorize the creation of, or issue or obligate itself to issue shares of, any additional class or series of capital stock unless the same ranks junior to the Preferred Stock with respect to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends and rights of redemption, or increase the authorized number of shares of Preferred Stock or increase the authorized number of shares of any additional class or series of capital stock of the Corporation unless the same ranks junior to the Preferred Stock with respect to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends and rights of redemption;

 

3.3.4        (i) reclassify, alter or amend any existing security of the Corporation that is pari passu with the Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to the Preferred Stock in respect of any such right, preference, or privilege or (ii) reclassify, alter or amend any existing security of the Corporation that is junior to the Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to or pari passu with the Preferred Stock in respect of any such right, preference or privilege;

 

3.3.5        cause or permit any of its subsidiaries to, without approval of the Board of Directors, including at least a majority of the Preferred Directors (including at least one Series B Director), sell, issue, sponsor, create or distribute any digital tokens, cryptocurrency or other blockchain-based assets (collectively, “Tokens”), including through a pre-sale, initial coin offering, token distribution event or crowdfunding, or through the issuance of any instrument convertible into or exchangeable for Tokens;

 

3.3.6        purchase or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital stock of the Corporation other than (i) redemptions of or dividends or distributions on the Preferred Stock as expressly authorized herein, (ii) dividends or other distributions payable on the Common Stock solely in the form of additional shares of Common Stock and or (iii) repurchases of stock from former employees, officers, directors, consultants or other persons who performed services for the Corporation or any subsidiary in connection with the cessation of such employment or service at the lower of the original purchase price or the then-current fair market value thereof;

 

3.3.7        create, or authorize the creation of, or issue, or authorize the issuance of any debt security or create any lien or security interest (except for purchase money liens or statutory liens of landlords, mechanics, materialmen, workmen, warehousemen and other similar persons arising or incurred in the ordinary course of business) or incur other indebtedness for borrowed money, including but not limited to obligations and contingent obligations under guarantees, or permit any subsidiary to take any such action with respect to any debt security lien, security interest or other indebtedness for borrowed money, other than equipment leases, bank lines of credit or trade payables incurred in the ordinary course; or 

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3.3.8        create, or hold capital stock in, any subsidiary that is not wholly owned (either directly or through one or more other subsidiaries) by the Corporation, or permit any subsidiary to create, or authorize the creation of, or issue or obligate itself to issue, any shares of any class or series of capital stock, or sell, transfer or otherwise dispose of any capital stock of any direct or indirect subsidiary of the Corporation, or permit any direct or indirect subsidiary to sell, lease, transfer, exclusively license or otherwise dispose (in a single transaction or series of related transactions) of all or substantially all of the assets of such subsidiary.

 

3.4           Series A Preferred Stock Protective Provisions. At any time when at least 16,225,000 shares of Series A Preferred Stock are outstanding (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Preferred Stock), the Corporation shall not, nor shall it permit any subsidiary to, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or this Restated Certificate) the written consent or affirmative vote of the holders of a majority of the Series A Preferred Stock given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect.

 

3.4.1        amend, alter or repeal any provision of this Restated Certificate or Bylaws of the Corporation in a manner that adversely affects the powers, preferences or rights of the Series A Preferred Stock (for clarification, the creation or issuance of any additional class or series of capital stock that ranks junior to the Series A Preferred Stock shall not be deemed to adversely affect the powers, rights or preferences of the Series A Preferred Stock);

 

3.4.2        create, or authorize the creation of, or issue or obligate itself to issue shares of, any additional class or series of capital stock unless the same ranks junior to the Series A Preferred Stock with respect to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends and rights of redemption, or increase the authorized number of shares of Series A Preferred Stock or increase the authorized number of shares of any additional class or series of capital stock of the Corporation unless the same ranks junior to the Series A Preferred Stock with respect to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends and rights of redemption; or

 

3.4.3        (i) reclassify, alter or amend any existing security of the Corporation that is pari passu with the Series A Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to the Series A Preferred Stock in respect of any such right, preference, or privilege or (ii) reclassify, alter or amend any existing security of the Corporation that is junior to the Series A Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to or pari passu with the Series A Preferred Stock in respect of any such right, preference or privilege. 

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3.5           Series B Preferred Stock Protective Provisions. At any time when at least 17,021,944 shares of Series B Preferred Stock are outstanding (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series B Preferred Stock), the Corporation shall not, nor shall it permit any subsidiary to, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or this Restated Certificate) the written consent or affirmative vote of the holders of a majority of the Series B Preferred Stock given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect.

 

3.5.1        amend, alter or repeal any provision of this Restated Certificate or Bylaws of the Corporation in a manner that adversely affects the powers, preferences or rights of the Series B Preferred Stock (for clarification, the creation or issuance of any additional class or series of capital stock that ranks junior to the Series B Preferred Stock shall not be deemed to adversely affect the powers, rights or preferences of the Series B Preferred Stock);

 

3.5.2        create, or authorize the creation of, or issue or obligate itself to issue shares of, any additional class or series of capital stock unless the same ranks junior to the Series B Preferred Stock with respect to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends and rights of redemption, or increase the authorized number of shares of Series B Preferred Stock or increase the authorized number of shares of any additional class or series of capital stock of the Corporation unless the same ranks junior to the Series B Preferred Stock with respect to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends and rights of redemption;

 

3.5.3        (i) reclassify, alter or amend any existing security of the Corporation that is pari passu with the Series B Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to the Series B Preferred Stock in respect of any such right, preference or privilege, or (ii) reclassify, alter or amend any existing security of the Corporation that is junior to the Series B Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to or pari passu with the Series B Preferred Stock in respect of any such right, preference or privilege; or

 

3.5.4        issue any shares of Series B Preferred Stock other than pursuant to the Series B Preferred Stock Purchase Agreement, dated as of November 10, 2020, by and among the Corporation, venBio Partners, LLC, Cormorant Asset Management, LP and the other purchasers named therein.

 

4.            Optional Conversion.

 

The holders of the Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

 

4.1           Right to Convert.

 

4.1.1        Conversion Ratio. Each share of Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing (a) the Series A Original Issue Price by the Series A Conversion Price (as defined below), in the case of the Series A Preferred Stock, or (b) the Series B Original Issue Price by the Series B Conversion Price (as defined below), in the case of the Series B Preferred Stock, in each case as in effect at the time of conversion. The “Series A Conversion Price” shall initially be equal to $1.00. The “Series B Conversion Price” shall initially be equal to $1.9093. The Series A Conversion Price and the Series B Conversion Price shall be referred to herein, as applicable, as the “Conversion Price.” Such initial Conversion Price, and the rate at which shares of Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below. 

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4.1.2        Termination of Conversion Rights. In the event of a notice of redemption of any shares of Preferred Stock pursuant to Section 2.3.2, the Conversion Rights of the shares designated for redemption shall terminate at the close of business on the last full day preceding the date fixed for redemption, unless the redemption price is not fully paid on such redemption date, in which case the Conversion Rights for such shares shall continue until such price is paid in full. In the event of a liquidation, dissolution or winding up of the Corporation or a Deemed Liquidation Event, the Conversion Rights shall terminate at the close of business on the last full day preceding the date fixed for the payment of any such amounts distributable on such event to the holders of Preferred Stock; provided that the foregoing termination of Conversion Rights shall not affect the amount(s) otherwise paid or payable in accordance with Section 2.1 to holders of Preferred Stock pursuant to such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event.

 

4.2           Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the number of shares of Common Stock to be issued upon such conversion of the Preferred Stock shall be rounded up to the nearest whole share. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Preferred Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.

 

4.3           Mechanics of Conversion.

 

4.3.1        Notice of Conversion. In order for a holder of Preferred Stock to voluntarily convert shares of Preferred Stock into shares of Common Stock, such holder shall (a) provide written notice to the Corporation’s transfer agent at the office of the transfer agent for the Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent) that such holder elects to convert all or any number of such holder’s shares of Preferred Stock and, if applicable, any event on which such conversion is contingent and (b), if such holder’s shares are certificated, surrender the certificate or certificates for such shares of Preferred Stock (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent). Such notice shall state such holder’s name or the names of the nominees in which such holder wishes the shares of Common Stock to be issued. If required by the Corporation, any certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such notice and, if applicable, certificates (or lost certificate affidavit and agreement) shall be the time of conversion (the “Conversion Time”), and the shares of Common Stock issuable upon conversion of the specified shares shall be deemed to be outstanding of record as of such date. The Corporation shall, as soon as practicable after the Conversion Time (i) issue and deliver to such holder of Preferred Stock, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof, or evidence of book entry of the same, and a certificate for the number (if any) of the shares of Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, or evidence of the book entry of the same, and (ii) pay all declared but unpaid dividends on the shares of Preferred Stock converted. 

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4.3.2        Reservation of Shares. The Corporation shall at all times when the Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to this Restated Certificate. Before taking any action which would cause an adjustment reducing the Conversion Price below the then par value of the shares of Common Stock issuable upon conversion of the Preferred Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and non-assessable shares of Common Stock at such adjusted Conversion Price.

 

4.3.3        Effect of Conversion. All shares of Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor and to receive payment of any dividends declared but unpaid thereon. Any shares of Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Preferred Stock accordingly.

 

4.3.4        No Further Adjustment. Upon any such conversion, no adjustment to the Conversion Price shall be made for any declared but unpaid dividends on the Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.

 

4.3.5        Taxes. The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of Preferred Stock pursuant to this Section 4. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.

 

4.4           Adjustments to Conversion Price for Diluting Issues.

 

4.4.1        Special Definitions. For purposes of this Article Fourth, the following definitions shall apply:

 

(a)            “Option” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.

 

(b)           “Series B Original Issue Date” shall mean the date on which the first share of Series B Preferred Stock was issued. 

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(c)            “Convertible Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options.

 

(d)           “Additional Shares of Common Stock” shall mean all shares of Common Stock issued (or, pursuant to Subsection 4.4.3 below, deemed to be issued) by the Corporation after the Series B Original Issue Date, other than (1) the following shares of Common Stock and (2) shares of Common Stock deemed issued pursuant to the following Options and Convertible Securities (clauses (1) and (2), collectively, “Exempted Securities”):

 

(i)as to any series of Preferred Stock, shares of Common Stock, Options or Convertible Securities issued as a dividend or distribution on such series of Preferred Stock;

 

(ii)shares of Common Stock, Options or Convertible Securities issued by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock that is covered by Section 4.5, 4.6, 4.7 or 4.8;

 

(iii)shares of Common Stock or Options issued to employees or directors of, or consultants or advisors to, the Corporation or any of its subsidiaries pursuant to a plan, agreement or arrangement approved by the Board of Directors of the Corporation, including the approval of at least a majority of the Preferred Directors (including at least one Series B Director);

 

(iv)shares of Common Stock or Convertible Securities actually issued upon the exercise of Options or shares of Common Stock actually issued upon the conversion or exchange of Convertible Securities, in each case provided such issuance is pursuant to the terms of such Option or Convertible Security; or

 

(v)shares of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board of Directors of the Corporation, including the approval of at least a majority of the Preferred Directors (including at least one Series B Director).

 

4.4.2        No Adjustment of Conversion Price. No adjustment in the Series A Conversion Price shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from the holders of a majority of the then-outstanding shares of Series A Preferred Stock agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock. No adjustment in the Series B Conversion Price shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from the holders of a majority of the then-outstanding shares of Series B Preferred Stock agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock. 

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4.4.3        Deemed Issue of Additional Shares of Common Stock.

 

(a)            If the Corporation at any time or from time to time after the Series B Original Issue Date shall issue any Options or Convertible Securities (excluding Options or Convertible Securities which are themselves Exempted Securities) or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability but without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date.

 

(b)            If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the applicable Conversion Price pursuant to the terms of Subsection 4.4.4, are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any such Option or Convertible Security or (2) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the applicable Conversion Price computed upon the original issue of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Conversion Price as would have obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to this clause (b) shall have the effect of increasing the applicable Conversion Price to an amount which exceeds the lower of (i) the applicable Conversion Price in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (ii) the applicable Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date.

 

(c)            If the terms of any Option or Convertible Security (excluding Options or Convertible Securities which are themselves Exempted Securities), the issuance of which did not result in an adjustment to the applicable Conversion Price pursuant to the terms of Subsection 4.4.4 (either because the consideration per share (determined pursuant to Subsection 4.4.5) of the Additional Shares of Common Stock subject thereto was equal to or greater than the applicable Conversion Price then in effect, or because such Option or Convertible Security was issued before the Series B Original Issue Date), are revised after the Series B Original Issue Date as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (2) any decrease in the consideration payable to the Corporation upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Subsection 4.4.3(a) shall be deemed to have been issued effective upon such increase or decrease becoming effective. 

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(d)            Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) which resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the applicable Conversion Price pursuant to the terms of Subsection 4.4.4, the applicable Conversion Price shall be readjusted to such Conversion Price as would have obtained had such Option or Convertible Security (or portion thereof) never been issued.

 

(e)             If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the time such Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the applicable Conversion Price provided for in this Subsection 4.4.3 shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall be treated as provided in clauses (b) and (c) of this Subsection 4.4.3). If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security is issued or amended, any adjustment to the applicable Conversion Price that would result under the terms of this Subsection 4.4.3 at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to the applicable Conversion Price that such issuance or amendment took place at the time such calculation can first be made.

 

4.4.4        Adjustment of Conversion Price Upon Issuance of Additional Shares of Common Stock. In the event the Corporation shall at any time after the Series B Original Issue Date issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Subsection 4.4.3), without consideration or for a consideration per share less than the applicable Conversion Price in effect immediately prior to such issuance or deemed issuance, then the applicable Conversion Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest one-hundredth of a cent) determined in accordance with the following formula:

 

CP2 = CP1* (A + B) ÷ (A + C).

 

For purposes of the foregoing formula, the following definitions shall apply:

 

(a)            “CP2” shall mean the applicable Conversion Price in effect immediately after such issuance or deemed issuance of Additional Shares of Common Stock

 

(b)            “CP1” shall mean the applicable Conversion Price in effect immediately prior to such issuance or deemed issuance of Additional Shares of Common Stock;

 

(c)            “A” shall mean the number of shares of Common Stock outstanding immediately prior to such issuance or deemed issuance of Additional Shares of Common Stock (treating for this purpose as outstanding all shares of Common Stock issuable upon exercise of Options outstanding immediately prior to such issuance or deemed issuance or upon conversion or exchange of Convertible Securities (including the Preferred Stock) outstanding (assuming exercise of any outstanding Options therefor) immediately prior to such issue); 

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(d)            “B” shall mean the number of shares of Common Stock that would have been issued if such Additional Shares of Common Stock had been issued or deemed issued at a price per share equal to CP1 (determined by dividing the aggregate consideration received by the Corporation in respect of such issue by CP1); and

 

(e)            “C” shall mean the number of such Additional Shares of Common Stock issued in such transaction.

 

4.4.5        Determination of Consideration. For purposes of this Subsection 4.4, the consideration received by the Corporation for the issuance or deemed issuance of any Additional Shares of Common Stock shall be computed as follows:

 

(a)            Cash and Property: Such consideration shall:

 

(i)insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest;

 

(ii)insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board of Directors of the Corporation; and

 

(iii)in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, as determined in good faith by the Board of Directors of the Corporation.

 

(b)           Options and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Subsection 4.4.3, relating to Options and Convertible Securities, shall be determined by dividing:

 

(i)The total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by

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(ii)the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities.

 

4.4.6        Multiple Closing Dates. In the event the Corporation shall issue on more than one date Additional Shares of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to the applicable Conversion Price pursuant to the terms of Subsection 4.4.4, and such issuance dates occur within a period of no more than ninety (90) days from the first such issuance to the final such issuance, then, upon the final such issuance, the applicable Conversion Price shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period).

 

4.5           Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the Series B Original Issue Date effect a subdivision of the outstanding Common Stock, the applicable Conversion Price in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Series B Original Issue Date combine the outstanding shares of Common Stock, the applicable Conversion Price in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this subsection shall become effective at the close of business on the date the subdivision or combination becomes effective. 

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4.6           Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time or from time to time after the Series B Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable on the Common Stock in additional shares of Common Stock, then and in each such event the applicable Conversion Price in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the applicable Conversion Price then in effect by a fraction:

 

(1)           the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

 

(2)           the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution.

 

Notwithstanding the foregoing (a) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the applicable Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the applicable Conversion Price shall be adjusted pursuant to this subsection as of the time of actual payment of such dividends or distributions; and (b) that no such adjustment shall be made if the holders of Preferred Stock simultaneously receive a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of Preferred Stock had been converted into Common Stock on the date of such event.

 

4.7           Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time after the Series B Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation (other than a distribution of shares of Common Stock in respect of outstanding shares of Common Stock) or in other property and the provisions of Section 1 do not apply to such dividend or distribution, then and in each such event the holders of Preferred Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities or other property in an amount equal to the amount of such securities or other property as they would have received if all outstanding shares of Preferred Stock had been converted into Common Stock on the date of such event.

 

4.8           Adjustment for Merger or Reorganization, etc. Subject to the provisions of Subsection 2.3, if there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which the Common Stock (but not the Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Subsections 4.4, 4.6 or 4.7), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Corporation) shall be made in the application of the provisions in this Section 4 with respect to the rights and interests thereafter of the holders of Preferred Stock, to the end that the provisions set forth in this Section 4 (including provisions with respect to changes in and other adjustments of the applicable Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Preferred Stock.

 

4.9           Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the applicable Conversion Price pursuant to this Section 4, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than thirty (30) days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of Preferred Stock (but in any event not later than fifteen (15) days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (i) the applicable Conversion Price then in effect, and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of Preferred Stock. 

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4.10         Notice of Record Date. In the event:

 

(a)            the Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

 

(b)           of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation Event; or

 

(c)            of the voluntary or involuntary dissolution, liquidation or winding-up of the Corporation,

 

then, and in each such case, the Corporation will send or cause to be sent to the holders of the Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Preferred Stock and the Common Stock. Such notice shall be sent at least fifteen (15) days prior to the record date or effective date for the event specified in such notice.

 

5.            Mandatory Conversion.

 

5.1           Trigger Events. Upon either (a) the closing of the sale of shares of Common Stock to the public at a price per share of at least the Series B Original Issue Price (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Common Stock), in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, resulting in at least $75,000,000 of gross proceeds to the Corporation and in connection with such offering the Common Stock is listed for trading on the Nasdaq Stock Market's National Market, the New York Stock Exchange or another exchange or marketplace approved the Board of Directors or (b) the date and time, or the occurrence of an event, specified by vote or written consent of the Requisite Holders, including the holders of a majority of the then-outstanding shares of Series B Preferred Stock (the time of such closing or the date and time specified or the time of the event specified in such vote or written consent is referred to herein as the “Mandatory Conversion Time”), then (i) all outstanding shares of Preferred Stock shall automatically be converted into shares of Common Stock, at the then effective conversion rate as calculated pursuant to Subsection 4.1.1. and (ii) such shares may not be reissued by the Corporation. 

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5.2           Procedural Requirements. All holders of record of shares of Preferred Stock shall be sent written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of Preferred Stock pursuant to this Section 5. Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice, each holder of shares of Preferred Stock in certificated form shall surrender his, her or its certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice. If so required by the Corporation, any certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. All rights with respect to the Preferred Stock converted pursuant to Subsection 5.1, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender any certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of any certificate or certificates of such holders (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Subsection 5.2. As soon as practicable after the Mandatory Conversion Time and, if applicable, the surrender of any certificate or certificates (or lost certificate affidavit and agreement) for Preferred Stock, the Corporation shall (a) issue and deliver to such holder, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof, or evidence of the issuance and book entry of the same, and (b) pay any declared but unpaid dividends on the shares of Preferred Stock converted. Such converted Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Preferred Stock accordingly.

 

6.            Redeemed or Otherwise Acquired Shares. Any shares of Preferred Stock that are redeemed, converted or otherwise acquired by the Corporation or any of its subsidiaries shall be automatically and immediately cancelled and retired and shall not be reissued, sold or transferred. Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights granted to the holders of Preferred Stock following redemption, conversion or acquisition.

 

7.            Waiver. Except as set forth herein, (a) any of the rights, powers, preferences and other terms of the Series A Preferred Stock set forth herein may be waived on behalf of all holders of Series A Preferred Stock by the affirmative written consent or vote of the holders of at least a majority of the shares of Series A Preferred Stock then outstanding, and (b) any of the rights, powers, preferences and other terms of the Series B Preferred Stock set forth herein may be waived on behalf of all holders of Series B Preferred Stock by the affirmative written consent or vote of the holders of at least a majority of the shares of Series B Preferred Stock then outstanding, and (c) any of the rights, powers, preferences and other terms applicable to all of the Preferred Stock set forth herein may be waived on behalf of all holders of Preferred Stock by the affirmative written consent or vote of the Requisite Holders.

 

8.            Notices. Any notice required or permitted by the provisions of this Article Fourth to be given to a holder of shares of the Preferred Stock shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication in compliance with the provisions of the General Corporation Law, and shall be deemed sent upon such mailing or electronic transmission. 

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Fifth: Subject to any additional vote required by this Restated Certificate or Bylaws, in furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, repeal, alter, amend and rescind any or all of the Bylaws of the Corporation.

 

Sixth: Subject to any additional vote required by this Restated Certificate, the number of directors of the Corporation shall be determined in the manner set forth in the Bylaws of the Corporation. Each director shall be entitled to one vote on each matter presented to the Board of Directors.

 

Seventh: Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.

 

Eighth: Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws of the Corporation may provide. The books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation.

 

Ninth: To the fullest extent permitted by law, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the General Corporation Law or any other law of the State of Delaware is amended after approval by the stockholders of this Article Ninth to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law as so amended.

 

Any repeal or modification of the foregoing provisions of this Article Ninth by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of, or increase the liability of any director of the Corporation with respect to any acts or omissions of such director occurring prior to, such repeal or modification.

 

Tenth: To the fullest extent permitted by applicable law, the Corporation is authorized to provide indemnification of (and advancement of expenses to) directors, officers and agents of the Corporation (and any other persons to which General Corporation Law permits the Corporation to provide indemnification) through Bylaw provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the General Corporation Law.

 

Any amendment, repeal or modification of the foregoing provisions of this Article Tenth shall not (a) adversely affect any right or protection of any director, officer or other agent of the Corporation existing at the time of such amendment, repeal or modification or (b) increase the liability of any director of the Corporation with respect to any acts or omissions of such director, officer or agent occurring prior to, such amendment, repeal or modification.

 

Eleventh: The Corporation renounces, to the fullest extent permitted by law, any interest or expectancy of the Corporation in, or in being offered an opportunity to participate in, any Excluded Opportunity. An “Excluded Opportunity” is any matter, transaction or interest that is presented to, or acquired, created or developed by, or which otherwise comes into the possession of (i) any director of the Corporation who is not an employee of the Corporation or any of its subsidiaries, or (ii) any holder of Preferred Stock or any partner, member, director, stockholder, employee, affiliate or agent of any such holder, other than someone who is an employee of the Corporation or any of its subsidiaries (collectively, the persons referred to in clauses (i) and (ii) are “Covered Persons”), unless such matter, transaction or interest is presented to, or acquired, created or developed by, or otherwise comes into the possession of, a Covered Person expressly and solely in such Covered Person’s capacity as a director of the Corporation while such Covered Person is performing services in such capacity. Any repeal or modification of this Article Eleventh will only be prospective and will not affect the rights under this Article Eleventh in effect at the time of the occurrence of any actions or omissions to act giving rise to liability. Notwithstanding anything to the contrary contained elsewhere in this Restated Certificate, the affirmative vote of the Requisite Holders, will be required to amend or repeal, or to adopt any provisions inconsistent with this Article Eleventh. 

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Twelfth: Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery in the State of Delaware shall be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim against the Corporation, its directors, officers or employees arising pursuant to any provision of the Delaware General Corporation Law or the Corporation’s certificate of incorporation or bylaws or (iv) any action asserting a claim against the Corporation, its directors, officers or employees governed by the internal affairs doctrine, except for, as to each of (i) through (iv) above, any claim as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or for which the Court of Chancery does not have subject matter jurisdiction. If any provision or provisions of this Article Twelfth shall be held to be invalid, illegal or unenforceable as applied to any person or entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article Twelfth (including, without limitation, each portion of any sentence of this Article Twelfth containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) and the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby.

 

Thirteenth: For purposes of Section 500 of the California Corporations Code (to the extent applicable), in connection with any repurchase of shares of Common Stock permitted under this Restated Certificate from employees, officers, directors or consultants of the Corporation in connection with a termination of employment or services pursuant to agreements or arrangements approved by the Board of Directors (in addition to any other consent required under this Restated Certificate), such repurchase may be made without regard to any “preferential dividends arrears amount” or “preferential rights amount” (as those terms are defined in Section 500 of the California Corporations Code).  Accordingly, for purposes of making any calculation under California Corporations Code Section 500 in connection with such repurchase, the amount of any “preferential dividends arrears amount” or “preferential rights amount” (as those terms are defined therein) shall be deemed to be zero (0).

 

*     *     *

 

3.            That the foregoing amendment and restatement was approved by the holders of the requisite number of shares of this corporation in accordance with Section 228 of the General Corporation Law.

 

4.            That this Restated Certificate, which restates and integrates and further amends the provisions of this Corporation’s Certificate of Incorporation, has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law.

 

[Signature Page Follows]

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IN WITNESS WHEREOF, this Second Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this 10th day of November, 2020.

 

  By: /s/ Steven Elms
    Steven Elms, President & CEO

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Exhibit 3.2

ELEVATION ONCOLOGY, INc.

RESTATED CERTIFICATE OF INCORPORATION

Elevation Oncology, Inc., a Delaware corporation, hereby certifies as follows:

1.       The name of this corporation is “Elevation Oncology, Inc.” The date of the filing of its original Certificate of Incorporation with the Secretary of State of the State of Delaware was April 29, 2019 under the name 14ner Oncology, Inc.

2.       The Restated Certificate of Incorporation of this corporation attached hereto as Exhibit A, which is incorporated herein by this reference, and which restates, integrates and further amends the provisions of the Certificate of Incorporation of this corporation as previously amended and/or restated, has been duly adopted by this corporation’s Board of Directors and by the stockholders in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware, with the approval of this corporation’s stockholders having been given by written consent without a meeting in accordance with Section 228 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, this corporation has caused this Restated Certificate of Incorporation to be signed by its duly authorized officer and the foregoing facts stated herein are true and correct.

Dated: [__], 2021ELEVATION ONCOLOGY, INC.
By:
Name: Shawn Leland
Title: Chief Executive Officer

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EXHIBIT A

ELEVATION ONCOLOGY, INC.

RESTATED CERTIFICATE OF INCORPORATION

ARTICLE I: NAME

The name of the corporation is Elevation Oncology, Inc. (the “Corporation”).

ARTICLE II: AGENT FOR SERVICE OF PROCESS

The address of the registered office of this Corporation in the State of Delaware is S. DuPont Highway in the City of Camden, County of Kent, 19934, and the name of the registered agent of this Corporation in the State of Delaware at such address is Paracorp Incorporated.

ARTICLE III: PURPOSE

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the “General Corporation Law”).

ARTICLE IV: AUTHORIZED STOCK

1.      Total Authorized. The total number of shares of all classes of stock that the Corporation has authority to issue is 510,000,000 shares, consisting of two classes: 500,000,000 shares of Common Stock, $0.0001 par value per share (“Common Stock”), and 10,000,000 shares of Preferred Stock, $0.0001 par value per share (“Preferred Stock”).

2.      Designation of Additional Series.

2.1.       The Board of Directors of the Corporation (the “Board”) is authorized, subject to any limitations prescribed by the law of the State of Delaware, to provide for the issuance of the shares of Preferred Stock in one or more series, and, by filing a Certificate of Designation pursuant to the applicable law of the State of Delaware (“Certificate of Designation”), to establish from time to time the number of shares to be included in each such series, to fix the designation, vesting, powers (including voting powers), preferences and relative, participating, optional or other special rights, if any, of the shares of each such series and any qualifications, limitations or restrictions thereof, and, except where otherwise provided in the applicable Certificate of Designation, to thereafter increase (but not above the total number of authorized shares of the Preferred Stock) or decrease (but not below the number of shares of such series then outstanding) the number of shares of any such series. The number of authorized shares of Preferred Stock may also be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of two-thirds of the voting power of all then-outstanding shares of capital stock of the Corporation entitled to vote thereon, voting together as a single class, without a separate vote of the holders of the Preferred Stock, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law, unless a separate vote of the holders of one or more series is required pursuant to the terms of any Certificate of Designation; provided, however, that if two-thirds of the Whole Board (as defined below) has approved such increase or decrease of the number of authorized shares of Preferred Stock, then only the affirmative vote of the holders of a majority of the voting power of all then-outstanding shares of the capital stock of the Corporation entitled to vote thereon, voting together as a single class, without a separate vote of the holders of the Preferred Stock, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law, unless a separate vote of the holders of one or more series is required pursuant to the terms of any Certificate of Designation, shall be required to effect such increase or decrease. For purposes of this Restated Certificate of Incorporation (as the same may be amended and/or restated from time to time, including pursuant to the terms of any Certificate of Designation designating a series of Preferred Stock, this “Certificate of Incorporation”), the term “Whole Board” shall mean the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships.

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2.2        Except as otherwise expressly provided in any Certificate of Designation designating any series of Preferred Stock pursuant to the foregoing provisions of this Article IV, any new series of Preferred Stock may be designated, fixed and determined as provided herein by the Board without approval of the holders of Common Stock or the holders of Preferred Stock, or any series thereof, and any such new series may have powers, preferences and rights, including, without limitation, voting powers, dividend rights, liquidation rights, redemption rights and conversion rights, senior to, junior to or pari passu with the rights of the Common Stock, any series of Preferred Stock or any future class or series of capital stock of the Corporation.

2.3        Each outstanding share of Common Stock shall entitle the holder thereof to one vote on each matter properly submitted to the stockholders of the Corporation for their vote; provided, that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any Certificate of Designation relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon pursuant to this Certificate of Incorporation (including any Certificate of Designation relating to any series of Preferred Stock).

ARTICLE V: AMENDMENT OF BYLAWS

The Board shall have the power to adopt, amend or repeal the Bylaws of the Corporation (as the same may be amended and/or restated from time to time, the “Bylaws”). Any adoption, amendment or repeal of the Bylaws by the Board shall require the approval of a majority of the Whole Board. The stockholders shall also have power to adopt, amend or repeal the Bylaws; provided, that, notwithstanding any other provision of this Certificate of Incorporation or any provision of law that might otherwise permit a lesser or no vote, but in addition to any vote of the holders of any class or series of stock of the Corporation required by applicable law or by this Certificate of Incorporation (including any Preferred Stock issued pursuant to a Certificate of Designation), the affirmative vote of the holders of at least two-thirds of the voting power of all then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required for the stockholders to adopt, amend or repeal any provision of the Bylaws; provided, further, that, in the case of any proposed adoption, amendment or repeal of any provisions of the Bylaws that is approved by the Board and submitted to the stockholders for adoption thereby, if two-thirds of the Whole Board has approved such adoption, amendment or repeal of any provisions of the Bylaws, then only the affirmative vote of the holders of a majority of the voting power of all then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class (in addition to any vote of the holders of any class or series of stock of the Corporation required by applicable law or by this Certificate of Incorporation (including any Preferred Stock issued pursuant to a Certificate of Designation)), shall be required to adopt, amend or repeal any provision of the Bylaws.

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ARTICLE VI: MATTERS RELATING TO THE BOARD OF DIRECTORS

1.       Director Powers. Except as otherwise provided by the General Corporation Law, the Bylaws of the Corporation or this Certificate of Incorporation, the business and affairs of the Corporation shall be managed by or under the direction of the Board.

2.       Number of Directors. Subject to the special rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the total number of directors constituting the Whole Board shall be fixed from time to time exclusively by resolution adopted by a majority of the Whole Board.

3.       Classified Board. Subject to the special rights of the holders of one or more series of Preferred Stock to elect additional directors under specified circumstances, the directors shall be divided, with respect to the time for which they severally hold office, into three classes designated as Class I, Class II and Class III, respectively (the “Classified Board”). The Board may assign members of the Board already in office to the Classified Board, which assignments shall become effective at the same time that the Classified Board becomes effective. Directors shall be assigned to each class in accordance with a resolution or resolutions adopted by the Board. The initial term of office of the Class I directors shall expire at the Corporation’s first annual meeting of stockholders following the closing of the Corporation’s initial public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, relating to the offer and sale of Common Stock to the public (the “Initial Public Offering”), the initial term of office of the Class II directors shall expire at the Corporation’s second annual meeting of stockholders following the closing of the Initial Public Offering and the initial term of office of the Class III directors shall expire at the Corporation’s third annual meeting of stockholders following the closing of the Initial Public Offering. At each annual meeting of stockholders following the closing of the Initial Public Offering, directors elected to succeed those directors of the class whose terms then expire shall be elected for a term of office expiring at the third succeeding annual meeting of stockholders after their election.

4.       Term and Removal. Each director shall hold office until the annual meeting at which such director’s term expires and until such director’s successor is duly elected and qualified, or until such director’s earlier death, resignation, disqualification or removal. Any director may resign at any time by delivering a resignation in writing or by electronic transmission to the Corporation at its principal office or to the Chairperson of the Board, the Chief Executive Officer or the Secretary. Subject to the special rights of the holders of any series of Preferred Stock, no director may be removed from the Board except for cause and only by the affirmative vote of the holders of at least two-thirds of the voting power of the then-outstanding shares of capital stock of the Corporation entitled to vote thereon, voting together as a single class. In the event of any increase or decrease in the authorized number of directors, (a) each director then serving as such shall nevertheless continue as a director of the class of which he or she is a member and (b) the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board among the classes of directors so as to make all classes as nearly equal in number as is practicable, provided that no decrease in the number of directors constituting the Board shall shorten the term of any director.

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5.      Board Vacancies and Newly Created Directorships. Subject to the special rights of the holders of any series of Preferred Stock, any vacancy occurring in the Board for any cause, and any newly created directorship resulting from any increase in the authorized number of directors, shall, unless (a) the Board determines by resolution that any such vacancies or newly created directorships shall be filled by the stockholders or (b) as otherwise provided by law, be filled only by the affirmative vote of a majority of the directors then in office, even if less than a quorum, or by a sole remaining director, and shall not be filled by the stockholders. Any director elected in accordance with the preceding sentence shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which the director has been assigned expires and until such director’s successor shall have been duly elected and qualified, or until such director’s earlier death, resignation, disqualification or removal.

6.       Vote by Ballot. Election of directors need not be by written ballot unless the Bylaws shall so provide.

ARTICLE VII: DIRECTOR LIABILITY

1.      Limitation of Liability. To the fullest extent permitted by law, no director of the Corporation shall be personally liable for monetary damages for breach of fiduciary duty as a director. Without limiting the effect of the preceding sentence, if the General Corporation Law is hereafter amended to authorize the further elimination or limitation of the liability of a director, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law, as so amended.

2.      Change in Rights. Neither any amendment nor repeal of this Article VII, nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article VII, shall eliminate, reduce or otherwise adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such amendment, repeal or adoption of such an inconsistent provision.

ARTICLE VIII: MATTERS RELATING TO STOCKHOLDERS

1.      No Action by Written Consent of Stockholders. Subject to the rights of any series of Preferred Stock then outstanding, no action shall be taken by the stockholders of the Corporation except at a duly called annual or special meeting of stockholders and no action shall be taken by the stockholders of the Corporation by written consent in lieu of a meeting.

2.      Special Meeting of Stockholders. Special meetings of the stockholders of the Corporation may be called only by the Chairperson of the Board, the Chief Executive Officer, the Lead Independent Director (as defined in the Bylaws), the President or the Board acting pursuant to a resolution adopted by a majority of the Whole Board and may not be called by the stockholders or any other person or persons.

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3.      Advance Notice of Stockholder Nominations and Business Transacted at Special Meetings. Advance notice of stockholder nominations for the election of directors of the Corporation and of business to be brought by stockholders before any meeting of stockholders of the Corporation shall be given in the manner provided in the Bylaws. Business transacted at special meetings of stockholders shall be limited to the purpose or purposes stated in the notice of meeting.

ARTICLE IX: CHOICE OF FORUM

Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for: (a) any derivative action or proceeding brought on behalf of the Corporation; (b) any action asserting a claim of breach of a fiduciary duty owed by, or other wrongdoing by, any director, officer, stockholder, employee or agent of the Corporation to the Corporation or the Corporation’s stockholders; (c) any action asserting a claim against the Corporation or any director, officer, stockholder, employee or agent of the Corporation arising pursuant to any provision of the General Corporation Law, this Certificate of Incorporation or the Bylaws or as to which the General Corporation Law confers jurisdiction on the Court of Chancery of the State of Delaware; (d) any action to interpret, apply, enforce or determine the validity of this Certificate of Incorporation or the Bylaws; or (e) any action asserting a claim against the Corporation or any director, officer, stockholder, employee or agent of the Corporation governed by the internal affairs doctrine, provided that, for the avoidance of doubt, nothing in this Article IX shall preclude the filing of claims in the federal district courts of the United States of America to enforce any duty or liability created under the Exchange Act, or any successor thereto. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article IX.

ARTICLE X: AMENDMENT OF CERTIFICATE OF INCORPORATION

If any provision of this Certificate of Incorporation shall be held to be invalid, illegal or unenforceable, then such provision shall nonetheless be enforced to the maximum extent possible consistent with such holding and the remaining provisions of this Certificate of Incorporation (including, without limitation, all portions of any section of this Certificate of Incorporation containing any such provision held to be invalid, illegal or unenforceable, which is not invalid, illegal or unenforceable) shall remain in full force and effect.

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The Corporation reserves the right to amend or repeal any provision contained in this Certificate of Incorporation in the manner prescribed by the laws of the State of Delaware and all rights conferred upon stockholders are granted subject to this reservation; provided, however, that, notwithstanding any other provision of this Certificate of Incorporation or any provision of law that might otherwise permit a lesser vote or no vote (but subject to the rights of any series of Preferred Stock set forth in any Certificate of Designation), but in addition to any vote of the holders of any class or series of the stock of the Corporation required by law or by this Certificate of Incorporation, the affirmative vote of the holders of at least two-thirds of the voting power of all then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend or repeal this Article X or Article V, Article VI, Article VII or Article VIII; provided, further, that if two-thirds of the Whole Board has approved such amendment or repeal of any provisions of this Certificate of Incorporation, then only the affirmative vote of the holders of a majority of the voting power of all then-outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class (in addition to any other vote of the holders of any class or series of stock of the Corporation required by law or by this Certificate of Incorporation or any Certificate of Designation), shall be required to amend or repeal such provisions of this Certificate of Incorporation.

* * * * * * * * * * *

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Exhibit 3.3

 

BYLAWS

 

OF

 

14ner Oncology, Inc.

 

ARTICLE I 

OFFICES

 

Section 1.1.           Principal Office. The principal office of 14ner Oncology, Inc. (the “Company”) shall be located in such place as is designated by the Board of Directors of the Company (the “Board”).

 

Section 1.2.           Registered Office. The registered office of the Company required by law to be maintained in the State of Delaware may be, but need not be, identical with the principal office.

 

Section 1.3.           Other Offices. The Company may have offices at such other places, either within or without the State of Delaware, as the Board may from time to time determine or as the affairs of the Company may require.

 

ARTICLE II 

MEETINGS OF STOCKHOLDERS

 

Section 2.1.           Place of Meetings. All meetings of stockholders shall be held at the principal office of the Company or at such other place, either within or without the State of Delaware, as shall be determined by the Board. The Board may, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication as provided by Section 211(a)(2) of the Delaware General Corporation Law (the “DGCL”).

 

Section 2.2.           Annual Meeting. An annual meeting of stockholders shall be held for the election of Directors at such date and time as may be designated by resolution of the Board from time to time. Any other proper business may be transacted at the annual meeting. The Company shall not be required to hold an annual meeting of stockholders, provided that (i) the stockholders are permitted to act by written consent under the Certificate of Incorporation of the Company (the “Certificate of Incorporation”) and these Bylaws, (ii) the stockholders take action by written consent to elect Directors and (iii) the stockholders unanimously consent to such action or, if such consent is less than unanimous, all of the directorships to which Directors could be elected at an annual meeting held at the effective time of such action are vacant and are filled by such action.

 

Section 2.3.           Special Meetings. A special meeting of the stockholders may be called at any time by the Board, the Chairperson of the Board, the Chief Executive Officer, the President (in the absence of a Chief Executive Officer), or by holders of shares entitled to cast no less than ten percent (10%) of the votes at the meeting. If any person(s) other than the Board calls a special meeting, the request shall: (i) be in writing; (ii) specify the time of such meeting and the general nature of the business proposed to be transacted; and (iii) be delivered personally or sent by registered mail or by facsimile transmission to the Chairperson of the Board, the Chief Executive Officer, the President (in the absence of a Chief Executive Officer) or the Secretary of the Company. The officer(s) receiving the request shall cause notice to be promptly given to the stockholders entitled to vote at such meeting, in accordance with the provisions of Section 2.5 of these Bylaws, that a meeting will be held at the time requested by the person or persons calling the meeting. No business may be transacted at such special meeting other than the business specified in such notice to stockholders. Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board may be held. 

 

 

Section 2.4.          Notice of Stockholders’ Meetings. All notices of meetings of stockholders shall be sent or otherwise given in accordance with either Section 2.5 or Section 8.5 of these Bylaws not less than 10 or more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, if any, date and hour of the meeting, the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called.

 

Section 2.5.           Manner of Giving Notice; Affidavit of Notice. Notice of any meeting of stockholders shall be given:

 

(a)            if mailed, when deposited in the United States mail, postage prepaid, directed to the stockholder at his or her address as it appears on the Company’s records; or

 

(b)            if electronically transmitted as provided in Section 8.5 of these Bylaws.

 

An affidavit of the Secretary or an Assistant Secretary of the Company or of the transfer agent or any other agent of the Company that the notice has been given by mail or by a form of electronic transmission, as applicable, shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

 

Section 2.6.           Quorum. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, at each meeting of stockholders the presence in person or by proxy of the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote at the meeting shall be necessary and sufficient to constitute a quorum. If, however, such quorum is not present or represented at any meeting of the stockholders, then either: (i) the chairperson of the meeting; or (ii) the stockholders entitled to vote at the meeting, present in person or represented by proxy, shall have the power to adjourn the meeting from time to time, in the manner provided in Section 2.7 of these Bylaws, until a quorum is present or represented. The stockholders at a meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of sufficient stockholders to leave less than a quorum.

 

If shares or other securities having voting power stand of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety, or otherwise, or if two or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (i) if only one votes, his act binds all; (ii) if more than one votes, the act of the majority so voting binds all; (c) if more than one votes, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionally, or may apply to the Delaware Court of Chancery for relief as provided in Section 217(b) of the DGCL. If the instrument filed with the Secretary shows that any such tenancy is held in unequal interests, a majority or even-split for the purpose of subsection (c) shall be a majority or even-split in interest.

 

Section 2.7.           Adjourned Meeting; Notice. Any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of the adjourned meeting if the time, place, if any, thereof, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Company may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. 

 

 

Section 2.8.           Conduct of Meetings.

 

(a)           Chairperson of the Meeting. Meetings of stockholders shall be presided over by the Chairperson of the Board, if any, or in the Chairperson’s absence by the Vice Chairperson of the Board, if any, or in the Vice Chairperson’s absence by the Chief Executive Officer (if one has been duly elected), or in the Chief Executive Officer’s absence by the President, or in the President’s absence by a Vice President, or in the absence of all of the foregoing persons by a chairperson designated by the Board, or in the absence of such designation by a chairperson chosen by vote of the stockholders at the meeting. The Secretary shall act as secretary of the meeting, but in the Secretary’s absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.

 

(b)           Rules and Procedures. The Board may adopt by resolution such rule, regulations and procedures for the conduct of any meeting of stockholders as it shall deem appropriate including, without limitation, such guidelines and procedures as it may deem appropriate regarding the participation by means of remote communication of stockholders and proxyholders not physically present at a meeting. Except to the extent inconsistent with such rules, regulations and procedures as adopted by the Board, the chairperson of any meeting of stockholders shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairperson, are appropriate for the proper conduct of the meeting. Such rules, regulation or procedures, whether adopted by the Board or prescribed by the chairperson of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders of record of the corporation, their duly authorized and constituted proxies or such other persons as shall be determined; (iv) restriction on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined by the Board or the chairperson of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

 

Section 2.9.          List of Stockholders Entitled to Vote. The officer of the Company who has charge of the stock ledger of the Company shall prepare, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. The Company shall not be required to include the electronic mail address or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least 10 days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting; or (ii) during ordinary business hours, at the Company’s principal executive office. In the event that the Company determines to make the list available on an electronic network, the Company may take reasonable steps to ensure that such information is available only to stockholders of the Company. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the list of stockholders or the books of the Company, or to vote in person or by proxy at any meeting of stockholders and of the number of shares held by each such stockholder. 

 

 

Section 2.10.         Voting.

 

(a)            Except as may be otherwise provided in the Certificate of Incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of capital stock held by such stockholder which has voting power upon the matter in question.

 

(b)           At all meetings of stockholders for the election of Directors a plurality of the votes cast shall be sufficient to elect. All other elections and questions shall, unless otherwise provided by law, the Certificate of Incorporation or these Bylaws, be decided by the vote of the holders of shares of stock having a majority of the votes which could be cast by the holders of all shares of stock entitled to vote thereon which are present in person or represented by proxy at the meeting.

 

(c)            Voting at meetings of stockholders need not be by written ballot and, unless otherwise required by law, need not be conducted by inspectors of election unless so determined by the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote thereon which are present in person or by proxy at such meeting. If authorized by the Board, the requirement of a written ballot for the election of Directors shall be satisfied by a ballot submitted by electronic transmission (as defined in Section 8.5 of these Bylaws), provided that any such electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the stockholder or proxy holder.

 

(d)           Shares of its own stock owned by the Company, directly or indirectly, through a subsidiary or otherwise, shall not be voted and shall not be counted in determining the total number of shares entitled to vote; provided, however, that shares held in a fiduciary capacity may be voted and shall be counted to the extent provided by law.

 

Section 2.11.        Record Date for Stockholder Notice; Voting; Giving Consents. In order that the Company may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board and which record date:

 

(i)        in the case of determination of stockholders entitled to notice of or to vote at any meeting of stockholders or adjournment thereof, shall, unless otherwise required by law, not be more than 60 nor less than 10 days before the date of such meeting;

 

(ii)       in the case of determination of stockholders entitled to express consent to corporate action in writing without a meeting, shall not be more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board; and

 

(iii)      in the case of determination of stockholders for any other action, shall not be more than 60 days prior to such other action.

 

If no record date is fixed by the Board:

 

(i)        the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held;  

 

 

(ii)       the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting when no prior action of the Board is required by law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Company in accordance with applicable law, or, if prior action by the Board is required by law, shall be at the close of business on the day on which the Board adopts the resolution taking such prior action; and

 

(iii)      the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.

 

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting, provided, however, that the Board may fix a new record date for the adjourned meeting. 

 

Section 2.12.        Proxies. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212 of the DGCL.

 

Section 2.13.         Stockholder Action by Written Consent Without a Meeting.

 

(a)            Unless otherwise provided in the Certificate of Incorporation, any action required or permitted by the DGCL to be taken at any annual or special meeting of the stockholders of a corporation may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, or by electronic transmission, setting forth the action so taken, shall be signed and dated by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Such signed and dated consent (including electronic transmission) must be delivered to the Company, whether done before or after the action so taken, but in no event later than 60 days after the earliest dated consent delivered in accordance with Section 228 of the DGCL. When corporate action is taken without a meeting by less than unanimous written consent, prompt notice shall be given to those stockholders who have not consented in writing or by electronic transmission and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the Company as provided in Section 228 of the DGCL. In the event that the action which is consented to is such as would have required the filing of a certificate under any provision of the DGCL, if such action had been voted on by stockholders at a meeting thereof, the certificate filed under such provision shall state, in lieu of any statement required by such provision concerning any vote of stockholders, that written consent has been given in accordance with Section 228 of the DGCL.

 

(b)           An electronic transmission consenting to an action to be taken and transmitted by a stockholder or proxyholder, shall be deemed to be written, signed and dated for the purposes of this section, provided that any such electronic transmission sets forth or is delivered with information from which the corporation can determine (i) that the electronic transmission was transmitted by the stockholder or proxyholder or by a person or persons authorized to act for the stockholder and (ii) the date on which such stockholder or proxyholder or authorized person or persons transmitted such electronic transmission. The date on which such electronic transmission is transmitted shall be deemed to be the date on which such consent was signed unless otherwise indicated on the face of such consent. Delivery made to a corporation’s registered office shall be made by hand or by certified or registered mail, return receipt requested. Notwithstanding the foregoing limitations on delivery, consents given by electronic transmission may be otherwise delivered to the principal place of business of the corporation or to an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded if, to the extent and in the manner provided by resolution of the board of directors of the corporation. Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used, provided that such copy, facsimile or other reproduction shall be a complete reproduction of the entire original writing. 

 

 

ARTICLE III

DIRECTORS

 

Section 3.1.          General Powers. Subject to the provisions of the DGCL and any limitations in the Certificate of Incorporation or these Bylaws related to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the Company shall be managed by or under the direction of the Board.

 

Section 3.2.           Number, Term and Qualification.

 

(a)            Number of Directors. Except as otherwise provided in the Certificate of Incorporation, the number of Directors which shall constitute the whole Board of Directors shall be determined from time to time by resolution of the Board, provided, that the Board shall consist of at least one member. No reduction of the authorized number of Directors shall have the effect of removing any Director before that Director’s term of office otherwise expires.

 

(b)            Term of Office. Each Director shall hold office until such Director’s death, resignation, retirement, removal, disqualification, or such Director’s successor is elected and qualifies.

 

(c)            Qualification. Directors need not be residents of the State of Delaware or stockholders of the Company.

 

Section 3.3.           Election of Directors. Except as provided in Section 3.5 of these Bylaws and unless Directors are elected by written consent in lieu of an annual meeting, the Directors shall be elected at each annual meeting of stockholders. Those persons who receive the highest number of votes shall be deemed to have been elected. Unless otherwise provided in the Certificate of Incorporation, election of Directors shall be by written ballot, voice vote or such other means as permitted by law.

 

Section 3.4.           Removal; Resignation.

 

(a)           Removal. Unless otherwise restricted by statute, the Certificate of Incorporation or these Bylaws, any Director or the entire Board may be removed from office, with or without cause, by a vote of stockholders holding a majority of the outstanding shares entitled to vote at an election of Directors. If a Director is elected by the holders of any class or classes of stock or series thereof, only such stockholders may participate in the vote to remove that Director. If any Directors are so removed, new Directors may be elected at the same meeting.

 

(b)           Resignation. Any Director may resign by delivering a resignation in writing or by electronic transmission to the Company. Such resignation shall be effective upon receipt unless it is specified to be effective at some later time or upon the happening of some later time or upon the happening of some later event. 

 

 

Section 3.5.           Vacancies. Unless otherwise provided in the Certificate of Incorporation or these Bylaws, vacancies and newly created directorships resulting from any increase in the authorized number of Directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the Directors then in office, although less than a quorum, or by a sole remaining Director; provided, however, whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more Directors by the provisions of the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the Directors elected by such class or classes or series thereof then in office, or by the sole remaining Director so elected.

 

A Director elected to fill a vacancy shall be elected for the unexpired term of such Director’s predecessor in office.

 

If at any time, by reason of death or resignation or other cause, the Company should have no Directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the Certificate of Incorporation or these Bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the DGCL.

 

If, at the time of filling any vacancy or any newly created directorship, the Directors then in office constitute less than a majority of the whole Board (as constituted immediately prior to any such increase), then the Court of Chancery may, upon application of any stockholder or stockholders holding at least 10% of the total number of the shares at the time outstanding having the right to vote for such Directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the Directors chosen by the Directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the DGCL as far as applicable.

 

Section 3.6.           Compensation. The Board may provide for the compensation of Directors for their services as such and may provide for the payment of any and all expenses incurred by the Directors in connection with such services.

 

Section 3.7.           Committees.

 

(a)            Establishment; Composition of Committees. The Board, by resolution adopted by a majority of the Directors then in office, may designate one or more committees, each committee to consist of one or more of the Directors of the Company. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any member of any such committee may be removed at any time with or without cause by resolution adopted by a majority of the Board.

 

(b)            Powers of Committees. Any such committee, to the extent provided in the resolution of the Board or these Bylaws, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Company, and may authorize the seal of the Company to be affixed to all papers which may require it; but no such committee shall have the power or authority to: (i) adopt, amend or repeal any bylaw of the Company; or (ii) approve or adopt, or recommend to the stockholders any action or matter expressly required by the DGCL to be submitted to stockholders for approval. 

 

 

(c)            Meetings and Action of Committees. Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of:

 

(i)        Section 4.1 (Place of Meetings; Meetings by Telephone);

 

(ii)       Section 4.3 (Regular Meetings);

 

(iii)      Section 4.4 (Special Meetings);

 

(iv)      Section 4.5 (Notice of Meetings);

 

(v)       Section 4.6 (Quorum);

 

(v)       Section 4.8 (Board Action by Written Consent Without a Meeting); and

 

(vi)      Section 8.3 (Waiver of Notice)

 

with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the Board and its members; provided, however:

 

(i)        the time of regular meetings of committees may be determined either by resolution of the Board or by resolution of the committee;

 

(ii)       special meetings of committees may also be called by resolution of the Board or by resolution of the committee; and

 

(iii)      notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The Board may adopt rules for the government of any committee not inconsistent with the provisions of these Bylaws. 

 

ARTICLE IV 

MEETINGS OF DIRECTORS 

 

Section 4.1.          Place of Meetings; Meetings by Telephone. The Board may hold meetings, both regular and special, either within or outside the State of Delaware. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the Board, or any committee designated by the Board, may participate in a meeting of the Board, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

 

Section 4.2.          Conduct of Business. Meetings of the Board shall be presided over by the Chairperson of the Board, if any, or in his or her absence by the Vice Chairperson of the Board, if any, or in the absence of the foregoing persons by a chairperson designated by the Board, or in the absence of such designation by a chairperson chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his or her absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.

 

Section 4.3.           Regular Meetings. Regular meetings of the Board may be held at such time and place as shall be determined from time to time by the Board. 

 

 

Section 4.4.           Special Meetings. Special meetings of the Board for any purpose or purposes may be called at any time by the Chairperson of the Board, the Chief Executive Officer, the President, the Secretary or any two Directors.

 

Section 4.5.           Notice of Meetings.

 

(a)            Regular Meetings. Regular meetings of the Board may be held without notice.

 

(b)           Special Meetings. Notice of the time and place of special meetings shall be:

 

(i)        delivered personally by hand, by courier or by telephone;

 

(ii)       sent by United States first-class mail, postage prepaid;

 

(iii)      sent by facsimile; or

 

(iv)      sent by electronic mail,

 

directed to each Director at that Director’s address, telephone number, facsimile number or electronic mail address, as the case may be, as shown on the Company’s records.

 

If the notice is (i) delivered personally by hand, by courier or by telephone, (ii) sent by facsimile or (iii) sent by electronic mail, it shall be delivered or sent at least 24 hours before the time of the holding of the meeting. If the notice is sent by United States mail, it shall be deposited in the United States mail at least four days before the time of the holding of the meeting. Any oral notice may be communicated to the Director. The notice need not specify the place of the meeting (if the meeting is to be held at the Company’s principal executive office) nor the purpose of the meeting. The transaction of all business at any meeting of the Board, or any committee thereof, however called or noticed, or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present and if, either before or after the meeting, each of the directors not present who did not receive notice shall sign a written waiver of notice or shall waive notice by electronic transmission. All such waivers shall be filed with the corporate records or made a part of the minutes of the meeting.

 

Section 4.6.           Quorum. A majority of the Directors in office immediately before the meeting shall constitute a quorum for the transaction of business at any meeting of the Board. If a quorum is not present at any meeting of the Board, then the Directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.

 

Section 4.7.           Manner of Acting.

 

(a)            The act of a majority of the Directors then in office shall be the act of the Board, unless a greater number is required by law, the Certificate of Incorporation, or a bylaw adopted by the stockholders.

 

(b)            A Director of the Company, who is present at a meeting of the Board at which action on any corporate matter is taken, shall be presumed to have assented to the action taken unless such Director’s contrary vote is recorded or such Director’s dissent is otherwise entered in the minutes of the meeting or unless he or she shall file such Director’s written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary of the Company immediately after the adjournment of the meeting. Such right of dissent shall not apply to a Director who voted in favor of such action. 

 

 

Section 4.8.           Board Action By Consent Without a Meeting. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

 

ARTICLE V 

OFFICERS

 

Section 5.1.           Officers. The officers of the Company shall be a President and a Secretary. The Company may also have, at the discretion of the Board, a Chairperson of the Board, a Vice Chairperson of the Board, a Chief Executive Officer, one or more Vice Presidents, a Chief Financial Officer, a Treasurer, one or more Assistant Treasurers, one or more Assistant Secretaries, and any such other officers as may be appointed in accordance with the provisions of these Bylaws. Any number of offices may be held by the same person.

 

Section 5.2.           Appointment; Term. The Board shall appoint the officers of the Company, except such officers as may be appointed in accordance with the provisions of Sections 5.3 and 5.5 of these Bylaws, subject to the rights, if any, of an officer under any contract of employment. Each officer shall hold office until such officer’s death, resignation, retirement, removal, disqualification, or until such officer’s successor is elected and qualifies, unless a different term is specified in the resolution of the Board appointing such officer.

 

Section 5.3.           Subordinate Officers. The Board may appoint, or empower the Chief Executive Officer or, in the absence of a Chief Executive Officer, the President, to appoint, such other officers and agents as the business of the Company may require. Each of such officers and agents shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the Board may from time to time determine.

 

Section 5.4.            Removal and Resignation of Officers.

 

(a)             Removal. Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the Board at any regular or special meeting of the Board or, except in the case of an officer chosen by the Board, by any officer upon whom such power of removal may be conferred by the Board.

 

(b)             Resignation. Any officer may resign at any time by giving written notice to the Company. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice. Unless otherwise specified in the notice of resignation, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Company under any contract to which the officer is a party.

 

Section 5.5.            Vacancies in Office. Any vacancy occurring in any office of the Company shall be filled by the Board or as provided in Section 5.2 of these Bylaws.

 

Section 5.6.            Representation of Shares of Other Corporations. Unless otherwise directed by the Board, the President or any other person authorized by the Board or the President is authorized to vote, represent and exercise on behalf of the Company all rights incident to any and all shares of any other corporation or corporations standing in the name of the Company. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority. 

 

 

Section 5.7.          Authority and Duties of Officers. Except as otherwise provided in these Bylaws, the officers of the Company shall have such powers and duties in the management of the Company as may be designated from time to time by the Board and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board.

 

ARTICLE VI 

CERTIFICATES FOR SHARES AND OTHER TRANSFERS

 

Section 6.1.           Stock Certificates; Partly Paid Shares. The shares of the Company shall be represented by certificates, provided, however, that the Board may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Company. Notwithstanding the adoption of such a resolution by the Board, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the Company by the Chairperson of the Board or Vice-Chairperson of the Board, or the President or any Vice President of the Company, and by the Secretary, Assistant Secretary, Treasurer or Assistant Treasurer of the Company representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile or may be engraved or printed or omitted if the certificate is countersigned by a transfer agent, or registered by a registrar, other than the Company itself or an employee of the Company. In case any officer, transfer agent or registrar who signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Company with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue. The certificates shall be consecutively numbered or otherwise identified; and the name and address of the persons to whom they are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the Company.

 

The Company may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, upon the books and records of the Company in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the Company shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.

 

Section 6.2.         Transfer of Shares. Transfer of shares shall be made on the stock transfer books of the Company only upon surrender of the certificates for the shares sought to be transferred by the record holder thereof or by such holder’s duly authorized agent, transferee or legal representative. All certificates surrendered for transfer shall be canceled before new certificates for the transferred shares shall be issued.

 

Section 6.3.           Restrictions on Transfer.

 

(a)            S-Corp Preservation. If the Company has elected Subchapter S status under Section 1362 of the Internal Revenue Code of 1986, as amended, no stockholder or involuntary transferee shall dispose of or transfer any shares of the Company which such stockholder now owns or may hereafter acquire if such disposition or transfer would, or in the reasonable discretion of the Board, foreseeably could result in the termination of such Subchapter S status, unless such disposition or transfer is consented to by all stockholders of the Company. Any such disposition or transfer that does not comply with the terms of this Section 6.3(a) shall be void and have no legal force or effect and shall not be recognized on the share transfer books of the Company as effective. 

 

 

(b)           Right of First Refusal. No stockholder or involuntary transferee shall dispose of or transfer any shares of the Company which such stockholder now owns or may hereafter acquire except as set forth in this Section 6.3(b). Any purported transfer or disposition of shares in violation of the terms of this Section 6.3(b) shall be void and the Company shall not recognize or give any effect to such transaction.

 

i.              An individual stockholder shall be free to transfer, during such stockholder’s lifetime or by testamentary transfer, any or all of such stockholder’s shares of the Company to such stockholder’s spouse, any of such stockholder’s children, grandchildren or direct lineal descendants, whether by blood or by adoption, spouses of such issue, parents, siblings, or direct lineal descendants, whether by blood or by adoption, of such siblings, domestic partner sharing the same household, university or charitable organization or a trust or family limited partnership for the sole benefit of those persons or any of them, a Section 501(c)(3) organization or a non-profit foundation or other non-profit organization; and a stockholder which is a partnership, corporation or limited liability company shall be free to transfer any or all of its shares of the Company to its partners, stockholders or members, respectively, if there is no consideration for such transfer; but, in case of any such transfer, the transferee shall be bound by all the terms of this provision and no further transfer of such shares shall be made by such transferee except back to the stockholder who originally owned them or except in accordance with the provisions of this Section 6.3(b).

 

ii.             Any stockholder or transferee who wishes to transfer all or any part of such stockholder’s shares of the Company (hereinafter “Offeror”), other than as permitted in Section 6.3(b)(i) above, first shall submit a written offer to sell such shares to the Company at the same price per share and upon the same terms and conditions offered by a bona fide prospective purchaser of such shares. Such written offer to the Company shall continue to be a binding offer to sell until: (1) rejected by the Company; or (2) the expiration of a period of 30 days after delivery of such written offer to the Company, whichever shall first occur.

 

iii.            Every written offer submitted in accordance with the provisions of this Section 6.3(b) shall specifically name the person to whom the Offeror intends to transfer the shares, the number of shares which such Offeror intends so to transfer to each person and the price per share and other terms upon which each intended transfer is to be made. Upon the termination of all such written offers, the Offeror shall be free to transfer, for a period of three months thereafter, any unpurchased shares to the persons so named at the price per share and upon the other terms and conditions so named, provided that any such transferee of those shares shall thereafter be bound by all the provisions of these Bylaws.

 

iv.            Every written offer submitted to the Company shall be deemed to have been delivered when delivered to the principal office of the Company or if and when sent by prepaid certified mail, or delivered by hand to the President of the Company at the principal office of the Company.

 

v.             If any consideration to be received by the Offeror for the shares offered is property other than cash, then the price per share shall be measured to the extent of the fair market value of such noncash consideration.

 

vi.            The provisions contained herein shall not apply to the pledge of any shares of the Company as collateral for a loan but shall apply to the sale or other disposition of shares under any such pledge.

 

vii.           The provisions of this Section 6.3(b) may be waived with respect to any transfer either by the Company, upon duly authorized action by the Board, or by the stockholders, upon the written consent of the holders of at least a majority of the voting power of the Company (excluding the votes represented by those shares to be transferred by the Offeror). 

 

 

viii.          In the event of any conflict between the terms of this Section 6.3(b) and any written agreement between the Company and any stockholder of the Company, the terms of such written agreement shall control, and the provisions of this Section shall not be applicable.

 

ix.             The restrictions set forth in this Section 6.3(b) shall terminate upon the closing of a public offering of securities of the Company registered under the Securities Act of 1933, as amended.

 

x.              Every certificate representing shares of the Company shall bear the following legend in substantially the following form prominently displayed: 

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE, AND THE TRANSFER THEREOF, ARE SUBJECT TO THE RESTRICTIONS ON TRANSFER PROVISIONS OF THE BYLAWS OF THE COMPANY, A COPY OF WHICH IS ON FILE IN, AND MAY BE EXAMINED AT, THE PRINCIPAL OFFICE OF THE COMPANY.” 

 

Section 6.4.           Lost Certificates. The officers of the Company may authorize the issuance of a new share certificate in place of a certificate claimed to have been lost or destroyed, upon receipt of an affidavit of such fact from the person claiming the loss or destruction. When authorizing such issuance of a new certificate, the officers of the Company may require the claimant to give the Company a bond in such sum as it may direct to indemnify the Company against loss from any claim with respect to the certificate claimed to have been lost or destroyed, or otherwise to indemnify the Company against such loss.

 

Section 6.5.           Holder of Record. The Company may treat as absolute owner of the shares the person in whose name the shares stand of record on its books just as if that person had full competency, capacity, and authority to exercise all rights of ownership irrespective of any knowledge or notice to the contrary or any description indicating a representative, pledge or other fiduciary relation or any reference to any other instrument or to the rights of any other person appearing upon its record or upon the share certificate; except that any person furnishing to the Company proof of his/her appointment as a fiduciary shall be treated as if he or she were a holder of record of the Company’s shares.

 

Section 6.6.           Treasury Shares. Treasury shares of the Company shall consist of such shares as have been issued and thereafter acquired but not canceled by the Company. Treasury shares shall not carry voting or dividend rights, except rights in share dividends. 

 

ARTICLE VII 

INDEMNIFICATION AND REIMBURSEMENT 

OF DIRECTORS AND OFFICERS

 

Section 7.1.           Indemnification for Expenses and Liabilities. Any person who at any time serves or has served: (i) as a Director, officer, employee or agent of the Company; (ii) at the request of the Company as a Director, officer, partner, trustee, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, or other enterprise; or (iii) at the request of the Company as a trustee or administrator under an employee benefit plan, or is called as a witness at a time when he or she has not been made a named defendant or respondent to any Proceeding, shall have a right to be indemnified by the Company to the fullest extent permitted by the DGCL against all Liability (as defined) and Expenses (as defined) in any Proceeding (as defined) (including without limitation a Proceeding brought by or on behalf of the Company itself) arising out of his or her status as such or activities in any of the foregoing capacities. 

 

 

The Board shall take all such action as may be necessary and appropriate to authorize the Company to pay the indemnification required by this Article VII, including, without limitation, to the extent required, making a good faith evaluation of the manner in which the claimant for indemnity acted and of the reasonable amount of indemnity due him or her.

 

Any person who at any time serves or has served in any of the aforesaid capacities for or on behalf of the Company shall be deemed to be doing or to have done so in reliance upon, and as consideration for, the rights provided for herein. Any repeal or modification of these indemnification provisions shall not affect any rights or obligations existing at the time of such repeal or modification. The rights provided for herein shall inure to the benefit of the legal representatives of any such person and shall not be exclusive of any other rights to which such person may be entitled apart from this provision.

 

The rights granted herein shall not be limited by the provisions contained in Section 145 of the DGCL or any successor to such statute. 

 

The rights conferred on any person by this Bylaw shall not be exclusive of any other right which such person may have or hereafter acquire under any applicable statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding office. The corporation is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advances, to the fullest extent no prohibited by the DGCL or any other applicable law.

 

The rights conferred on any person by this Bylaw shall continue as to a person who has ceased to be a director, or officer, employee or other agent and shall inure to the benefit of the heirs, executors and administrators of such a person. 

 

Section 7.2.           Advance Payment of Expenses. The Company shall (upon receipt of an undertaking by or on behalf of the Director, officer, employee or agent involved to repay the Expenses described herein unless it shall ultimately be determined that he or she is entitled to be indemnified by the Company against such Expenses) pay Expenses incurred by such Director, officer, employee or agent in defending a Proceeding or appearing as a witness at a time when he or she has not been named as a defendant or a respondent with respect thereto in advance of the final disposition of such Proceeding.

 

Section 7.3.           Insurance. The Company shall have the power to purchase and maintain insurance (on behalf of any person who is or was a Director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a Director, officer, employee or agent of another domestic or foreign corporation, partnership, joint venture, trust or other enterprise or as a trustee or administrator under an employee benefit plan) against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Company would have the power to indemnify him or her against such liability.

 

Section 7.4.           Definitions. The following terms as used in this Article shall have the following meanings. “Proceeding” means any threatened, pending or completed action, suit, or proceeding and any appeal therein (and any inquiry or investigation that could lead to such action, suit, or proceeding), whether civil, criminal, administrative, investigative or arbitrative and whether formal or informal. “Expenses” means expenses of every kind, including counsel fees. “Liability” means the obligation to pay a judgment, settlement, penalty, fine (including an excise tax assessed with respect to an employee benefit plan), reasonable expenses incurred with respect to a Proceeding, and all reasonable expenses incurred in enforcing the indemnification rights provided herein. “Director,” “officer,” “employee” and “agent” include the estate or personal representative of a Director, officer, employee or agent. “Company” shall include any domestic or foreign predecessor of this Company in a merger or other transaction in which the predecessor’s existence ceased upon consummation of the transaction. 

 

 

ARTICLE VIII 

GENERAL PROVISIONS

 

Section 8.1.           Dividends. The Board, subject to any restrictions contained in either: (i) the DGCL; or (ii) the Certificate of Incorporation, may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property, or in shares of the Company’s capital stock.

 

The Board may set apart out of any of the funds of the Company available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the Company, and meeting contingencies.

 

Section 8.2.           Seal. The corporate seal shall be in such form as may be approved from time to time by the Board. Such seal may be an impression or stamp and may be used by the officers of the Company by causing it, or a facsimile thereof, to be impressed or affixed or in any other manner reproduced. In addition to any form of seal adopted by the Board, the officers of the Company may use as the corporate seal a seal in the form of a circle containing the name of the Company and the state of its incorporation (or an abbreviation thereof) on the circumference and the word “Seal” in the center.

 

Section 8.3.          Waiver of Notice. Whenever notice is required to be given to any stockholder or Director under the provisions of the DGCL, the Certificate of Incorporation or these Bylaws, a written waiver, signed by the person or persons entitled to notice, or a waiver by electronic transmission by the person or persons entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, Directors, or members of a committee of Directors need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the Certificate of Incorporation or these Bylaws.

 

Section 8.4.           Fiscal Year. The fiscal year of the Company shall be determined by the Board.

 

Section 8.5.           Notice by Electronic Transmission. Without limiting the manner by which notice otherwise may be given effectively to stockholders pursuant to the DGCL, the Certificate of Incorporation or these Bylaws, any notice to stockholders given by the Company under any provision of the DGCL, the Certificate of Incorporation or these Bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the Company. Any such consent shall be deemed revoked if:

 

(i)        the Company is unable to deliver by electronic transmission two consecutive notices given by the Company in accordance with such consent; and

 

(ii)       such inability becomes known to the Secretary or an Assistant Secretary of the Company or to the transfer agent, or other person responsible for the giving of notice.

 

However, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action. 

 

 

Any notice given pursuant to the preceding paragraph shall be deemed given:

 

(i)        if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice;

 

(ii)       if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice;

 

(iii)      if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and

 

(iv)      if by any other form of electronic transmission, when directed to the stockholder.

 

An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the Company that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

 

Notwithstanding the foregoing, notice by a form of electronic transmission shall not apply to Sections 164, 296, 311, 312 or 324 of the DGCL. 

 

An “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

 

Section 8.6.           Records and Reports.

 

(a)            Maintenance and Inspection of Records. The Company shall, either at its principal executive office or at such place or places as designated by the Board, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these Bylaws as amended to date, accounting books, and other records.

 

Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the Company’s stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person’s interest as a stockholder. In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent so to act on behalf of the stockholder. The demand under oath shall be directed to the Company at its registered office in Delaware or at its principal executive office.

 

(b)           Inspection by Directors. Any Director shall have the right to examine the Company’s stock ledger, a list of its stockholders, and its other books and records for a purpose reasonably related to his or her position as a Director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a Director is entitled to the inspection sought. The Court may summarily order the Company to permit the Director to inspect any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper. 

 

 

Section 8.7.          Amendments. Except as otherwise provided herein, these Bylaws may be amended or repealed and new Bylaws may be adopted by the affirmative vote of the holders of a majority of the voting power of the Company, or, if the Certificate of Incorporation so permits, by the affirmative vote of a majority of the Directors then holding office at any regular or special meeting of the Board or by unanimous written consent.

 

Section 8.8.           All terms used in these Bylaws shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the context may require.

 

[Remainder of Page Intentionally Left Blank] 

 

 

THIS IS TO CERTIFY that the above Bylaws were duly adopted by the Board, effective as of April 29, 2019.

 

  /s/ Daniel S. Fuchs
  Daniel S. Fuchs, Secretary

 

14ner Oncology, Inc. 

Bylaws 

- Signature Page -

 


Exhibit 3.4

 

 

 

ELEVATION ONCOLOGY, INC.

 

(a Delaware corporation)

 

RESTATED BYLAWS

 

As Adopted [●], 2021 and

 

As Effective [●], 2021

 

 

 

 

 

 

elevation oncology, INC.

 

(a Delaware corporation)

 

RESTATED BYLAWS

 

TABLE OF CONTENTS

 

Page

 

Article I: STOCKHOLDERS 1

Section 1.1:  Annual Meetings 1
Section 1.2: Special Meetings 1
Section 1.3: Notice of Meetings 1
Section 1.4: Adjournments 2
Section 1.5: Quorum 2
Section 1.6: Organization 2
Section 1.7: Voting; Proxies 3
Section 1.8: Fixing Date for Determination of Stockholders of Record 3
Section 1.9: List of Stockholders Entitled to Vote 3
Section 1.10: Inspectors of Elections. 4
Section 1.11: Conduct of Meetings 5
Section 1.12: Notice of Stockholder Business; Nominations. 5

Article II: BOARD OF DIRECTORS 13

Section 2.1:    Number; Qualifications 13
Section 2.2:    Election; Resignation; Removal; Vacancies 13
Section 2.3:   Regular Meetings 14
Section 2.4:    Special Meetings 14
Section 2.5:    Remote Meetings Permitted 14
Section 2.6:    Quorum; Vote Required for Action 14
Section 2.7:   Organization 14
Section 2.8:    Unanimous Action by Directors in Lieu of a Meeting 14
Section 2.9:    Powers 15
Section 2.10:   Compensation of Directors 15
Section 2.11:  Confidentiality 15

Article III: COMMITTEES 15

Section 3.1:    Committees 15
Section 3.2:    Committee Rules 15

Article IV: OFFICERS; CHAIRPERSON; LEAD INDEPENDENT DIRECTOR 16

Section 4.1:    Generally 16
Section 4.2:    Chief Executive Officer 16
Section 4.3:    Chairperson of the Board 17
Section 4.4:    Lead Independent Director 17
Section 4.5:    President 17
Section 4.6:    Chief Financial Officer 17
Section 4.7:    Treasurer 17
Section 4.8:    Vice President 17

 

i 

 

 

Section 4.9:    Secretary 17
Section 4.10:   Delegation of Authority 18
Section 4.11:   Removal 18

Article V: STOCK 18

Section 5.1:    Certificates; Uncertificated Shares 18
Section 5.2:    Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates or Uncertificated Shares 18
Section 5.3:    Other Regulations 18

Article VI: INDEMNIFICATION 19

Section 6.1:    Indemnification of Officers and Directors 19
Section 6.2:    Advancement of Expenses 19
Section 6.3:    Non-Exclusivity of Rights 19
Section 6.4:    Indemnification Contracts 20
Section 6.5:    Right of Indemnitee to Bring Suit 20
Section 6.6:    Nature of Rights 20
Section 6.7:    Amendment or Repeal 20
Section 6.8:    Insurance 20

Article VII: NOTICES 21

Section 7.1:    Notice 21
Section 7.2:    Waiver of Notice 22

Article VIII: INTERESTED DIRECTORS 22

Section 8.1:    Interested Directors 22
Section 8.2:    Quorum 22

Article IX: MISCELLANEOUS 22

Section 9.1:    Fiscal Year 22
Section 9.2:    Seal 22
Section 9.3:    Form of Records 22
Section 9.4:    Reliance Upon Books and Records 23
Section 9.5:    Certificate of Incorporation Governs 23
Section 9.6:    Severability 23
Section 9.7:    Time Periods 23

Article X: AMENDMENT 23

Article XI: EXCLUSIVE FORUM 23

 

ii 

 

 

elevation oncology, INC.

 

(a Delaware corporation)

 

RESTATED BYLAWS

 

As Adopted [●], 2021 and

As Effective [●], 2021

 

Article I: STOCKHOLDERS

 

Section 1.1:         Annual Meetings. If required by applicable law, an annual meeting of stockholders shall be held for the election of directors at such date and time as the Board of Directors (the “Board”) of Elevation Oncology, Inc. (the “Corporation”) shall each year fix. The meeting may be held either at a place, within or without the State of Delaware as permitted by the Delaware General Corporation Law (the “DGCL”), or by means of remote communication as the Board in its sole discretion may determine. Any proper business may be transacted at the annual meeting.

 

Section 1.2:       Special Meetings. Special meetings of stockholders for any purpose or purposes shall be called in the manner set forth in the Restated Certificate of Incorporation of the Corporation (as the same may be amended and/or restated from time to time, the “Certificate of Incorporation”). The special meeting may be held either at a place, within or without the State of Delaware, or by means of remote communication as the Board in its sole discretion may determine. Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of the meeting.

 

Section 1.3:        Notice of Meetings. Notice of all meetings of stockholders shall be given in writing or by electronic transmission in the manner provided by applicable law (including, without limitation, as set forth in Section 7.1.1 of these Bylaws) stating the date, time and place, (if any) of the meeting, the means of remote communication (if any) by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and the record date for determining the stockholders entitled to vote at the meeting (if such date is different from the record date for stockholders entitled to notice of the meeting). In the case of a special meeting, such notice shall also set forth the purpose or purposes for which the meeting is called. Unless otherwise required by applicable law or the Certificate of Incorporation, notice of any meeting of stockholders shall be given not less than ten (10), nor more than sixty (60), days before the date of the meeting to each stockholder of record entitled to vote at such meeting as of the record date for determining the stockholders entitled to notice of the meeting.

 

 

 

 

Section 1.4:         Adjournments. Notwithstanding Section 1.5 of these Bylaws, the chairperson of the meeting shall have the power to adjourn the meeting to another time, date and place (if any), regardless of whether a quorum is present, at any time and for any reason. Any meeting of stockholders, annual or special, may be adjourned from time to time, and notice need not be given of any such adjourned meeting if the time, date and place (if any) thereof and the means of remote communication (if any) by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken; provided, however, that if the adjournment is for more than thirty (30) days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If, after the adjournment, a new record date for determination of stockholders entitled to vote is fixed for the adjourned meeting, the Board shall fix as the record date for determining stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote at the adjourned meeting, and shall give notice of the adjourned meeting to each stockholder of record as of the record date so fixed for notice of such adjourned meeting. At the adjourned meeting, the Corporation may transact any business that might have been transacted at the original meeting. If a quorum is present at the original meeting, it shall also be deemed present at the adjourned meeting. To the fullest extent permitted by law, the Board may postpone, reschedule or cancel at any time and for any reason any previously scheduled special or annual meeting of stockholders before it is to be held, regardless of whether any notice or public disclosure with respect to any such meeting has been sent or made pursuant to Section 1.3 hereof or otherwise, in which case notice shall be provided to the stockholders of the new date, time and place (if any) of the meeting as provided in Section 1.3 above.

 

Section 1.5:        Quorum. Except as otherwise provided by applicable law, the Certificate of Incorporation or these Bylaws, at each meeting of stockholders the holders of a majority of the voting power of the shares of stock issued and outstanding and entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business; provided, however, that where a separate vote by a class or classes or series of stock is required by applicable law or the Certificate of Incorporation, the holders of a majority of the voting power of the shares of such class or classes or series of the stock issued and outstanding and entitled to vote on such matter, present in person or represented by proxy at the meeting, shall constitute a quorum entitled to take action with respect to the vote on such matter. If a quorum shall fail to attend any meeting, the chairperson of the meeting or, if directed to be voted on by the chairperson of the meeting, the holders of a majority of the voting power of the shares entitled to vote who are present in person or represented by proxy at the meeting may adjourn the meeting. Shares of the Corporation’s stock belonging to the Corporation (or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation are held, directly or indirectly, by the Corporation) shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation or any other corporation to vote any shares of the Corporation’s stock held by it in a fiduciary capacity and to count such shares for purposes of determining a quorum. A quorum, once established at a meeting, shall not be broken by the withdrawal of enough votes to leave less than a quorum.

 

Section 1.6:         Organization. Meetings of stockholders shall be presided over by (a) such person as the Board may designate, or (b) in the absence of such a person, the Chairperson of the Board, or (c) in the absence of such person, the Lead Independent Director, or (d) in the absence of such person, the Chief Executive Officer of the Corporation, or (e) in the absence of such person, the President of the Corporation, or (f) in the absence of such person, by a Vice President of the Corporation. The Secretary of the Corporation shall act as secretary of the meeting, but in such person’s absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.

 

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Section 1.7:         Voting; Proxies. Each stockholder of record entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy. Such a proxy may be prepared, transmitted and delivered in any manner permitted by applicable law. Except as may be required in the Certificate of Incorporation, directors shall be elected by a plurality of the votes cast by the holders of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. At all meetings of stockholders at which a quorum is present, unless a different or minimum vote is required by applicable law, rule or regulation applicable to the Corporation or its securities, the rules or regulations of any stock exchange applicable to the Corporation, the Certificate of Incorporation or these Bylaws, in which case such different or minimum vote shall be the applicable vote on the matter, every matter other than the election of directors shall be decided by the affirmative vote of the holders of a majority of the voting power of the shares of stock entitled to vote on such matter that are present in person or represented by proxy at the meeting and are voted for or against the matter (or if there are two or more classes or series of stock entitled to vote as separate classes, then in the case of each class or series, the holders of a majority of the voting power of the shares of stock of that class or series present in person or represented by proxy at the meeting voting for or against such matter).

 

Section 1.8:         Fixing Date for Determination of Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall, unless otherwise required by law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If the Board so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at 5:00 p.m. Eastern Time on the day next preceding the day on which notice is given, or, if notice is waived, at 5:00 p.m. Eastern Time on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance herewith at the adjourned meeting.

 

In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the Board and which shall not be more than sixty (60) days prior to such action. If no such record date is fixed by the Board, then the record date for determining stockholders for any such purpose shall be at 5:00 p.m. Eastern Time on the day on which the Board adopts the resolution relating thereto.

 

Section 1.9:         List of Stockholders Entitled to Vote. The Corporation shall prepare, at least ten (10) days before every meeting of stockholders, a complete list of stockholders entitled to vote at the meeting (provided, however, if the record date for determining the stockholders entitled to vote is less than ten (10) days before the date of the meeting, the list shall reflect the stockholders entitled to vote as of the tenth (10th) day before the meeting date), arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least ten (10) days prior to the meeting, either (a) on a reasonably accessible electronic network as permitted by applicable law (provided that the information required to gain access to the list is provided with the notice of the meeting) or (b) during ordinary business hours, at the principal place of business of the Corporation. If the meeting is held at a location where stockholders may attend in person, a list of stockholders entitled to vote at the meeting shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present at the meeting. If the meeting is held solely by means of remote communication, then the list shall be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access the list shall be provided with the notice of the meeting. Except as otherwise provided by law, the stock ledger shall be the only evidence as to who are the stockholders entitled to examine the list of stockholders required by this Section 1.9 or to vote in person or by proxy at any meeting of stockholders.

 

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Section 1.10:     Inspectors of Elections.

 

1.10.1    Applicability. Unless otherwise required by the Certificate of Incorporation or by applicable law, the following provisions of this Section 1.10 shall apply only if and when the Corporation has a class of voting stock that is: (a) listed on a national securities exchange; (b) authorized for quotation on an interdealer quotation system of a registered national securities association; or (c) held of record by more than two thousand (2,000) stockholders. In all other cases, observance of the provisions of this Section 1.10 shall be optional, and at the discretion of the Board.

 

1.10.2   Appointment. The Corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors of election to act at the meeting and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting.

 

1.10.3    Inspector’s Oath. Each inspector of election, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such inspector’s ability.

 

1.10.4    Duties of Inspectors. At a meeting of stockholders, the inspectors of election shall (a) ascertain the number of shares outstanding and the voting power of each share, (b) determine the shares represented at a meeting and the validity of proxies and ballots, (c) count all votes and ballots, (d) determine and retain for a reasonable period of time a record of the disposition of any challenges made to any determination by the inspectors and (e) certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors.

 

1.10.5    Opening and Closing of Polls. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced by the chairperson of the meeting at the meeting. No ballot, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of the polls unless the Court of Chancery upon application by a stockholder shall determine otherwise.

 

1.10.6    Determinations. In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in connection with proxies pursuant to Section 211(a)(2)b.(i) of the DGCL, or in accordance with Sections 211(e) or 212(c)(2) of the DGCL, ballots and the regular books and records of the Corporation, except that the inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for the limited purpose permitted herein, the inspectors at the time they make their certification of their determinations pursuant to this Section 1.10 shall specify the precise information considered by them, including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors’ belief that such information is accurate and reliable.

 

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Section 1.11:     Conduct of Meetings. The Board may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board, the person presiding over any meeting of stockholders shall have the right and authority to convene and (for any or no reason) to recess and/or adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such presiding person, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board or prescribed by the presiding person of the meeting, may include, without limitation, the following: (a) the establishment of an agenda or order of business for the meeting; (b) rules and procedures for maintaining order at the meeting and the safety of those present; (c) limitations on attendance at or participation in the meeting to stockholders entitled to vote at the meeting, their duly authorized and constituted proxies or such other persons as the presiding person of the meeting shall determine; (d) restrictions on entry to the meeting after the time fixed for the commencement thereof; (e) limitations on the time allotted to questions or comments by participants; (f) restricting the use of audio/video recording devices and cell phones; and (g) complying with any state and local laws and regulations concerning safety and security. The presiding person at any meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and if such presiding person should so determine, such presiding person shall so declare to the meeting and any such matter or business not properly brought before the meeting shall not be transacted or considered. Unless and to the extent determined by the Board or the person presiding over the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

 

Section 1.12:     Notice of Stockholder Business; Nominations.

 

1.12.1    Annual Meeting of Stockholders.

 

(a)               Nominations of persons for election to the Board and the proposal of other business to be considered by the stockholders may be made at an annual meeting of stockholders only: (i) pursuant to the Corporation’s notice of such meeting (or any supplement thereto), (ii) by or at the direction of the Board or any committee thereof or (iii) by any stockholder of the Corporation who was a stockholder of record at the time of giving of the notice provided for in this Section 1.12 (the “Record Stockholder”), who is entitled to vote at such meeting and who complies with the notice and other procedures set forth in this Section 1.12 in all applicable respects. For the avoidance of doubt, the foregoing clause (iii) shall be the exclusive means for a stockholder to make nominations or propose business (other than business included in the Corporation’s proxy materials pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (such act, and the rules and regulations promulgated thereunder, the “Exchange Act”)), at an annual meeting of stockholders, and such stockholder must fully comply with the notice and other procedures set forth in this Section 1.12 to make such nominations or propose business before an annual meeting.

 

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(b)               For nominations or other business to be properly brought before an annual meeting by a Record Stockholder pursuant to Section 1.12.1(a) of these Bylaws:

 

(i)              the Record Stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and provide any updates or supplements to such notice at the times and in the forms required by this Section 1.12;

 

(ii)              such other business (other than the nomination of persons for election to the Board) must otherwise be a proper matter for stockholder action;

 

(iii)              if the Proposing Person (as defined below) has provided the Corporation with a Solicitation Notice (as defined below), such Proposing Person must, in the case of a proposal other than the nomination of persons for election to the Board, have delivered a proxy statement and form of proxy to holders of at least the percentage of the Corporation’s voting shares required under applicable law to carry any such proposal, or, in the case of a nomination or nominations, have delivered a proxy statement and form of proxy to holders of a percentage of the Corporation’s voting shares reasonably believed by such Proposing Person to be sufficient to elect the nominee or nominees proposed to be nominated by such Record Stockholder, and must, in either case, have included in such materials the Solicitation Notice; and

 

(iv)             if no Solicitation Notice relating thereto has been timely provided pursuant to this Section 1.12, the Proposing Person proposing such business or nomination must not have solicited a number of proxies sufficient to have required the delivery of such a Solicitation Notice under this Section 1.12.

 

To be timely, a Record Stockholder’s notice must be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation not later than 5:00 p.m. Eastern Time on the seventy-fifth (75th) day nor earlier than 5:00 p.m. Eastern Time on the one hundred and fifth (105th) day prior to the first anniversary of the preceding year’s annual meeting (except in the case of the Corporation’s first annual meeting following its initial public offering, for which such notice shall be timely if delivered in the same time period as if such meeting were a special meeting governed by Section 1.12.3 of these Bylaws); provided, however, that in the event that the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such anniversary date, notice by the Record Stockholder to be timely must be so delivered (A) no earlier than 5:00 p.m. Eastern Time on the one hundred and fifth (105th) day prior to such annual meeting and (B) no later than 5:00 p.m. Eastern Time on the later of the ninetieth (90th) day prior to such annual meeting or 5:00 p.m. Eastern Time on the tenth (10th) day following the day on which Public Announcement (as defined below) of the date of such meeting is first made by the Corporation. In no event shall an adjournment or postponement of an annual meeting commence a new time period (or extend any time period) for providing the Record Stockholder’s notice. For purposes of this Section 1.12, “delivery” of any notice or materials by a stockholder shall be made by either (1) hand delivery, overnight courier service, or by certified or registered mail, return receipt required, in each case, to the Secretary at the principal executive offices of the Company, or (2) electronic mail to the Secretary at the principal executive offices of the Company at such email address for the Secretary as may be specified in the Company’s proxy statement for the annual meeting of stockholders immediately preceding such delivery of notice or materials.

 

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(c)               As to each person whom the Record Stockholder proposes to nominate for election or reelection as a director, in addition to the matters set forth in paragraph (e) below, such Record Stockholder’s notice shall set forth:

 

(i)       the name, age, business address and residence address of such person;

 

(ii)       the principal occupation or employment of such nominee;

 

(iii)       the class, series and number of any shares of stock of the Corporation that are beneficially owned or owned of record by such person or any Associated Person (as defined in Section 1.12.4(c));

 

(iv)       the date or dates such shares were acquired and the investment intent of such acquisition;

 

(v)       all other information relating to such person that would be required to be disclosed in solicitations of proxies for election of directors in an election contest (even if an election contest is not involved), or would be otherwise required, in each case pursuant to and in accordance with Section 14(a) (or any successor provision) under the Exchange Act and the rules and regulations thereunder;

 

(vi)       such person’s written consent to being named in the Corporation’s proxy statement as a nominee, to the public disclosure of information regarding or related to such person provided to the Corporation by such person or otherwise pursuant to this Section 1.12 and to serving as a director if elected;

 

(vii)       whether such person meets the independence requirements of the stock exchange upon which the Corporation’s Common Stock is primarily traded;

 

(viii)       a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three (3) years, and any other material relationships, between or among such Proposing Person or any of its respective affiliates and associates, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, on the other hand, including all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the Proposing Person or any of its respective affiliates and associates were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such registrant; and

 

(ix)       a completed and signed questionnaire, representation and agreement required by Section 1.12.2 of these Bylaws.

 

(d)               As to any business other than the nomination of a director or directors that the Record Stockholder proposes to bring before the meeting, in addition to the matters set forth in paragraph (e) below, such Record Stockholder’s notice shall set forth:

 

(i)       a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the Bylaws, the text of the proposed amendment), the reasons for conducting such business at the meeting and any material interest in such business of such Proposing Person, including any anticipated benefit to any Proposing Person therefrom; and

 

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(ii)       a description of all agreements, arrangements and understandings between or among any such Proposing Person and any of its respective affiliates or associates, on the one hand, and any other person or persons, on the other hand, (including their names) in connection with the proposal of such business by such Proposing Person.

 

(e)               As to each Proposing Person giving the notice, such Record Stockholder’s notice shall set forth:

 

(i)       the current name and address of such Proposing Person, including, if applicable, their name and address as they appear on the Corporation’s stock ledger, if different;

 

(ii)       the class or series and number of shares of stock of the Corporation that are directly or indirectly owned of record or beneficially owned by such Proposing Person, including any shares of any class or series of the Corporation as to which such Proposing Person has a right to acquire beneficial ownership at any time in the future;

 

(iii)       whether and the extent to which any derivative interest in the Corporation’s equity securities (including without limitation any option, warrant, convertible security, stock appreciation right or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, whether or not such instrument or right shall be subject to settlement in the underlying class or series of shares of the Corporation or otherwise, and any cash-settled equity swap, total return swap, synthetic equity position or similar derivative arrangement (any of the foregoing, a “Derivative Instrument”), as well as any rights to dividends on the shares of any class or series of shares of the Corporation that are separated or separable from the underlying shares of the Corporation) or any short interest in any security of the Corporation (for purposes of this Bylaw a person shall be deemed to have a short interest in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any increase or decrease in the value of the subject security, including through performance-related fees) is held directly or indirectly by or for the benefit of such Proposing Person, including without limitation whether and the extent to which any ongoing hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding (including without limitation any short position or any borrowing or lending of shares) has been made, the effect or intent of which is to mitigate loss to or manage risk or benefit of share price changes for, or to increase or decrease the voting power of, such Proposing Person with respect to any share of stock of the Corporation (any of the foregoing, a “Short Interest”);

 

(iv)       any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such Proposing Person or any of its respective affiliates or associates is a general partner or, directly or indirectly, beneficially owns an interest in a general partner of such general or limited partnership;

 

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(v)      any direct or indirect material interest in any material contract or agreement with the Corporation, any affiliate of the Corporation or any Competitor (as defined below) (including, in any such case, any employment agreement, collective bargaining agreement or consulting agreement);

 

(vi)      any significant equity interests or any Derivative Instruments or Short Interests in any Competitor held by such Proposing Person and/or any of its respective affiliates or associates;

 

(vii)     any other material relationship between such Proposing Person, on the one hand, and the Corporation, any affiliate of the Corporation or any Competitor, on the other hand;

 

(viii)    all information that would be required to be set forth in a Schedule 13D filed pursuant to Rule 13d-1(a) or an amendment pursuant to Rule 13d-2(a) if such a statement were required to be filed under the Exchange Act and the rules and regulations promulgated thereunder by such Proposing Person and/or any of its respective affiliates or associates;

 

(ix)      any other information relating to such Proposing Person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies or consents by such Proposing Person in support of the business proposed to be brought before the meeting pursuant to Section 14(a) (or any successor provision) under the Exchange Act and the rules and regulations thereunder;

 

(x)       such Proposing Person’s written consent to the public disclosure of information provided to the Corporation pursuant to this Section 1.12;

 

(xi)      a complete written description of any agreement, arrangement or understanding (whether oral or in writing) (including any knowledge that another person or entity is Acting in Concert (as defined in Section 1.12.4(c)) with such Proposing Person) between or among such Proposing Person, any of its respective affiliates or associates and any other person Acting in Concert with any of the foregoing persons;

 

(xii)     a representation that the Record Stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination;

 

(xiii)    a representation whether such Proposing Person intends (or is part of a group that intends) to deliver a proxy statement or form of proxy to holders of, in the case of a proposal, at least the percentage of the Corporation’s voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the Corporation’s voting shares to elect such nominee or nominees (an affirmative statement of such intent being a “Solicitation Notice”); and

 

(xiv)    any proxy, contract, arrangement or relationship pursuant to which the Proposing Person has a right to vote, directly or indirectly, any shares of any security of the Corporation.

 

The disclosures to be made pursuant to the foregoing clauses (ii), (iii), (iv) and (vi) shall not include any information with respect to the ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result of being the stockholder directed to prepare and submit the notice required by these Bylaws on behalf of a beneficial owner.

 

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(f)          A stockholder providing written notice required by this Section 1.12 shall update such notice in writing, if necessary, so that the information provided or required to be provided in such notice is true and correct in all material respects as of (i) the record date for determining the stockholders entitled to notice of the meeting and (ii) 5:00 p.m. Eastern Time on the tenth (10th) business day prior to the meeting or any adjournment or postponement thereof. In the case of an update pursuant to clause (i) of the foregoing sentence, such update shall be received by the Secretary of the Corporation at the principal executive office of the Corporation not later than five (5) business days after the record date for determining the stockholders entitled to notice of the meeting, and in the case of an update and supplement pursuant to clause (ii) of the foregoing sentence, such update and supplement shall be received by the Secretary of the Corporation at the principal executive office of the Corporation not later than eight (8) business days prior to the date for the meeting and, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed). For the avoidance of doubt, the obligation to update as set forth in this paragraph shall not limit the Corporation’s rights with respect to any deficiencies in any notice provided by a stockholder, extend any applicable deadlines hereunder or enable or be deemed to permit a stockholder who has previously submitted notice hereunder to amend or update any proposal or nomination or to submit any new proposal, including by changing or adding nominees, matters, business and/or resolutions proposed to be brought before a meeting of the stockholders.

 

(g)          Notwithstanding anything in Section 1.12 or any other provision of these Bylaws to the contrary, any person who has been determined by a majority of the Whole Board to have violated Section 2.11 of these Bylaws or a Board Confidentiality Policy (as defined below) while serving as a director of the Corporation in the preceding five (5) years shall be ineligible to be nominated or be qualified to serve as a member of the Board, absent a prior waiver for such nomination or qualification approved by two-thirds of the Whole Board.

 

1.12.2     Submission of Questionnaire, Representation and Agreement. To be eligible to be a nominee of any stockholder for election or reelection as a director of the Corporation, the person proposed to be nominated must deliver (in accordance with the time periods prescribed for delivery of notice under Section 1.12 of these Bylaws) to the Secretary of the Corporation at the principal executive offices of the Corporation a completed and signed questionnaire in the form required by the Corporation (which form the stockholder shall request in writing from the Secretary of the Corporation and which the Secretary shall provide to such stockholder within ten days of receiving such request) with respect to the background and qualification of such person to serve as a director of the Corporation and the background of any other person or entity on whose behalf, directly or indirectly, the nomination is being made and a signed representation and agreement (in the form available from the Secretary upon written request) that such person: (a) is not and will not become a party to (i) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or (ii) any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Corporation, with such person’s fiduciary duties under applicable law, (b) is not and will not become a party to any Compensation Arrangement (as defined below) that has not been disclosed therein, (c) if elected as a director of the Corporation, will comply with all informational and similar requirements of applicable insurance policies and laws and regulations in connection with service or action as a director of the Corporation, (d) if elected as a director of the Corporation, will comply with all corporate governance, conflict of interest, stock ownership requirements, confidentiality and trading policies and guidelines of the Corporation publicly disclosed from time to time, (e) if elected as a director of the Corporation, will act in the best interests of the Corporation and its stockholders and not in the interests of individual constituencies, (f) consents to being named as a nominee in the Corporation’s proxy statement pursuant to Rule 14a-4(d) under the Exchange Act and any associated proxy card of the Corporation and agrees to serve if elected as a director and (g) intends to serve as a director for the full term for which such individual is to stand for election.

 

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1.12.3     Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of such meeting. Nominations of persons for election to the Board may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of such meeting (a) by or at the direction of the Board or any committee thereof or (b) provided that the Board has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice of the special meeting, who shall be entitled to vote at the meeting and who complies with the notice and other procedures set forth in this Section 1.12 in all applicable respects. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board, any such stockholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Corporation’s notice of meeting, if the stockholder’s notice required by Section 1.12.1(b) of these Bylaws shall be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation (i) no earlier than the one hundred and fifth (105th) day prior to such special meeting and (ii) no later than 5:00 p.m. Eastern Time on the later of the seventy-fifth (75th) day prior to such special meeting or the tenth (10th) day following the day on which Public Announcement is first made of the date of the special meeting and of the nominees proposed by the Board to be elected at such meeting. In no event shall an adjournment or postponement of a special meeting commence a new time period (or extend any time period) for providing such notice.

 

1.12.4     General.

 

(a)           Except as otherwise expressly provided in any applicable rule or regulation promulgated under the Exchange Act, only such persons who are nominated in accordance with the procedures set forth in this Section 1.12 shall be eligible to be elected at a meeting of stockholders and serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 1.12. Except as otherwise provided by law or these Bylaws, the chairperson of the meeting shall have the power and duty to determine whether a nomination or any other business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 1.12 and, if any proposed nomination or business is not in compliance herewith, to declare that such defective proposal or nomination shall be disregarded. Notwithstanding the foregoing provisions of this Section 1.12, unless otherwise required by law, if the stockholder (or a Qualified Representative of the stockholder (as defined below)) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or proposed business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation.

 

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(b)          Notwithstanding the foregoing provisions of this Section 1.12, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth herein. Nothing in this Section 1.12 shall be deemed to affect any rights of (a) stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act or (b) the holders of any series of the Corporation’s Preferred Stock to elect directors pursuant to any applicable provisions of the Certificate of Incorporation.

 

(c)          For purposes of these Bylaws the following definitions shall apply:

 

(A)   a person shall be deemed to be “Acting in Concert” with another person if such person knowingly acts (whether or not pursuant to an express agreement, arrangement or understanding) in concert with, or toward a common goal relating to the management, governance or control of the Corporation in substantial parallel with, such other person where (1) each person is conscious of the other person’s conduct or intent and this awareness is an element in their decision-making processes and (2) at least one additional factor suggests that such persons intend to act in concert or in substantial parallel, which such additional factors may include, without limitation, exchanging information (whether publicly or privately), attending meetings, conducting discussions or making or soliciting invitations to act in concert or in substantial parallel; provided that a person shall not be deemed to be Acting in Concert with any other person solely as a result of the solicitation or receipt of revocable proxies or consents from such other person in response to a solicitation made pursuant to, and in accordance with, Section 14(a) (or any successor provision) of the Exchange Act by way of a proxy or consent solicitation statement filed on Schedule 14A. A person Acting in Concert with another person shall be deemed to be Acting in Concert with any third party who is also Acting in Concert with such other person;

 

(B)    “affiliate” and “associate” shall have the meanings ascribed thereto in Rule 405 under the Securities Act of 1933, as amended (the “Securities Act”); provided, however, that the term “partner” as used in the definition of “associate” shall not include any limited partner that is not involved in the management of the relevant partnership;

 

(C)    “Associated Person” shall mean with respect to any subject stockholder or other person (including any proposed nominee) (1) any person directly or indirectly controlling, controlled by or under common control with such stockholder or other person, (2) any beneficial owner of shares of stock of the Corporation owned of record or beneficially by such stockholder or other person, (3) any associate of such stockholder or other person and (4) any person directly or indirectly controlling, controlled by or under common control or Acting in Concert with any such Associated Person;

 

(D)    “Compensation Arrangement” shall mean any direct or indirect compensatory payment or other financial agreement, arrangement or understanding with any person or entity other than the Corporation, including any agreement, arrangement or understanding with respect to any direct or indirect compensation, reimbursement or indemnification in connection with candidacy, nomination, service or action as a nominee or as a director of the Corporation;

 

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(E)     “Competitor” shall mean any entity that provides products or services that compete with or are alternatives to the principal products produced or services provided by the Corporation or its affiliates;

 

(F)     “Proposing Person” shall mean (1) the Record Stockholder providing the notice of business proposed to be brought before an annual meeting or nomination of persons for election to the Board at a stockholder meeting, (2) the beneficial owner or beneficial owners, if different, on whose behalf the notice of business proposed to be brought before the annual meeting or nomination of persons for election to the Board at a stockholder meeting is made and (3) any Associated Person on whose behalf the notice of business proposed to be brought before the annual meeting or nomination of persons for election to the Board at a stockholder meeting is made;

 

(G)    “Public Announcement” shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act; and

 

(H)   to be considered a “Qualified Representative” of a stockholder, a person must be a duly authorized officer, manager, trustee or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as a proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction thereof, at the meeting. The Secretary of the Corporation, or any other person who shall be appointed to serve as secretary of the meeting, may require, on behalf of the Corporation, reasonable and appropriate documentation to verify the status of a person purporting to be a “Qualified Representative” for purposes hereof.

 

Article II: BOARD OF DIRECTORS

 

Section 2.1:     Number; Qualifications. The total number of directors constituting the Whole Board shall be fixed from time to time in the manner set forth in the Certificate of Incorporation and the term “Whole Board” shall have the meaning specified in the Certificate of Incorporation. No decrease in the authorized number of directors constituting the Whole Board shall shorten the term of any incumbent director. Directors need not be stockholders of the Corporation.

 

Section 2.2:     Election; Resignation; Removal; Vacancies. Election of directors need not be by written ballot. Each director shall hold office until the annual meeting at which such director’s term expires and until such director’s successor is elected and qualified or until such director’s earlier death, resignation, disqualification or removal. Any director may resign by delivering a resignation in writing or by electronic transmission to the Corporation at its principal office or to the Chairperson of the Board, the Chief Executive Officer or the Secretary. Such resignation shall be effective upon delivery unless it is specified to be effective at a later time or upon the happening of an event. Subject to the special rights of holders of any series of the Corporation’s Preferred Stock to elect directors, directors may be removed only as provided by the Certificate of Incorporation and applicable law. All vacancies occurring in the Board and any newly created directorships resulting from any increase in the authorized number of directors shall be filled in the manner set forth in the Certificate of Incorporation.

 

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Section 2.3:     Regular Meetings. Regular meetings of the Board may be held at such places, within or without the State of Delaware, and at such times as the Board may from time to time determine. Notice of regular meetings need not be given if the date, times and places thereof are fixed by resolution of the Board.

 

Section 2.4:     Special Meetings. Special meetings of the Board may be called by the Chairperson of the Board, the Chief Executive Officer, the Lead Independent Director or a majority of the members of the Board then in office and may be held at any time, date or place, within or without the State of Delaware, as the person or persons calling the meeting shall fix. Notice of the time, date and place of such meeting shall be given orally, in writing or by electronic transmission (including electronic mail), by the person or persons calling the meeting to all directors at least four (4) days before the meeting if the notice is mailed, or at least twenty-four (24) hours before the meeting if such notice is given by telephone, hand delivery, telegram, telex, mailgram, facsimile, electronic mail or other means of electronic transmission; provided, however, that if, under the circumstances, the Chairperson of the Board, the Lead Independent Director or the Chief Executive Officer calling a special meeting deems that more immediate action is necessary or appropriate, notice may be delivered on the day of such special meeting. Unless otherwise indicated in the notice, any and all business may be transacted at a special meeting.

 

Section 2.5:     Remote Meetings Permitted. Members of the Board, or any committee of the Board, may participate in a meeting of the Board or such committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to conference telephone or other communications equipment shall constitute presence in person at such meeting.

 

Section 2.6:    Quorum; Vote Required for Action. At all meetings of the Board, a majority of the Whole Board shall constitute a quorum for the transaction of business. If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, date or time. Except as otherwise provided herein or in the Certificate of Incorporation, or required by law, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board.

 

Section 2.7:     Organization. Meetings of the Board shall be presided over by (a) the Chairperson of the Board, or (b) in the absence of such person, the Lead Independent Director, or (c) in such person’s absence, by the Chief Executive Officer, or (d) in such person’s absence, by a chairperson chosen by the Board at the meeting. The Secretary of the Corporation shall act as secretary of the meeting, but in such person’s absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.

 

Section 2.8:     Unanimous Action by Directors in Lieu of a Meeting. Any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or such committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee, as applicable. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

 

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Section 2.9:      Powers. Except as otherwise provided by the Certificate of Incorporation or the DGCL, the business and affairs of the Corporation shall be managed by or under the direction of the Board.

 

Section 2.10:  Compensation of Directors. Members of the Board, as such, may receive, pursuant to a resolution of the Board, fees and other compensation for their services as directors, including without limitation their services as members of committees of the Board.

 

Section 2.11:   Confidentiality. Each director shall maintain the confidentiality of, and shall not share with any third-party person or entity (including third parties that originally sponsored, nominated or designated such director (the “Sponsoring Party”)), any non-public information learned in their capacities as directors, including communications among Board members in their capacities as directors, provided that directors that are originally nominated or designated by a Sponsoring Party may disclose such information to the Sponsoring Party (or the management company of the Sponsoring Party) if the Sponsoring Party (or the management company of the Sponsoring Party) has applicable confidentiality restrictions in place. The Board may adopt a board confidentiality policy further implementing and interpreting this Section 2.11 (a “Board Confidentiality Policy”). Other than as provided in the first section of this Section 2.11, all directors are required to comply with this Section 2.11 and any Board Confidentiality Policy unless such director or the Sponsoring Party for such director has entered into a specific written agreement with the Corporation, in either case as approved by the Board, providing otherwise with respect to such confidential information.

 

Article III: COMMITTEES

 

Section 3.1:     Committees. The Board may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting of such committee who are not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent provided in a resolution of the Board, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority in reference to the following matters: (a) approving, adopting or recommending to the stockholders any action or matter (other than the election or removal of members of the Board) expressly required by the DGCL to be submitted to stockholders for approval or (b) adopting, amending or repealing any bylaw of the Corporation.

 

Section 3.2:     Committee Rules. Each committee shall keep records of its proceedings and make such reports as the Board may from time to time request. Unless the Board otherwise provides, each committee designated by the Board may make, alter and repeal rules for the conduct of its business. In the absence of such rules, each committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article II of these Bylaws. Except as otherwise provided in the Certificate of Incorporation, these Bylaws or the resolution of the Board designating the committee, any committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and may delegate to any such subcommittee any or all of the powers and authority of the committee.

 

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Article IV: OFFICERS; CHAIRPERSON; LEAD INDEPENDENT DIRECTOR

 

Section 4.1:     Generally. The officers of the Corporation shall consist of a Chief Executive Officer (who may be the Chairperson of the Board or the President), a President, a Secretary and a Treasurer and may consist of such other officers, including, without limitation, a Chief Financial Officer, and one or more Vice Presidents, as may from time to time be appointed by the Board. All officers shall be elected by the Board; provided, however, that the Board may empower the Chief Executive Officer of the Corporation to appoint any officer other than the Chief Executive Officer, the President, the Chief Financial Officer or the Treasurer. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, each officer shall hold office until such officer’s successor is duly elected and qualified or until such officer’s earlier resignation, death, disqualification or removal. Any number of offices may be held by the same person. Any officer may resign by delivering a resignation in writing or by electronic transmission to the Corporation at its principal office or to the Chairperson of the Board, the Chief Executive Officer or the Secretary. Such resignation shall be effective upon delivery unless it is specified to be effective at some later time or upon the happening of some later event. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled by the Board and the Board may, in its discretion, leave unfilled, for such period as it may determine, any offices. Each such successor shall hold office for the unexpired term of such officer’s predecessor and until a successor is duly elected and qualified or until such officer’s earlier resignation, death, disqualification or removal.

 

Section 4.2:     Chief Executive Officer. Subject to the control of the Board and such supervisory powers (if any) as may be given by the Board, the powers and duties of the Chief Executive Officer of the Corporation are:

 

(a)       to act as the general manager and, subject to the control of the Board, to have general supervision, direction and control of the business and affairs of the Corporation;

 

(b)       subject to Section 1.6 of these Bylaws, to preside at all meetings of the stockholders;

 

(c)       subject to Section 1.2 of these Bylaws, to call special meetings of the stockholders to be held at such times and, subject to the limitations prescribed by law or by these Bylaws, at such places as he or she shall deem proper; and

 

(d)       to affix the signature of the Corporation to all deeds, conveyances, mortgages, guarantees, leases, obligations, bonds, certificates and other papers and instruments in writing which have been authorized by the Board or which, in the judgment of the Chief Executive Officer, should be executed on behalf of the Corporation; to sign certificates for shares of stock of the Corporation (if any); and, subject to the direction of the Board, to have general charge of the property of the Corporation and to supervise and control all officers, agents and employees of the Corporation.

 

The person holding the office of President shall be the Chief Executive Officer of the Corporation unless the Board shall designate another officer to be the Chief Executive Officer.

 

Section 4.3:     Chairperson of the Board. Subject to the provisions of Section 2.7 of these Bylaws, the Chairperson of the Board shall have the power to preside at all meetings of the Board and shall have such other powers and duties as provided in these Bylaws and as the Board may from time to time prescribe. The Chairperson of the Board may or may not be an officer of the Corporation.

 

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Section 4.4:     Lead Independent Director. The Board may, in its discretion, elect a lead independent director from among its members that are Independent Directors (as defined below) (such director, the “Lead Independent Director”). The Lead Independent Director shall preside at all meetings at which the Chairperson of the Board is not present and shall exercise such other powers and duties as may from time to time be assigned to him or her by the Board or as prescribed by these Bylaws. For purposes of these Bylaws, “Independent Director” has the meaning ascribed to such term under the rules of the exchange upon which the Corporation’s Common Stock is primarily traded.

 

Section 4.5:     President. The person holding the office of Chief Executive Officer shall be the President of the Corporation unless the Board shall have designated one individual as the President and a different individual as the Chief Executive Officer of the Corporation. Subject to the provisions of these Bylaws and to the direction of the Board, and subject to the supervisory powers of the Chief Executive Officer (if the Chief Executive Officer is an officer other than the President), and subject to such supervisory powers and authority as may be given by the Board to the Chairperson of the Board, and/or to any other officer, the President shall have the responsibility for the general management and control of the business and affairs of the Corporation and the general supervision and direction of all of the officers, employees and agents of the Corporation (other than the Chief Executive Officer, if the Chief Executive Officer is an officer other than the President) and shall perform all duties and have all powers that are commonly incident to the office of President or that are delegated to the President by the Board.

 

Section 4.6:     Chief Financial Officer. The person holding the office of Chief Financial Officer shall be the Treasurer of the Corporation unless the Board shall have designated another officer as the Treasurer of the Corporation. Subject to the direction of the Board and the Chief Executive Officer, the Chief Financial Officer shall perform all duties and have all powers that are commonly incident to the office of Chief Financial Officer, or as the Board or the Chief Executive Officer may from time to time prescribe.

 

Section 4.7:     Treasurer. The person holding the office of Treasurer shall be the Chief Financial Officer of the Corporation unless the Board shall have designated another officer as the Chief Financial Officer of the Corporation. The Treasurer shall have custody of all monies and securities of the Corporation. The Treasurer shall make such disbursements of the funds of the Corporation as are authorized and shall render from time to time an account of all such transactions. The Treasurer shall also perform such other duties and have such other powers as are commonly incident to the office of Treasurer, or as the Board or the Chief Executive Officer may from time to time prescribe.

 

Section 4.8:     Vice President. Each Vice President shall have all such powers and duties as are commonly incident to the office of Vice President or that are delegated to him or her by the Board or the Chief Executive Officer. A Vice President may be designated by the Board to perform the duties and exercise the powers of the Chief Executive Officer or President in the event of the Chief Executive Officer’s or President’s absence or disability.

 

Section 4.9:     Secretary. The Secretary shall issue or cause to be issued all authorized notices for, and shall keep, or cause to be kept, minutes of all meetings of the stockholders and the Board. The Secretary shall have charge of the corporate minute books and similar records and shall perform such other duties and have such other powers as are commonly incident to the office of Secretary, or as the Board or the Chief Executive Officer may from time to time prescribe.

 

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Section 4.10:   Delegation of Authority. The Board may from time to time delegate the powers or duties of any officer of the Corporation to any other officers or agents of the Corporation, notwithstanding any provision hereof.

 

Section 4.11:   Removal. Any officer of the Corporation shall serve at the pleasure of the Board and may be removed at any time, with or without cause, by the Board; provided that if the Board has empowered the Chief Executive Officer to appoint any officer of the Corporation, then such officer may also be removed by the Chief Executive Officer. Such removal shall be without prejudice to the contractual rights of such officer (if any) with the Corporation.

 

Article V: STOCK

 

Section 5.1:     Certificates; Uncertificated Shares. The shares of capital stock of the Corporation shall be uncertificated shares; provided, however, that the resolution of the Board that the shares of capital stock of the Corporation shall be uncertificated shares shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation (or the transfer agent or registrar, as the case may be). Notwithstanding the foregoing, the Board may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be certificated shares. Every holder of stock represented by certificates shall be entitled to have a certificate signed by, or in the name of, the Corporation, by any two authorized officers of the Corporation (it being understood that each of the Chairperson of the Board, the Vice-Chairperson of the Board, the Chief Executive Officer, the President, any Vice President, the Treasurer, any Assistant Treasurer, the Secretary and any Assistant Secretary shall be an authorized officer for such purpose), representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue.

 

Section 5.2:     Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates or Uncertificated Shares. The Corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate previously issued by it, alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to agree to indemnify the Corporation and/or to give the Corporation a bond sufficient to indemnify it, against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

 

Section 5.3:    Other Regulations. Subject to applicable law, the Certificate of Incorporation and these Bylaws, the issue, transfer, conversion and registration of shares represented by certificates and of uncertificated shares shall be governed by such other regulations as the Board may establish.

 

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Article VI: INDEMNIFICATION

 

Section 6.1:     Indemnification of Officers and Directors. Each person who was or is made a party to, or is threatened to be made a party to, or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, legislative, investigative or any other type whatsoever, preliminary, informal or formal, including any arbitration or other alternative dispute resolution (including but not limited to giving testimony or responding to a subpoena) and including any appeal of any of the foregoing (a “Proceeding”), by reason of the fact that such person (or a person of whom such person is the legal representative), is or was a director or officer of the Corporation or a Reincorporated Predecessor (as defined below) or, while serving as a director or officer of the Corporation or a Reincorporated Predecessor, is or was serving at the request of the Corporation as a director, officer, employee, agent or trustee of another corporation, or of a partnership, joint venture, trust or other enterprise or non-profit entity, including service with respect to employee benefit plans (for purposes of this Article VI, an “Indemnitee”), shall be indemnified and held harmless by the Corporation to the fullest extent permitted by the DGCL as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), against all expenses, costs, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes and penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith. Such indemnification shall continue as to an Indemnitee who has ceased to be a director or officer of the Corporation or a Reincorporated Predecessor (as defined below) or, while serving as a director or officer of the Corporation or a Reincorporated Predecessor, is or was serving at the request of the Corporation as a director, officer, employee, agent or trustee of another corporation, or of a partnership, joint venture, trust or other enterprise or non-profit entity, including service with respect to employee benefit plans and shall inure to the benefit of such Indemnitees’ heirs, executors and administrators. Notwithstanding the foregoing, subject to Section 6.5 of this Article VI, the Corporation shall indemnify any such Indemnitee seeking indemnity in connection with a Proceeding (or part thereof) initiated by such Indemnitee only if such Proceeding (or part thereof) was authorized by the Board or such indemnification is authorized by an agreement approved by the Board. As used herein, the term the “Reincorporated Predecessor” means a corporation that is merged with and into the Corporation in a statutory merger where (a) the Corporation is the surviving corporation of such merger; or (b) the primary purpose of such merger is to change the corporate domicile of the Reincorporated Predecessor to Delaware.

 

Section 6.2:     Advancement of Expenses. Notwithstanding any other provision of these Bylaws, the Corporation shall pay all reasonable expenses (including attorneys’ fees) incurred by an Indemnitee in defending any Proceeding in advance of its final disposition; provided, however, that if the DGCL then so requires, the advancement of such expenses (i.e., payment of such expenses as incurred or otherwise in advance of the final disposition of the Proceeding) shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such Indemnitee, to repay such amounts if it shall ultimately be determined by a court of competent jurisdiction in a final judgment not subject to appeal that such Indemnitee is not entitled to be indemnified under this Article VI or otherwise. Any advances of expenses or undertakings to repay pursuant to this Section 6.2 shall be unsecured, interest free and without regard to Indemnitee’s ability to pay.

 

Section 6.3:     Non-Exclusivity of Rights. The rights conferred on any person in this Article VI shall not be exclusive of any other right that such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote or consent of stockholders or disinterested directors, or otherwise. Additionally, nothing in this Article VI shall limit the ability of the Corporation, in its discretion, to indemnify or advance expenses to persons whom the Corporation is not obligated to indemnify or advance expenses pursuant to this Article VI.

 

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Section 6.4:     Indemnification Contracts. The Board is authorized to cause the Corporation to enter into indemnification contracts with any director, officer, employee or agent of the Corporation, or any person serving at the request of the Corporation as a director, officer, employee, agent or trustee of another corporation, partnership, joint venture, trust or other enterprise or non-profit entity, including employee benefit plans, providing indemnification or advancement rights to such person. Such rights may be greater than those provided in this Article VI.

 

Section 6.5:      Right of Indemnitee to Bring Suit.

 

6.5.1       Right to Bring Suit. If a claim under Section 6.1 or 6.2 of this Article VI is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty (20) days, the Indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If the Indemnitee is successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Indemnitee also shall be entitled to be paid, to the fullest extent permitted by law, the expense of prosecuting or defending such suit.

 

6.5.2      Effect of Determination. Neither the absence of a determination prior to the commencement of such suit that indemnification of or the providing of advancement to the Indemnitee is proper in the circumstances because the Indemnitee has met the applicable standard of conduct set forth in applicable law, nor an actual determination that the Indemnitee has not met such applicable standard of conduct, shall create a presumption that the Indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the Indemnitee, be a defense to such suit.

 

6.5.3      Burden of Proof. In any suit brought by the Indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the Indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article VI, or otherwise, shall be on the Corporation.

 

Section 6.6:     Nature of Rights. The rights conferred upon Indemnitees in this Article VI shall be contract rights and such rights shall continue as to an Indemnitee who has ceased to be a director or officer and shall inure to the benefit of the Indemnitee’s heirs, executors and administrators.

 

Section 6.7:     Amendment or Repeal. Any amendment, repeal or modification of any provision of this Article VI that adversely affects any right of an Indemnitee or an Indemnitee’s successors shall be prospective only, and shall not adversely affect any right or protection conferred on a person pursuant to this Article VI and existing at the time of such amendment, repeal or modification.

 

Section 6.8:      Insurance. The Corporation may purchase and maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise or non-profit entity against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL.

 

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Article VII: NOTICES

 

Section 7.1:       Notice.

 

7.1.1       Form and Delivery. Except as otherwise specifically required in these Bylaws (including, without limitation, Section 7.1.2 of these Bylaws) or by applicable law, all notices required to be given pursuant to these Bylaws may (a) in every instance in connection with any delivery to a member of the Board, be effectively given by hand delivery (including use of a delivery service), by depositing such notice in the mail, postage prepaid, or by sending such notice by overnight express courier, facsimile, electronic mail or other form of electronic transmission and (b) be effectively delivered to a stockholder when given by hand delivery, by depositing such notice in the mail, postage prepaid, or, if specifically consented to by the stockholder as described in Section 7.1.2 of these Bylaws, by sending such notice by facsimile, electronic mail or other form of electronic transmission. Any such notice shall be addressed to the person to whom notice is to be given at such person’s address as it appears on the records of the Corporation. The notice shall be deemed given (a) in the case of hand delivery, when received by the person to whom notice is to be given or by any person accepting such notice on behalf of such person, (b) in the case of delivery by mail, upon deposit in the mail, (c) in the case of delivery by overnight express courier, when dispatched, and (d) in the case of delivery via facsimile, electronic mail or other form of electronic transmission, at the time provided in Section 7.1.2 of these Bylaws.

 

7.1.2       Electronic Transmission. Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Corporation under any provision of the DGCL, the Certificate of Incorporation or these Bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given in accordance with Section 232 of the DGCL. Any such consent shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked if (a) the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent and (b) such inability becomes known to the Secretary or an Assistant Secretary of the Corporation or to the transfer agent, or other person responsible for the giving of notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action. Notice given pursuant to this Section 7.1.2 shall be deemed given: (i) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice; (ii) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (iii) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of such posting and the giving of such separate notice; and (iv) if by any other form of electronic transmission, when directed to the stockholder.

 

7.1.3      Affidavit of Giving Notice. An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the Corporation that the notice has been given in writing or by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

 

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Section 7.2:     Waiver of Notice. Whenever notice is required to be given under any provision of the DGCL, the Certificate of Incorporation or these Bylaws, a written waiver of notice, signed by the person entitled to notice, or waiver by electronic transmission by such person, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any waiver of notice.

 

Article VIII: INTERESTED DIRECTORS

 

Section 8.1:      Interested Directors. No contract or transaction between the Corporation and one or more of its members of the Board or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are members of the board of directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof that authorizes the contract or transaction, or solely because his, her or their votes are counted for such purpose, if: (a) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; (b) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (c) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board, a committee thereof, or the stockholders.

 

Section 8.2:     Quorum. Interested directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction.

 

Article IX: MISCELLANEOUS

 

Section 9.1:      Fiscal Year. The fiscal year of the Corporation shall be determined by resolution of the Board.

 

Section 9.2:     Seal. The Board may provide for a corporate seal, which may have the name of the Corporation inscribed thereon and shall otherwise be in such form as may be approved from time to time by the Board.

 

Section 9.3:     Form of Records. Any records administered by or on behalf of the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on or by means of, or be in the form of, any other information storage device, method or one or more electronic networks or databases (including one or more distributed electronic networks or databases), electronic or otherwise, provided that the records so kept can be converted into clearly legible paper form within a reasonable time and otherwise comply with the DGCL. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect such records pursuant to any provision of the DGCL.

 

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Section 9.4:    Reliance Upon Books and Records. A member of the Board, or a member of any committee designated by the Board shall, in the performance of such person’s duties, be fully protected in relying in good faith upon the books and records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of the Corporation’s officers or employees, or committees of the Board, or by any other person as to matters the member reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.

 

Section 9.5:     Certificate of Incorporation Governs. In the event of any conflict between the provisions of the Certificate of Incorporation and these Bylaws, the provisions of the Certificate of Incorporation shall govern.

 

Section 9.6:     Severability. If any provision of these Bylaws shall be held to be invalid, illegal, unenforceable or in conflict with the provisions of the Certificate of Incorporation, then such provision shall nonetheless be enforced to the maximum extent possible consistent with such holding and the remaining provisions of these Bylaws (including without limitation, all portions of any section of these Bylaws containing any such provision held to be invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation, that are not themselves invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation) shall remain in full force and effect.

 

Section 9.7:     Time Periods. In applying any provision of these Bylaws which requires that an act be done or not be done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded, and the day of the event shall be included.

 

Article X: AMENDMENT

 

Notwithstanding any other provision of these Bylaws, any alteration, amendment or repeal of these Bylaws, and any adoption of new Bylaws, shall require the approval of the Board or the stockholders of the Corporation as expressly provided in the Certificate of Incorporation.

 

Article XI: EXCLUSIVE FORUM

 

Unless the Corporation consents in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act, including all causes of action asserted against any defendant named in such complaint.  For the avoidance of doubt, this provision is intended to benefit and may be enforced by us, our officers and directors, the underwriters to any offering giving rise to such complaint, and any other professional entity whose profession gives authority to a statement made by that person or entity and who has prepared or certified any part of the documents underlying the offering. Any person or entity purchasing or otherwise acquiring or holding any interest in any security of the Corporation shall be deemed to have notice of and consented to the provisions of this Article XI.

 

 

 

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CERTIFICATION OF RESTATED BYLAWS

OF

ELEVATION ONCOLOGY, Inc.

 

a Delaware Corporation

 

I, Tammy Furlong, certify that I am Secretary of Elevation Oncology, Inc., a Delaware corporation (the “Corporation”), that I am duly authorized to make and deliver this certification, that the attached Bylaws are a true and complete copy of the Restated Bylaws of the Corporation in effect as of the date of this certificate.

 

Dated: [●], 2021
   
   
  Tammy Furlong
  Vice President of Finance and Accounting and Secretary

 

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 Exhibit 4.2

 

AMENDED AND RESTATED
INVESTORS’ RIGHTS AGREEMENT

 

THIS AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT (this “Agreement”), is made as of the 10ths day of November 2020, by and among Elevation Oncology, Inc, a Delaware corporation formerly known as 14ner Oncology, Inc. (the “Company”), each of the investors listed on Schedule A hereto, each of which is referred to in this Agreement as an “Investor,” and any subsequent investor that becomes a party to this Agreement in accordance with Section 6.9 hereof.

 

RECITALS

 

WHEREAS, certain of the Investors (the “Existing Investors”) hold shares of Series A Preferred Stock and/or shares of Common Stock issued upon conversion thereof and possess registration rights, information rights, rights of first offer, and other rights pursuant to that certain Investors’ Rights Agreement dated as of July 12, 2019, by and among the Company and such Existing Investors (as amended by that First Amendment to Investors’ Rights Agreement, dated August 7, 2019, the “Prior Agreement”);

 

WHEREAS, the Existing Investors are holders of at least a majority of the Registrable Securities (as defined in the Prior Agreement), and desire to amend and restated the Prior Agreement in its entirety and to accept the rights created pursuant to this Agreement in lieu of rights granted them under the Prior Agreement: and

 

WHEREAS, certain of the Investors are parties to that certain Series B Preferred Stock Purchase Agreement of even date herewith by and among the Company and such Investors (the “Purchase Agreement”), under which certain of the Company’s and such Investors’ obligations are conditioned upon the execution and delivery of this Agreement by such Investors and certain Existing Investors.

 

NOW, THEREFORE, the Existing Investors hereby agree that the Prior Agreement is hereby amended and restated in its entirety by this Agreement, and the parties to this Agreement further hereby agree as follows:

 

1.             Definitions. For purposes of this Agreement:

 

1.1               “Affiliate” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including without limitation any general partner, managing member, officer, director or trustee of such Person, or any venture capital fund, registered investment company or other investment fund now or hereafter existing that is controlled by one or more general partners, managing members or investment adviser of, or shares the same management company or investment adviser with, such Person.

 

1.2               “Board” means the Board of Directors of the Company.

 

1.3               “Certificate of Incorporation” means the Company’s Second Amended and Restated Certificate of Incorporation, as amended and/or restated from time to time.

 

1.4               “Common Stock” means shares of the Company’s common stock, par value $0.0001 per share. 

 

 

1.5               “Damages” means any loss, damage, claim or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, damage, claim or liability (or any action in respect thereof) arises out of or is based upon: (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the indemnifying party (or any of its agents or Affiliates) of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law.

 

1.6               “Derivative Securities” means any securities or rights convertible into, or exercisable or exchangeable for (in each case, directly or indirectly), Common Stock, including options and warrants.

 

1.7               “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

1.8               “Excluded Registration” means (i) a registration relating to the sale or grant of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, equity incentive or similar plan; (ii) a registration relating to an SEC Rule 145 transaction; (iii) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities; or (iv) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered.

 

1.9               “FOIA Party” means a Person that, in the determination of the Board, may be subject to, and thereby required to disclose non-public information furnished by or relating to the Company under, the Freedom of Information Act, 5 U.S.C. 552 (“FOIA”), any state public records access law, any state or other jurisdiction’s laws similar in intent or effect to FOIA, or any other similar statutory or regulatory requirement.

 

1.10            “Form S-1” means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC.

 

1.11            “Form S-3” means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC that permits forward incorporation of substantial information by reference to other documents filed by the Company with the SEC.

 

1.12            “GAAP” means generally accepted accounting principles in the United States as in effect from time to time.

 

1.13            “Holder” means any holder of Registrable Securities who is a party to this Agreement.

 

1.14            “Immediate Family Member” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, life partner or similar statutorily-recognized domestic partner, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including, adoptive relationships, of a natural person referred to herein. 

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1.15            “Initiating Holders” means, collectively, Holders who properly initiate a registration request under this Agreement.

 

1.16            “IPO” means the Company’s first underwritten public offering of its Common Stock under the Securities Act.

 

1.17            “Key Employee” means any executive-level employee (including, division director and vice president-level positions) as well as any employee who, either alone or in concert with others, develops, invents, programs, or designs any Company Intellectual Property (as defined in the Purchase Agreement).

 

1.18            “Major Investor” means any Investor that, individually or together with such Investor’s Affiliates, holds 3,353,044 shares of Registrable Securities (as adjusted for any stock split, stock dividend, combination, or other recapitalization or reclassification effected after the date hereof); provided, however, that (i) Samsara BioCapital, L.P. (“Samsara”) shall constitute a Major Investor for so long as Samsara, individually or together with its Affiliates, continues to beneficially own 2,618,760 shares of Registrable Securities (as adjusted for any stock split, stock dividend, combination, or other recapitalization or reclassification effected after the date hereof), (ii) Vivo Opportunity Fund, L.P. (“Vivo”) shall constitute a Major Investor for so long as Vivo, individually or together with its Affiliates, continues to beneficially own 1,571,256 shares of Registrable Securities (as adjusted for any stock split, stock dividend, combination, or other recapitalization or reclassification effected after the date hereof), and (iii) Janus Henderson Horizon Fund – Biotechnology Fund (“Janus Horizon”) and Janus Henderson Biotech Innovation Master Fund Limited (“Janus Biotech”) shall constitute a Major Investor for so long as Janus Horizon and Janus Biotech, individually or together with their Affiliates, continue to beneficially own 1,309,380 shares of Registrable Securities (as adjusted for any stock split, stock dividend, combination, or other recapitalization or reclassification effected after the date hereof).

 

1.19            “New Securities” means, collectively, equity securities of the Company, whether or not currently authorized, as well as rights, options, or warrants to purchase such equity securities, or securities of any type whatsoever that are, or may become, convertible or exchangeable into or exercisable for such equity securities.

 

1.20            “Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.

 

1.21            “Preferred Stock” means, collectively, shares of the Company’s Series A Preferred Stock and Series B Preferred Stock.

 

1.22            “Preferred Directors” means, collectively, the Series A Directors and the Series B Directors.

 

1.23            “Registrable Securities” means (i) the Common Stock issuable or issued upon conversion of the Preferred Stock; (ii) any Common Stock, or any Common Stock issued or issuable (directly or indirectly) upon conversion and/or exercise of any other securities of the Company, acquired by the Investors at any time (including Common Stock held by the Investors as of the date hereof); and (iii) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right, or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares referenced in clauses (i) and (ii) above; excluding in all cases, however, any Registrable Securities sold by a Person in a transaction in which the applicable rights under this Agreement are not assigned pursuant to Subsection 6.1, and excluding for purposes of Section 2 any shares for which registration rights have terminated pursuant to Subsection 2.13 of this Agreement. 

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1.24            “Registrable Securities then outstanding” means the number of shares determined by adding the number of shares of outstanding Common Stock that are Registrable Securities and the number of shares of Common Stock issuable (directly or indirectly) pursuant to then exercisable and/or convertible securities that are Registrable Securities.

 

1.25            “Requisite Preferred Directors” means at least 75% of the Preferred Directors.

 

1.26            “Restricted Securities” means the securities of the Company required to be notated with the legend set forth in Subsection 2.12(b) hereof.

 

1.27            “SEC” means the Securities and Exchange Commission.

 

1.28            “SEC Rule 144” means Rule 144 promulgated by the SEC under the Securities Act.

 

1.29            “SEC Rule 145” means Rule 145 promulgated by the SEC under the Securities Act.

 

1.30            “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

1.31            “Selling Expenses” means all underwriting discounts, selling commissions, and stock transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of counsel for any Holder, except for the fees and disbursements of the Selling Holder Counsel borne and paid by the Company as provided in Subsection 2.6.

 

1.32            “Series A Director” means any director of the Company that the holders of record of the Series A Preferred Stock are entitled to elect, exclusively and as a separate class, pursuant to the Certificate of Incorporation.

 

1.33            “Series A Preferred Stock” means shares of the Company’s Series A Preferred Stock, par value $0.0001 per share.

 

1.34            “Series B Director” means any director of the Company that the holders of record of the Series B Preferred Stock are entitled to elect, exclusively and as a separate class, pursuant to the Certificate of Incorporation.

 

1.35            “Series B Preferred Stock” means shares of the Company’s Series B Preferred Stock, par value $0.0001 per share.

 

1.36            “venBio” means venBio Partners, LLC. 

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1.37            “venBio Director” means the Series B Director designated by venBio pursuant to the Voting Agreement, dated of even date herewith, among the Company, the Investors and the other parties named therein.

 

2.             Registration Rights. The Company covenants and agrees as follows:

 

2.1              Demand Registration.

 

(a)              Form S-1 Demand. If at any time after the earlier of (i) three years after the date of this Agreement or (ii) one hundred eighty (180) days after the effective date of the registration statement for the IPO, the Company receives a request from Holders of a majority of the Registrable Securities then outstanding that the Company file a Form S-1 registration statement with respect to at least forty percent (40%) of the Registrable Securities then outstanding (or a lesser percent if the anticipated aggregate offering price, net of Selling Expenses, would exceed $10 million), then the Company shall (x) within ten (10) days after the date such request is given, give notice thereof (the “Demand Notice”) to all Holders other than the Initiating Holders; and (y) as soon as practicable, and in any event within sixty (60) days after the date such request is given by the Initiating Holders, file a Form S-1 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations contained in this Section 2.

 

(b)             Form S-3 Demand. If at any time when it is eligible to use a Form S-3 registration statement, the Company receives a request from Holders of at least ten percent (10%) of the Registrable Securities then outstanding that the Company file a Form S-3 registration statement with respect to outstanding Registrable Securities of such Holders having an anticipated aggregate offering price, net of Selling Expenses, of at least $5 million, then the Company shall (i) within ten (10) days after the date such request is given, give a Demand Notice to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within forty-five (45) days after the date such request is given by the Initiating Holders, file a Form S-3 registration statement under the Securities Act covering all Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations contained in this Section 2.

 

(c)              Notwithstanding the foregoing obligations, if the Company furnishes to Holders requesting a registration pursuant to this Subsection 2.1 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 either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, because such action would (i) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) 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, for a period of not more than one hundred twenty (120) days after the request of the Initiating Holders is given; provided, however, that the Company may not invoke this right more than twice in any twelve (12) month period; and provided further that the Company shall not register any securities for its own account or that of any other stockholder during such one hundred twenty (120) day period other than an Excluded Registration. 

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(d)             The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Subsection 2.1(a)(i) during the period that is sixty (60) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is one hundred eighty (180) days 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; (ii) after the Company has effected two registrations pursuant to Subsection 2.1(a); or (iii) if the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Subsection 2.1(b). The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Subsection 2.1(b) (i) during the period that is thirty (30) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is ninety (90) days 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; or (ii) if the Company has effected two registrations pursuant to Subsection 2.1(b) within the twelve (12) month period immediately preceding the date of such request. A registration shall not be counted as “effected” for purposes of this Subsection 2.1(d) until such time as the applicable registration statement has been declared effective by the SEC, unless the Initiating Holders withdraw their request for such registration, elect not to pay the registration expenses therefor, and forfeit their right to one demand registration statement pursuant to Subsection 2.6, in which case such withdrawn registration statement shall be counted as “effected” for purposes of this Subsection 2.1(d); provided, that if such withdrawal is during a period the Company has deferred taking action pursuant to Subsection 2.1(c), then the Initiating Holders may withdraw their request for registration and such registration will not be counted as “effected” for purposes of this Subsection 2.1(d).

 

2.2              Company Registration. If the Company proposes to register (including, for this purpose, a registration effected by the Company for stockholders other than the Holders) any of its securities under the Securities Act in connection with the public offering of such securities solely for cash (other than in an Excluded Registration), the Company shall, at such time, promptly give each Holder notice of such registration. Upon the request of each Holder given within twenty (20) days after such notice is given by the Company, the Company shall, subject to the provisions of Subsection 2.3, cause to be registered all of the Registrable Securities that each such Holder has requested to be included in such registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Subsection 2.2 before the effective date of such registration, whether or not any Holder has elected to include Registrable Securities in such registration. The expenses (other than Selling Expenses) of such withdrawn registration shall be borne by the Company in accordance with Subsection 2.6.

 

2.3              Underwriting Requirements.

 

(a)              If, pursuant to Subsection 2.1, the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to Subsection 2.1, and the Company shall include such information in the Demand Notice. The underwriter(s) will be selected by the Board and shall be reasonably acceptable to a majority in interest of the Initiating Holders. In such event, the right of any Holder to include such Holder’s Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in Subsection 2.4(e)) enter into an underwriting agreement in customary form with the underwriter(s) selected for such underwriting; provided, however, that no Holder (or any of their assignees) shall be required to make any representations, warranties or indemnities except as they relate to such Holder’s ownership of shares and authority to enter into the underwriting agreement and to such Holder’s intended method of distribution, and the liability of such Holder shall be several and not joint, and limited to an amount equal to the net proceeds from the offering received by such Holder. Notwithstanding any other provision of this Subsection 2.3, if the underwriter(s) advise(s) the Initiating Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities that otherwise would be underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be allocated among such Holders of Registrable Securities, including the Initiating Holders, in proportion (as nearly as practicable) to the number of Registrable Securities owned by each Holder or in such other proportion as shall mutually be agreed to by all such selling Holders; provided, however, that the number of Registrable Securities held by the Holders to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest one hundred (100) shares. 

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(b)             In connection with any offering involving an underwriting of shares of the Company’s capital stock pursuant to Subsection 2.2, the Company shall not be required to include any of the Holders’ Registrable Securities in such underwriting unless the Holders accept the terms of the underwriting as agreed upon between the Company and its underwriters, and then only in such quantity as the underwriters in their sole discretion determine will not jeopardize the success of the offering by the Company. If the total number of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the number of securities to be sold (other than by the Company) that the underwriters in their reasonable discretion determine is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters and the Company in their sole discretion determine will not jeopardize the success of the offering. If the underwriters determine that less than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable Securities that are included in such offering shall be allocated among the selling Holders in proportion (as nearly as practicable to) the number of Registrable Securities owned by each selling Holder or in such other proportions as shall mutually be agreed to by all such selling Holders. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest one hundred (100) shares. Notwithstanding the foregoing, in no event shall (i) the number of Registrable Securities included in the offering be reduced unless all other securities (other than securities to be sold by the Company) are first entirely excluded from the offering, or (ii) the number of Registrable Securities included in the offering be reduced below twenty percent (20%) of the total number of securities included in such offering, unless such offering is the IPO, in which case the selling Holders may be excluded further if the underwriters make the determination described above and no other stockholder’s securities are included in such offering. For purposes of the provision in this Subsection 2.3(b) concerning apportionment, for any selling Holder that is a partnership, limited liability company, or corporation, the partners, members, retired partners, retired members, stockholders, and Affiliates of such Holder, or the estates and Immediate Family Members of any such partners, retired partners, members, and retired members and any trusts for the benefit of any of the foregoing Persons, shall be deemed to be a single “selling Holder,” and any pro rata reduction with respect to such “selling Holder” shall be based upon the aggregate number of Registrable Securities owned by all Persons included in such “selling Holder,” as defined in this sentence.

 

(c)              For purposes of Subsection 2.1, a registration shall not be counted as “effected” if, as a result of an exercise of the underwriter’s cutback provisions in Subsection 2.3(a), fewer than the total number of Registrable Securities that Holders have requested to be included in such registration statement are actually included. 

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2.4              Obligations of the Company. Whenever required under this Section 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

 

(a)              prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such registration statement to become effective and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to one hundred twenty (120) days or, if earlier, until the distribution contemplated in the registration statement has been completed; provided, however, that (i) such one hundred twenty (120) day period shall be extended for a period of time equal to the period the Holder refrains, at the request of an underwriter of Common Stock (or other securities) of the Company, from selling any securities included in such registration;

 

(b)             prepare and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary to comply with the Securities Act in order to enable the disposition of all securities covered by such registration statement;

 

(c)             furnish to the selling Holders such numbers of copies of a prospectus, including a preliminary prospectus, as required by the Securities Act, and such other documents as the Holders may reasonably request in order to facilitate their disposition of their Registrable Securities;

 

(d)             use its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue-sky laws of such jurisdictions as shall be reasonably requested by the selling Holders; provided that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;

 

(e)              in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the underwriter(s) of such offering;

 

(f)              use its commercially reasonable efforts to cause all such Registrable Securities covered by such registration statement to be listed on a national securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed;

 

(g)             provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and provide a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;

 

(h)             promptly make available for inspection by the selling Holders, any underwriter(s) participating in any disposition pursuant to such registration statement, and any attorney or accountant or other agent retained by any such underwriter or selected by the selling Holders, all financial and other records, pertinent corporate documents, and properties of the Company, and cause the Company’s officers, directors, employees, and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant, or agent, in each case, as necessary or advisable to verify the accuracy of the information in such registration statement and to conduct appropriate due diligence in connection therewith; 

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(i)               notify each selling Holder, promptly after the Company receives notice thereof, of the time when such registration statement has been declared effective or a supplement to any prospectus forming a part of such registration statement has been filed; and

 

(j)               after such registration statement becomes effective, notify each selling Holder of any request by the SEC that the Company amend or supplement such registration statement or prospectus.

 

In addition, the Company shall ensure that, at all times after any registration statement covering a public offering of securities of the Company under the Securities Act shall have become effective, its insider trading policy shall provide that the Company’s directors may implement a trading program under Rule 10b5-1 of the Exchange Act.

 

2.5             Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as is reasonably required to effect the registration of such Holder’s Registrable Securities.

 

2.6             Expenses of Registration. All expenses (other than Selling Expenses) incurred in connection with registrations, filings, or qualifications pursuant to Section 2, including all registration, filing, and qualification fees; printers’ and accounting fees; fees and disbursements of counsel for the Company; and the reasonable fees and disbursements, not to exceed $50,000, of one counsel for the selling Holders selected by Holders of a majority of the Registrable Securities to be registered (“Selling Holder Counsel”), shall be borne and paid by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Subsection 2.1 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all selling Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be included in the withdrawn registration), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one registration pursuant to Subsections 2.1(a) or 2.1(b), as the case may be; provided further that if, at the time of such withdrawal, the Holders shall have learned of a material adverse change in the condition, business, or prospects of the Company from that known to the Holders at the time of their request and have withdrawn the request with reasonable promptness after learning of such information then the Holders shall not be required to pay any of such expenses and shall not forfeit their right to one registration pursuant to Subsections 2.1(a) or 2.1(b). All Selling Expenses relating to Registrable Securities registered pursuant to this Section 2 (other than fees and disbursements of counsel to any Holder, other than the Selling Holder Counsel, which shall be borne solely by the Holder engaging such counsel) shall be borne and paid by the Holders pro rata on the basis of the number of Registrable Securities registered on their behalf.

 

2.7              Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration pursuant to this Agreement as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.

 

2.8              Indemnification. If any Registrable Securities are included in a registration statement under this Section 2:

 

(a)              To the extent permitted by law, the Company will indemnify and hold harmless each selling Holder, and the partners, members, officers, directors, and stockholders of each such Holder; legal counsel and accountants for each such Holder; any underwriter (as defined in the Securities Act) for each such Holder; and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any Damages, and the Company will pay to each such Holder, underwriter, controlling Person, or other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Subsection 2.8(a) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any such Holder, underwriter, controlling Person, or other aforementioned Person expressly for use in connection with such registration. 

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(b)             To the extent permitted by law, each selling Holder, severally and not jointly, will indemnify and hold harmless the Company, and each of its directors, each of its officers who has signed the registration statement, each Person (if any), who controls the Company within the meaning of the Securities Act, legal counsel and accountants for the Company, any underwriter (as defined in the Securities Act), any other Holder selling securities in such registration statement, and any controlling Person of any such underwriter or other Holder, against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of such selling Holder expressly for use in connection with such registration; and each such selling Holder will pay to the Company and each other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Subsection 2.8(b) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; and provided further that in no event shall the aggregate amounts payable by any Holder by way of indemnity or contribution under Subsections 2.8(b) and 2.8(d) exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of fraud or willful misconduct by such Holder.

 

(c)              Promptly after receipt by an indemnified party under this Subsection 2.8 of notice of the commencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Subsection 2.8, give the indemnifying party notice of the commencement thereof. The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such action. The failure to give notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Subsection 2.8, to the extent that such failure materially prejudices the indemnifying party’s ability to defend such action. The failure to give notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Subsection 2.8

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(d)             To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either: (i) any party otherwise entitled to indemnification hereunder makes a claim for indemnification pursuant to this Subsection 2.8 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Subsection 2.8 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is provided under this Subsection 2.8, then, and in each such case, such parties will contribute to the aggregate losses, claims, damages, liabilities, or expenses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party in connection with the statements, omissions, or other actions that resulted in such loss, claim, damage, liability, or expense, as well as to reflect 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 allegedly untrue statement of a material fact, or the omission or alleged omission of 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; provided, however, that, in any such case (x) no Holder will be required to contribute any amount in excess of the public offering price of all such Registrable Securities offered and sold by such Holder pursuant to such registration statement, and (y) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation; and provided further that in no event shall a Holder’s liability pursuant to this Subsection 2.8(d), when combined with the amounts paid or payable by such Holder pursuant to Subsection 2.8(b), exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of willful misconduct or fraud by such Holder.

 

(e)              Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control; provided, however, that any matter expressly provided for or addressed by the foregoing provisions that is not expressly provided for or addressed by the underwriting agreement shall be controlled by the foregoing provisions.

 

(f)              Unless otherwise superseded by an underwriting agreement entered into in connection with the underwritten public offering, the obligations of the Company and Holders under this Subsection 2.8 shall survive the completion of any offering of Registrable Securities in a registration under this Section 2, and otherwise shall survive the termination of this Agreement or any provision(s) of this Agreement.

 

2.9               Reports Under Exchange Act. With a view to making available to the Holders the benefits of SEC Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company shall:

 

(a)              make and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144, at all times after the effective date of the registration statement filed by the Company for the IPO;

 

(b)             use commercially reasonable efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after the Company has become subject to such reporting requirements); and 

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(c)              furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) to the extent accurate, a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the effective date of the registration statement filed by the Company for the IPO), the Securities Act, and the Exchange Act (at any time after the Company has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after the Company so qualifies); (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company; and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration (at any time after the Company has become subject to the reporting requirements under the Exchange Act) or pursuant to Form S-3 (at any time after the Company so qualifies to use such form).

 

2.10            Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of majority of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company that would provide to such holder or prospective holder the right to include securities in any registration on other than either a pro rata basis with respect to the Registrable Securities or on a subordinate basis after all Holders have had the opportunity to include in the registration and offering all shares of Registrable Securities that they wish to so include; provided that this limitation shall not apply to Registrable Securities acquired by any additional Investor that becomes a party to this Agreement in accordance with Subsection 6.9.

 

2.11            “Market Stand-off” Agreement. Each Holder hereby agrees that it will not, without the prior written consent of the managing underwriter, during the period commencing on the date of the final prospectus relating to the registration by the Company of shares of its Common Stock or any other equity securities under the Securities Act on a registration statement on Form S-1 or Form S-3, and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) days in the case of the IPO), (i) lend; offer; pledge; sell; contract to sell; sell any option or contract to purchase; purchase any option or contract to sell; grant any option, right, or warrant to purchase; or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable (directly or indirectly) for Common Stock held by such Holder immediately before the effective date of the registration statement for the IPO or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash, or otherwise. The foregoing provisions of this Subsection 2.11 shall apply only to the IPO, shall not apply to shares acquired in the IPO or in the open market following the IPO, shall not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement or the transfer of any shares to any trust for the direct or indirect benefit of the Holder or the immediate family of the Holder, provided that the trustee of the trust agrees to be bound in writing by the restrictions set forth herein, and provided  further that any such transfer shall not involve a disposition for value; and shall be applicable to the Holders only if all officers and directors are subject to the same restrictions and the Company uses commercially reasonable efforts to obtain a similar agreement from all stockholders individually owning more than one percent (1%) of the Company’s outstanding Common Stock (after giving effect to conversion into Common Stock of all outstanding Preferred Stock). The underwriters in connection with such registration are intended third-party beneficiaries of this Subsection 2.11 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto. Each Holder further agrees to execute such agreements as may be reasonably requested by the underwriters in connection with such registration that are consistent with this Subsection 2.11 or that are necessary to give further effect thereto. Any discretionary waiver or termination of the restrictions of any or all of such agreements by the Company or the underwriters shall apply pro rata to all Company stockholders that are subject to such agreements, based on the number of shares subject to such agreements. 

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2.12            Restrictions on Transfer.

 

(a)             The Preferred Stock and the Registrable Securities shall not be sold, pledged, or otherwise transferred, and the Company shall not recognize and shall issue stop-transfer instructions to its transfer agent with respect to any such sale, pledge, or transfer, except upon the conditions specified in this Agreement, which conditions are intended to ensure compliance with the provisions of the Securities Act. A transferring Holder will cause any proposed purchaser, pledgee, or transferee of the Preferred Stock and the Registrable Securities held by such Holder to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Agreement.

 

(b)             Each certificate, instrument, or book entry representing (i) the Preferred Stock, (ii) the Registrable Securities, and (iii) any other securities issued in respect of the securities referenced in clauses (i) and (ii), upon any stock split, stock dividend, recapitalization, merger, consolidation, or similar event, shall (unless otherwise permitted by the provisions of Subsection 2.12(c)) be notated with a legend substantially in the following form:

 

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD, PLEDGED, OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR A VALID EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.

 

THE SECURITIES REPRESENTED HEREBY MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

 

The Holders consent to the Company making a notation in its records and giving instructions to any transfer agent of the Restricted Securities in order to implement the restrictions on transfer set forth in this Subsection 2.12.

 

(c)              The holder of such Restricted Securities, by acceptance of ownership thereof, agrees to comply in all respects with the provisions of this Section 2. Before any proposed sale, pledge, or transfer of any Restricted Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transaction, the Holder thereof shall give notice to the Company of such Holder’s intention to effect such sale, pledge, or transfer. Each such notice shall describe the manner and circumstances of the proposed sale, pledge, or transfer in sufficient detail and, if reasonably requested by the Company, shall be accompanied at such Holder’s expense by either (i) a written opinion of legal counsel who shall, and whose legal opinion shall, be reasonably satisfactory to the Company, addressed to the Company, to the effect that the proposed transaction may be effected without registration under the Securities Act; (ii) a “no action” letter from the SEC to the effect that the proposed sale, pledge, or transfer of such Restricted Securities without registration will not result in a recommendation by the staff of the SEC that action be taken with respect thereto; or (iii) any other evidence reasonably satisfactory to counsel to the Company to the effect that the proposed sale, pledge, or transfer of the Restricted Securities may be effected without registration under the Securities Act, whereupon the Holder of such Restricted Securities shall be entitled to sell, pledge, or transfer such Restricted Securities in accordance with the terms of the notice given by the Holder to the Company. The Company will not require such a notice, legal opinion or “no action” letter (x) in any transaction in compliance with SEC Rule 144; or (y) in any transaction in which such Holder distributes Restricted Securities to an Affiliate of such Holder for no consideration; provided that each transferee agrees in writing to be subject to the terms of this Subsection 2.12. Each certificate, instrument, or book entry representing the Restricted Securities transferred as above provided shall be notated with, except if such transfer is made pursuant to SEC Rule 144, the appropriate restrictive legend set forth in Subsection 2.12(b), except that such certificate instrument, or book entry shall not be notated with such restrictive legend if, in the opinion of counsel for such Holder and the Company, such legend is not required in order to establish compliance with any provisions of the Securities Act. 

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2.13            Termination of Registration Rights. The right of any Holder to request registration or inclusion of Registrable Securities in any registration pursuant to Subsections 2.1 or 2.2 shall terminate upon the earliest to occur of:

 

(a)              the closing of a Deemed Liquidation Event, as such term is defined in the Certificate of Incorporation; and

 

(b)              such time after consummation of the IPO as SEC Rule 144 or another similar exemption under the Securities Act is available for the sale of all of such Holder’s shares without limitation during a three-month period without registration.

 

3.             Information and Observer Rights.

 

3.1              Delivery of Financial Statements. The Company shall deliver to each Major Investor:

 

(a)              as soon as practicable, but in any event within ninety (90) days after the end of each fiscal year of the Company (i) a balance sheet as of the end of such year, (ii) statements of income and of cash flows for such year, and (iii) a statement of stockholders’ equity as of the end of such year, all such financial statements audited and certified by independent public accountants of nationally or regionally recognized standing selected by the Company;

 

(b)              as soon as practicable, but in any event within forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, unaudited statements of income and cash flows for such fiscal quarter, and an unaudited balance sheet as of the end of such fiscal quarter, all prepared in accordance with GAAP (except that such financial statements may (i) be subject to normal year-end audit adjustments; and (ii) not contain all notes thereto that may be required in accordance with GAAP);

 

(c)              as soon as practicable, but in any event thirty (30) days before the end of each fiscal year, a budget and business plan for the next fiscal year (collectively, the “Budget”), prepared on a monthly basis, including balance sheets, income statements, and statements of cash flow for such months and, promptly after prepared, any other budgets or revised budgets prepared by the Company; and

 

(d)             such other information relating to the financial condition, business, prospects, or corporate affairs of the Company as any Major Investor may from time to time reasonably request; provided, however, that the Company shall not be obligated under this Subsection 3.1 to provide information (i) that the Company reasonably determines in good faith to be a trade secret or confidential information (unless covered by an enforceable confidentiality agreement, in a form acceptable to the Company); or (ii) the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel. 

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If, for any period, the Company has any subsidiary whose accounts are consolidated with those of the Company, then in respect of such period the financial statements delivered pursuant to the foregoing sections shall be the consolidated and consolidating financial statements of the Company and all such consolidated subsidiaries.

 

Notwithstanding anything else in this Subsection 3.1 to the contrary, the Company may cease providing the information set forth in this Subsection 3.1 during the period starting with the date sixty (60) days before the Company’s good-faith estimate of the date of filing of a registration statement if it reasonably concludes it must do so to comply with the SEC rules applicable to such registration statement and related offering; provided that the Company’s covenants under this Subsection 3.1 shall be reinstated at such time as the Company is no longer actively employing its commercially reasonable efforts to cause such registration statement to become effective.

 

3.2               Inspection; Notice of Legal Action. The Company shall permit each Major Investor, at such Major Investor’s expense, to visit and inspect the Company’s properties; examine its books of account and records; and discuss the Company’s affairs, finances, and accounts with its officers, during normal business hours of the Company as may be reasonably requested by the Major Investor; provided, however, that the Company shall not be obligated pursuant to this Subsection 3.2 to provide access to any information that it reasonably and in good faith considers to be a trade secret or confidential information (unless covered by an enforceable confidentiality agreement, in form acceptable to the Company) or the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel. The Company shall provide notice to each Major Investor in the event that any claim, action, suit or proceeding is initiated against the Company.

 

3.3               Observer Rights.

 

(a)             As long as Aisling Capital IV, LP (“Aisling”) is a Major Investor, the Company shall invite a representative of Aisling to attend all meetings of the Board in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents, and other materials that it provides to its directors at the same time and in the same manner as provided to such directors; provided, however, that such representative shall agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information so provided; and provided further, that the Company reserves the right to withhold any information and to exclude such representative from any meeting or portion thereof if access to such information or attendance at such meeting could adversely affect the attorney-client privilege between the Company and its counsel or result in disclosure of trade secrets or a conflict of interest, or if such Investor or its representative is a competitor of the Company.

 

(b)             As long as Vertex Global HC Fund II Pte. Ltd. (“Vertex”) is a Major Investor, the Company shall invite a representative of Vertex to attend all meetings of the Board in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents, and other materials that it provides to its directors at the same time and in the same manner as provided to such directors; provided, however, that such representative shall agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information so provided; and provided further, that the Company reserves the right to withhold any information and to exclude such representative from any meeting or portion thereof if access to such information or attendance at such meeting could adversely affect the attorney-client privilege between the Company and its counsel or result in disclosure of trade secrets or a conflict of interest, or if such Investor or its representative is a competitor of the Company. 

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(c)              As long as BVF Partners L.P. (“BVF”) is a Major Investor, the Company shall invite a representative of BVF to attend all meetings of the Board in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents, and other materials that it provides to its directors at the same time and in the same manner as provided to such directors; provided, however, that such representative shall agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information so provided; and provided further, that the Company reserves the right to withhold any information and to exclude such representative from any meeting or portion thereof if access to such information or attendance at such meeting could adversely affect the attorney-client privilege between the Company and its counsel or result in disclosure of trade secrets or a conflict of interest, or if such Investor or its representative is a competitor of the Company.

 

(d)             As long as Qiming U.S. Healthcare Fund II, L.P. (“Qiming”) is a Major Investor, the Company shall invite a representative of Qiming to attend all meetings of the Board in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents, and other materials that it provides to its directors at the same time and in the same manner as provided to such directors; provided, however, that such representative shall agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information so provided; and provided further, that the Company reserves the right to withhold any information and to exclude such representative from any meeting or portion thereof if access to such information or attendance at such meeting could adversely affect the attorney-client privilege between the Company and its counsel or result in disclosure of trade secrets or a conflict of interest, or if such Investor or its representative is a competitor of the Company.

 

(e)              As long as any Affiliate of Driehaus Capital Management LLC (“Driehaus”) is a Major Investor, the Company shall invite a representative of Driehaus to attend all meetings of the Board in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents, and other materials that it provides to its directors at the same time and in the same manner as provided to such directors; provided, however, that such representative shall agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information so provided; and provided further, that the Company reserves the right to withhold any information and to exclude such representative from any meeting or portion thereof if access to such information or attendance at such meeting could adversely affect the attorney-client privilege between the Company and its counsel or result in disclosure of trade secrets or a conflict of interest, or if such Investor or its representative is a competitor of the Company.

 

(f)              As long as venBio is a Major Investor, the Company shall invite a representative of venBio to attend all meetings of the Board in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents, and other materials that it provides to its directors at the same time and in the same manner as provided to such directors; provided, however, that such representative shall agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information so provided; and provided further, that the Company reserves the right to withhold any information and to exclude such representative from any meeting or portion thereof if access to such information or attendance at such meeting could adversely affect the attorney-client privilege between the Company and its counsel or result in disclosure of trade secrets or a conflict of interest, or if such Investor or its representative is a competitor of the Company.

 

(g)             As long as Boxer Capital, LLC (“Boxer”) is a Major Investor, the Company shall invite a representative of Boxer to attend all meetings of the Board in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents, and other materials that it provides to its directors at the same time and in the same manner as provided to such directors; provided, however, that such representative shall agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information so provided; and provided further, that the Company reserves the right to withhold any information and to exclude such representative from any meeting or portion thereof if access to such information or attendance at such meeting could adversely affect the attorney-client privilege between the Company and its counsel or result in disclosure of trade secrets or a conflict of interest, or if such Investor or its representative is a competitor of the Company. 

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3.4               Termination of Information and Observer Rights. The covenants set forth in Subsection 3.1, Subsection 3.2, and Subsection 3.3 shall terminate and be of no further force or effect (i) immediately before the consummation of the IPO, (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, or (iii) upon the closing of a Deemed Liquidation Event, as such term is defined in the Certificate of Incorporation, whichever event occurs first.

 

3.5               Confidentiality. Each Investor agrees that such Investor will keep confidential and will not disclose, divulge, or use for any purpose (other than to monitor its investment in the Company) any confidential information obtained from the Company pursuant to the terms of this Agreement (including notice of the Company’s intention to file a registration statement), unless such confidential information (a) is known or becomes known to the public in general (other than as a result of a breach of this Subsection 3.5 by such Investor), (b) is or has been independently developed or conceived by such Investor without use of the Company’s confidential information, or (c) is or has been made known or disclosed to such Investor by a third party without a breach of any obligation of confidentiality such third party may have to the Company; provided, however, that an Investor may disclose confidential information (i) to its attorneys, accountants, consultants, and other professionals to the extent reasonably necessary to obtain their services in connection with monitoring its investment in the Company; (ii) to any prospective purchaser of any Registrable Securities from such Investor, if such prospective purchaser agrees to be bound by the provisions of this Subsection 3.5; (iii) to any Affiliate, partner, member, stockholder, or wholly owned subsidiary of such Investor in the ordinary course of business, provided that such Investor informs such Person that such information is confidential and directs such Person to maintain the confidentiality of such information; or (iv) as may otherwise be required by law, regulation, rule, court order or subpoena, provided that such Investor promptly notifies the Company of such disclosure and takes reasonable steps to minimize the extent of any such required disclosure.

 

4.             Rights to Future Stock Issuances.

 

4.1               Right of First Offer. Subject to the terms and conditions of this Subsection 4.1 and applicable securities laws, if the Company proposes to offer or sell any New Securities, the Company shall first offer such New Securities to each Major Investor. A Major Investor shall be entitled to apportion the right of first offer hereby granted to it in such proportions as it deems appropriate, among (i) itself, (ii) its Affiliates and (iii) its beneficial interest holders, such as limited partners, members or any other Person having “beneficial ownership,” as such term is defined in Rule 13d-3 promulgated under the Exchange Act, of such Major Investor (“Investor Beneficial Owners”); provided that each such Affiliate or Investor Beneficial Owner (x) is not a competitor, as reasonably determined by the Board, or FOIA Party, unless such party’s purchase of New Securities is otherwise consented to by the Board, (y) agrees to enter into this Agreement and each of the Voting Agreement and Right of First Refusal and Co-Sale Agreement of even date herewith among the Company, the Investors and the other parties named therein, as an “Investor” under each such agreement (provided that any competitor, as reasonably determined by the Board, or FOIA Party shall not be entitled to any rights as a Major Investor under Subsections 3.1, 3.2 and 4.1 hereof), and (z) agrees to purchase at least such number of New Securities as are allocable hereunder to the Major Investor holding the fewest number of shares of Preferred Stock and any other Derivative Securities. 

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(a)              The Company shall give notice (the “Offer Notice”) to each Major Investor, stating (i) its bona fide intention to offer such New Securities, (ii) the number of such New Securities to be offered, and (iii) the price and terms, if any, upon which it proposes to offer such New Securities.

 

(b)             By notification to the Company within twenty (20) days after the Offer Notice is given, each Major Investor may elect to purchase or otherwise acquire, at the price and on the terms specified in the Offer Notice, up to that portion of such New Securities which equals the proportion that the Common Stock then held by such Major Investor (including all shares of Common Stock then issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the Preferred Stock and any other Derivative Securities then held by such Major Investor) bears to the total Common Stock of the Company then outstanding (assuming full conversion and/or exercise, as applicable, of all Preferred Stock and any other Derivative Securities then outstanding). At the expiration of such twenty (20) day period, the Company shall promptly notify each Major Investor that elects to purchase or acquire all the shares available to it (each, a “Fully Exercising Investor”) of any other Major Investor’s failure to do likewise. During the ten (10) day period commencing after the Company has given such notice, each Fully Exercising Investor may, by giving notice to the Company, elect to purchase or acquire, in addition to the number of shares specified above, up to that portion of the New Securities for which Major Investors were entitled to subscribe but that were not subscribed for by the Major Investors which is equal to the proportion that the Common Stock issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of Preferred Stock and any other Derivative Securities then held, by such Fully Exercising Investor bears to the Common Stock issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the Preferred Stock and any other Derivative Securities then held, by all Fully Exercising Investors who wish to purchase such unsubscribed shares. The closing of any sale pursuant to this Subsection 4.1(b) shall occur within the later of ninety (90) days of the date that the Offer Notice is given and the date of initial sale of New Securities pursuant to Subsection 4.1(c).

 

(c)              If all New Securities referred to in the Offer Notice are not elected to be purchased or acquired as provided in Subsection 4.1(b), the Company may, during the one hundred twenty (120) day period following the expiration of the periods provided in Subsection 4.1(b), offer and sell the remaining unsubscribed portion of such New Securities to any Person or Persons at a price not less than, and upon terms no more favorable to the offeree than, those specified in the Offer Notice. If the Company does not enter into an agreement for the sale of the New Securities within such period, or if such agreement is not consummated within thirty (30) days of the execution thereof, the right provided hereunder shall be deemed to be revived and such New Securities shall not be offered unless first reoffered to the Major Investors in accordance with this Subsection 4.1.

 

(d)             The right of first offer in this Subsection 4.1 shall not be applicable to (i) Exempted Securities (as defined in the Certificate of Incorporation); and (ii) shares of Common Stock issued in the IPO.

 

(e)              Notwithstanding any provision hereof to the contrary, in lieu of complying with the provisions of this Subsection 4.1, the Company may elect to give notice to the Major Investors within thirty (30) days after the issuance of New Securities. Such notice shall describe the type, price, and terms of the New Securities. Each Major Investor shall have twenty (20) days from the date notice is given to elect to purchase up to the number of New Securities that would, if purchased by such Major Investor, maintain such Major Investor’s percentage-ownership position, calculated as set forth in Subsection 4.1(b) before giving effect to the issuance of such New Securities.

 

4.2             Termination. The covenants set forth in Subsection 4.1 shall terminate and be of no further force or effect (i) immediately before the consummation of the IPO, (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, or (iii) upon the closing of a Deemed Liquidation Event, as such term is defined in the Certificate of Incorporation, whichever event occurs first and, as to each Major Investor, in accordance with Subsection 4.1(e)

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5.                Additional Covenants.

 

5.1            Insurance. The Company has obtained from financially sound and reputable insurers Directors and Officers liability insurance, in an amount and on terms and conditions satisfactory to the Board, and will use commercially reasonable efforts to cause such insurance policy to be maintained until such time as the Board determines that such insurance should be discontinued. The policy shall not be cancelable by the Company without prior approval by the Board, including at least one of the Series B Directors.

 

5.2            Employee Agreements. The Company will cause (i) each Person now or hereafter employed by it or by any subsidiary (or engaged by the Company or any subsidiary as a consultant/independent contractor) with access to material confidential information and/or trade secrets to enter into a nondisclosure and proprietary rights assignment agreement; and (ii) each Key Employee to enter into a one (1) year noncompetition and nonsolicitation agreement, substantially in the form approved by the Board. In addition, the Company shall not amend, modify, terminate, waive, or otherwise alter, in whole or in part, any of the above-referenced agreements or any restricted stock agreement between the Company and any employee, without the approval of the Board.

 

5.3            Employee Stock. Unless otherwise approved by the Board, all future employees and consultants of the Company who purchase, receive options to purchase, or receive awards of shares of the Company’s capital stock after the date hereof shall be required to execute restricted stock or option agreements, as applicable, providing for (i) vesting of shares over a four (4) year period, with the first twenty-five percent (25%) of such shares vesting following twelve (12) months of continued employment or service, and the remaining shares vesting in equal monthly installments over the following thirty-six (36) months, and (ii) a market stand-off provision substantially similar to that in Subsection 2.11.

 

5.4            Matters Requiring Investor Director Approval. So long as the holders of Series A Preferred Stock are entitled to elect a Series A Director or the holders of the Series B Preferred Stock are entitled to elect a Series B Director, the Company hereby covenants and agrees with each of the Investors that it shall not, without approval of the Board, which approval must include the affirmative vote of the Requisite Preferred Directors:

 

(a)              make, or permit any subsidiary to make, any loan or advance to, or own any stock or other securities of, any subsidiary or other corporation, partnership, or other entity unless it is wholly owned by the Company;

 

(b)             make, or permit any subsidiary to make, any loan or advance to any Person, including, without limitation, any employee or director of the Company or any subsidiary, except advances and similar expenditures in the ordinary course of business or under the terms of an employee stock or option plan approved by the Board;

 

(c)             guarantee, directly or indirectly, or permit any subsidiary to guarantee, directly or indirectly, any indebtedness except for trade accounts of the Company or any subsidiary arising in the ordinary course of business; 

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(d)             make any investment inconsistent with any investment policy approved by the Board;

 

(e)             incur any aggregate indebtedness in excess of $500,000 that is not already included in a budget approved by the Board, other than trade credit incurred in the ordinary course of business;

 

(f)              otherwise enter into or be a party to any transaction with any director, officer, or employee of the Company or any “associate” (as defined in Rule 12b-2 promulgated under the Exchange Act) of any such Person, except for: transactions contemplated by this Agreement, the Purchase Agreement, and the other Transaction Agreements (as defined in the Purchase Agreement); transactions resulting in payments to or by the Company in an aggregate amount less than $60,000 per year; or transactions made in the ordinary course of business and pursuant to reasonable requirements of the Company’s business and upon fair and reasonable terms that are approved by a majority of the Board;

 

(g)             hire, terminate, or change the compensation of the executive officers outside of the ordinary course of business, including approving any option grants or stock awards to executive officers;

 

(h)             change the principal business of the Company, enter new lines of business, or exit the current line of business;

 

(i)              sell, assign, license, pledge, or encumber material technology or intellectual property, other than licenses granted in the ordinary course of business; or

 

(j)              enter into any corporate strategic relationship involving the payment, contribution, or assignment by the Company or to the Company of money or assets greater than $500,000.

 

5.5            Board Matters. Unless otherwise determined by the vote of a majority of the directors then in office, including the affirmative vote of at least one of the Series B Directors, the Board shall meet at least quarterly in accordance with an agreed-upon schedule. The Company shall reimburse the directors for all reasonable out-of-pocket travel expenses incurred (consistent with the Company’s travel policy) in connection with providing service to the Company and attending meetings of the Board and other Company events. Any costs and expenses incurred by a board observer shall be the responsibility of the party entitled to appoint such board observer under Subsection 3.3. Subject to the approval of the Board of the venBio Director’s service on such committee, the venBio Director shall be entitled in such person’s discretion to be a member of all committees of the Board.

 

5.6            Successor Indemnification. If the Company or any of its successors or assignees consolidates with or merges into any other Person and is not the continuing or surviving corporation or entity of such consolidation or merger, then to the extent necessary, proper provision shall be made so that the successors and assignees of the Company assume the obligations of the Company with respect to indemnification of members of the Board as in effect immediately before such transaction, whether such obligations are contained in the Company’s Bylaws, the Certificate of Incorporation, or elsewhere, as the case may be.

 

5.7            Indemnification Matters. The Company hereby acknowledges that one (1) or more of the directors nominated to serve on the Board by the Investors (each an “Investor Director”) may have certain rights to indemnification, advancement of expenses and/or insurance provided by one or more of the Investors and certain of their Affiliates (collectively, the “Investor Indemnitors”).  The Company hereby agrees (a) that it is the indemnitor of first resort (i.e., its obligations to any such Investor Director are primary and any obligation of the Investor Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by such Investor Director are secondary), (b) that it shall be required to advance the full amount of expenses incurred by such Investor Director and shall be liable for the full amount of all expenses, judgments, penalties, fines and amounts paid in settlement by or on behalf of any such Investor Director to the extent legally permitted and as required by the Company’s Certificate of Incorporation or Bylaws of the Company (or any agreement between the Company and such Investor Director), without regard to any rights such Investor Director may have against the Investor Indemnitors, and, (c) that it irrevocably waives, relinquishes and releases the Investor Indemnitors from any and all claims against the Investor Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof.  The Company further agrees that no advancement or payment by the Investor Indemnitors on behalf of any such Investor Director with respect to any claim for which such Investor Director has sought indemnification from the Company shall affect the foregoing and the Investor Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of such Investor Director against the Company. The Investor Directors and the Investor Indemnitors are intended third-party beneficiaries of this Subsection 5.7 and shall have the right, power and authority to enforce the provisions of this Subsection 5.7 as though they were a party to this Agreement. 

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5.8            Right to Conduct Activities. The Company hereby agrees and acknowledges that each of the Investors (together with its Affiliates) is a professional investment organization, and as such reviews the business plans and related proprietary information of many enterprises, some of which may compete directly or indirectly with the Company’s business (as currently conducted or as currently propose to be conducted).  The Company hereby agrees that, to the extent permitted under applicable law, each Investor (and its Affiliates) shall not be liable to the Company for any claim arising out of, or based upon, (i) the investment by such Investor (or its Affiliates) in any entity competitive with the Company, or (ii) actions taken by any partner, officer, employee or other representative of such Investor  (or its Affiliates) to assist any such competitive company, whether or not such action was taken as a member of the board of directors of such competitive company or otherwise, and whether or not such action has a detrimental effect on the Company; provided, however, that the foregoing shall not relieve (x) any of the Investors from liability associated with the unauthorized disclosure of the Company’s confidential information obtained pursuant to this Agreement, or (y) any director or officer of the Company from any liability associated with his or her fiduciary duties to the Company.

 

5.9             FCPA. The Company covenants that it shall not (and shall not permit any of its subsidiaries or Affiliates or any of its or their respective directors, officers, managers, employees, independent contractors, representatives or agents to) promise, authorize or make any payment to, or otherwise contribute any item of value to, directly or indirectly, to any third party, including any Non-U.S. Official (as such term is defined in the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”)), in each case, in violation of the FCPA, the U.K. Bribery Act, or any other applicable anti-bribery or anti-corruption law. The Company further covenants that it shall (and shall cause each of its subsidiaries and Affiliates to) cease all of its or their respective activities, as well as remediate any actions taken by the Company, its subsidiaries or Affiliates, or any of their respective directors, officers, managers, employees, independent contractors, representatives or agents in violation of the FCPA, the U.K. Bribery Act, or any other applicable anti-bribery or anti-corruption law. The Company further covenants that it shall (and shall cause each of its subsidiaries and Affiliates to) maintain systems of internal controls (including, but not limited to, accounting systems, purchasing systems and billing systems) to ensure compliance with the FCPA, the U.K. Bribery Act, or any other applicable anti-bribery or anti-corruption law. Upon request, the Company agrees to provide responsive information and/or certifications concerning its compliance with applicable anti-corruption laws. The Company shall promptly notify each Investor if the Company becomes aware of any Enforcement Action (as defined in the Purchase Agreement). The Company shall, and shall cause any direct or indirect subsidiary or entity controlled by it, whether now in existence or formed in the future, to comply with the FCPA. The Company shall use its best efforts to cause any direct or indirect subsidiary, whether now in existence or formed in the future, to comply in all material respects with all applicable laws. 

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5.10           Termination of Covenants. The covenants set forth in this Section 5, except for Subsections 5.6 and 5.7, shall terminate and be of no further force or effect (i) immediately before the consummation of the IPO, (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, or (iii) upon a Deemed Liquidation Event, as such term is defined in the Certificate of Incorporation, whichever event occurs first.

 

6.             Miscellaneous.

 

6.1             Successors and Assigns. The rights under this Agreement may be assigned (but only with all related obligations) by a Holder to a transferee of Registrable Securities that (i) is an Affiliate of a Holder; (ii) is a Holder’s Immediate Family Member or trust for the benefit of an individual Holder or one or more of such Holder’s Immediate Family Members; or (iii) after such transfer, holds at least 25,000 shares of Registrable Securities (subject to appropriate adjustment for stock splits, stock dividends, combinations, and other recapitalizations); provided, however, that (x) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the Registrable Securities with respect to which such rights are being transferred; and (y) such transferee agrees in a written instrument delivered to the Company to be bound by and subject to the terms and conditions of this Agreement, including the provisions of Subsection 2.11. For the purposes of determining the number of shares of Registrable Securities held by a transferee, the holdings of a transferee (1) that is an Affiliate or stockholder of a Holder; (2) who is a Holder’s Immediate Family Member; or (3) that is a trust for the benefit of an individual Holder or such Holder’s Immediate Family Member shall be aggregated together and with those of the transferring Holder; provided  further that all transferees who would not qualify individually for assignment of rights shall, as a condition to the applicable transfer, establish a single attorney-in-fact for the purpose of exercising any rights, receiving notices, or taking any action under this Agreement. The terms and conditions of this Agreement inure to the benefit of and are binding upon the respective successors and permitted assignees of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assignees any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein.

 

6.2             Governing Law. This Agreement shall be governed by the internal law of the State of Delaware, without regard to conflict of law principles that would result in the application of any law other than the law of the State of Delaware.

 

6.3             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. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

6.4             Titles and Subtitles. The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement. 

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6.5             Notices.

 

(a)             All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or (i) personal delivery to the party to be notified; (ii) when sent, if sent by electronic mail or facsimile during the recipient’s normal business hours, and if not sent during normal business hours, then on the recipient’s next business day; (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one (1) business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next-day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their addresses as set forth on Schedule A hereto, or to the principal office of the Company and to the attention of the Chief Executive Officer, in the case of the Company, or to such email address, facsimile number, or address as subsequently modified by written notice given in accordance with this Subsection 6.5. If notice is given to the Company, a copy shall also be sent to Hutchison PLLC, 3110 Edwards Mill Road, Suite 300, Raleigh, NC 27612, Attention: Bill Wofford (bwofford@hutchlaw.com).

 

(b)             Consent to Electronic Notice. Each Investor consents to the delivery of any stockholder notice pursuant to the Delaware General Corporation Law (the “DGCL”), as amended or superseded from time to time, by electronic transmission pursuant to Section 232 of the DGCL (or any successor thereto) at the electronic mail address or the facsimile number as on the books of the Company. Each Investor agrees to promptly notify the Company of any change in such stockholder’s electronic mail address, and that failure to do so shall not affect the foregoing.

 

6.6             Amendments and Waivers. Any term of this Agreement may be amended, modified or terminated and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of the Company and the holders of at least a majority of the Registrable Securities then outstanding; provided that the Company may in its sole discretion waive compliance with Subsection 2.12(c) (and the Company’s failure to object promptly in writing after notification of a proposed assignment allegedly in violation of Subsection 2.12(c) shall be deemed to be a waiver); and provided further that any provision hereof may be waived by any waiving party on such party’s own behalf, without the consent of any other party. Notwithstanding the foregoing, (a) this Agreement may not be amended, modified or terminated and the observance of any term hereof may not be waived with respect to any Investor without the written consent of such Investor, unless such amendment, modification, termination, or waiver applies to all Investors in the same fashion (it being agreed that a waiver of the provisions of Section 4 with respect to a particular transaction shall be deemed to apply to all Investors in the same fashion if such waiver does so by its terms, notwithstanding the fact that certain Investors may nonetheless, by agreement with the Company, purchase securities in such transaction); (b) Subsections 3.1 and 3.2 and any other section of this Agreement applicable to the Major Investors (including this clause (b) of this Subsection 6.6) may not be amended, modified, terminated or waived without the written consent of the holders of at least a majority of the Registrable Securities then outstanding and held by the Major Investors; (c) Subsection 3.3(a) and this Subsection 6.6(c) may not be amended, modified, terminated or waived without the written consent of Aisling; (d) Subsection 3.3(b) and this Subsection 6.6(d) may not be amended, modified, terminated or waived without the written consent of Vertex; (e) Subsection 3.3(c) and this Subsection 6.6(e) may not be amended, modified, terminated or waived without the written consent of BVF; (f) Subsection 3.3(d) and this Subsection 6.6(f) may not be amended, modified, terminated or waived without the written consent of Qiming; (g) Subsection3.3(e) and this Subsection 6.6(g) may not be amended, modified, terminated or waived without the written consent of Driehaus; (h) Subsection 3.3(f) and this Subsection 6.6(h) may not be amended, modified, terminated or waived without the written consent of venBio; and (i) Subsection 3.3(g) and this Subsection 6.6(i) may not be amended, modified, terminated or waived without the written consent of Boxer. Notwithstanding the foregoing, Schedule A hereto may be amended by the Company from time to time to add transferees of any Registrable Securities in compliance with the terms of this Agreement without the consent of the other parties; and Schedule A hereto may also be amended by the Company after the date of this Agreement without the consent of the other parties to add information regarding any additional Investor who becomes a party to this Agreement in accordance with Subsection 6.9. The Company shall give prompt notice of any amendment, modification or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, modification, termination, or waiver. Any amendment, modification, termination, or waiver effected in accordance with this Subsection 6.6 shall be binding on all parties hereto, regardless of whether any such party has consented thereto. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision. 

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6.7             Severability. In case any one or more of the provisions contained in this Agreement is for any reason held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and such invalid, illegal, or unenforceable provision shall be reformed and construed so that it will be valid, legal, and enforceable to the maximum extent permitted by law.

 

6.8             Aggregation of Stock. All shares of Registrable Securities held or acquired by Affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement and such Affiliated persons may apportion such rights as among themselves in any manner they deem appropriate.

 

6.9             Additional Investors. Notwithstanding anything to the contrary contained herein, if the Company issues additional shares of the Company’s Preferred Stock after the date hereof, any purchaser of such shares of Preferred Stock may become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement, and thereafter shall be deemed an “Investor” for all purposes hereunder. No action or consent by the Investors shall be required for such joinder to this Agreement by such additional Investor, so long as such additional Investor has agreed in writing to be bound by all of the obligations as an “Investor” hereunder.

 

6.10           Entire Agreement; Prior Agreement Superseded. This Agreement (including any Schedules and Exhibits hereto) together with the other Transaction Documents (as defined in the Purchase Agreement) constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled. Upon the effectiveness of this Agreement, the Prior Agreement shall be deemed amended and restated and superseded and replaced in its entirety by this Agreement, and shall be of no further force or effect.

 

6.11           Dispute Resolution. The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the state courts of Delaware and to the jurisdiction of the United States District Court for the District of Delaware for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the state courts of Delaware or the United States District Court for the District of Delaware, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court.  

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Waiver of Jury Trial: EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE OTHER TRANSACTION AGREEMENTS, THE SECURITIES OR THE SUBJECT MATTER HEREOF OR THEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS SECTION HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

 

6.12           Delays or Omissions. No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such nonbreaching or nondefaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

[Remainder of Page Intentionally Left Blank] 

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IN WITNESS WHEREOF, the parties have executed this Amended and Restated Investors’ Rights Agreement as of the date first written above.

 

  ELEVATION ONCOLOGY, INC.
     
  By: /s/ Steven Elms
  Name: Steven Elms
  Title: President & CEO

 

Signature Page to Amended and Restated Investors’ Rights Agreement

 

 

  INVESTOR:
     
  VENBIO PARTNERS LLC
     
  By: /s/ Richard Gaster
  Name:      Richard Gaster
  Title:        Partner

 

Signature Page to Amended and Restated Investors’ Rights Agreement

 

 

  INVESTOR:
   
  CORMORANT PRIVATE HEALTHCARE FUND III, LP
     
  By: Cormorant Private GP III, LLC
     
  By: /s/ Bihua Chen
  Name:    Bihua Chen
  Title:      Managing Member
     
  CORMORANT GLOBAL HEALTHCARE MASTER FUND, LP
     
  By: Cormorant Global GP, LLC
     
  By: /s/ Bihua Chen
  Name:     Bihua Chen
  Title:       Managing Member
     
  CRMA SPV, L.P.
     
  By: Cormorant Asset Management, LP
     
  By: /s/ Bihua Chen
  Name:    Bihua Chen
  Title:      Attorney-In-Fact

 

Signature Page to Amended and Restated Investors’ Rights Agreement

 

 

  INVESTORS:
     
  BOXER CAPITAL, LLC
     
  By: /s/ Aaron Davis
  Name:    Aaron Davis
  Title:      Chief Executive Officer
     
  MVA INVESTORS, LLC
     
  By: /s/ Aaron Davis
  Name:    Aaron Davis
  Title:      Chief Executive Officer

 

Signature Page to Amended and Restated Investors’ Rights Agreement

 

 

  INVESTOR:
     
  SAMSARA BIOCAPITAL, L.P.
     
  By: /s/Srinivas Akkaraju
  Name:    Srinivas Akkaraju
  Title:      Managing General Partner

 

Signature Page to Amended and Restated Investors’ Rights Agreement

 

 

  INVESTOR:
     
  VIVO OPPORTUNITY FUND, L.P.
     
  By: Vivo Opportunity, LLC, General Partner
     
  By: /s/ Albert Cha
  Name:    Albert Cha
  Title:      Managing Member

 

Signature Page to Amended and Restated Investors’ Rights Agreement

 

 

  INVESTORS:
     
  JANUS HENDERSON HORIZON FUND - BIOTECHNOLOGY FUND
     
  By: Janus Capital Management LLC, its investment advisor
     
  By: /s/ Andrew Acker
  Name:    Andrew Acker
  Title:      Authorized Signatory
     
  JANUS HENDERSON BIOTECH INNOVATION MASTER FUND LIMITED
     
  By: Janus Capital Management LLC, its investment advisor
     
  By: /s/ Andrew Acker
  Name:    Andrew Acker
  Title:      Authorized Signatory

 

Signature Page to Amended and Restated Investors’ Rights Agreement

 

 

  INVESTOR:
     
  AISLING CAPITAL IV, LP
     
  By: /s/ Robert Wenzel
  Name:     Robert Wenzel
  Title:       CFO

 

Signature Page to Amended and Restated Investors’ Rights Agreement

 

 

  INVESTOR:
     
  VERTEX GLOBAL HC FUND II PTE. LTD.
     
  By: /s/ Chua Kee Lock
  Name:    Chua Kee Lock
  Title:      Director

 

Signature Page to Amended and Restated Investors’ Rights Agreement

 

 

  INVESTORS:
     
  BIOTECHNOLOGY VALUE FUND, LP
     
  By: /s/ Mark Lampert
  Name: Mark Lampert
  Title: Chief Executive Officer BVF I GP LLC, itself General Partner of Biotechnology Value Fund, L.P.
     
  BIOTECHNOLOGY VALUE FUND II, LP
     
  By: /s/ Mark Lampert
  Name: Mark Lampert
  Title: Chief Executive Officer BVF II GP LLC, itself General Partner of Biotechnology Value Fund II, L.P.
     
  BIOTECHNOLOGY VALUE TRADING FUND OS, L.P.
     
  By: /s/ Mark Lampert
  Name: Mark Lampert
  Title: President BVF Inc., General Partner of BVF Partners L.P., itself sole member of BVF Partners OS Ltd., itself GP of Biotechnology Value Trading Fund OS, L.P.
     
  MSI BVF SPV, L.L.C. (c/o Magnitude Capital)
     
  By: /s/ Mark Lampert
  Name: Mark Lampert
  Title: President BVF Inc., itself General Partner of BVF Partners L.P., itself attorney-in-fact for MSI BVF SPV, L.L.C.

 

Signature Page to Amended and Restated Investors’ Rights Agreement

 

 

  INVESTORS:
     
  DRIEHAUS EVENT DRIVEN FUND, A SERIES OF DRIEHAUS MUTUAL FUNDS
     
  By: Driehaus Capital Management LLC, its investment adviser
     
  By: /s/ Janet McWilliams
  Name: Janet McWilliams
  Title: General Counsel
     
  DRIEHAUS LIFE SCIENCES MASTER FUND, L.P.
     
  By: Driehaus Capital Management LLC, its investment adviser
     
  By: /s/ Janet McWilliams
  Name: Janet McWilliams
  Title: General Counsel
     
  DESTINATIONS MULTI-STRATEGY ALTERNATIVES FUND, A SERIES OF BRINKER CAPITAL DESTINATIONS TRUST
     
  By: Driehaus Capital Management LLC, its investment subadviser
     
  By: /s/ Janet McWilliams
  Name Janet McWilliams
  Title: General Counsel

 

Signature Page to Amended and Restated Investors’ Rights Agreement

 

 

  INVESTOR:
   
  QIMING U.S. HEALTHCARE FUND II, L.P., a Delaware limited partnership
     
  By: QIMING U.S. HEALTHCARE GP II, LLC, a Delaware limited liability company
  Its: General Partner
     
  By: /s/ Mark McDade
  Name: Mark McDade
  Its: Authorized Signatory

 

Signature Page to Amended and Restated Investors’ Rights Agreement

 

 

  INVESTOR:
   
  /s/ Franklin Berger
  Franklin Berger

 

Signature Page to Amended and Restated Investors’ Rights Agreement

 

 

  INVESTOR:
   
  /s/ Sai-Hong Ou
  Sai-Hong Ou

 

Signature Page to Amended and Restated Investors’ Rights Agreement

 

 

  INVESTOR:
   
  /s/ Lori Kunkel
  Lori Kunkel

 

Signature Page to Amended and Restated Investors’ Rights Agreement

 

 

SCHEDULE A

 

Investors

 

venBio Partners LLC 

1700 Owens Street, Suite 595 

San Francisco, CA 94158 

Attn: Richard Gaster 

Email: richard@venbio.com

 

With a copy to (which shall not constitute notice): 

 

Sidley Austin LLP 

1999 Avenue of the Stars, 17th Floor 

Los Angeles, CA 90067 

Attn: Mehdi Khodadad 

Email: mkhodadad@sidley.com 

 

Cormorant Private Healthcare Fund III, LP 

200 Clarendon Street, 52nd Floor 

Boston, MA 02116 

Attn: Jay Scollin 

Attn: Neb Obradovic 

Email:   scollins@cormorant-asset.com 

      neb@cormorant-asset.com 

 

Cormorant Global Healthcare Master Fund, LP 

200 Clarendon Street, 52nd Floor 

Boston, MA 02116 

Attn: Jay Scollin 

Attn: Neb Obradovic 

Email: scollins@cormorant-asset.com 

     neb@cormorant-asset.com 

 

CRMA SPV, L.P. 

200 Clarendon Street, 52nd Floor 

Boston, MA 02116 

Attn: Jay Scollin 

Attn: Neb Obradovic 

Email: scollins@cormorant-asset.com 

     neb@cormorant-asset.com 

 

Boxer Capital, LLC
12860 El Camino Real, Suite 300
San Diego, CA 92130 

Attn: Aaron Davis 

Email:adavis@tavistock.com 

 

 

MVA Investors, LLC
12860 El Camino Real, Suite 300
San Diego, CA 92130 

Attn: Aaron Davis 

Email:adavis@tavistock.com

 

Samsara BioCapital, L.P.

565 Everett Ave.
Palo Alto, CA 94301 

Attn: 

Email:   srini@samsaracap.com 

      rich@samsaracap.com

 

With a copy to (which shall not constitute notice):

 

Wilmer, Cutler, Pickering, Hale and Dorr LLP
60 State Street
Boston, MA 02109 

Attn: Jason Kropp
Email: Jason.Kropp@wilmerhale.com

 

Vivo Opportunity Fund, L.P. 

192 Lytton Ave.
Palo Alto, CA 94301 

Attn: Albert Cha 

Email: acha@vivocapital.com 

 

Janus Henderson Horizon Fund - Biotechnology Fund
c/o Janus Capital Management, LLC
151 Detroit Street
Denver, CO 80206 

Attn: Andy Acker
Attn: Angela Morton 

Email: andy.acker@janushenderson.com 

    amorton@janushenderson.com

 

With a copy to (which shall not constitute notice): 

 

Perkins Coie LLP 

3150 Porter Drive 

Palo Alto, CA 94306 

Attn: Adrian Rich 

Email: arich@perkinscoie.com

 

 

Janus Henderson Biotech Innovation Master Fund Limited 

c/o Janus Capital Management, LLC
151 Detroit Street
Denver, CO 80206 

Attn: Andy Acker
Attn: Angela Morton 

Email: andy.acker@janushenderson.com

    amorton@janushenderson.com

 

With a copy to (which shall not constitute notice):

 

Perkins Coie LLP 

3150 Porter Drive 

Palo Alto, CA 94306 

Attn: Adrian Rich 

Email: arich@perkinscoie.com

 

Aisling Capital IV, LP 

888 Seventh Avenue, 12th Floor 

New York, NY 10106 

Attn: Steven Elms 

Fax: 212 651 6379 

Email: selms@aislingcapital.com

 

and

 

Aisling Capital IV, L.P. 

888 Seventh Avenue, 12th Floor 

New York, NY 10106 

Attn: Chief Financial Officer 

Fax: 212 651 6379 

Email: rwenzel@aislingcapital.com

 

With a required copy to: 

 

McDermott Will & Emery LLP 

340 Madison Avenue 

New York, NY 10173-1922 

Attn: Todd Finger 

Fax: 212 547 5444 

Email: tfinger@mwe.com 

 

Vertex Global HC Fund II Pte. Ltd. 

345 S. California Ave.
Palo Alto, CA 94306
Attn: Lori Hu
Email: lhu@vertexventureshc.com

 

 

Biotechnology Value Fund, LP 

44 Montgomery Street, 40th Floor 

San Francisco, CA 94104

 

With a copy to (which shall not constitute notice): 

 

Gibson, Dunn & Crutcher LLP

555 Mission Street, Suite 3000 

San Francisco, CA 94105 

Attention: Ryan A. Murr

 

Biotechnology Value Fund II, LP 

44 Montgomery Street, 40th Floor 

San Francisco, CA 94104

 

With a copy to (which shall not constitute notice): 

 

Gibson, Dunn & Crutcher LLP 

555 Mission Street, Suite 3000 

San Francisco, CA 94105 

Attention: Ryan A. Murr

 

Biotechnology Value Trading Fund OS, L.P. 

PO Box 309 Ugland House 

Grand Cayman, KY1- 1104 

Cayman Islands

 

With a copy to (which shall not constitute notice):

 

Gibson, Dunn & Crutcher LLP 

555 Mission Street, Suite 3000 

San Francisco, CA 94105 

Attention: Ryan A. Murr

 

MSI BVF SPV, L.L.C. (c/o Magnitude Capital) 

200 Park Avenue, 56th Floor 

New York, NY 10166

 

With a copy to (which shall not constitute notice):

 

Gibson, Dunn & Crutcher LLP 

555 Mission Street, Suite 3000 

San Francisco, CA 94105 

Attention: Ryan A. Murr

 

 

Destinations Multi-Strategy Alternatives Fund, A Series of Brinker Capital Destinations Trust 

25 E. Erie
Chicago, IL 60611
Attn: Janet McWilliams, General Counsel 

Email: jmcwilliams@driehaus.com 

 

Driehaus Event Driven Fund, A Series of Driehaus Mutual Funds 

25 E. Erie
Chicago, IL 60611
Attn: Janet McWilliams, General Counsel 

Email: jmcwilliams@driehaus.com 

 

Driehaus Life Sciences Master Fund, L.P. 

25 E. Erie
Chicago, IL 60611
Attn: Janet McWilliams, General Counsel 

Email: jmcwilliams@driehaus.com 

 

Qiming U.S. Healthcare Fund II, L.P.
11100 NE 8th Street, Suite 200 

Bellevue, Washington 98004 

Attn: Colin Walsh 

Email: colin@qimingvc.com

 

With a copy to (which shall not constitute notice): 

 

DLA Piper LLP (US) 

701 Fifth Avenue, Suite 6900 

Seatle, WA 98104 

Attn: Kerra Melvin 

Email: kerra.melvin@dlapiper.com 

 

Franklin Berger 

 

 

 

Sai-Hong Ou 

 

Lori Kunkel 

 

 


Exhibit 10.2

 

14ner Oncology, Inc.

 

2019 STOCK INCENTIVE PLAN

 

1.Purpose

 

The purpose of this 2019 Stock Incentive Plan (the “Plan”) of 14ner Oncology, Inc., a Delaware corporation (the “Company”), is to advance the interests of the Company’s stockholders by enhancing the Company’s ability to attract, retain and motivate persons who are expected to make important contributions to the Company and by providing such persons with equity ownership opportunities and performance-based incentives that are intended to align their interests with those of the Company’s stockholders. Except where the context otherwise requires, the term “Company” includes the Company’s present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”) and other business ventures (including, without limitation, any joint venture or limited liability company) in which the Company has a controlling interest, as determined by the Board of Directors of the Company (the “Board”).

 

2.Eligibility

 

All of the Company’s employees, officers, directors, and individual consultants and advisors (each a “Service Provider”) are eligible to receive options, restricted stock, restricted stock units and other stock-based awards (each, an “Award”) under the Plan. Each person who receives an Award under the Plan is deemed a “Participant.”

 

3.Administration and Delegation

 

(a)          Administration by Board of Directors. The Plan shall be administered by the Board. The Board shall have authority to grant Awards and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem advisable. The Board may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. All decisions by the Board shall be made in the Board’s sole discretion and shall be final and binding on all persons having or claiming any interest in the Plan or in any Award. No director or person acting pursuant to the authority delegated by the Board shall be liable for any action or determination relating to or under the Plan made in good faith.

 

(b)          Appointment of Committees. To the extent permitted by applicable law, the Board may delegate any or all of its powers under the Plan to one or more committees or subcommittees of the Board (a “Committee”). All references in the Plan to the “Board” shall mean the Board or a Committee of the Board to the extent that the Board’s powers or authority under the Plan have been delegated to such Committee.

 

4.Stock Available for Awards.

 

(a)          Subject to adjustment under Section 8, Awards may be made under the Plan for up to 8,333,333 shares of the common stock of the Company, par value of $0.0001 per share (the “Common Stock”). If any Award expires or is terminated, surrendered or canceled without having been fully exercised or is forfeited in whole or in part (including as the result of shares of Common Stock subject to such Award being repurchased by the Company at the original issuance price pursuant to a contractual repurchase right) or results in any Common Stock not being issued, the unused Common Stock covered by such Award shall again be available for the grant of Awards under the Plan. Further, shares of Common Stock tendered to the Company by a Participant to exercise an Award shall be added to the number of shares of Common Stock available for the grant of Awards under the Plan. However, in the case of Incentive Stock Options (as hereinafter defined), the foregoing provisions shall be subject to any limitations under the Code. Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares. At no time while there is any Option (as defined below) outstanding and held by a Participant who was a resident of the State of California on the date of grant of such Option, shall the total number of shares of Common Stock issuable upon exercise of all outstanding options and the total number of shares provided for under any stock bonus or similar plan or agreement of the Company exceed the applicable percentage as calculated in accordance with the conditions and exclusions of Section 260.140.45 of the California Code of Regulations, as amended (the “California Regulations”), based on the shares of the Company which are outstanding at the time the calculation is made unless the Plan complies with all conditions of Rule 701 of the Securities Act of 1933, as amended.

 

 

(b)          Substitute Awards. In connection with a merger or consolidation of an entity with the Company or the acquisition by the Company of property or stock of an entity, the Board may grant Awards in substitution for any options or other stock or stock-based awards granted by such entity or an affiliate thereof. Substitute Awards may be granted on such terms as the Board deems appropriate in the circumstances, notwithstanding any limitations on Awards contained in the Plan. Substitute Awards shall not count against the overall share limit set forth in Section 4(a), except as may be required by reason of Section 422 and related provisions of the Code.

 

5.Stock Options

 

(a)          General. The Board may grant options to purchase Common Stock (each, an “Option”) and determine the number of shares of Common Stock to be covered by each Option, the exercise price of each Option and the conditions and limitations applicable to the exercise of each Option, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable. An Option, or portion of an Option, which is not intended to be or fails to qualify as an Incentive Stock Option (as hereinafter defined) shall be designated a “Nonstatutory Stock Option.

 

(b)          Incentive Stock Options. An Option that the Board intends to be an “incentive stock option” as defined in Section 422 of the Code (an “Incentive Stock Option”) shall only be granted to employees of the Company and any other entities the employees of which are eligible to receive Incentive Stock Options under the Code, and shall be subject to and shall be construed consistently with the requirements of Section 422 of the Code. A Participant who owns more than 10% of the total combined voting power of all classes of outstanding stock of the Company shall not be eligible for the grant of an Incentive Stock Option unless (i) the exercise price is at least 110% of the Fair Market Value (as defined below) on the date the Option is granted and (ii) such Incentive Stock Option by its terms is not exercisable after the expiration of five years from the date the Option is granted. The Company shall have no liability to a Participant, or any other party, if an Option (or any part thereof) that is intended to be an Incentive Stock Option is not an Incentive Stock Option or for any action taken by the Board pursuant to Section 9(g), including without limitation the conversion of an Incentive Stock Option to a Nonstatutory Stock Option.

 

(c)          Exercise Price. The Board shall establish the exercise price of each Option and specify such exercise price in the applicable option agreement. The exercise price shall be not less than 100% of the Fair Market Value on the date the Option is granted unless the Board specifically determines that the exercise price is intended to be less than such Fair Market Value, in which case the option agreement shall contain provisions complying with Section 409A of the Code; provided that if the Board approves the grant of an Option with an exercise price to be determined on a future date, the exercise price shall be not less than 100% of the Fair Market Value on such future date. The term “Fair Market Value” shall mean, as of a given date: (i) if the Common Stock is listed on a national securities exchange, the last sale price of the Common Stock in the principal trading market for the Common Stock on such date; (ii) if the Common Stock is not listed on a national securities exchange, but is traded in the over-the counter market, the closing bid price for the Common Stock on such date, as reported by the OTC Bulletin Board or the National Quotation Bureau, Incorporated or similar publisher of such quotations; or (iii) if the Common Stock is not listed on a national securities exchange or traded in the over-the-counter market, such price as shall be determined by (or in a manner approved by) the Board in good faith and in compliance with applicable provisions of the Code and the regulations issued thereunder.

 

 

(d)          Duration of Options. Each Option shall be exercisable at such times and subject to such terms and conditions as the Board may specify in the applicable option agreement.

 

(e)          Exercise of Option. Options may be exercised by delivery to the Company of a written notice of exercise signed by the proper person or by any other form of notice (including electronic notice) approved by the Board together with payment in full as specified in Section 5(f) for the number of shares of Common Stock for which the Option is exercised. Shares of Common Stock subject to the Option will be delivered by the Company following exercise either as soon as practicable or, subject to such conditions as the Board shall specify, on a deferred basis (with the Company’s obligation to be evidenced by an instrument providing for future delivery of the deferred shares at the time or times specified by the Board).

 

(f)           Payment Upon Exercise. Common Stock purchased upon the exercise of an Option granted under the Plan shall be paid for as follows:

 

(1)         in cash or by check, payable to the order of the Company;

 

(2)         except as may otherwise be provided in the applicable option agreement, by (i) delivery of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price and any required tax withholding or (ii) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price and any required tax withholding;

 

(3)         when the Common Stock is registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and to the extent provided for in the applicable option agreement or approved by the Board, in its sole discretion, by delivery (either by actual delivery or attestation) of shares of Common Stock owned by the Participant valued at their Fair Market Value, provided (i) such method of payment is then permitted under applicable law, (ii) such Common Stock, if acquired directly from the Company, was owned by the Participant for such minimum period of time, if any, as may be established by the Board in its discretion and (iii) such Common Stock is not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements;

 

(4)         to the extent permitted by applicable law and provided for in the applicable option agreement or approved by the Board, in its sole discretion, by (i) delivery of a promissory note of the Participant to the Company on terms determined by the Board, or (ii) payment of such other lawful consideration as the Board may determine; or

 

(5)         by any combination of the above permitted forms of payment.

 

 

6.Restricted Stock; Restricted Stock Units

 

(a)           General. The Board may grant Awards entitling recipients to acquire shares of Common Stock (“Restricted Stock”), subject to the right of the Company to repurchase all or part of such shares at their issue price or other stated or formula price (or to require forfeiture of such shares if issued at no cost) from the recipient in the event that conditions specified by the Board in the applicable Award are not satisfied prior to the end of the applicable restriction period or periods established by the Board for such Award. Instead of granting Awards for Restricted Stock, the Board may grant Awards entitling the recipient to receive shares of Common Stock to be delivered at the time such shares of Common Stock vest (“Restricted Stock Units”) (Restricted Stock and Restricted Stock Units are each referred to herein as a “Restricted Stock Award”).

 

(b)           Terms and Conditions. The Board shall determine the terms and conditions of a Restricted Stock Award, including the conditions for repurchase (or forfeiture) and the issue price, if any.

 

(c)           Additional Provisions Relating to Restricted Stock.

 

(1)         Dividends. Participants holding shares of Restricted Stock will be entitled to all ordinary cash dividends paid with respect to such shares, unless otherwise provided by the Board. If any such dividends or distributions are paid in shares, or consist of a dividend or distribution to holders of Common Stock other than an ordinary cash dividend, the shares, cash or other property will be subject to the same restrictions on transferability and forfeitability as the shares of Restricted Stock with respect to which they were paid. Each dividend payment will be made no later than the end of the calendar year in which the dividends are paid to stockholders of that class of stock or, if later, the 15th day of the third month following the date the dividends are paid to stockholders of that class of stock.

 

(2)         Stock Certificates. The Company may require that any stock certificates issued in respect of a Restricted Stock Award shall be registered in the name of the Participant and be deposited by the Participant, together with a stock power endorsed in blank, with the Company (or its designee). After the expiration of the applicable restriction periods, upon request of a Participant or as otherwise determined by the Company, the Company (or such designee) shall deliver the certificates no longer subject to such restrictions to the Participant or if the Participant has died, to the beneficiary designated, in a manner determined by the Board, by a Participant to receive amounts due or exercise rights of the Participant in the event of the Participant’s death (the “Designated Beneficiary”). In the absence of an effective designation by a Participant, “Designated Beneficiary” shall mean the Participant’s then living spouse, or, if none, the Participant’s estate.

 

7.Other Stock-Based Awards

 

Other Awards of shares of Common Stock, and other Awards that are valued in whole or in part by reference to, or are otherwise based on, shares of Common Stock or other property, may be granted hereunder to Participants (“Other Stock-Based Awards”), including without limitation stock appreciation rights and Awards entitling recipients to receive shares of Common Stock to be delivered in the future. Such Other Stock-Based Awards shall also be available as a form of payment in the settlement of other Awards granted under the Plan or as payment in lieu of compensation to which a Participant is otherwise entitled. Other Stock-Based Awards may be paid in shares of Common Stock or cash, as the Board shall determine. Subject to the provisions of the Plan, the Board shall determine the conditions of each Other Stock-Based Award, including any purchase price applicable thereto.

 

 

8.Adjustments for Changes in Common Stock and Certain Other Events

 

(a)           Changes in Capitalization. In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any dividend or distribution to holders of Common Stock other than an ordinary cash dividend, (i) the number and class of securities available under this Plan, (ii) the number and class of securities and exercise price per share of each outstanding Option, (iii) the number of shares subject to and the repurchase price per share subject to each outstanding Restricted Stock Award, and (iv) the terms of each other outstanding Award shall be equitably adjusted by the Company (or substituted Awards may be made, if applicable) in the manner determined by the Board. Without limiting the generality of the foregoing, in the event the Company effects a split of the Common Stock by means of a stock dividend and the exercise price of and the number of shares subject to an outstanding Option are adjusted as of the date of the distribution of the dividend (rather than as of the record date for such dividend), then an optionee who exercises an Option between the record date and the distribution date for such stock dividend shall be entitled to receive, on the distribution date, the stock dividend with respect to the shares of Common Stock acquired upon such Option exercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend.

 

(b)           Change in Control

 

(1)          Definition. Unless otherwise specifically provided in an Award agreement, a “Change in Control” shall be deemed to have occurred upon the first to occur of:

 

(i)          any “person” (as such term is used in sections 13(d) and 14(d) of the Exchange Act) becoming a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing either (A) more than a majority of the voting power of the then outstanding securities of the Company, or (B) more than a majority of the aggregate fair market value of the then outstanding securities of the Company; provided, however, that a Change in Control shall not be deemed to occur as a result of (x) a transaction in which the Company becomes a subsidiary of another corporation and in which the stockholders of the Company, immediately prior to the transaction, will beneficially own, immediately after the transaction, shares entitling such stockholders to more than majority of all votes to which all stockholders of the parent corporation would be entitled in the election of directors, or (y) a transaction in which the person acquires newly issued securities of the Company in exchange for an investment in the Company; or

 

(ii)         the consummation of either: (A) a merger, share exchange, consolidation or reorganization of the Company where the stockholders of the Company, immediately prior to the merger or consolidation, will not beneficially own, immediately after the merger, share exchange, consolidation or reorganization, shares entitling such stockholders to either (x) more than a majority of all votes to which all stockholders of the surviving corporation would be entitled in the election of directors, or (y) more than a majority of the aggregate fair market value of then outstanding securities of the Company; or (B) a sale or other disposition of all or substantially all of the assets of the Company.

 

(2)          Consequences of a Change in Control on Awards Other than Restricted Stock Awards. In connection with a Change in Control, the Board may take any one or more of the following actions as to all (or any portion of) outstanding Awards other than Restricted Stock Awards on such terms as the Board determines: (i) provide that Awards shall be assumed, or substantially equivalent Awards shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof) in compliance with the applicable provisions of the Code, including Code Sections 409A, 422 and 424, (ii) upon written notice to a Participant, provide that the Participant’s unexercised Options or other unexercised Awards will terminate immediately prior to the consummation of such Change in Control unless exercised by the Participant within a specified period following the date of such notice, (iii) provide that outstanding Awards shall become exercisable, realizable or deliverable, or restrictions applicable to an Award shall lapse, in whole or in part prior to or upon such Change in Control, (iv) in the event of a Change in Control under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for each share surrendered in the Change in Control (the “Acquisition Price”), make or provide for a cash payment to a Participant equal to the excess, if any, of (A) the Acquisition Price times the number of shares of Common Stock subject to the Participant’s Options or other Awards (to the extent the exercise price does not exceed the Acquisition Price) less (B) the aggregate exercise price of all such outstanding Options or other Awards and any applicable tax withholdings, in exchange for the termination of such Options or other Awards, (v) provide that, in connection with a liquidation or dissolution of the Company, Awards shall convert into the right to receive liquidation proceeds (if applicable, net of the exercise price thereof) and (vi) any combination of the foregoing. In taking any of the actions permitted under this Section 8(b), the Board shall not be obligated by the Plan to treat all Awards, or all Awards of the same type, identically.

 

 

For purposes of clause (i) above, an Option shall be considered assumed if, following consummation of the Change in Control, the Option confers the right to purchase, for each share of Common Stock subject to the Option immediately prior to the consummation of the Change in Control, the consideration (whether cash, securities or other property) received as a result of the Change in Control by holders of Common Stock for each share of Common Stock held immediately prior to the consummation of the Change in Control (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if the consideration received as a result of the Change in Control is not solely common stock of the acquiring or succeeding corporation (or an affiliate thereof), the Company may, with the consent of the acquiring or succeeding corporation, provide for the consideration to be received upon the exercise of Options to consist solely of common stock of the acquiring or succeeding corporation (or an affiliate thereof) with equivalent in value (as determined by the Board) to the per share consideration received by holders of outstanding shares of Common Stock as a result of the Change in Control.

 

(3)          Consequences of a Change in Control on Restricted Stock Awards. Upon the occurrence of a Change in Control other than a liquidation or dissolution of the Company, the repurchase and other rights of the Company under each outstanding Restricted Stock Award shall inure to the benefit of the Company’s successor and shall, unless the Board determines otherwise, apply to the cash, securities or other property which the Common Stock was converted into or exchanged for pursuant to such Change in Control in the same manner and to the same extent as they applied to the Common Stock subject to such Restricted Stock Award. Upon the occurrence of a Change in Control involving the liquidation or dissolution of the Company, except to the extent specifically provided to the contrary in the instrument evidencing any Restricted Stock Award or any other agreement between a Participant and the Company, all restrictions and conditions on all Restricted Stock Awards then outstanding shall automatically be deemed terminated or satisfied.

 

9.General Provisions Applicable to Awards

 

(a)          Transferability of Awards. Except as the Board may otherwise expressly determine or provide in an Award, Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution or, other than in the case of an Incentive Stock Option, pursuant to a qualified domestic relations order, and, during the life of the Participant, shall be exercisable only by the Participant. References to a Participant, to the extent relevant in the context, shall include references to authorized transferees.

 

 

(b)          Documentation. Unless otherwise expressly determined by the Board, each Incentive Stock Option shall be evidenced by a Notice of Incentive Stock Option and Incentive Stock Option Agreement substantially in the form attached as Exhibit A, each Nonstatutory Stock Option shall be evidenced by a Notice of Nonstatutory Stock Option and Nonstatutory Stock Option Agreement substantially in the form attached as Exhibit B, and each Restricted Stock Award shall be evidenced by a Summary of Restricted Stock Purchase and Restricted Stock Purchase Agreement substantially in the form attached as Exhibit C. Each Award may contain terms and conditions in addition to those set forth in the Plan.

 

(c)          Board Discretion. Except as otherwise provided by the Plan, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award need not be identical, and the Board need not treat Participants uniformly.

 

(d)          Termination of Status. The Board shall determine the effect on an Award of the disability, death, termination of employment, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during which, the Participant, or the Participant’s legal representative, conservator, guardian or Designated Beneficiary, may exercise rights under the Award.

 

(e)          Withholding. The Participant must satisfy all applicable federal, state, and local or other income and employment tax withholding obligations before the Company will deliver stock certificates or otherwise recognize ownership of Common Stock under an Award. The Company may decide to satisfy the withholding obligations through additional withholding on salary or wages. If the Company elects not to or cannot withhold from other compensation, the Participant must pay the Company the full amount, if any, required for withholding or have a broker tender to the Company cash equal to the withholding obligations. Payment of withholding obligations is due before the Company will issue any shares on exercise or release from forfeiture of an Award or, if the Company so requires, at the same time as is payment of the exercise price unless the Company determines otherwise. If provided for in an Award or approved by the Board in its sole discretion, a Participant may satisfy such tax obligations in whole or in part by delivery of shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their Fair Market Value; provided, however, except as otherwise provided by the Board, that the total tax withholding where stock is being used to satisfy such tax obligations cannot exceed the Company’s minimum statutory withholding obligations (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income). Shares surrendered to satisfy tax withholding requirements cannot be subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements.

 

(f)           Amendment of Award.

 

(1)       The Board may amend, modify or terminate any outstanding Award, including but not limited to, substituting therefor another Award of the same or a different type, changing the date of exercise or realization, and converting an Incentive Stock Option to a Nonstatutory Stock Option, provided that the Participant’s consent to such action shall be required unless the Board determines that the action, taking into account any related action, would not materially and adversely affect the Participant.

 

(2)       The Board may, without stockholder approval, amend any outstanding Award granted under the Plan to provide an exercise price per share that is lower than the then-current exercise price per share of such outstanding Award provided that such amended exercise price is at least equal to the then-current Fair Market Value. The Board may also, without stockholder approval, cancel any outstanding award (whether or not granted under the Plan) and grant in substitution new Awards under the Plan covering the same or a different number of shares of Common Stock and having an exercise price per share lower than the then-current exercise price per share of the cancelled award.

 

 

(g)          Conditions on Delivery of Stock. The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company’s counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any applicable stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules, regulations or contracts of the Company.

 

(h)          Acceleration. The Board may at any time provide that any Award shall become immediately exercisable in full or in part, free of some or all restrictions or conditions, or otherwise realizable in full or in part, as the case may be.

 

10.Miscellaneous

 

(a)           No Right To Employment or Other Status. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan, except as expressly provided in the applicable Award.

 

(b)           No Rights As Stockholder. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed with respect to an Award until becoming the record holder of such shares. Notwithstanding the foregoing, in the event the Company effects a split of the Common Stock by means of a stock dividend or otherwise and the exercise price of and the number of shares subject to such Option are adjusted as of the effective date of the stock dividend or split (rather than as of the record date for such stock dividend or split), then an optionee who exercises an Option between the record date and the distribution date for such stock dividend or split shall be entitled to receive, on the distribution date, the stock dividend or split with respect to the shares of Common Stock acquired upon such Option exercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend or split.

 

(c)           Effective Date and Term of Plan. The Plan shall become effective on the date on which it is adopted by the Board. No Awards shall be granted under the Plan after the expiration of 10 years from the earlier of (i) the date on which the Plan was adopted by the Board or (ii) the date the Plan was approved by the Company’s stockholders, but Awards previously granted may extend beyond that date.

 

(d)           Amendment of Plan. The Board may amend, suspend or terminate the Plan or any portion thereof at any time; provided, however, that if at any time the approval of the Company’s stockholders is required as to any modification or amendment under Section 422 of the Code or any successor provision with respect to Incentive Stock Options, the Board may not effect such modification or amendment without such approval. Unless otherwise specified in the amendment, any amendment to the Plan adopted in accordance with this Section 10(d) shall apply to, and be binding on the holders of, all Awards outstanding under the Plan at the time the amendment is adopted, provided the Board determines that such amendment does not materially and adversely affect the rights of Participants under the Plan.

 

 

(e)           Authorization of Sub-Plans. The Board may from time to time establish one or more sub-plans under the Plan for purposes of satisfying applicable blue sky, securities or tax laws of various jurisdictions. The Board shall establish such sub-plans by adopting supplements to this Plan containing (i) such limitations on the Board’s discretion under the Plan as the Board deems necessary or desirable or (ii) such additional terms and conditions not otherwise inconsistent with the Plan as the Board shall deem necessary or desirable. All supplements adopted by the Board shall be deemed to be part of the Plan, but each supplement shall apply only to Participants within the affected jurisdiction and the Company shall not be required to provide copies of any supplement to Participants in any jurisdiction which is not the subject of such supplement.

 

(f)            Non-Plan Equity-Based Awards. Nothing in this Plan is intended to, or shall, impair or affect the Board’s ability to make non-Plan equity-based awards.

 

(g)           Compliance with Code Section 409A. It is intended that all Awards granted hereunder be either exempt from, or issued in compliance with, Code Section 409A. The Company shall have no liability to a Participant, or any other party, if an Award that is intended to be exempt from, or compliant with, Code Section 409A is not so exempt or compliant, or for any action taken by the Board.

 

(h)           Governing Law. The provisions of the Plan and all Awards made hereunder shall be governed by and construed in accordance with the laws of Delaware.

 

* * * * * * * *

 

 

14ner Oncology, Inc.

 

2019 STOCK INCENTIVE PLAN

 

CALIFORNIA SUPPLEMENT

 

Pursuant to Section 10(e) of the Plan, the Board has adopted this supplement for purposes of satisfying the requirements of Section 25102(o) of the California Corporations Code, as amended:

 

Any Awards granted under the Plan to a Participant who is a resident of the State of California on the date of grant (a “California Participant”) shall be subject to the following additional limitations, terms and conditions:

 

1.Additional Limitations on Awards.

 

(a)          Generally. The terms of all Awards granted to a California Participant under Sections 5, 6 or 7 of the Plan shall comply, to the extent applicable, with Section 260.140.41 or Section 260.140.42 of the California Regulations.

 

(b)          Maximum Duration of Options. No Options granted to California Participants shall have a term in excess of 10 years measured from the Option grant date.

 

(c)          Minimum Exercise Period Following Termination. Unless a California Participant’s employment is terminated for cause (as defined by applicable law, the terms of any contract of employment between the Company and such Participant, or in the instrument evidencing the grant of such Participant’s Option), in the event of termination of employment of such Participant, such Participant shall have the right to exercise an Option, to the extent that he or she was otherwise entitled to exercise such Option on the date employment terminated, until the earlier of the Option expiration date or: (i) at least six months from the date of termination, if termination was caused by such Participant’s death or “permanent and total disability” (within the meaning of Section 22(e)(3) of the Code) and (ii) at least 30 days from the date of termination, if termination was caused other than by such Participant’s death or “permanent and total disability” (within the meaning of Section 22(e)(3) of the Code).

 

2.            Additional Requirement to Provide Information to California Participants. Unless the Plan or agreement complies with all conditions of Rule 701 of the Securities Act of 1933, as amended (“Rule 701”), the Company shall provide to each California Participant and to each California Participant who acquires Common Stock pursuant to the Plan, not less frequently than annually, copies of annual financial statements (which need not be audited). The Company shall not be required to provide such statements to key employees whose duties in connection with the Company assure their access to equivalent information or when the Plan or agreement complies with all conditions of Rule 701.

 

3.            Additional Limitations on Timing of Awards. No Award granted to a California Participant shall become exercisable, vested or realizable, as applicable to such Award, unless the Plan has been approved by the holders of at least a majority of the Company’s outstanding voting securities by the later of (i) within 12 months before or after the date the Plan was adopted by the Board or the agreement entered into; and (ii) prior to or within 12 months of the granting of any option or issuance of any security under the Plan or agreement to a California Participant.

 

4.            Additional Restriction Regarding Recapitalizations, Stock Splits, Etc. For purposes of Section 8 of the Plan, in the event of a stock split, reverse stock split, stock dividend, recapitalization, combination, reclassification or other distribution of the Company's securities, the number of securities allocated to each California Participant must be adjusted proportionately and without the receipt by the Company of any consideration from any California Participant.

 

 

FIRST AMENDMENT TO THE

14NER ONCOLOGY, INC.  

2019 STOCK INCENTIVE PLAN

 

THIS FIRST AMENDMENT to the 14ner Oncology, Inc. 2019 Stock Incentive Plan (the “Plan”) is effective as of December 30, 2019.

 

WHEREAS, the Board of Directors (the “Board”) of 14ner Oncology, Inc., a Delaware corporation (the “Company”), has adopted, and the stockholders of the Company have approved, the Plan; and

 

WHEREAS, the Board of the Company has approved this amendment of the Plan in order to increase the number of shares of Common Stock of the Company issuable pursuant to awards granted under the Plan by 612,500 shares, from 8,333,333 to 8,945,833 shares, and the Board has recommended this amendment to the stockholders for approval.

 

NOW, THEREFORE, the Plan shall be amended as follows:

 

1.            The first sentence of Section 4(a) of the Plan shall be deleted in its entirety and the following substituted in lieu thereof:

 

“Subject to adjustment under Section 8, Awards may be made under the Plan for up to 8,945,833 shares of the Common Stock of the Company, par value $0.0001 per share (the “Common Stock).”

 

2.            Except as amended herein, the terms and provisions of the Plan shall remain unchanged and in full force and effect.

 

IN WITNESS WHEREOF, the undersigned has executed this First Amendment to the 14ner Oncology, Inc., 2019 Stock Incentive Plan as of the date set forth above.

 

  14NER ONCOLOGY, INC.
     
  By: /s/ Steven Elms
    Steven Elms, CEO

 

 

SECOND AMENDMENT TO THE

14NER ONCOLOGY, INC.  

2019 STOCK INCENTIVE PLAN

 

THIS SECOND AMENDMENT to the 14ner Oncology, Inc. 2019 Stock Incentive Plan (the “Plan”) is effective as of March 12, 2020.

 

WHEREAS, the Board of Directors (the “Board”) of 14ner Oncology, Inc., a Delaware corporation (the “Company”), has adopted, and the stockholders of the Company have approved, the Plan;

 

WHEREAS, on February 12, 2020, the Company changed its name from “14ner Oncology, Inc.” to “Elevation Oncology, Inc”; and

 

WHEREAS, the Board of the Company has approved this amendment of the Plan in order to change the references to the name of the Company from “14ner Oncology, Inc.” to “Elevation Oncology, Inc”.

 

NOW, THEREFORE, the Plan shall be amended as follows:

 

2.            The title of the Plan shall be deleted in its entirety and the following substituted in lieu thereof:

 

ELEVATION ONCOLOGY, INC.

 

2019 STOCK INCENTIVE PLAN

 

2.            The first sentence of Section 1 of the Plan shall be deleted in its entirety and the following substituted in lieu thereof:

 

“The purpose of this 2019 Stock Incentive Plan (the “Plan”) of Elevation Oncology, Inc., a Delaware corporation (the “Company”), is to advance the interests of the Company’s stockholders by enhancing the Company’s ability to attract, retain and motivate persons who are expected to make important contributions to the Company and by providing such persons with equity ownership opportunities and performance-based incentives that are intended to align their interests with those of the Company’s stockholders.”

 

3.           The title of California Supplement to the Plan shall be deleted in its entirety and the following substituted in lieu thereof:

 

ELEVATION ONCOLOGY, INC.

 

2019 STOCK INCENTIVE PLAN

 

CALIFORNIA SUPPLEMENT

 

 

4.       Except as amended herein, the terms and provisions of the Plan shall remain unchanged and in full force and effect.

 

IN WITNESS WHEREOF, the undersigned has executed this Second Amendment to the 14ner Oncology, Inc., 2019 Stock Incentive Plan as of the date set forth above.

 

  ELEVATION ONCOLOGY, INC.
     
  By: /s/ Steven Elms
    Steven Elms, CEO

 

 

THIRD AMENDMENT TO THE

ELEVATION ONCOLOGY, INC.  

2019 STOCK INCENTIVE PLAN

 

THIS THIRD AMENDMENT to the Elevation Oncology, Inc. 2019 Stock Incentive Plan (the “Plan”) is effective as of November 10, 2020.

 

WHEREAS, the Board of Directors (the “Board”) of Elevation Oncology, Inc., a Delaware corporation (the “Company”), has adopted, and the stockholders of the Company have approved, the Plan;

 

WHEREAS, the Board of the Company has approved this amendment of the Plan in order to increase the number of shares of Common Stock of the Company issuable pursuant to awards granted under the Plan by 5,028,067 shares, from 8,945,833 shares to 13,973,900 and the Board has recommended this amendment to the stockholders for approval.

 

NOW, THEREFORE, the Plan shall be amended as follows:

 

3.            The first sentence of Section 4(a) of the Plan shall be deleted in its entirety and the following substituted in lieu thereof:

 

“Subject to adjustment under Section 8, Awards may be made under the Plan for up to 13,973,900 shares of the Common Stock of the Company, par value $0.0001 per share (the “Common Stock).”

 

2.            Except as amended herein, the terms and provisions of the Plan shall remain unchanged and in full force and effect.

 

IN WITNESS WHEREOF, the undersigned has executed this Third Amendment to the Elevation Oncology, Inc., 2019 Stock Incentive Plan as of the date set forth above.

 

  ELEVATION ONCOLOGY, INC.
     
  By: /s/ Steven Elms
    Steven Elms, CEO

 

 

EXHIBIT A

 

Notice of Incentive Stock Option
and
Incentive Stock Option Agreement

 

 

Elevation Oncology, Inc.

(f/k/a 14ner Oncology, Inc.)

 

NOTICE OF INCENTIVE STOCK OPTION 

2019 STOCK INCENTIVE PLAN

 

Elevation Oncology, Inc. (f/k/a 14ner Oncology, Inc.), a Delaware corporation (the “Company”) grants to the undersigned (the “Participant”) the following incentive stock option to purchase shares (the “Shares”) of the common stock of the Company, par value of $0.0001 per share (the “Common Stock”), pursuant to the Company’s 2019 Stock Incentive Plan (the “Plan”):

 

Participant:

 

*[Participant Name]

Total Number of Shares:

 

*[Number of Shares]

Grant Date:

 

*[Grant Date]

Exercise Price per Share:

 

$*[Exercise Price]

Vesting Commencement Date:

 

*[Vesting Date]

Vesting Schedule:

 

*[Describe Vesting Schedule – for example: “25% of the Total Number of Shares shall vest and become exercisable on the 1 year anniversary of the Vesting Commencement Date and 1/48 of the Total Number of Shares shall vest and become exercisable on the corresponding day of each month thereafter, or on the last day of each month, to the extent each month thereafter does not have the corresponding day, until all of the Shares have vested on the fourth anniversary of the Vesting Commencement Date, subject to Participant continuing to be a Service Provider through each such date.”]

*[In addition, this Option may vest and become exercisable on an accelerated basis under Section 2 of the Incentive Stock Option Agreement.]

 

Final Exercise Date:

 

*[Expiration Date].  This Option may expire earlier pursuant to Section 3 of the Incentive Stock Option Agreement if the Participant’s relationship with the Company is terminated or pursuant to Section 8 of the Plan.

 

 

This incentive stock option is granted under and governed by the terms and conditions of the Plan and the Incentive Stock Option Agreement, both of which are incorporated herein by reference. By signing below, the Participant accepts this incentive stock option, acknowledges receipt of a copy of the Plan and the Incentive Stock Option Agreement, and agrees to the terms thereof.

 

*[PARTICIPANT NAME]:   ELEVATION ONCOLOGY, INC.:
             
           
    By:      
(Signature)          
    Name:  
           
Address:     Title:    
           
    Date:    

 

 

THE OPTION GRANTED PURSUANT TO THIS AGREEMENT AND THE SHARES ISSUABLE UPON THE EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR APPLICABLE LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

 

Elevation Oncology, Inc.  

(f/k/a 14ner Oncology, Inc.)

 

INCENTIVE STOCK OPTION AGREEMENT 

Granted under 2019 Stock Incentive Plan

 

1.Grant of Option.

 

This Incentive Stock Option Agreement (the “Agreement”) evidences the grant by Elevation Oncology, Inc. (f/k/a 14ner Oncology, Inc.), a Delaware corporation (the “Company”), on the Grant Date to the Participant, an employee of the Company, of an option (this “Option”) to purchase, in whole or in part, on the terms provided herein and in the Plan, the Total Number of Shares at the Exercise Price per Share, all as defined and set forth in the accompanying Notice of Incentive Stock Option (the “Notice”). Capitalized terms that are not otherwise defined herein or in the Notice shall have the meanings given to such terms in the Plan.

 

It is intended that this Option shall be an incentive stock option as defined in Section 422 of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”). If for any reason the Option, or any portion thereof, does not meet the requirements of Section 422 of the Code, then the Option, or any portion thereof, as necessary, shall be deemed a nonstatutory stock option granted under the Plan. Except as otherwise indicated by the context, the term “Participant,” as used in this Agreement, shall include any person who acquires the right to exercise this Option validly under its terms.

 

2.Vesting Schedule.

 

This Option shall vest and become exercisable at the time or times set forth in the accompanying Notice. [In addition, this Option may vest and become exercisable on an accelerated basis as follows:

 

*[Insert any applicable acceleration provisions, such as one of the following examples.]

 

*[If, prior to the Final Exercise Date, the Participant’s status as a Service Provider is terminated by the Company without Cause (as defined in Section 3(e) below), then, immediately upon the effective date of such termination, this Option shall become exercisable as to [partial acceleration: that portion of the Total Number of Shares that otherwise would have vested during the *[___] month period following the effective date of such termination, it being understood that in no event shall the Participant be entitled to exercise the Option to purchase greater than the Total Number of Shares as a result of this provision.] OR [full acceleration: 100% of the Total Number of Shares, it being understood that in no event shall the Participant be entitled to exercise the Option to purchase greater than the Total Number of Shares as a result of this provision.]

 

[Single Trigger] *[Immediately prior to the effective date of a Change in Control, this Option shall vest and become exercisable as to [partial acceleration: that portion of the Total Number of Shares that otherwise would have vested during the *[___] month period following the effective date of such Change in Control, it being understood that in no event shall the Participant be entitled to exercise the Option to purchase greater than the Total Number of Shares as a result of this provision.] OR [full acceleration: 100% of the Total Number of Shares, it being understood that in no event shall the Participant be entitled to exercise the Option to purchase greater than the Total Number of Shares as a result of this provision.]

 

 

[Double Trigger] *[If (a) upon the consummation of a Change in Control this Option is assumed, or a substantially equivalent award is substituted, by the acquiring or succeeding corporation (in accordance with Section 8(b)(2)(i) of the Plan) and (b) within *[12] months following such Change in Control the Participant’s status as a Service Provider is terminated by the acquiring or succeeding corporation without Cause (as defined in Section 3(e) below), then, immediately upon the effective date of such termination, this Option shall vest and become exercisable as to [partial acceleration: that portion of the Total Number of Shares that otherwise would have vested during the *[___] month period following the effective date of such termination, it being understood that in no event shall the Participant be entitled to exercise the Option to purchase greater than the Total Number of Shares as a result of this provision.] OR [full acceleration: 100% of the Total Number of Shares, it being understood that in no event shall the Participant be entitled to exercise the Option to purchase greater than the Total Number of Shares as a result of this provision.]

 

3.Exercise of Option.

 

(a)          Form of Exercise. Each election to exercise this Option shall be in writing in substantially the form of the Notice of Stock Option Exercise attached to this Agreement as Exhibit A, signed by the Participant, and received by the Company at its principal office, accompanied by this Agreement, and payment in full in the manner provided in the Plan. The Participant may purchase less than the number of Shares subject to this Option; provided that, no partial exercise of this Option may be for any fractional share.

 

(b)          Continuous Relationship with the Company Required. Except as otherwise provided in this Section 3, this Option may not be exercised unless the Participant, at the time of the exercise of this Option, is, and has been at all times since the Grant Date, a Service Provider to or of the Company or any subsidiary of the Company as defined in Section 424 (f) of the Code (an “Eligible Participant”).

 

(c)          Termination of Relationship with the Company. If the Participant ceases to be an Eligible Participant for any reason, then, except as provided in paragraphs (d) and (e) below, the right to exercise this Option shall terminate three months after such cessation (but in no event after the Final Exercise Date); provided that, this Option shall be exercisable only to the extent that the Participant was entitled to exercise this Option on the date of such cessation. Notwithstanding the foregoing, if the Participant, prior to the Final Exercise Date, violates the non-competition or confidentiality provisions of any employment agreement, confidentiality and nondisclosure agreement, or other agreement between the Participant and the Company, the right to exercise this Option shall terminate immediately upon such violation.

 

(d)          Exercise Period Upon Death or Disability. If the Participant dies or becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to the Final Exercise Date while the Participant is an Eligible Participant and the Company has not terminated such relationship for “Cause” (as defined below), this Option shall be exercisable, within the period of one year following the date of death or disability of the Participant, by the Participant (or in the case of death by an authorized transferee); provided that, this Option shall be exercisable only to the extent that this Option was exercisable by the Participant on the date of the Participant’s death or disability, and further provided that this Option shall not be exercisable after the Final Exercise Date.

 

 

(e)          Termination for Cause. If, prior to the Final Exercise Date, the Participant’s status as a Service Provider is terminated by the Company for Cause (as defined below), the right to exercise this Option shall terminate immediately upon the effective date of such termination. If the Participant is party to an agreement with the Company that contains an applicable definition of “cause”, “Cause” shall have the meaning ascribed to such term in such agreement. Otherwise, “Cause” shall mean willful misconduct by the Participant or willful failure by the Participant to perform the Participant’s responsibilities to the Company (including, without limitation, breach by the Participant of any provision of any employment, consulting, advisory, nondisclosure, non-competition or other similar agreement between the Participant and the Company), as determined by the Company, which determination shall be conclusive. The Participant shall be considered to have been discharged for Cause if the Company determines, within 30 days after the Participant’s resignation or termination other than for Cause, that discharge for Cause was warranted.

 

4.Restrictions on Transfer; Rights of First Refusal and Stockholder Agreements.

 

(a)          Bylaws. The Participant acknowledges and agrees that the Shares are subject to the provisions of the Company’s Bylaws, as amended from time to time (the “Bylaws”), including without limitation, all restrictions on transfer and rights of first refusal described in the Bylaws. The Participant may inspect the Bylaws at the Company’s principal office.

 

(b)          Legend. Any certificate representing Shares shall bear a legend substantially in the following form (in addition to, or in combination with, any legend required by applicable federal and state securities laws and agreements relating to the transfer and/or voting of the Company securities):

 

“The securities represented by this certificate, and the transfer thereof, are subject to the restriction on transfer provisions of the Bylaws of the Company, a copy of which is on file in, and may be examined at, the principal office of the Company”

 

(c)          Stockholder Agreements. The Participant acknowledges and agrees that the Company may condition the issuance of the Shares upon the Participant joining and becoming a party to such stockholder agreements, which may impose certain contractual rights and obligations on the Shares, as may be entered into from time to time by and among the Company and certain holders of the Company’s capital stock.

 

5.            Agreement in Connection with Public Offering. The Participant agrees, in connection with the initial underwritten public offering of the Company’s securities pursuant to a registration statement under the Securities Act of 1933, as amended (the “Securities Act”): (i) not to sell, make short sale of, loan, grant any options for the purchase of, or otherwise dispose of any shares of Common Stock held by the Participant (other than those shares included in the offering) without the prior written consent of the Company or the underwriters managing such initial underwritten public offering of the Company’s securities for a period of 180 days from the effective date of such registration statement, which period may be extended upon the request of the underwriters for an additional period of up to 15 days if the Company issues or proposes to issue an earnings or other public release within 15 days of the expiration of the 180-day lockup period, and (ii) to execute any agreement reflecting clause (i) above as may be requested by the Company or the managing underwriters at the time of such offering.

 

The Participant agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriters of such offering which are consistent with the foregoing or which are necessary to give further effect thereto. In addition, if requested, by the Company or the underwriters of such offering, the Participant shall provide, within 10 days of such request, such information as may be required by the Company or such underwriters in connection with the completion of any public offering of the Company’s securities pursuant to a registration statement filed under the Securities Act. The obligations described in this Section 5 shall not apply to a registration relating solely to employee benefits plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a Commission Rule 145 transaction on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of the applicable period. Participant agrees that any transferee of this Option or Shares pursuant to this Agreement shall be bound by this Section 5.

 

 

6.Tax Matters.

 

(a)          Withholding. No Shares shall be issued pursuant to the exercise of this Option unless and until the Participant pays to the Company, or makes provision satisfactory to the Company for payment of, any federal, state or local withholding taxes required by law to be withheld in respect of this Option.

 

(b)          Disqualifying Disposition. If the Participant disposes of Shares acquired upon exercise of this Option within two years from the Grant Date or one year after such Shares were acquired pursuant to exercise of this Option, the Participant shall immediately notify the Company in writing of such disposition and shall timely satisfy all resulting tax obligations and shall hold the Company harmless with respect to any such tax obligations.

 

(c)          Code Section 409A. The Exercise Price is intended to be the Fair Market Value of the Common Stock on the Grant Date. The Company has determined the Fair Market Value of the Common Stock in good faith and using the reasonable application of a reasonable valuation method, for purposes of determining the Exercise Price. Notwithstanding this, the Internal Revenue Service may assert that the Fair Market Value of the Common Stock on the Grant Date was greater than the Exercise Price. Under Code Section 409A, if the Exercise Price is less than the Fair Market Value of the Common Stock as of the Grant Date, this Option may be treated as a form of deferred compensation and the Participant may be subject to an additional 20% tax, plus interest and possible penalties. The Participant acknowledges that the Company has advised the Participant to consult with a tax adviser regarding the potential impact of Code Section 409A and that the Company, in the exercise of its sole discretion and without the consent of the Participant, may amend or modify this Agreement in any manner and delay the payment of any amounts payable pursuant to this Agreement to the minimum extent necessary to meet the requirements of Code Section 409A, as amplified by any Internal Revenue Service or U.S. Treasury Department regulations or guidance as the Company deems appropriate or advisable.

 

7.            Nontransferability of Option. This Option may not be sold, assigned, transferred, pledged or otherwise encumbered by the Participant, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the lifetime of the Participant, this Option shall be exercisable only by the Participant.

 

8.            Provisions of the Plan. This Option is subject to the provisions of the Plan, a copy of which is furnished to the Participant with this Option.

 

9             Entire Agreement; Governing Law. The Plan and the accompanying Notice are incorporated herein by reference. This Agreement, the Notice and the Plan constitute the entire agreement between the Company and the Participant with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Participant with respect to the subject matter hereof. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without reference to conflict of law provisions.

 

 

10.         Amendment. Except as set forth in Section 6(c), this Agreement may not be modified or amended in any manner adverse to the Participant’s interest except by means of a writing signed by the Company and Participant.

 

11.         No Guarantee of Continued Service. THE PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF OPTIONS PURSUANT TO THE VESTING SCHEDULE SET FORTH HEREIN AND IN THE NOTICE ARE EARNED ONLY BY CONTINUING SERVICE AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). THE PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED SERVICE FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE PARTICIPANT’S SERVICE WITH OR WITHOUT CAUSE.

 

*         *        *

 

 

Exhibit A

 

Elevation Oncology, Inc.

(f/k/a 14ner Oncology, Inc.)

 

NOTICE OF INCENTIVE STOCK OPTION EXERCISE

2019 STOCK INCENTIVE PLAN

 

The undersigned (the “Participant”) has previously been awarded an incentive stock option (the “Option”) to purchase shares (the “Shares”) of the common stock of Elevation Oncology, Inc. (f/k/a 14ner Oncology, Inc.), a Delaware corporation (the “Company”), pursuant to the Company’s 2019 Stock Incentive Plan (the “Plan”), and hereby notifies the Company of the Participant’s desire to exercise the Option on the terms set forth herein:

 

  PARTICIPANT INFORMATION:     OPTION INFORMATION:    
                   
  Name:       Grant Date:        
                   
  Address:       Exercise Price Per        
          Share: $____________________  
                   
                   
  Taxpayer       Total Shares Covered        
  ID #:         by Option:        
                   

  

EXERCISE INFORMATION:
 
Number of Shares Being Purchased: ______________________
   
Aggregate Exercise Price: $____________________
   
   
Form of Payment (check all that apply):

☐       Check for $_________ made payable to “Elevation Oncology, Inc.”

 

☐       Cash in the amount of $_________

   
Please register the Shares
in my name as follows:
   

(Print name as it is to appear on stock certificate)

 

 

 

 

REPRESENTATIONS AND WARRANTIES OF THE PARTICIPANT:

 

 The Participant hereby represents and warrants to the Company that, as of the date hereof:

 

1.             I am purchasing the Shares for my own account for investment only, and not with a view to, or for sale in connection with, any distribution of the Shares in violation of the Securities Act of 1933 (the “Securities Act”), or any rule or regulation under the Securities Act.

 

2.             I have had such opportunity as I have deemed adequate to obtain from representatives of the Company such information as is necessary to permit me to evaluate the merits and risks of my investment in the Company.

 

3.             I have sufficient experience in business, financial and investment matters to be able to evaluate the risks involved in the purchase of the Shares and to make an informed investment decision with respect to such purchase.

 

4.             I can afford a complete loss of the value of the Shares and am able to bear the economic risk of holding such Shares for an indefinite period.

 

5.             I acknowledge that I am acquiring the Shares subject to all other terms of the Plan, including the Notice of Incentive Stock Option and related Incentive Stock Option Agreement.

 

6.             I acknowledge that the Company has encouraged me to consult my own adviser to determine the tax consequences of acquiring the Shares at this time. I acknowledge that the Company has encouraged me to consult my own adviser to determine the form of ownership that is appropriate for me.

 

7.             I acknowledge that the Shares remain subject to the Company’s right of first refusal and the market stand-off (sometimes referred to as the “lock-up”), all in accordance with the applicable Notice of Incentive Stock Option and related Incentive Stock Option Agreement.

 

8.             I understand that (i) the Shares have not been registered under the Securities Act and are “restricted securities” within the meaning of Rule 144 under the Securities Act, (ii) the Shares cannot be sold, transferred or otherwise disposed of unless they are subsequently registered under the Securities Act or an exemption from registration is then available; (iii) in any event, the exemption from registration under Rule 144 will not be available for at least six months or one year (depending on whether the Company is subject to the reporting obligations of the Securities Exchange Act of 1934, as amended) and even then will not be available unless applicable terms and conditions of Rule 144 are complied with; and (iv) there is now no registration statement on file with the Securities and Exchange Commission with respect to any stock of the Company and the Company has no obligation or current intention to register the Shares under the Securities Act.

 

   
  (Print Participant Name)
   
  (Signature)
   
  Date:  

 

 

 

EXHIBIT B

 

Notice of Nonstatutory Stock Option
and
Nonstatutory Stock Option Agreement

 

 

Elevation Oncology, Inc.

(f/k/a 14ner Oncology, Inc.)

 

NOTICE OF NONSTATUTORY STOCK OPTION

2019 STOCK INCENTIVE PLAN

 

Elevation Oncology, Inc. (f/k/a 14ner Oncology, Inc.), a Delaware corporation (the “Company”) grants to the undersigned (the “Participant”) the following nonstatutory stock option to purchase shares (the “Shares”) of the common stock of the Company, par value of $0.0001 per share (the “Common Stock”) pursuant to the Company’s 2019 Stock Incentive Plan (the “Plan”):

 

Participant:

 

*[Participant Name]

Total Number of Shares:

 

*[Number of Shares]

Grant Date:

 

*[Grant Date]

Exercise Price per Share:

 

$*[Exercise Price]

 

Vesting Commencement Date:

 

*[Vesting Date]

Vesting Schedule:

 

*[Describe Vesting Schedule – for example: “25% of the Total Number of Shares shall vest and become exercisable on the 1 year anniversary of the Vesting Commencement Date and 1/48 of the Total Number of Shares shall vest and become exercisable on the corresponding day of each month thereafter, or on the last day of each month, to the extent each month thereafter does not have the corresponding day, until all of the Shares have vested on the fourth anniversary of the Vesting Commencement Date, subject to Participant continuing to be a Service Provider through each such date.”]

 

*[In addition, this option may vest and become exercisable on an accelerated basis under Section 2 of the Nonstatutory Stock Option Agreement.]

 

Final Exercise Date:

 

*[Expiration Date].  This option may expire earlier pursuant to Section 3 of the Nonstatutory Stock Option Agreement if the Participant’s relationship with the Company is terminated, or pursuant to Section 8 of the Plan.

 

 

This nonstatutory stock option is granted under and governed by the terms and conditions of the Plan and the accompanying Nonstatutory Stock Option Agreement, both of which are incorporated herein by reference. By signing below, the Participant accepts this nonstatutory stock option, acknowledges receipt of a copy of the Plan and the Nonstatutory Stock Option Agreement, and agrees to the terms thereof.

 

[PARTICIPANT NAME]:   ELEVATION ONCOLOGY, INC.:
             
           
    By:      
(Signature)          
    Name:  
           
Address:     Title:    
           
    Date:    

 

 

THE OPTION GRANTED PURSUANT TO THIS AGREEMENT AND THE SHARES ISSUABLE UPON THE EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR APPLICABLE LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

 

Elevation Oncology, Inc.

(f/k/a 14ner Oncology, Inc.)

 

NONSTATUTORY STOCK OPTION AGREEMENT
Granted Under 2019 Stock Incentive Plan

 

1.Grant of Option.

 

This Nonstatutory Stock Option Agreement (the “Agreement”) evidences the grant by Elevation Oncology, Inc. (f/k/a 14ner Oncology, Inc.), a Delaware corporation (the “Company”), on the Grant Date to the Participant, a[n] *[employee/officer/director/consultant/advisor] of the Company, of an option (this “Option”) to purchase, in whole or in part, on the terms provided herein and in the Plan, the Total Number of Shares of Common Stock at the Exercise Price per Share, all as defined and set forth in the accompanying Notice of Nonstatutory Stock Option (the “Notice”). Capitalized terms that are not otherwise defined herein or in the Notice shall have the meanings given to such terms in the Plan.

 

It is intended that this Option shall not be an incentive stock option as defined in Section 422 of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”). Except as otherwise indicated by the context, the term “Participant,” as used in this Agreement, shall include any person who acquires the right to exercise this Option validly under its terms.

 

2.Vesting Schedule.

 

This Option shall vest and become exercisable at the time or times set forth in the accompanying Notice. [In addition, the Option may vest and become exercisable on an accelerated basis as follows:

 

*[Insert any applicable acceleration provisions.]

 

*[If, prior to the Final Exercise Date, the Participant’s status as a Service Provider is terminated by the Company without Cause (as defined in Section 3(e) below), then, immediately upon the effective date of such termination, this Option shall become exercisable as to [partial acceleration: that portion of the Total Number of Shares that otherwise would have vested during the *[___] month period following the effective date of such termination, it being understood that in no event shall the Participant be entitled to exercise the Option to purchase greater than the Total Number of Shares as a result of this provision.] OR [full acceleration: 100% of the Total Number of Shares, it being understood that in no event shall the Participant be entitled to exercise the Option to purchase greater than the Total Number of Shares as a result of this provision.]

 

[Single Trigger] *[Immediately prior to the effective date of a Change in Control, this Option shall vest and become exercisable as to [partial acceleration: that portion of the Total Number of Shares that otherwise would have vested during the *[___] month period following the effective date of such Change in Control, it being understood that in no event shall the Participant be entitled to exercise the Option to purchase greater than the Total Number of Shares as a result of this provision.] OR [full acceleration: 100% of the Total Number of Shares, it being understood that in no event shall the Participant be entitled to exercise the Option to purchase greater than the Total Number of Shares as a result of this provision.]

 

 

[Double Trigger] *[If (a) upon the consummation of a Change in Control this Option is assumed, or a substantially equivalent award is substituted, by the acquiring or succeeding corporation (in accordance with Section 8(b)(2)(i) of the Plan) and (b) within *[12] months following such Change in Control the Participant’s status as a Service Provider is terminated by the acquiring or succeeding corporation without Cause (as defined in Section 3(e) below), then, immediately upon the effective date of such termination, this Option shall vest and become exercisable as to [partial acceleration: that portion of the Total Number of Shares that otherwise would have vested during the *[___] month period following the effective date of such termination, it being understood that in no event shall the Participant be entitled to exercise the Option to purchase greater than the Total Number of Shares as a result of this provision.] OR [full acceleration: 100% of the Total Number of Shares, it being understood that in no event shall the Participant be entitled to exercise the Option to purchase greater than the Total Number of Shares as a result of this provision.]

 

3.Exercise of Option.

 

(a)         Form of Exercise. Each election to exercise this Option shall be in writing in substantially the form of the Notice of Stock Option Exercise attached to this Agreement as Exhibit A, signed by the Participant, and received by the Company at its principal office, accompanied by this Agreement, and payment in full in the manner provided in the Plan. The Participant may purchase less than the number of Shares subject to this Option; provided that, no partial exercise of this Option may be for any fractional share.

 

(b)         Continuous Relationship with the Company Required. Except as otherwise provided in this Section 3, this Option may not be exercised unless the Participant, at the time of the exercise of this Option, is, and has been at all times since the Grant Date, a Service Provider to or of the Company or any subsidiary of the Company as defined in Section 424(f) of the Code (an “Eligible Participant”).

 

(c)         Termination of Relationship with the Company. If the Participant ceases to be an Eligible Participant for any reason, then, except as provided in paragraphs (d) and (e) below, the right to exercise this Option shall terminate three months after such cessation (but in no event after the Final Exercise Date); provided that, this Option shall be exercisable only to the extent that the Participant was entitled to exercise this Option on the date of such cessation. Notwithstanding the foregoing, if the Participant, prior to the Final Exercise Date, violates the non-competition or confidentiality provisions of any employment agreement, confidentiality and nondisclosure agreement, or other agreement between the Participant and the Company, the right to exercise this Option shall terminate immediately upon such violation.

 

(d)         Exercise Period Upon Death or Disability. If the Participant dies or becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to the Final Exercise Date while the Participant is an Eligible Participant and the Company has not terminated such relationship for “Cause” (as defined below), this Option shall be exercisable, within the period of one year following the date of death or disability of the Participant, by the Participant (or in the case of death by an authorized transferee); provided that, this Option shall be exercisable only to the extent that this Option was exercisable by the Participant on the date of the Participant’s death or disability, and further provided that this Option shall not be exercisable after the Final Exercise Date.

 

(e)         Termination for Cause. If, prior to the Final Exercise Date, the Participant’s status as a Service Provider is terminated by the Company for Cause (as defined below), the right to exercise this Option shall terminate immediately upon the effective date of such termination. If the Participant is party to an agreement with the Company that contains an applicable definition of “cause”, “Cause” shall have the meaning ascribed to such term in such agreement. Otherwise, “Cause” shall mean willful misconduct by the Participant or willful failure by the Participant to perform the Participant’s responsibilities to the Company (including, without limitation, breach by the Participant of any provision of any employment, consulting, advisory, nondisclosure, non-competition or other similar agreement between the Participant and the Company), as determined by the Company, which determination shall be conclusive. The Participant shall be considered to have been discharged for “Cause” if the Company determines, within 30 days after the Participant’s resignation or termination other than for Cause, that discharge for Cause was warranted.

 

 

4.Restrictions on Transfer; Rights of First Refusal and Stockholder Agreements.

 

(a)          Bylaws. The Participant acknowledges and agrees that the Shares are subject to the provisions of the Company’s Bylaws, as amended from time to time (the “Bylaws”), including without limitation, all restrictions on transfer and rights of first refusal described in the Bylaws. The Participant may inspect the Bylaws at the Company’s principal office.

 

(b)          Legend. Any certificate representing Shares shall bear a legend substantially in the following form (in addition to, or in combination with, any legend required by applicable federal and state securities laws and agreements relating to the transfer and/or voting of the Company securities):

 

“The securities represented by this certificate, and the transfer thereof, are subject to the restriction on transfer provisions of the Bylaws of the Company, a copy of which is on file in, and may be examined at, the principal office of the Company.”

 

(c)           Stockholder Agreements. The Participant acknowledges and agrees that the Company may condition the issuance of the Shares upon the Participant joining and becoming a party to such stockholder agreements, which may impose certain contractual rights and obligations on the Shares, as may be entered into from time to time by and among the Company and certain holders of the Company’s capital stock.

 

5.Agreement in Connection with Public Offering.

 

The Participant agrees, in connection with the initial underwritten public offering of the Company’s securities pursuant to a registration statement under the Securities Act of 1933, as amended (the “Securities Act”): (i) not to sell, make short sale of, loan, grant any options for the purchase of, or otherwise dispose of any shares of Common Stock held by the Participant (other than those shares included in the offering) without the prior written consent of the Company or the underwriters managing such initial underwritten public offering of the Company’s securities for a period of 180 days from the effective date of such registration statement, which period may be extended upon the request of the underwriters for an additional period of up to 15 days if the Company issues or proposes to issue an earnings or other public release within 15 days of the expiration of the 180-day lockup period, and (ii) to execute any agreement reflecting clause (i) above as may be requested by the Company or the managing underwriters at the time of such offering.

 

The Participant agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriters of such offering which are consistent with the foregoing or which are necessary to give further effect thereto. In addition, if requested, by the Company or the underwriters of such offering, the Participant shall provide, within 10 days of such request, such information as may be required by the Company or such underwriters in connection with the completion of any public offering of the Company’s securities pursuant to a registration statement filed under the Securities Act. The obligations described in this Section 5 shall not apply to a registration relating solely to employee benefits plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a Commission Rule 145 transaction on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of the applicable period. Participant agrees that any transferee of this Option or Shares pursuant to this Agreement shall be bound by this Section 5.

 

 

6.Tax Matters.

 

(a)       Withholding. No Shares shall be issued pursuant to the exercise of this Option unless and until the Participant pays to the Company, or makes provision satisfactory to the Company for payment of, any federal, state or local withholding or other taxes required by law to be withheld in respect of this Option.

 

(b)       Code Section 409A. The Exercise Price is intended to be not less than the Fair Market Value of the Common Stock on the Grant Date. The Company has determined the Fair Market Value of the Common Stock in good faith and using the reasonable application of a reasonable valuation method, for purposes of determining the Exercise Price. Notwithstanding this, the Internal Revenue Service may assert that the Fair Market Value of the Common Stock on the Grant Date was greater than the Exercise Price. Under Code Section 409A, if the Exercise Price is less than the Fair Market Value of the Common Stock as of the Grant Date, this Option may be treated as a form of deferred compensation and the Participant may be subject to an additional 20% tax, plus interest and possible penalties. The Participant acknowledges that the Company has advised the Participant to consult with a tax adviser regarding the potential impact of Code Section 409A and that the Company, in the exercise of its sole discretion and without the consent of the Participant, may amend or modify this Agreement in any manner and delay the payment of any amounts payable pursuant to this Agreement to the minimum extent necessary to meet the requirements of Code Section 409A, as amplified by any Internal Revenue Service or U.S. Treasury Department regulations or guidance as the Company deems appropriate or advisable.

 

7.            Nontransferability of Option. This Option may not be sold, assigned, transferred, pledged or otherwise encumbered by the Participant, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the lifetime of the Participant, this Option shall be exercisable only by the Participant.

 

8.             Provisions of the Plan. This Option is subject to the provisions of the Plan, a copy of which is furnished to the Participant with this Option.

 

9              Entire Agreement; Governing Law. The Plan and the Notice are incorporated herein by reference. This Agreement, the Notice and the Plan constitute the entire agreement between the Company and the Participant with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Participant with respect to the subject matter hereof. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without reference to conflict of law provisions.

 

10.          Amendment. Except as set forth in Section 6(b), this Agreement may not be modified or amended in any manner adverse to the Participant’s interest except by means of a writing signed by the Company and Participant.

 

 

 

11.           No Guarantee of Continued Service. THE PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF OPTIONS PURSUANT TO THE VESTING SCHEDULE SET FORTH HEREIN AND IN THE NOTICE ARE EARNED ONLY BY CONTINUING SERVICE AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). THE PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED SERVICE FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE PARTICIPANT’S SERVICE WITH OR WITHOUT CAUSE.

 

* * * * * * * * * * *

 

 

Exhibit A

 

Elevation Oncology, Inc.

(f/k/a 14ner Oncology, Inc.)

 

NOTICE OF NONSTATUTORY STOCK OPTION EXERCISE

2019 STOCK INCENTIVE PLAN

 

The undersigned (the “Participant”) has previously been awarded a nonstatutory stock option (the “Option”) to purchase shares (the “Shares”) of the common stock of Elevation Oncology, Inc. (f/k/a 14ner Oncology, Inc.), a Delaware corporation (the “Company”), pursuant to the Company’s 2019 Stock Incentive Plan (the “Plan”), and hereby notifies the Company of the Participant’s desire to exercise the Option on the terms set forth herein:

 

  PARTICIPANT INFORMATION:     OPTION INFORMATION:    
                   
  Name:       Grant Date:        
                   
  Address:       Exercise Price Per        
          Share: $____________________  
                   
                   
  Taxpayer       Total Shares Covered        
  ID #:         by Option:        
                   

  

EXERCISE INFORMATION:
 
Number of Shares Being Purchased: ______________________
   
Aggregate Exercise Price: $____________________
   
   
Form of Payment (check all that apply):

☐       Check for $_________ made payable to “Elevation Oncology, Inc.”

 

☐       Cash in the amount of $_________

     
Please register the Shares
in my name as follows:
   

(Print name as it is to appear on stock certificate)

 

 

 

 

REPRESENTATIONS AND WARRANTIES OF THE PARTICIPANT:

 

The Participant hereby represents and warrants to the Company that, as of the date hereof:

 

9.             I am purchasing the Shares for my own account for investment only, and not with a view to, or for sale in connection with, any distribution of the Shares in violation of the Securities Act of 1933 (the “Securities Act”), or any rule or regulation under the Securities Act.

 

10.           I have had such opportunity as I have deemed adequate to obtain from representatives of the Company such information as is necessary to permit me to evaluate the merits and risks of my investment in the Company.

 

11.           I have sufficient experience in business, financial and investment matters to be able to evaluate the risks involved in the purchase of the Shares and to make an informed investment decision with respect to such purchase.

 

12.           I can afford a complete loss of the value of the Shares and am able to bear the economic risk of holding such Shares for an indefinite period.

 

13.           I acknowledge that I am acquiring the Shares subject to all other terms of the Plan, including the Notice of Nonstatutory Stock Option and related Nonstatutory Stock Option Agreement.

 

14.           I acknowledge that the Company has encouraged me to consult my own adviser to determine the tax consequences of acquiring the Shares at this time. I acknowledge that the Company has encouraged me to consult my own adviser to determine the form of ownership that is appropriate for me.

 

15.           I acknowledge that the Shares remain subject to the Company’s right of first refusal and the market stand-off (sometimes referred to as the “lock-up”), all in accordance with the applicable Notice of Nonstatutory Stock Option and related Nonstatutory Stock Option Agreement.

 

16.           I understand that (i) the Shares have not been registered under the Securities Act and are “restricted securities” within the meaning of Rule 144 under the Securities Act, (ii) the Shares cannot be sold, transferred or otherwise disposed of unless they are subsequently registered under the Securities Act or an exemption from registration is then available; (iii) in any event, the exemption from registration under Rule 144 will not be available for at least six months or one year (depending on whether the Company is subject to the reporting obligations of the Securities Exchange Act of 1934, as amended) and even then will not be available unless applicable terms and conditions of Rule 144 are complied with; and (iv) there is now no registration statement on file with the Securities and Exchange Commission with respect to any stock of the Company and the Company has no obligation or current intention to register the Shares under the Securities Act.

 

   
  (Print Participant Name)
   
  (Signature)
   
  Date:  

 

 

EXHIBIT C

 

Restricted Stock Purchase Agreement

 

 

Elevation Oncology, Inc.

(f/k/a 14ner Oncology, Inc.)

 

SUMMARY OF RESTRICTED STOCK PURCHASE 

2019 STOCK INCENTIVE PLAN

 

Elevation Oncology, Inc. (f/k/a 14ner Oncology, Inc.), a Delaware corporation (the “Company”) hereby issues and sells to the undersigned (the “Participant”), and the Participant hereby purchases from the Company, shares (the “Shares”) of the common stock of the Company, par value of $0.0001 per share (the “Common Stock”), pursuant to the Company’s 2019 Stock Incentive Plan (the “Plan”):

 

Participant:

 

*[Participant Name]

Total Number of Shares:

 

*[Number of Shares]

Purchase Date:

 

*[Purchase Date]

Purchase Price per Share:

 

$*[Purchase Price]

Vesting Commencement Date:

 

*[Vesting Date]

Vesting Schedule:

 

*[Describe Vesting Schedule – for example: “The Company’s Right of Repurchase shall lapse with respect to 25% of the Total Number of Shares on the 1 year anniversary of the Vesting Commencement Date and with respect to an additional 1/48 of the Total Number of Shares on the corresponding day of each month thereafter, or on the last day of each month, to the extent each month thereafter does not have the corresponding day, until all of the Shares have been released on the fourth anniversary of the Vesting Commencement Date, subject to Participant continuing to be a Service Provider through each such date.”] 

*[In addition, the Right of Repurchase shall lapse on an accelerated basis under Section 2 of the Restricted Stock Purchase Agreement.]

 

 

 

This restricted stock purchase is governed by the terms and conditions of the Plan and the Restricted Stock Purchase Agreement, both of which are incorporated herein by reference. By signing below, the Participant acknowledges receipt of a copy of the Plan and the Restricted Stock Purchase Agreement, and purchases the Shares on the terms set forth herein and therein.

 

*[PARTICIPANT NAME]:   ELEVATION ONCOLOGY, INC.:
             
           
    By:      
(Signature)          
    Name:  
           
Address:     Title:    
           
    Date:    

 

 

 

SHARES PURCHASED HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR APPLICABLE LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

 

Elevation Oncology, Inc.

(f/k/a 14ner Oncology, Inc.)

 

RESTRICTED STOCK PURCHASE AGREEMENT
2019 STOCK INCENTIVE PLAN

 

1.             Purchase of Shares. The Company hereby issues and sells to the Participant, and the Participant hereby purchases from the Company, subject to the terms and conditions set forth in this Agreement and in the Plan, the Total Number of Shares at a price per share equal to the Purchase Price per Share, all as defined and set forth in the accompanying Summary of Restricted Stock Purchase. The aggregate purchase price for the Shares shall be paid by the Participant by a check payable to the order of the Company or such other method as may be acceptable to the Company.

 

2.             Right of Repurchase. The Participant shall vest in, and the Company shall have a right of repurchase with respect to, the Shares (the “Right of Repurchase”), which such Right of Repurchase shall lapse according to the Vesting Schedule set forth in the accompanying Summary of Restricted Stock Purchase. [In addition, the Right of Repurchase shall lapse on an accelerated basis as follows:

 

*[Insert any applicable acceleration provisions, such as one of the following examples:]

 

*[If the Participant’s status as a Service Provider is terminated by the Company without Cause (as defined below), then, immediately upon the effective date of such termination, the Right of Repurchase shall lapse as to [partial acceleration: that portion of the Total Number of Shares that would have vested during the *[___] month period following the effective date of such termination.] OR [full acceleration: 100% of the Total Number of Shares.]

 

[Single Trigger] *[Upon the consummation of a Change in Control the Right of Repurchase shall lapse as to [partial acceleration: that portion of the Total Number of Shares that would have vested during the *[___] month period following the effective date of such Change in Control.] OR [full acceleration: 100% of the Total Number of Shares.]

 

[Double Trigger] *[If within *[12] months following a Change in Control the Participant’s status as a Service Provider is terminated by the acquiring or succeeding corporation without Cause (as defined below), then, immediately upon the effective date of such termination, the Right of Repurchase shall lapse as to [partial acceleration: that portion of the Total Number of Shares that would have vested during the *[___] month period following the effective date of such termination.] OR [full acceleration: 100% of the Total Number of Shares.]

 

3.Exercise of Right of Repurchase and Closing.

 

(a)                In the event the Participant ceases to be a Service Provider for any reason (other than Cause, as defined below) or no reason, including, without limitation, by reason of Participant’s death or disability (as defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), the Company shall, upon the date of such termination (as reasonably fixed by the Company), have an irrevocable, exclusive right to purchase some or all of the Shares which have not yet vested and been released from the Right of Repurchase, at a price per share equal to the lesser of (x) the fair market value of the shares at the time the Right of Repurchase is exercised, as determined by the Company’s board of directors and (y) the Purchase Price (the “Repurchase Price”). If, prior to the date on which the Shares are fully vested pursuant to the Vesting Schedule or any applicable vesting acceleration provision, (i) the Participant violates the non-competition, confidentiality or other provisions of any employment agreement, confidentiality, inventions and/or nondisclosure agreement, or other agreement between the Participant and the Company or (ii) the Participant’s status as a Service Provider is terminated by the Company for Cause (as defined below), the Company’s Right of Repurchase shall apply to the Total Number of Shares, and the Company shall have an irrevocable, exclusive right to purchase some or all of the Total Number of Shares, at the Repurchase Price. The number of Shares as to which the Right of Repurchase applies, as set forth in the preceding two sentences, shall be referred to herein as the “Repurchase Shares.”

 

 

(b)          The Company may exercise the Right of Repurchase as to any or all of the Repurchase Shares at any time following the Participant’s termination; provided, however, that without requirement of further action on the part of either party hereto, the Company’s Right of Repurchase shall be deemed to have been automatically exercised as to all Repurchase Shares at 5:00 p.m. EDT on the date that is 90 days following the date of the Participant’s termination, unless the Company declines in writing to exercise the Right of Repurchase prior to such time.

 

(c)          If the Company decides not to exercise the Right of Repurchase, it shall so notify the Participant within 90 days of the Participant’s termination. If the Company decides to exercise its Right of Repurchase, the Company shall deliver payment (if any) to the Participant, with a copy to the Escrow Agent (as defined in Section 6 hereof), by any of the following methods, in the Company’s sole discretion: (i) delivering to the Participant or the Participant’s executor a check in the amount of the aggregate Repurchase Price; (ii) canceling an amount of the Participant’s indebtedness to the Company equal to the aggregate Repurchase Price; or (iii) any combination of (i) and (ii) such that the combined payment and cancellation of indebtedness equals such aggregate Repurchase Price. Upon delivery of the payment of the aggregate Repurchase Price in any of the ways described above, the Company shall become the legal and beneficial owner of the Repurchase Shares being repurchased and all related rights and interests therein, and the Company shall have the right to retain and transfer to its own name the number of Repurchase Shares being repurchased by the Company. In the event that Participant’s continuous status as a Service Provider terminates, and the Company neither notifies the Participant within 90 days thereafter of the Company’s decision not to exercise the Right of Repurchase, nor delivers payment of the Repurchase Price to the Participant within 90 days thereafter, then the sole remedy of the Participant thereafter shall be to receive the applicable Repurchase Price determined as set forth above from the Company in the manner set forth above, and in no case shall the Participant have any claim of ownership as to any of the Repurchase Shares.

 

(d)          The Company in its sole discretion may designate and assign one or more employees, officers, directors or shareholders of the Company or other persons or organizations to exercise all or a part of the Company’s Right of Repurchase to purchase all or a part of the Repurchase Shares.

 

(e)          The Company or its assignee must notify the Participant that it does not elect to exercise the Right of Repurchase conferred above by giving the requisite written notice within 90 days following Participant’s termination as a Service Provider to the Company. If the Company or its assignee gives such requisite notice, the Repurchase Option shall terminate.

 

(f)           In the event that the Right of Repurchase is exercised, whether automatically in the manner provided for above or pursuant to written notice, then upon and following such exercise, the only remaining right of the Participant under this Agreement shall be the right to receive the applicable Repurchase Price, and the Participant have no right whatsoever to receive the Repurchase Shares. In the event that the Company’s Right of Repurchase is terminated pursuant to clause (e) above, then upon and following such termination, the only remaining right of the Participant under this Agreement shall be the right to receive the Repurchase Shares, and the Participant shall have no right whatsoever to receive the Repurchase Price.

 

 

 

(g)          For purposes hereof, if the Participant is party to an agreement with the Company that contains an applicable definition of “cause”, “Cause” shall have the meaning ascribed to such term in such agreement. Otherwise, “Cause” shall mean willful misconduct by the Participant or willful failure by the Participant to perform the Participant’s responsibilities to the Company (including, without limitation, breach by the Participant of any provision of any employment, consulting, advisory, nondisclosure, non-competition or other similar agreement between the Participant and the Company), as determined by the Company, which determination shall be conclusive. The Participant shall be considered to have been discharged for Cause if the Company determines, within 30 days after the Participant’s resignation or termination other than for Cause, that discharge for Cause was warranted.

 

4.Restrictions on Transfer; Rights of First Refusal and Stockholder Agreements.

 

(a)           The Participant acknowledges and agrees that the Shares are subject to the provisions of the Company’s Bylaws, as amended from time to time (the “Bylaws”), including without limitation, all restrictions on transfer and rights of first refusal described in the Bylaws. The Participant may inspect the Bylaws at the Company’s principal office.

 

(b)           Legends. Any certificate representing Shares shall bear legends substantially in the following form (in addition to, or in combination with, any legend required by applicable federal and state securities laws and agreements relating to the transfer and/or voting of the Company securities):

 

“The securities represented by this certificate are subject to restrictions on transfer and an option to purchase set forth in a restricted stock agreement between the Company and the registered owner of these shares (or such owner’s predecessor in interest), and such restricted stock agreement is available for inspection without charge at the principal office of the Company.”

 

“The securities represented by this certificate, and the transfer thereof, are subject to the restriction on transfer provisions of the Bylaws of the Company, a copy of which is on file in, and may be examined at, the principal office of the Company”

 

(c)           Stockholder Agreements. The Participant acknowledges and agrees that upon the request of the Company, the Participant shall join and become a party to such stockholder agreements, which may impose certain contractual rights and obligations on the Shares, as may be entered into from time to time by and among the Company and the holders of the Company’s capital stock.

 

5.            Agreement in Connection with Public Offering. The Participant agrees, in connection with the initial underwritten public offering of the Company’s securities pursuant to a registration statement under the Securities Act of 1933, as amended (the “Securities Act”): (i) not to sell, make short sale of, loan, grant any options for the purchase of, or otherwise dispose of any shares of Common Stock held by the Participant (other than those shares included in the offering) without the prior written consent of the Company or the underwriters managing such initial underwritten public offering of the Company’s securities for a period of 180 days from the effective date of such registration statement, which period may be extended upon the request of the underwriters for an additional period of up to 15 days if the Company issues or proposes to issue an earnings or other public release within 15 days of the expiration of the 180-day lockup period, and (ii) to execute any agreement reflecting clause (i) above as may be requested by the Company or the managing underwriters at the time of such offering.

 

 

The Participant agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriters of such offering which are consistent with the foregoing or which are necessary to give further effect thereto. In addition, if requested, by the Company or the underwriters of such offering, the Participant shall provide, within 10 days of such request, such information as may be required by the Company or such underwriters in connection with the completion of any public offering of the Company’s securities pursuant to a registration statement filed under the Securities Act. The obligations described in this Section 5 shall not apply to a registration relating solely to employee benefits plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a Commission Rule 145 transaction on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of the applicable period. Participant agrees that any transferee of the Shares pursuant to this Agreement shall be bound by this Section 5.

 

6.            Escrow. The Participant shall, upon the execution of this Agreement, execute Joint Escrow Instructions in the form attached to this Agreement as Exhibit A. The Joint Escrow Instructions shall be delivered to the Secretary of the Company, as escrow agent thereunder (the “Escrow Agent”). The Participant shall deliver to the Escrow Agent a stock assignment duly endorsed in blank, in the form attached to this Agreement as Exhibit B, and hereby instructs the Company to deliver to the Escrow Agent, on behalf of the Participant, the certificate(s) evidencing the Shares issued hereunder. Such materials shall be held by the Escrow Agent pursuant to the terms of the Joint Escrow Instructions.

 

7.Provisions of the Plan.

 

(a)          This Agreement is subject to the provisions of the Plan, a copy of which is furnished to the Participant with this Agreement.

 

(b)          As provided in the Plan, upon the occurrence of a Change in Control, the repurchase and other rights of the Company hereunder shall inure to the benefit of the Company’s successor and shall apply to the cash, securities or other property which the Shares were converted into or exchanged for pursuant to such Change in Control in the same manner and to the same extent as they applied to the Shares under this Agreement. If, in connection with a Change in Control, a portion of the cash, securities and/or other property received upon the conversion or exchange of the Shares is to be deferred, contingent or placed into escrow to secure indemnification or for other reasons, the mix between the vested and unvested portion of such cash, securities and/or other property that is deferred, contingent or placed into escrow shall be the same as the mix between the vested and unvested portion of such cash, securities and/or other property that is not subject to deferral, contingence or escrow.

 

8.Investment Representations. The Participant represents, warrants and covenants as follows:

 

(a)           The Participant is purchasing the Shares for the Participant’s own account for investment only, and not with a view to, or for sale in connection with, any distribution of the Shares in violation of the Securities Act, or any rule or regulation under the Securities Act.

 

(b)          The Participant has had such opportunity as the Participant deems adequate to obtain from representatives of the Company such information as is necessary to permit the Participant to evaluate the merits and risks of the Participant’s investment in the Company.

 

 

(c)          The Participant has sufficient experience in business, financial and investment matters to be able to evaluate the risks involved in the purchase of the Shares and to make an informed investment decision with respect to such purchase.

 

(d)          The Participant can afford a complete loss of the value of the Shares and is able to bear the economic risk of holding such Shares for an indefinite period.

 

(e)          The Participant acknowledges that the Participant is acquiring the Shares subject to all other terms of the Plan and this Agreement, including the related Summary of Restricted Stock Purchase

 

(f)          The Participant acknowledges that the Company has encouraged the Participant to consult the Participant’s own adviser to determine the tax consequences of acquiring the Shares at this time.

 

(g)          The Participant acknowledges that the Shares shall be subject to the Company’s Right of Repurchase, right of first refusal and the market stand-off (sometimes referred to as the “lock-up”), all in accordance with the related Summary of Restricted Stock Purchase and this Agreement.  

 

(h)       The Participant understands that (i) the Shares have not been registered under the Securities Act and are “restricted securities” within the meaning of Rule 144 under the Securities Act, (ii) the Shares cannot be sold, transferred or otherwise disposed of unless they are subsequently registered under the Securities Act or an exemption from registration is then available; (iii) in any event, the exemption from registration under Rule 144 will not be available for at least six months or one year (depending on whether the Company is subject to the reporting obligations of the Securities Exchange Act of 1934, as amended) and even then will not be available unless applicable terms and conditions of Rule 144 are complied with; and (iv) there is now no registration statement on file with the Securities and Exchange Commission with respect to any stock of the Company and the Company has no obligation or current intention to register the Shares under the Securities Act.

 

9.Withholding Taxes; Section 83(b) Election.

 

(a)           The Participant acknowledges and agrees that the Company has the right to deduct from payments of any kind otherwise due to the Participant any federal, state or local taxes of any kind required by law to be withheld with respect to the purchase of the Shares by the Participant or the lapse of the Repurchase Option.

 

(b)           The Participant has reviewed with the Participant’s own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. The Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Participant understands that the Participant (and not the Company) shall be responsible for the Participant’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement. The Participant understands that as a condition to the issuance of the Shares, Participant shall be required to file an election under Section 83(b) of the Internal Revenue Code of 1986 with the I.R.S. within 30 days from the date of this Agreement; if such election is not filed on a timely basis, the Company shall declare this Agreement, and the offer to issue the Shares, void. In such event, the Company shall return the full amount of the Purchase Price previously paid to the Participant. The Company shall not issue a stock certificate with respect to the Shares unless and until the 83(b) election has been timely filed.

 

 

THE PARTICIPANT ACKNOWLEDGES THAT IT IS SOLELY THE PARTICIPANT’S RESPONSIBILITY, AND NOT THE COMPANY’S, TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF THE PARTICIPANT REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON THE PARTICIPANT’S BEHALF.

 

10.Miscellaneous.

 

(a)           No Rights to Continued Service. The Participant acknowledges and agrees that the vesting of the Shares is earned only by continuing service as a Service Provider at the will of the Company (not through the act of being hired or purchasing shares hereunder). The Participant further acknowledges and agrees that the transactions contemplated hereunder and the vesting schedule set forth herein do not constitute an express or implied promise of continued engagement as an employee or consultant for the vesting period, for any period, or at all.

 

(b)           Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law.

 

(c)           Waiver. Any provision for the benefit of the Company contained in this Agreement may be waived, either generally or in any particular instance, by the Board of Directors of the Company.

 

(d)           Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company and the Participant and their respective heirs, executors, administrators, legal representatives, successors and assigns, subject to the restrictions on transfer set forth in Section 4 of this Agreement.

 

(e)           Notice. All notices required or permitted hereunder shall be in writing and deemed effectively given upon personal delivery or five days after deposit in the United States Post Office, by registered or certified mail, postage prepaid, addressed to the other party hereto at the address shown beneath his or its respective signature to this Agreement, or at such other address or addresses as either party shall designate to the other in accordance with this Section 10(e).

 

(f)            Pronouns. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural, and vice versa.

 

(g)           Entire Agreement; Governing Law. The Plan and the Bylaws are incorporated herein by reference. This Agreement, the Plan, and the Bylaws constitute the entire agreement between the Company and the Participant with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Participant with respect to the subject matter hereof, and this Agreement may not be modified adversely to the Participant’s interest except by means of a writing signed by the Company and Participant. This Agreement shall be governed by and construed in accordance with the laws of Delaware without reference to conflict of law provisions.

 

(h)           Amendment. This Agreement may be amended or modified only by a written instrument executed by both the Company and the Participant.

 

(i)            Participant’s Acknowledgments. The Participant acknowledges that the Participant: (i) has read this Agreement; (ii) has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of the Participant’s own choice or has voluntarily declined to seek such counsel; (iii) understands the terms and consequences of this Agreement; (iv) is fully aware of the legal and binding effect of this Agreement; and (v) understands that the law firm of Hutchison PLLC, is acting as counsel to the Company in connection with the transactions contemplated by the Agreement, and is not acting as counsel for the Participant.

 

 

 

 

[Remainder of Page Intentionally Left Blank]

 

 

 

 

Exhibit A

 

Elevation Oncology, Inc.

(f/k/a 14ner Oncology, Inc.)

 

Joint Escrow Instructions

 

Corporate Secretary
Elevation Oncology, Inc. (f/k/a 14ner Oncology, Inc.) 

 

Dear Madam or Sir: 

 

As Escrow Agent for Elevation Oncology, Inc. (f/k/a 14ner Oncology, Inc.), a Delaware corporation (the “Company”), and its successors in interest under the Restricted Stock Purchase Agreement, and related Summary of Restricted Stock Purchase, each of even date herewith (the “Agreement”), to which a copy of these Joint Escrow Instructions is attached, and the undersigned person (“Holder”), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of the Agreement in accordance with the following instructions:

 

1.             Appointment. Holder irrevocably authorizes the Company to deposit with you any certificates evidencing the Shares (as defined in the Agreement) to be held by you hereunder and any additions and substitutions to said Shares. For purposes of these Joint Escrow Instructions, “Shares” shall be deemed to include any additional or substitute property. Holder does hereby irrevocably constitute and appoint you as his attorney-in-fact and agent for the term of this escrow to execute with respect to such Shares all documents necessary or appropriate to make such Shares negotiable and to complete any transaction herein contemplated. Subject to the provisions of this Section 1 and the terms of the Agreement, Holder shall exercise all rights and privileges of a stockholder of the Company while the Shares are held by you.

 

2.Closing of Repurchase.

 

(a)           Upon any repurchase by the Company of the Shares pursuant to the Agreement, the Company shall give to Holder and you a written notice specifying the number of Shares to be repurchased, the purchase price for the Shares, as determined pursuant to the Agreement, and the time for a closing hereunder (the “Closing”) at the principal office of the Company. Holder and the Company hereby irrevocably authorize and direct you to close the transaction contemplated by such notice in accordance with the terms of said notice.

 

(b)           At the Closing, you are directed (i) to date the stock assignment form or forms necessary for the transfer of the Shares, (ii) to fill in on such form or forms the number of Shares being transferred, and (iii) to deliver the same, together with the certificate or certificates evidencing the Shares to be transferred, to the Company against the simultaneous delivery to you of the purchase price for the Shares being repurchased pursuant to the Agreement.

 

3.             Withdrawal. The Holder shall have the right to withdraw from this escrow any of the Shares as to which the Right of Repurchase (as defined in the Agreement) has terminated or expired.

 

4.             Duties of Escrow Agent.

 

(a)           Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto.

 

 

(b)          You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties. You shall not be personally liable for any act you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact of Holder while acting in good faith and in the exercise of your own good judgment, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith.

 

(c)          You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or entity, excepting only orders or process of courts of law, and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. If you are uncertain of any actions to be taken or instructions to be followed, you may refuse to act in the absence of an order, judgment or decrees of a court. In case you obey or comply with any such order, judgment or decree of any court, you shall not be liable to any of the parties hereto or to any other person or entity, by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction.

 

(d)          You shall not be liable in any respect on account of the identity, authority or rights of the parties executing or delivering or purporting to execute or deliver the Agreement or any documents or papers deposited or called for hereunder.

 

(e)          You shall be entitled to employ such legal counsel and other experts as you may deem necessary properly to advise you in connection with your obligations hereunder and may rely upon the advice of such counsel.

 

(f)           Your rights and responsibilities as Escrow Agent hereunder shall terminate if (i) you cease to be Secretary of the Company or (ii) you resign by written notice to each party. In the event of a termination under clause (i), your successor as Secretary shall become Escrow Agent hereunder; in the event of a termination under clause (ii), the Company shall appoint a successor Escrow Agent hereunder.

 

(g)          If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in furnishing such instruments.

 

(h)          It is understood and agreed that if you believe a dispute has arisen with respect to the delivery and/or ownership or right of possession of the securities held by you hereunder, you are authorized and directed to retain in your possession without liability to anyone all or any part of said securities until such dispute shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any such proceedings.

 

(i)           These Joint Escrow Instructions set forth your sole duties with respect to any and all matters pertinent hereto and no implied duties or obligations shall be read into these Joint Escrow Instructions against you.

 

(j)           The Company shall indemnify you and hold you harmless against any and all damages, losses, liabilities, costs, and expenses, including attorneys’ fees and disbursements, (including without limitation the fees of counsel retained pursuant to Section 4(e) above, for anything done or omitted to be done by you as Escrow Agent in connection with this Agreement or the performance of your duties hereunder, except such as shall result from your gross negligence or willful misconduct.

 

 

5.             Notice. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid, addressed to each of the other parties thereunto entitled at the following addresses, or at such other addresses as a party may designate by ten days’ advance written notice to each of the other parties hereto.

 

COMPANY:

Notices to the Company shall be sent to the address set forth in the salutation hereto, Attn: President

 

HOLDER: Notices to Holder shall be sent to the address set forth below Holder’s signature below.
ESCROW AGENT:

Notices to the Escrow Agent shall be sent to the address set forth in the salutation hereto.

 

6.Miscellaneous.

 

(a)           By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions, and you do not become a party to the Agreement.

 

(b)           This instrument shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.

 

  Very truly yours,
     
ELEVATION ONCOLOGY, INC.:   HOLDER:
                 
By:         By:      
                 
Name:         Name:      
                 
Title:         Address:      
                 
ESCROW AGENT:          
                 
By:                
                 
Name:                

 

 

Exhibit B

 

Elevation Oncology, Inc.

(f/k/a 14ner Oncology, Inc.)

 

STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE

 

FOR VALUE RECEIVED, I hereby sell, assign and transfer ________________ shares of common stock, par value of $0.0001 per share, of Elevation Oncology, Inc. (f/k/a 14ner Oncology, Inc.), a Delaware corporation (the “Company”) standing in my name on the books of the Company represented by Certificate(s) Number __________ herewith, to ________________________________ and do hereby irrevocably constitute and appoint Hutchison PLLC to transfer the said stock on the books of the Company with full power of substitution in the premises.

 

  Dated: ____________________
   
  HOLDER:
   
   
  (Signature)
   
   
  (Print Name)

 

 

IF YOU WISH TO MAKE A SECTION 83(b) ELECTION, THE FILING OF SUCH ELECTION IS YOUR RESPONSIBILITY.

 

the form for making this section 83(b) election is attached to this agreement as Exhibit C.

 

YOU MUST FILE THIS FORM WITHIN 30 DAYS OF PURCHASING THE SHARES.

 

YOU (and not the Company or any of its agents) shall be solely responsible for filing such form WITH THE IRS, even if YOU request the company or its agents to make this filing on YOUR behalf and even if the company or its agents have previously made this filing on YOUR Behalf.

 

The election should be filed by mailing a signed election form by certified mail, return receipt requested to the IRS Service Center where you file your tax returns. See www.irs.gov.

 

 

 

Exhibit C

 

IRC SECTION 83(B) ELECTION

 

The undersigned taxpayer hereby elects pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, to include in the undersigned’s gross income for the 201__ taxable year the excess (if any) of the fair market value of the property described below, over the amount the undersigned paid for such property, and supplies herewith the following information in compliance with the Treasury regulations promulgated under Section 83(b):

 

1.The undersigned’s name, address and taxpayer identification (social security) number are:

 

Name:  
   
Address:  
   
   
   
Social Security Number:  

 

2.The property with respect to which the election is made consists of *[No. of Shares] shares of common stock, par value of $0.0001 per share, of Elevation Oncology, Inc. (f/k/a 14ner Oncology, Inc.), a Delaware corporation (the “Company”).

 

3.The effective date on which the shares were transferred to the undersigned was*[Date], the date of the imposition on the shares of restrictions constituting a substantial risk of forfeiture was *[Date], and the taxable year to which this election relates is the year ending *[Date].

 

4.The Company has a right of first refusal with respect to any proposed transfer of the shares. If the taxpayer’s employment with the Company is terminated, the taxpayer must sell any unvested shares back to the Company at a purchase price of $*[       ] per share.

 

5.The fair market value of the shares at the time of transfer (determined without regard to any restrictions other than those which by their terms will never lapse) is $*[        ] per share.

 

6.The amount paid for the shares by the undersigned is $*[       ] per share.

 

7.A copy of this election has been furnished to the Company.

 

Date:     By:  
     
     
    Print Name

 


 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [*],
HAS BEEN OMITTED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO ELEVATION ONCOLOGY, INC. IF PUBLICLY DISCLOSED.

 

Exhibit 10.5

 

ASSET PURCHASE AGREEMENT

 

by and between

 

14NER ONCOLOGY, INC.

 

and

 

MERRIMACK PHARMACEUTICALS, INC.

 

Dated as of May 28, 2019

 

 

 

Table of Contents

 

  Page
     
Article I PURCHASE AND SALE OF THE TRANSFERRED ASSETS 1
     
  1.1. Purchase and Sale of Assets 1
  1.2. Excluded Assets 2
  1.3. Assumption of Liabilities 3
  1.4. Retained Liabilities 4
  1.5. Closing Date Consideration 4
  1.6. Closing; Delivery and Payment 5
  1.7. Taxes and Fees 6
  1.8. Wrong Pocket Assets 6
  1.9. Milestone Payments 7
     
Article II REPRESENTATIONS AND WARRANTIES OF THE SELLER 10
     
  2.1. Organization, Standing and Power 10
  2.2. Authority; No Conflict; Required Filings and Consents 11
  2.3. Taxes 11
  2.4. Intellectual Property 12
  2.5. Contracts 13
  2.6. Litigation 13
  2.7. Compliance With Laws 13
  2.8. Permits 14
  2.9. Regulatory Matters 14
  2.10. Brokers 15
  2.11. Title to Transferred Assets 15
  2.12. Exclusive Representations and Warranties 15
     
Article III REPRESENTATIONS AND WARRANTIES OF THE BUYER 15
     
  3.1. Organization, Standing and Power 15
  3.2. Authority; No Conflict; Required Filings and Consents 15
  3.3. Assets 16
  3.4. Litigation 16
  3.5. Brokers 16
  3.6. Adequacy of Information 16
  3.7. Exclusive Representations and Warranties 17
     
Article IV ADDITIONAL AGREEMENTS 17
     
  4.1. Confidentiality 17
  4.2. Post-Closing Cooperation 18
  4.3. Public Disclosure 18
  4.4. Further Assurances 19
  4.5. Seller Names and Marks 19
  4.6. Tax Matters 19
  4.7. Books and Records 19
  4.8. Services from Affiliates 20
  4.9. NIH Undertaking 20

 

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Article V INDEMNIFICATION 20
     
  5.1. Indemnification by the Seller 20
  5.2. Indemnification by the Buyer 20
  5.3. Claims for Indemnification 21
  5.4. Survival 22
  5.5. Limitations 22
  5.6. Indemnification Payments 23
  5.7. Setoff 23
     
Article VI MISCELLANEOUS 24
     
  6.1. Notices 24
  6.2. Entire Agreement 25
  6.3. No Third Party Beneficiaries 25
  6.4. Assignment 25
  6.5. Severability 26
  6.6. Counterparts and Signature 26
  6.7. Interpretation 26
  6.8. Governing Law 26
  6.9. Remedies 27
  6.10. Submission to Jurisdiction 27
  6.11. Disclosure Schedule 27
  6.12. Fees and Expenses 27
  6.13. Amendment 27
  6.14. Extension; Waiver 28
     
Article VII DEFINITIONS 28

 

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Disclosure Schedule

 

Schedules:   
    
Schedule 1.1(a)  Transferred Patents
Schedule 1.1(b)  Transferred Permits
Schedule 1.1(c)  Transferred Know-How
Schedule 1.1(d)  Transferred Inventory
Schedule 1.1(e)  Transferred Contracts
Schedule 1.2(b)  Excluded Assets
Schedule 1.3(d)  Assumed Liabilities
Schedule A  Description of MM-121
Schedule B  Description of MM-111
    
Exhibits:   
    
Exhibit A  Bill of Sale
Exhibit B  Patent Assignment
Exhibit C  Assumption Agreement
Exhibit D  Dyax Assumption and Undertaking

 

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ASSET PURCHASE AGREEMENT

 

THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is entered into as of May 28, 2019, by and between 14ner Oncology, Inc., a Delaware corporation (the “Buyer”), and Merrimack Pharmaceuticals, Inc., a Delaware corporation (the “Seller”).

 

Introduction

 

The Seller desires to sell, transfer and assign to the Buyer, and the Buyer desires to purchase from the Seller, the Transferred Assets (as defined below), subject to the assumption by the Buyer of the Assumed Liabilities (as defined below), upon the terms and subject to the conditions set forth in this Agreement.

 

In consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth below, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Buyer and the Seller agree as follows:

 

Article I

 

PURCHASE AND SALE OF THE TRANSFERRED ASSETS

 

1.1.          Purchase and Sale of Assets. Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, the Seller agrees to sell, convey, transfer, assign and make available for transfer to the Buyer, and the Buyer agrees to purchase from the Seller, all of the right, title and interest in and to the Transferred Assets, in each case, free and clear of all Liens other than Permitted Liens. For purposes of this Agreement, “Transferred Assets” means the following assets as the same exist as of immediately prior to the Closing:

 

(a)          the Patent Rights set forth on Schedule 1.1(a) (including any continuation, divisional, continuation-in-part, substitution, reissue, renewal, reexamination, supplemental protection certificate, extension, and foreign counterpart of such Patent Rights) (the “Transferred Patents”), and the Seller’s and, to the extent applicable, its Subsidiaries’, right, title and interest in and to all patent files, correspondence, opinions, studies, search results and documentation that are in the possession or control of the Seller (or, to the extent applicable, any of its Subsidiaries) as of immediately prior to the Closing to the extent exclusively related to such Transferred Patents (the “Transferred Patent Files”); provided that the Seller shall have the right to retain copies of any such Transferred Patent Files for its compliance records;

 

(b)          the permits set forth on Schedule 1.1(b) and the Seller’s and, to the extent applicable, its Subsidiaries’, right, title and interest in and to any other regulatory filings, marketing authorizations, permits, licenses, registrations, regulatory clearances, approvals, concessions, qualifications, registrations, certifications and similar items in each case granted by Governmental Entities (“Permits”) to the extent exclusively used or held for use in connection with, or are exclusively related to, a Product as of immediately prior to the Closing (the “Transferred Permits”); provided that the Seller shall have the right to retain copies of any such Transferred Permits for its compliance records;

 

 

 

(c)          any and all Know-How owned by Seller or its Subsidiaries that is exclusively related to any Product as of immediately prior to the Closing (the “Transferred Know-How”), including the Know-How identified on Schedule 1.1(c);

 

(d)          all of the inventory exclusively related to any Product as of immediately prior to the Closing, including the bulk and vialed inventory, existing finished quantities, work in process, raw materials, constituent substances, materials, stores and supplies, as well as any trade and sample inventories (the “Transferred Inventory”), as set forth on Schedule 1.1(d);

 

(e)          the Seller’s and, to the extent applicable, its Subsidiaries’, right, title and interest in and to the contracts, licenses, instruments and other agreements and legally binding arrangements set forth on Schedule 1.1(e) (the “Transferred Contracts”); and

 

(f)          the Seller’s and, to the extent applicable, its Subsidiaries’, right, title and interest in and to all books, documentation, ledgers, files, reports, plans and operating records that are in the possession or control of the Seller or its Subsidiaries that are exclusively related to any Product as of immediately prior to the Closing (and not any Excluded Asset or Retained Liability) (the “Transferred Books and Records”); provided that the Seller shall have the right to retain copies of any such Transferred Books and Records, including lab notebooks, for its compliance records.

 

Notwithstanding the foregoing, the Buyer acknowledges and agrees that in respect of the items described in Sections 1.1(b) and (f), (A) with respect to any portions of such items that do not relate solely to the Transferred Assets or the Assumed Liabilities or are also required for the operation of the Excluded Assets or relate to the Retained Liabilities, the Seller and its Affiliates may retain the originals of such items, and make available copies thereof to the Buyer and redact from any such items any information that is not related to the Transferred Assets or the Assumed Liabilities and (B) to the extent the Buyer does not take possession of any of the Transferred Books and Records at the Closing, the Seller and its Affiliates shall make such items available to the Buyer for fourteen (14) calendar days (or such earlier time as when transferred) following the Closing to enable the Buyer to take possession and control of such items at the Buyer’s expense.

 

1.2.          Excluded Assets. Notwithstanding anything to the contrary in this Agreement, the Buyer is only purchasing the Transferred Assets, and the Transferred Assets shall not include any of the Excluded Assets. For purposes of this Agreement, “Excluded Assets” means all assets, rights and properties of the Seller or any of its Affiliates other than the Transferred Assets. Without limitation of the foregoing, the Excluded Assets shall include the following:

 

(a)          all accounts receivable, pre-paid expenses, cash and cash equivalents or similar investments, other current assets, bank accounts, commercial paper, certificates of deposit, Treasury bills and other marketable securities, including security deposits, reserves, prepaid rents and prepaid expenses;

 

(b)          all assets, properties or rights set forth on, or arising under any Contracts set forth on, Schedule 1.2(b);

 

(c)          other than the Transferred Intellectual Property, all Intellectual Property owned by or licensed to the Seller or any of its Affiliates (including all Seller Names and Marks);

 

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(d)          all insurance policies, surety bonds or self-insurance of the Seller or any of its Affiliates and all claims, credits, causes of action or rights thereunder (including rights to assert claims thereunder);

 

(e)          (i) all books, records, files and papers, whether in hard copy or computer format, (A) prepared in connection with or relating to this Agreement or any Ancillary Agreement or the Contemplated Transactions or the sale of any Product, (B) prepared and maintained by the Seller or any of its Affiliates, including all regulatory files (including correspondence with Governmental Entities), market research data, and marketing data that do not relate exclusively to the Transferred Assets, (C) relating to employees of the Seller or its Affiliates, (D) that form part of the general ledger of the Seller or any of its Affiliates, that are working papers of the auditors of the Seller or any of its Affiliates or that are records related to Taxes payable by the Seller or any of its Affiliates, or (E) relating primarily to an Excluded Asset or Retained Liability and (ii) all minute books of the Seller and its Affiliates and other corporate records of the Seller and its Affiliates;

 

(f)          all accounting goodwill related to any Product;

 

(g)          all privileged communications between the Seller and any of its Affiliates and its and their respective attorneys, and any other privileged documents;

 

(h)          all rights of the Seller or any of its Affiliates arising under this Agreement or the Ancillary Agreements or the Contemplated Transactions;

 

(i)          all interests in the share capital and other equity interests of the Seller or any of its Affiliates or any other Person;

 

(j)          all Tax refunds and Tax deposits and all Tax books and records;

 

(k)          all claims, causes of action, defenses, counterclaims or other rights, if any, arising out of or relating to (i) any of the Transferred Assets or any Product or the Assumed Liabilities arising before the Closing (other than any claims with respect to infringement of Transferred Patents or misappropriation of Transferred Know-How, which claims shall constitute Transferred Assets) or (ii) any Excluded Asset or Retained Liability; and

 

(l)          all rights that accrue or will accrue to the benefit of the Seller under this Agreement or the Ancillary Agreements.

 

1.3.          Assumption of Liabilities. Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, the Buyer shall assume and agree to perform, pay, satisfy or discharge when due the Assumed Liabilities. For purposes of this Agreement, “Assumed Liabilities” means the following Liabilities:

 

(a)          all Liabilities first arising out of the prosecution, ownership, operation, maintenance, sale, lease or use of any Transferred Asset or any Product from and after the Closing;

 

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(b)          the Liabilities arising or required to be performed under the Transferred Contracts from and after the Closing; provided, however, that Buyer shall not assume and shall have no obligation to perform or pay any Liabilities to the extent that such Liabilities relate to any breach of or default by the Seller or its Subsidiaries under any provision of any of such Transferred Contracts that occurred prior to the Closing;

 

(c)          all Liabilities for which the Buyer agrees to be liable hereunder or that are otherwise apportioned to the Buyer hereunder; and

 

(d)          the Liabilities set forth on Schedule 1.3(d).

 

1.4.          Retained Liabilities. Notwithstanding anything to the contrary in this Agreement, the Assumed Liabilities shall not include any of the Retained Liabilities, and the Buyer does not hereby and shall not assume or in any way undertake to perform, pay, satisfy or discharge any Retained Liabilities. For purposes of this Agreement, “Retained Liabilities” means all Liabilities other than the Assumed Liabilities. Without limitation of the foregoing, the Retained Liabilities shall include the following:

 

(a)          all Liabilities to the extent relating to any Excluded Assets (and not otherwise constituting Assumed Liabilities);

 

(b)          all Liabilities for (i) any and all Taxes in respect of any Product or otherwise related to the Transferred Assets that are attributable to any taxable period (or portion thereof) ending on or prior to the Closing Date, (ii) any and all Taxes of the Seller, (iii) any and all Taxes of another person for which the Seller is liable, including Taxes for which the Seller is liable by reason of Treasury Regulations Section 1.1502-6 (or any comparable or similar provision of federal, state, local or foreign law), being a transferee or successor, any contractual obligation or otherwise, and (iv) subject to Section 1.7, any and all income, transfer, sales, use or other Taxes arising in connection with the consummation of the Contemplated Transactions (including any income Taxes arising as a result of the transfer by the Seller to the Buyer of the Transferred Assets);

 

(c)          the Liabilities to the extent (i) arising or required to be performed under the Transferred Contracts prior to the Closing or (ii) relating to the breach of or default by the Seller that occurred prior to the Closing; and

 

(d)          the Liabilities with respect to any human clinical study of a Product to the extent conducted by or on behalf of the Seller prior to the Closing.

 

Except as set forth in Section 5.7 hereof, the Buyer’s obligations under this Agreement shall not be subject to offset or reduction by reason of any actual or alleged breach by the Seller or any of its Affiliates of any representation, warranty or covenant contained in this Agreement or any Ancillary Agreement or any right or alleged right to indemnification hereunder or thereunder.

 

1.5.          Closing Date Consideration. At the Closing, upon the terms and subject to the conditions set forth herein, the Buyer shall purchase from the Seller the Transferred Assets in exchange for the Aggregate Consideration as set forth in this Agreement and the assumption of the Assumed Liabilities.

 

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1.6.          Closing; Delivery and Payment.

 

(a)          The Closing shall take place at 9:30 a.m.  on June 24, 2019, or such earlier date as the parties mutually agree in writing (the “Closing Date”), at the offices of Wilmer Cutler Pickering Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109, unless another place is agreed to in writing by the Buyer and the Seller. All transactions at the Closing shall be deemed to take place simultaneously, and no transaction shall be deemed to have been completed and no documents or certificates shall be deemed to have been delivered until all other transactions are completed and all other documents and certificates are delivered. The Closing may take place remotely, via electronic exchange of documents.

 

(b)          At the Closing:

 

(i)          the Buyer shall deliver the Closing Date Consideration by wire transfer of immediately available funds to an account designated in writing by the Seller;

 

(ii)          the Seller shall execute and deliver to the Buyer a Bill of Sale substantially in the form attached hereto as Exhibit A (the “Bill of Sale”);

 

(iii)          the Seller shall execute and deliver to the Buyer a Patent Assignment substantially in the form attached hereto as Exhibit B (the “Patent Assignment”);

 

(iv)          the Seller shall execute and deliver to the Buyer an IND transfer letter to FDA for each of the Transferred Permits and such other instruments of transfer, conveyance and assignment as the Buyer may reasonably request in order to effect the sale, transfer, conveyance and assignment to the Buyer of all right, title and interest in and to the Transferred Assets in accordance with the terms and conditions of this Agreement (the “Additional Transfer Documents”);

 

(v)          the Buyer shall execute and deliver to the Seller an Assumption Agreement substantially in the form attached hereto as Exhibit C (the “Assumption Agreement,” and, together with the Bill of Sale, the Patent Assignment and the Additional Transfer Documents (if any), the “Ancillary Agreements”);

 

(vi)          the Seller shall make available to the Buyer to enable the Buyer to take possession and control of, each to the extent existing in physical form and in the possession of the Seller, the Transferred Books and Records and the Transferred Know-How;

 

(vii)          the Seller shall make available to the Buyer to enable the Buyer to take possession and control of, all of the other Transferred Assets of a tangible nature;

 

(viii)          the Seller shall deliver to the Buyer a certificate, executed by the Seller’s corporate secretary on behalf of the Seller, certifying as to the resolutions of the board of directors of the Seller authorizing and approving the sale of the Transferred Assets to the Buyer pursuant to this Agreement and the other Contemplated Transactions;

 

(ix)          the Buyer shall deliver to the Seller a certificate, executed by the Buyer’s corporate secretary on behalf of the Buyer, certifying as to the resolutions of the board of directors of the Buyer authorizing and approving the purchase of the Transferred Assets by the Buyer pursuant to this Agreement and the other Contemplated Transactions;

 

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(x)          the Buyer shall deliver to the Seller evidence, in the form attached hereto as Exhibit D, that the Buyer has undertaken to Dyax Corp., or its successor (“Dyax”), in writing to (A) assume all of the Seller’s obligations under that certain Amended and Restated Collaboration Agreement, dated as of January 24, 2007, between the Seller and Dyax, as amended as of July 31, 2008, November 6, 2009 and January 18, 2012, and (B) be bound the terms of that certain Sublicense Agreement, dated as of June 30, 2008, between the Seller and Dyax; and

 

(xi)          the Seller shall deliver to the Buyer a certification that the Seller is not a foreign person in accordance with the Treasury Regulations under Section 1445 of the Code.

 

1.7.          Taxes and Fees.

 

(a)          Transfer Taxes. All transfer, sales, and use taxes, deed excise stamps and similar charges (“Transfer Taxes”) related to the Contemplated Transactions shall be borne one-half by the Seller and one-half by the Buyer. The required party shall file all necessary Tax Returns and other documentation with respect to such Transfer Taxes required by a Governmental Entity to be filed and, if required by applicable Law, the other party will, and will cause its Affiliates to, join in the execution of any such Tax Returns and other documentation. The Seller and the Buyer shall cooperate in the preparation and filing of all forms and documentation necessary to provide exemption from Transfer Tax, to the extent permitted by applicable Law.

 

(b)          Withholding Taxes. The Buyer will be entitled to deduct and withhold from the amounts otherwise payable by it pursuant to this Agreement such amounts as it reasonably determines that it is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign Tax Law, and to collect any necessary Tax forms, including Forms W-8 or W-9, as applicable, or any similar information, from the Seller and any other recipient of payments hereunder; provided, however, that the Buyer will (i) promptly (and in any event no later than five (5) Business Days prior to the date on which such payment is made or, in the case of a change in applicable Law after the date of this Agreement that would require withholding from such amounts, as soon as practicable) notify the Seller of any intention to so deduct and withhold and provide the Seller the opportunity to provide any statement, form, or other documentation that would reduce or eliminate any such requirement to deduct and withhold; (ii) remit and report any such amount required to be deducted and withheld to the applicable Governmental Entity in accordance with applicable Law; (iii) promptly provide to the Seller a certificate, receipt or other documentation of proof of such remittance reasonably acceptable to the Seller; and (iv) cooperate with the Seller as reasonably requested with respect to the filing of any Tax Return or conduct of any claim relating to any available refund of such amount remitted. In the event that any amount is so deducted and withheld, and properly remitted, such amount will be treated for all purposes of this Agreement as having been paid to the person to whom the payment from which such amount was withheld was made.

 

1.8.          Wrong Pocket Assets. If at any time or from time to time after the Closing until the date that is three (3) months after the Closing Date, Seller or any of its controlled Affiliates, on the one hand, or the Buyer or any of its Affiliates, on the other hand, shall receive or otherwise possess any asset or right (including cash) that should belong to the Buyer, on the one hand, or the Seller or any of its Affiliates, on the other, pursuant to this Agreement, the Seller or the Buyer (as the case may be) shall promptly transfer, or cause to be transferred, such asset or right to the Person so entitled thereto. Prior to any such transfer in accordance with this Section 1.8, the Person receiving or possessing such asset shall hold such asset in trust for such other Person. Without limitation of the foregoing, in the event Seller or any of its controlled Affiliates receives any payment in respect of any Transferred Asset or Buyer or any of its Affiliates receives any payment in respect of an Excluded Asset, the Seller or the Buyer (as applicable) shall promptly deliver such payment to an account designated in writing by the Buyer or the Seller (as applicable) by wire transfer of immediately available funds.

 

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1.9.          Milestone Payments.

 

(a)            Milestone Events and Milestone Payments. Subject to the terms and conditions of this Agreement, Buyer shall make each applicable payment (each a “Milestone Payment”) set forth below to the Seller promptly (and in any event no later than thirty (30) days) after the achievement by any member of the Buyer Rights Group of the relevant event listed below (each, a “Milestone Event”).

 

(i)              A one-time payment of Three Million Dollars ($3,000,000) upon the achievement of the primary endpoint (as set forth in the protocol for such study) in any registrational study (i.e., a study that is intended to be used as a pivotal study for purposes of filing an NDA or BLA if such primary endpoint is satisfied) of any Product or the determination by the applicable member of the Buyer Rights Group to proceed with the preparation of an NDA or BLA based on the results of any such study whether or not such primary endpoint is achieved;

 

(ii)             A one-time payment of [*] upon the acceptance for filing by the FDA or any other Governmental Entity of an NDA or BLA, with respect to any Product;

 

(iii)            A one-time payment of [*] upon Regulatory Approval by the FDA of any Product for any indication in the United States;

 

(iv)            A one-time payment of [*] upon the first occurrence of Pricing and Reimbursement Approval of any Product for any indication in any one of France, Germany, Italy, Spain or the United Kingdom;

 

(v)             A one-time payment of [*] upon Regulatory Approval by the PMDA of any Product for any indication in Japan;

 

(vi)            A one-time payment of [*] upon the cumulative Net Sales of all Products exceeding One Hundred Million Dollars ($100,000,000);

 

(vii)           A one-time payment of [*] upon the cumulative Net Sales of all Products exceeding Two Hundred Million Dollars ($200,000,000); and

 

(viii)          A one-time payment of [*] upon the cumulative Net Sales of all Products exceeding Three Hundred Million Dollars ($300,000,000).

 

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(b)           For the avoidance of doubt, (i) no Milestone Payment shall be paid more than once, such that the aggregate maximum cumulative amount of Milestone Payments is Fifty Four Million Five Hundred Thousand Dollars ($54,500,000), and (ii) the cumulative Net Sales of all Products worldwide over all periods will be aggregated to determine whether the Milestone Events in Section 1.9(a)(vi), Section 1.9(a)(vii) and Section 1.9(a)(viii) have been achieved (e.g., if cumulative Net Sales of all Products worldwide over all periods total Three Hundred Million Dollars and One Cent ($300,000,000.01), then all three of such Milestone Events shall have occurred and all three corresponding Milestone Payments shall have become due and payable pursuant to this Agreement). Payment in full of the Closing Date Consideration and the Milestone Payments shall constitute payment in full to the Seller and its Affiliates with respect to the Products under this Article I. In the event that the Seller or its Affiliates (as of the Closing Date) own or control any Patent Rights which are not Transferred Patents and which would, absent a license, be infringed by the manufacture, use or sale of any Product, the Buyer (together with any applicable member of the Buyer Rights Group) shall have an irrevocable, royalty-free license to practice such Patent Rights solely with respect to the development and commercialization of such Product.

 

(c)            Diligence.

 

(i)              The Buyer shall, itself or through the members of the Buyer Rights Group, use Commercially Reasonable Efforts to develop the Products, to seek and obtain Regulatory Approval therefor, to market, sell and otherwise commercialize the Products and to achieve the Milestone Events.

 

(ii)             Other than the diligence obligations specifically set forth in this Section 1.9(c), (A) neither the Buyer nor any other member of the Buyer Rights Group shall have other diligence obligations with respect to achievement of any Milestone Event, or to develop, market or sell any Product, and (B) the mere fact that the Buyer (1) engages in the development of a product competitive with a Product or (2) ceases developmental activities with respect to the Products will not, in each case of clauses (1) or (2), in and of themselves, constitute the failure to use Commercially Reasonable Efforts to develop the Products; provided that the Buyer shall not take any action, or intentionally refrain from taking any action, for the purpose of frustrating the achievement of any Milestone Events and/or the payment of any Milestone Payments hereunder.

 

(d)           Methods of Payments; Foreign Currency. All Milestone Payments shall be paid in U.S. dollars by wire transfer to an account designated in writing by the Seller. For all Net Sales and Exclusions denominated in any currency other than U.S. dollars, the amount of such sales in foreign currencies shall be converted into U.S. dollars using the exchange rate for the relevant month (the “Monthly Rate”), such Monthly Rate being determined as the last price rate of exchange for such currencies on the last business day of the immediately preceding calendar month as published on Bloomberg page FXC (or such other publication as may be agreed upon in writing between the parties from time to time).

 

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(e)            Reporting.

 

(i)              Within twenty (20) calendar days after each calendar quarter commencing after December 31, 2019 and continuing until the earlier to occur of (a) all Milestone Events having been achieved or (b) the Buyer has certified in writing to the Seller that it has in good faith permanently discontinued all development and commercialization activities with respect to the Products and/or any Transferred Assets, the Buyer shall provide the Seller with a written report (each, a “Quarterly Report”) summarizing, in reasonable detail, the status of the development of the Products in order to achieve any Milestone Event that had not yet been achieved; provided that if the Buyer resumes such development and/or commercialization activities after discontinuing them, then the Buyer will continue to be subject to the obligations set forth in this Section 1.9(e); provided, further, that the parties acknowledge and agree that the Buyer shall not be required to include the following information in any Quarterly Report (in each case to the extent not otherwise publicly available): (A) the precise status of enrollment of patients in any preclinical studies or clinical trials of any Product conducted by or on behalf of any member of the Buyer Rights Group, including information relating to any such patient’s response to any Product; (B) information regarding the Buyer’s cash or financial position; or (C) the content of any informal oral discussions with or feedback from any Regulatory Authorities.

 

(ii)             The Buyer shall provide written notice to the Seller of (A) the achievement of each Milestone Event no later than ten (10) Business Days after the occurrence thereof or after Buyer becomes aware of the achievement of such Milestone Event and (B) any determination by the Buyer or any applicable member of the Buyer Rights Group to terminate or discontinue further development or commercialization of any Product prior to the payment of all Milestone Payments. If the Buyer determines to issue a press release or similar public announcement of a Material Event, the Buyer shall use commercially reasonable efforts to provide a copy of such release or announcement to the Seller a reasonable period of time in advance of public release or publication.

 

(iii)            The Buyer shall, and shall cause the other members of the Buyer Rights Group to, keep books and records sufficient to calculate Milestone Payments and reasonable documentation regarding the Products.

 

(iv)           Commencing upon the date of the first commercial sale of a Product anywhere in the world, the Buyer shall provide to the Seller, within thirty (30) calendar days after each calendar quarter a report with respect to the immediately preceding three (3) month period stating: (A) the total gross sales of each Product sold by members of the Buyer Rights Group during such three (3) month period (broken out by the Applicable Jurisdiction(s)); and (B) the Net Sales of the each Product sold by members of the Buyer Rights Group during such three (3) month period (broken out by the Applicable Jurisdiction(s)), including a breakdown of the sum of each of the Exclusions made, if any, from gross sales to arrive at the calculation of Net Sales of the applicable Product for such Applicable Jurisdiction during such period.

 

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(f)            Audits. Upon the written request of the Seller, the Buyer shall, and shall cause the other members of the Buyer Rights Group to, permit an independent public accountant selected by the Seller and reasonably satisfactory to the Buyer and the relevant member of the Buyer Rights Group (the “Accountant”) to have reasonable access upon reasonable prior notice and during normal business hours, but no more than once during any calendar year, to review the records specified in Section 1.9(e)(iii) solely for the purpose of determining the accuracy of the reports described in Section 1.9(e)(i) and Section 1.9(e)(iv) (an “Audit”), at the Seller’s expense. Before conducting the Audit, the Accountant must execute a reasonable confidentiality agreement with the Buyer and, if applicable, the relevant Buyer Rights Group member. In acting hereunder, the Accountant shall act as an expert and not as arbitrator, and Accountant’s authority is limited to resolving disputed issues of fact (and not law). The procedures set forth in this Section 1.9(f) concerning the determinations set forth herein by the Accountant shall be governed by the law of expert determination and appraisal rather than the law of arbitration. If the Accountant concludes that any Milestone Payment was not paid when due, the Seller shall be entitled to deliver a written notice of such non-payment (a “Dispute Notice”), in which case the Seller and the Buyer shall, for a period of not less than thirty (30) calendar days after delivery of the Dispute Notice, attempt in good faith to resolve the items in dispute. If no agreement is reached by the Seller and the Buyer as to the calculation of the disputed amount within thirty (30) calendar days after delivery of a Dispute Notice, then either party shall have the right to pursue applicable legal remedies in accordance with the provisions of Section 6.9. If the Seller and the Buyer agree, or any dispute resolution mechanism determines that, any Milestone Payment was not paid as a result of an underreporting of Net Sales by more than five percent (5%), the Buyer shall reimburse the Seller for the reasonable out-of-pocket costs of the Audit. A quarterly period can only be subject to an Audit on one occasion and the Seller shall not be permitted to Audit a calendar quarter more than three (3) years after the end of such quarter.

 

(g)           Overdue Payments. Any portion of any Milestone Payment not paid when due shall bear interest from the due date until the date of payment thereof at a per annum rate equal to five percentage points (5%) above the prime rate as published by the Wall Street Journal Online as of the date the applicable payment was due, compounded annually; provided that interest shall not accrue at a rate that exceeds the maximum rate permitted by applicable Law.

 

(h)           Contractual Right Only. The rights and obligations of the Seller under this Section 1.9, including the right to receive payments, (i) are purely contractual rights and not a security for purposes of any federal or state securities Laws, (ii) will not be represented by any form of certificate or instrument, (iii) do not give the Seller any dividend rights, voting rights, liquidation rights, preemptive rights or other rights common to holders of the Buyer’s equity securities and (iv) subject to Section 6.4, are not transferrable, assignable or redeemable (other than indirect transfers or assignments, transfers by operation of law or transfers or assignments to any Affiliate of the Seller).

 

Article II

 

REPRESENTATIONS AND WARRANTIES OF THE SELLER

 

The Seller represents and warrants to the Buyer as of the date hereof as follows, except as set forth herein or, subject to Section 6.11, in the Disclosure Schedule.

 

2.1.          Organization, Standing and Power. The Seller is duly organized, validly existing and in good standing under the Laws of the State of Delaware, has all requisite corporate power and authority to own the Transferred Assets.

 

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2.2.          Authority; No Conflict; Required Filings and Consents.

 

(a)            The Seller has all requisite corporate power and authority to enter into this Agreement and each of the Ancillary Agreements to which it is a party and to consummate the Contemplated Transactions. The execution, delivery and performance by the Seller of this Agreement and each of the Ancillary Agreements to which it will be a party and the consummation by the Seller of the Contemplated Transactions have been duly authorized by all necessary corporate or similar action on the part of the Seller. This Agreement and each such Ancillary Agreement has been duly executed and delivered by the Seller and this Agreement and each such Ancillary Agreement is the legal, valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar Laws relating to or affecting the rights of creditors generally and by equitable principles, including those limiting the availability of specific performance, injunctive relief and other equitable remedies and those providing for equitable defenses (the “Bankruptcy Exception”).

 

(b)           The execution, delivery and performance by the Seller of this Agreement and each of the Ancillary Agreements to which it is a party, and the consummation by the Seller of the Contemplated Transactions, do not and will not (i) conflict with, or result in any violation or breach of, any provision of the Certificate of Incorporation or Bylaws or similar organizational documents of the Seller, (ii) conflict with, or result in any violation or breach of, or constitute (with or without notice or lapse of time, or both) a default (or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any material benefit) under, require a consent or waiver under, require the payment of a penalty under or result in the imposition of any Liens, other than Permitted Liens, on or with respect to any of the Transferred Assets, or (iii) subject to compliance with the requirements specified in Section 2.2(c), conflict with or violate any Permit, concession, franchise, license or Law applicable to the Seller or any of its properties or assets, with only such exceptions, in the case of each of clauses (ii) and (iii), as would not reasonably be expected to have, individually or in the aggregate, a Seller Material Adverse Effect.

 

(c)            No consent, approval, license, Permit, order or authorization of, or registration, declaration, notice or filing with, any Governmental Entity is required by or with respect to the Seller in connection with the execution, delivery and performance by the Seller of this Agreement and each of the Ancillary Agreements to which it is a party or the consummation of the Contemplated Transactions, except as would not reasonably be expected to have, individually or in the aggregate, a Seller Material Adverse Effect.

 

2.3.          Taxes.

 

(a)            The Seller has timely paid all Taxes which will have been required to be paid on or prior to the date hereof, the non-payment of which would result in a Lien on any Transferred Asset or would result in the Buyer becoming liable or responsible therefor.

 

(b)           The Seller has established, in accordance with GAAP applied on a basis consistent with that of preceding periods, adequate reserves for the payment of, and will timely pay, all Taxes that arise from or with respect to the Transferred Assets and are incurred in or attributable to the Pre-Closing Tax Period, the non-payment of which would result in a Lien on any Transferred Asset.

 

(c)            There are no Liens with respect to Taxes upon any of the Transferred Assets, other than Permitted Liens.

 

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(d)           The Seller has incurred no liability in respect of real property, personal property or similar Taxes applicable to the Transferred Assets for any Pre-Closing Tax Period after 2016; provided that, it is agreed and understood that this representation refers only to liabilities incurred prior to the Closing and shall not serve as a representation or warranty regarding, or a guarantee of, nor can it be relied upon with respect to, Taxes attributable to any Tax period (or portion thereof) beginning, or Tax positions taken, after the Closing Date.

 

2.4.          Intellectual Property.

 

(a)            The Seller is the sole and exclusive owner of, and has good title to, the MM-121 Patents, free and clear of all Liens, other than Permitted Liens. The Seller and its Affiliates do not own any material Patent Rights with respect to the manufacture, composition or use of a MM-121 Product other than the MM-121 Patents included in the Transferred Assets and Patent Rights that the Seller has abandoned or which have expired.

 

(b)           To the Seller’s Knowledge, all material MM-121 Patents have been duly filed or registered (as applicable) with the applicable Governmental Entity and maintained in all material respects, including the timely submission of all necessary filings and payment of fees in accordance with the legal and administrative requirements in the appropriate jurisdictions, and have not lapsed or expired.

 

(c)            Except as would not reasonably be expected to, individually or in the aggregate, result in a material Assumed Liability, to the Seller’s Knowledge, (i) the research, development, manufacture, commercialization, use or importation of the MM-121 Products, in each case as currently conducted or as conducted since January 1, 2017, do not infringe or violate, or constitute a misappropriation of, any Intellectual Property of any third party, (ii) no third party, including any Affiliate of the Seller, is infringing or violating or misappropriating any of the MM-121 Intellectual Property, and (iii) the Seller has not sent any written notice of infringement or misappropriation to, or asserted or threatened any action or claim of infringement or misappropriation against, any Person involving or relating to any MM-121 Intellectual Property, (iv) the Seller and each of its Affiliates has taken reasonable measures, to maintain in confidence all material trade secrets and confidential information comprising a part of the MM-121 Intellectual Property, (v) there is no pending or threatened claim, interference, opposition or demand of any third party, including any Affiliate of the Seller, challenging the ownership, validity or scope of any MM-121 Intellectual Property, (vi) all MM-121 Patents are valid and enforceable, (vii) neither the Seller nor any of its Affiliates has been served with or provided written notice or other notice that any MM-121 Intellectual Property is the subject of any Order barring or limiting the Seller’s use of any such MM-121 Intellectual Property, and (viii) no MM-121 Intellectual Property was developed, in whole or in part, under contract with or using the facilities, funding or personnel of any Governmental Entity or university or other educational institution that would give any such Governmental Entity, university or institution any rights to such MM-121 Intellectual Property or entitle any such Governmental Entity, university or institution to royalties or other payments with respect to the exploitation of such MM-121 Intellectual Property.

 

(d)           Schedule 1.1(c) includes a complete and accurate list of the clinical studies conducted in humans by the Seller since January 1, 2017 involving the use of MM-121 Product as a single agent therapy.

 

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(e)            Notwithstanding anything herein to the contrary, the representations and warranties set forth in this Section 2.4 are the only representations and warranties of the Seller with respect to Intellectual Property matters.

 

2.5.          Contracts.

 

(a)            Section 2.5(a) of the Disclosure Schedule sets forth a complete and accurate list of each Transferred Contract. Other than the foregoing Transferred Contracts, neither the Seller nor any of its Subsidiaries is a party to any Contract which grants a third party any right to manufacture, market or sell any Product or engage in human clinical studies with respect to any Product after the Closing.

 

(b)           (i) The Seller has furnished to the Buyer a complete and accurate copy of each Transferred Contract, (ii) each Transferred Contract is a legal, valid and binding obligation of the Seller (or its applicable Affiliate) and, to the Seller’s Knowledge, of each other party thereto, and is enforceable (subject to the Bankruptcy Exception) and in full force and effect with respect to the Seller (or its applicable Affiliate), and, to the Seller’s Knowledge, with respect to each other party thereto, except to the extent it has previously expired in accordance with its terms and (iii) neither the Seller (or its applicable Affiliate) nor, to the Seller’s Knowledge, any other party to any Transferred Contract is in violation in any material respect of or in default in any material respect under, nor, to the Seller’s Knowledge, does there exist any condition which, upon the passage of time or the giving of notice or both, would reasonably be expected to cause such a violation of or default under or permit termination of or modification or acceleration of any material obligations of the Seller (or its applicable Affiliate) pursuant to any Transferred Contract.

 

2.6.          Litigation. There is no action, suit, proceeding, claim, arbitration or, to the Seller’s Knowledge, investigation pending against the Seller or any of its Affiliates with respect to, or affecting, any Product of which the Seller or any of its Affiliates has received written notice and, to the Seller’s Knowledge, no such action, suit, proceeding, claim, arbitration or investigation has been threatened in writing against the Seller or any of its Affiliates which, in each case, if determined or resolved adversely in accordance with the plaintiff’s demands, would reasonably be expected to result in, individually or in the aggregate, a material liability which would constitute an Assumed Liability. There are no unsatisfied material judgments or outstanding material orders, injunctions, decrees, stipulations or awards rendered by a court, an administrative agency or by an arbitrator against any of the Transferred Assets or against the Seller or any of its Affiliates with respect to, or affecting, any Product.

 

2.7.          Compliance With Laws. Except as would not reasonably be expected to, individually or in the aggregate, result in a material Liability, the Seller is and since January 1, 2017 has been, in compliance in all material respects with, is not in material violation of, and, since January 1, 2017, has not received any written notice alleging any material violation with respect to, any applicable Law with respect to any Product or the ownership or operation of the Transferred Assets.

 

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2.8.          Permits. (a) The Seller has all material Permits necessary for the Seller to own, lease or operate the Transferred Assets and conduct its business as it relates to any Product in the manner currently conducted (the “Seller Permits”), (b) the Seller is in compliance in all material respects with the terms of the Seller Permits and has not received any written notices that it is in material violation of any of the terms or conditions of such the Seller Permits, (c) all Seller Permits are in full force and effect and no action or claim is pending or, to the Seller’s Knowledge, threatened in writing to revoke, suspend, adversely modify or terminate any Seller Permit or declare any Seller Permit invalid in any material respect and (d) neither the Seller nor any of its Affiliates has received any written notice with respect to any material failure by the Seller or any of its Affiliates to have any Seller Permit.

 

2.9.          Regulatory Matters. At all times since January 1, 2017, except as would not reasonably be expected to, individually or in the aggregate, result in a material Liability, and in each case solely with respect to any MM-121 Product:

 

(a)            The Seller and each of its Affiliates has developed, tested, labeled, packaged, manufactured and stored the MM-121 Products in compliance in all material respects with (i) the FDA Act, and (ii) any other applicable Governmental Entities in any other country where the Seller or any of its Affiliates has developed, tested, labeled, packaged, manufactured or stored any such Product.

 

(b)           All preclinical studies and other studies and tests of any MM-121 Product conducted by or on behalf of the Seller have been, and if still pending are being, conducted in material compliance, to the extent applicable, with good laboratory practices, good clinical practices and all applicable Laws, including the FDA Act and the respective counterparts thereof outside the United States.

 

(c)            With respect to any MM-121 Product, the Seller has not received any written notice of FDA regulatory actions against the Seller or any of its Affiliates, including notice of adverse findings, regulatory, untitled or warning letters or mandatory recalls, or any other notice from any governmental entity alleging or asserting material noncompliance with any Law.

 

(d)           Neither the Seller nor any of its Affiliates have received written notice of any pending or threatened claim, suit, proceeding, hearing, enforcement, audit or, to the Seller’s Knowledge, investigation from the FDA or any other Governmental Entity alleging that any operation or activity of the Seller or any of its Affiliates in connection with any MM-121 Product is in material violation of the FDA Act or the respective counterparts thereof promulgated by applicable state Governmental Entities or Governmental Entities outside the United States, including, as applicable, the medicinal products and medical device Laws of the European Union. No civil, criminal or administrative action, suit, demand, claim, complaint, hearing, proceeding or, to the Seller’s Knowledge, investigation for which the Seller has received written notice is pending or, to the Seller’s Knowledge, threatened against the Seller or any of its Affiliates in connection with any MM-121 Product. To the Seller’s Knowledge, there has not been any material violation of any laws by the Seller or any of its Affiliates in its product development efforts, submissions or reports to any Governmental Entity in connection with any MM-121 Product that could reasonably be expected to require investigation, corrective action or enforcement action.

 

(e)            Notwithstanding anything herein to the contrary, the representations and warranties set forth in this Section 2.9 are the only representations and warranties of the Seller with respect to regulatory matters.

 

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(f)            There are no Liabilities attributable to any human exposure to a Product to the extent arising prior to the Closing.

 

2.10.        Brokers. No agent, broker, investment banker, financial advisor or other firm or Person is or shall be entitled, as a result of any action, agreement or commitment of the Seller or any of its Affiliates, to any broker’s, finder’s, financial advisor’s or other similar fee or commission (or reimbursement of expenses) in connection with any of the Contemplated Transactions.

 

2.11.        Title to Transferred Assets. The Seller is the sole and exclusive owner of, and has good and valid title to each of the Transferred Assets, and all Transferred Assets are free of all Liens, other than Permitted Liens. At the Closing, the Seller shall transfer and deliver to the Buyer good and valid title to each of the Transferred Assets free and clear of all Liens other than Permitted Liens.

 

2.12.        Exclusive Representations and Warranties. Other than the representations and warranties set forth in this Article II, the Seller is not making any other representations or warranties, express or implied, with respect to any Product or the Transferred Assets. The Seller hereby disclaims any other express or implied representations or warranties, including regarding any financial projections, suitability for clinical development or other forward-looking statements provided by or on behalf of the Seller or its Affiliates, and the Buyer acknowledges and agrees that, other than the representations set forth in this Article II, the Transferred Assets are being sold, and the Assumed Liabilities are being assumed, on an “as is” basis.

 

Article III

 

REPRESENTATIONS AND WARRANTIES OF THE BUYER

 

The Buyer represents and warrants to the Seller as of the date hereof as follows, except as set forth herein.

 

3.1.          Organization, Standing and Power. The Buyer is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware, has all requisite corporate power and authority to carry on its business as now being conducted.

 

3.2.          Authority; No Conflict; Required Filings and Consents.

 

(a)            The Buyer has all requisite corporate power and authority to enter into this Agreement and each of the Ancillary Agreements to which it will be a party and to consummate the Contemplated Transactions. The execution, delivery and performance by the Buyer of this Agreement and each of the Ancillary Agreements to which it will be a party and the consummation by the Buyer of the Contemplated Transactions have been duly authorized by all necessary corporate action on the part of the Buyer. This Agreement and each such Ancillary Agreement has been duly executed and delivered by the Buyer and this Agreement and each such Ancillary Agreement is the valid and binding obligation of the Buyer, enforceable against the Buyer in accordance with its terms, subject to the Bankruptcy Exception.

 

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(b)           The execution, delivery and performance by the Buyer of this Agreement and each of the Ancillary Agreements to which it is a party, and the consummation by the Buyer of the Contemplated Transactions, shall not, (i) conflict with, or result in any violation or breach of, any provision of the organizational documents of the Buyer, (ii) conflict with, or result in any violation or breach of, or constitute (with or without notice or lapse of time, or both) a default (or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any material benefit) under, require a consent or waiver under, require the payment of a penalty under or result in the imposition of any Lien, other than Permitted Liens, on or with respect to the Buyer’s assets under, any of the terms, conditions or provisions of any lease, license, contract or other agreement, instrument or obligation to which the Buyer is a party or by which the Buyer or any of its properties or assets may be bound, or (iii) subject to compliance with the requirements specified in Section 3.2(c), conflict with or violate any permit, concession, franchise, license or Law applicable to the Buyer or any of its properties or assets.

 

(c)            No consent, approval, license, permit, order or authorization of, or registration, declaration, notice or filing with, any Governmental Entity is required by or with respect to the Buyer in connection with the execution, delivery and performance by the Buyer of this Agreement and each of the Ancillary Agreements to which it is a party or the consummation by the Buyer of the Contemplated Transactions.

 

3.3.          Assets. Assuming the completion of an equity financing of at least $20 million on or before the Closing Date, the Buyer will have assets on the Closing Date sufficient for the conduct of the Buyer’s businesses as presently conducted and as presently proposed to be conducted and sufficient to consummate the Contemplated Transactions.

 

3.4.          Litigation. There is no action, suit, proceeding, claim, arbitration or investigation pending or threatened, against the Buyer or any of its Affiliates, and the Buyer is not subject to any outstanding order, writ, judgment, injunction or decree of any Governmental Entity that, in either case, would, individually or in the aggregate, (a) prevent or materially delay the consummation by the Buyer of the Contemplated Transactions or (b) otherwise prevent or materially delay performance by the Buyer of any of its material obligations under this Agreement.

 

3.5.          Brokers. No agent, broker, investment banker, financial advisor or other firm or Person is or shall be entitled, as a result of any action, agreement or commitment of the Buyer, to any broker’s, finder’s, financial advisor’s or other similar fee or commission (or reimbursement of expenses) in connection with any of the Contemplated Transactions.

 

3.6.          Adequacy of Information. The Buyer acknowledges and agrees that:

 

(a)            it has been furnished with or given adequate access to all information regarding the Products and the Transferred Assets that it has desired or requested for review to enable it to make an informed and intelligent decision with respect to the execution, delivery and performance of this Agreement and each Ancillary Agreement;

 

(b)           it has carried out an appropriate due diligence investigation concerning the information given by the Seller about the Products and the Transferred Assets and is taking full responsibility for making its own and independent investigation and evaluation of the Products and the Transferred Assets;

 

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(c)            it is not relying on, and will not assert any claim against, Seller, its Affiliates or any of their respective employees, directors, agents, stockholders or representatives or hold Seller or any such Persons liable for any inaccuracies, misstatements or omissions with respect to information furnished by Seller, its Affiliates or representatives, including any information in any information memorandum, “on-line” or physical data rooms or in any management presentations (except for the representations and warranties expressly contained in Article II or contained in the Ancillary Agreements); and

 

(d)            the Seller has discontinued development of the Products, and accordingly the Transferred Assets are sold “as is” and the Buyer agrees to accept the Transferred Assets and the Assumed Liabilities in the condition they are in on the Closing Date based on its own inspection, examination and determination with respect to all matters, and without reliance upon any express or implied representations or warranties whatsoever, whether at law or in equity, of any nature made or provided by or on behalf of or imputed to the Seller, any of its Subsidiaries or any other Person, except for the representations and warranties expressly contained in Article II.

 

3.7.           Exclusive Representations and Warranties. Other than the representations and warranties set forth in this Article III, the Buyer is not making any other representations or warranties, express or implied, with respect to the Contemplated Transactions. The Buyer hereby disclaims any other express or implied representations or warranties, including regarding any financial projections or other forward-looking statements provided by or on behalf of the Buyer or its Affiliates.

 

Article IV

 

ADDITIONAL AGREEMENTS

 

4.1.           Confidentiality. After the Closing Date until expiration of the Buyer’s obligation to provide Quarterly Reports, the Seller will, and will cause its controlled Affiliates and their respective Representatives to, treat and hold as confidential, and not disclose to any Person (including any Affiliates) any of the Confidential Information, except (i) to the extent necessary to perform its obligations or enforce its rights under this Agreement or the Ancillary Agreements, (ii) to its Affiliates and its or their respective Representatives on a need-to-know basis (provided that the Seller shall be responsible for any breach of this Section 4.1 by any of its Affiliates or Representatives to which such information is disclosed in accordance with clause (ii)) or (iii) notwithstanding anything else herein, the Seller may make any public disclosure it believes in good faith is required by any applicable Law or stock market or stock exchange rule. In the event that the Seller or any of its Affiliates or its or their respective Representatives are requested or required (by oral question or request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand or similar process or as otherwise required by Law or pursuant to any listing agreement with any securities exchange) to disclose any Confidential Information, to the extent practicable and permitted by applicable Law, the Seller will notify the Buyer promptly of the request or requirement so that the Buyer may seek, at its expense, an appropriate protective order or waive compliance with the provisions of this Section 4.1, and, in the absence of a protective order or the receipt of a waiver hereunder, the Seller or any of its Affiliates may disclose any such Confidential Information; provided, however, that the Seller shall use commercially reasonable efforts to obtain, at the request, and at the expense, of the Buyer, a reasonably available assurance that confidential treatment will be accorded to such portion of the Confidential Information to be disclosed as the Buyer shall designate. For the avoidance of doubt, nothing in this Agreement shall in any way limit or restrict the Seller’s or any of its Affiliates’ right or ability to engage in any activity or business, whether or not competitive with the business of the Buyer or any of its Affiliates.

 

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4.2.           Post-Closing Cooperation. Subject to compliance with contractual obligations and applicable Law, for three (3) months immediately following the Closing Date, each party shall afford to the other party and the other party’s Representatives during normal business hours in a manner so as to not unreasonably disrupt or interfere with the conduct of business reasonable access to the personnel of such party with relevant knowledge regarding any Product, if any. Requests may be made under this Section 4.2 for access to information requested by the requesting party in connection with its financial reporting and accounting matters, preparing financial statements, preparing and filing any Tax Returns, prosecuting any claims for refund, defending any Tax claims or assessment, preparing securities Law or securities exchange filings, prosecuting, defending or settling any litigation or insurance claim, prosecuting patent applications and pursuing other patent matters, performing obligations under this Agreement and the Ancillary Agreements and all other proper business purposes (including determining any matter relating to its rights and obligations hereunder). A party making information or personnel available to another party under this Section 4.2 shall be entitled to receive from such other party, upon the presentation of invoices therefor, payments for such amounts relating to supplies, disbursements and other out-of-pocket expenses, as may reasonably be incurred in making such information or personnel available. Notwithstanding anything to the contrary contained herein, nothing in this Section 4.2 shall require (i) the Seller or any of its Affiliates or the Buyer or any of its Affiliates (x) to waive the protection of an attorney-client privilege or (y) to take any action that would result in the disclosure of any trade secrets (provided that, in the case of clause (i)(x), the disclosing party shall use commercially reasonable efforts to provide the other party, to the extent possible, with access to the relevant information in a manner that would not reasonably be expected to result in any such waiver) or (ii) the auditors and independent accountants of the Seller or any of its Affiliates or of the Buyer or any of its Affiliates to make any work papers available to any Person unless and until such Person has signed a customary confidentiality and hold harmless agreement relating to such access to work papers in form and substance reasonably acceptable to such auditors or independent accountants.

 

4.3.           Public Disclosure. The press release announcing the execution of this Agreement shall be issued in such form as shall be mutually agreed upon by the Seller and the Buyer. Subject to Section 4.1, unless otherwise required by applicable Law, by any listing agreement with any securities exchange, the Seller and the Buyer shall not, and cause their respective Affiliates not to, make any public announcement or disseminate any written communication with respect to this Agreement or the Contemplated Transactions, or otherwise communicate with any news media regarding this Agreement or the Contemplated Transactions, without the prior written consent of the Buyer and the Seller; provided that after the Contemplated Transactions have been announced, the Seller and its Affiliates and the Buyer and its Affiliates shall be entitled to respond to questions in the ordinary course or issue any press release or make any other public statement that, in each case, is not inconsistent with any public statement previously issued or made by it in accordance with the provisions of this Section 4.3.

 

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4.4.           Further Assurances. Each of the parties will execute and deliver any further instruments and documents as any other party reasonably may request in order to carry out the purposes of this Agreement. The Buyer shall use its reasonable best efforts to complete an equity financing of at least $20 million prior to the Closing Date.

 

4.5.           Seller Names and Marks. Following the Closing, Buyer shall, and shall cause its Affiliates to, cease and discontinue any and all uses of the Seller Names and Marks and remove (or obscure) all Seller Names and Marks from the Transferred Assets and any other materials of Buyer or any of its Affiliates, unless otherwise required by Law.

 

4.6.           Tax Matters.

 

(a)            Subject to the terms of Section 4.2 hereof, the Buyer and the Seller agree to furnish or cause to be furnished to each other, upon request, as promptly as practicable, such information and assistance relating to the Transferred Assets (including access to books and records) as is reasonably necessary for the filing of all Tax Returns, the making of any election relating to Taxes, the preparation for any audit by any Governmental Entity, and the prosecution or defense of any claim, suit or proceeding relating to any Tax. The Buyer and the Seller (and their respective Subsidiaries) shall retain all books and records with respect to Taxes pertaining to the Transferred Assets for a period of at least six years following the Closing Date. The Seller and the Buyer shall cooperate with each other in the conduct of any audit or other proceeding relating to Taxes involving the Transferred Assets.

 

(b)            Any real property, personal property or similar Taxes applicable to the Transferred Assets for a taxable period that includes but does not end on the Closing Date (collectively, the “Apportioned Obligations”) shall be paid by the Buyer or the Seller, as applicable, and such Taxes shall be apportioned between the Buyer and the Seller based on the number of days in such taxable period included in the Pre-Closing Tax Period and the number of days in the entire taxable period. The Seller shall pay the Buyer an amount equal to any such Taxes payable by the Buyer which are attributable to the Pre-Closing Tax Period, and the Buyer shall pay the Seller an amount equal to any such Taxes payable by the Seller which are not attributable to the Pre-Closing Tax Period. Such payments shall be made on or prior to the Closing Date or, if later, on the date such Taxes are due (or thereafter, promptly after request by the Buyer or the Seller if such Taxes are not identified by the Buyer or the Seller on or prior to the Closing Date). Apportioned Obligations shall be timely paid, and all applicable filings, reports and returns shall be filed, as provided by applicable Law.

 

4.7.           Books and Records. From and after the Closing, subject to Section 4.1, the Seller and its Affiliates and its and their respective Representatives may retain a copy of any or all of the data room materials and other books, data, files, information and records relating to any Product on or before the Closing Date. Each party agrees that, with respect to all original data room materials and other books, data, files, information and records relating to any Product and existing as of the Closing, it will (and will cause each of its Affiliates and Representatives to) (i) comply in all material respects with all applicable Law relating to the preservation and retention of records and (ii) apply preservation and retention policies that are no less stringent than those generally applied by such party or its Affiliates or Representatives. In addition, for at least three years after the Closing Date, the Buyer shall, and shall cause each of its Affiliates to, preserve all original data room materials and other books, data, files, information and records relating to any Product and existing as of the Closing Date and, thereafter, until the seventh (7th) anniversary of the Closing Date, dispose of such original data room materials and other books, data, files, information and records only after it shall have given the Seller ninety (90) days’ prior written notice of such disposition and the opportunity (at the Seller’s expense) to remove and retain such information.

 

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4.8.           Services from Affiliates. The Buyer acknowledges that the Seller and its Affiliates currently provide certain services and benefits in connection with the Products. The Buyer further acknowledges and agrees that all such services and benefits shall cease, and any agreement in respect thereof shall terminate with respect to any Product as of the Closing.

 

4.9.           NIH Undertaking. Notwithstanding anything else contained herein and in furtherance of the Buyer’s obligations under Section 1.3, the Buyer hereby assumes and agrees, effective at Closing, to perform, pay, satisfy or discharge when due all obligations with respect to payment or otherwise in respect of the developmental milestone obligations contained in Section IV of Appendix C to that certain Patent License Agreement between the Seller and National Institutes of Health within the Department of Health and Human Services, dated as of February 20, 2008, as amended March 13, 2019.

 

Article V

 

INDEMNIFICATION

 

5.1.           Indemnification by the Seller. Subject to the terms and conditions of this Article V, from and after the Closing, the Seller shall defend and indemnify the Buyer in respect of, and hold it harmless against, any and all Damages suffered or incurred by the Buyer to the extent resulting from or constituting:

 

(a)            any inaccuracy in or breach of any of the representations or warranties of the Seller contained in Article II of this Agreement;

 

(b)            any breach or failure to perform by the Seller of any covenant or agreement contained in this Agreement; or

 

(c)            any Retained Liabilities or Excluded Assets.

 

5.2.           Indemnification by the Buyer. Subject to the terms and conditions of this Article V, from and after the Closing, the Buyer shall defend and indemnify the Seller in respect of, and hold it harmless against any and all Damages suffered or incurred by the Seller to the extent resulting from or constituting:

 

(a)            any inaccuracy in or breach of any of the representations or warranties of the Buyer contained in Article III of this Agreement;

 

(b)            any breach or failure to perform by the Buyer of any covenant or agreement contained in this Agreement; or

 

(c)            any Assumed Liabilities or Transferred Assets.

 

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5.3.           Claims for Indemnification.

 

(a)            Third Party Claims. All claims for indemnification made under this Agreement resulting from, related to or arising out of a third party claim against an Indemnified Party (a “Third Party Claim”) shall be made in accordance with the following procedures. A Person entitled to indemnification under this Article V (an “Indemnified Party”) shall give prompt written notification to the Indemnifying Party (a “Third Party Claim Notice”) of the commencement of any action, suit or proceeding relating to a third party claim for which indemnification may be sought or, if earlier, upon becoming aware of the assertion of any such claim by a third party. For purposes of this Agreement, “Indemnifying Party” means (i) in the case of a claim for indemnification by the Buyer, the Seller and (ii) in the case of a claim for indemnification by the Seller, the Buyer. Such Third Party Claim Notice shall include a description in reasonable detail (to the extent then known by the Indemnified Party) of (A) the facts constituting the basis for such third party claim and (B) the amount of the Damages claimed (the “Third Party Claim Amount”). No delay or failure on the part of the Indemnified Party in so notifying the Indemnifying Party shall relieve the Indemnifying Party of any liability or obligation hereunder except to the extent the Indemnifying Party is actually prejudiced thereby. Within thirty (30) Business Days after delivery of such Third Party Claim Notice, the Indemnifying Party may, upon written notice thereof to the Indemnified Party, assume control of the defense with counsel reasonably satisfactory to the Indemnified Party of any such Third Party Claim seeking (i) solely monetary damages or (ii) injunctive relief that would be reasonably expected to be immaterial to the operations or business of the Indemnified Party and monetary damages. If the Indemnifying Party does not assume control of such defense, the Indemnified Party shall control such defense. The party not controlling such defense may participate therein at its own expense; provided that if the Indemnifying Party assumes control of such defense and the Indemnified Party reasonably concludes, based on advice from counsel, that the Indemnifying Party and the Indemnified Party have conflicting interests with respect to such action, suit, proceeding or claim, the reasonable fees and expenses of counsel to the Indemnified Party solely in connection therewith shall be considered “Damages” for purposes of this Agreement; provided, however, that in no event shall the Indemnifying Party be responsible for the fees and expenses of more than one (1) counsel for the Indemnified Party. The party controlling such defense shall keep the other party advised of the status of such action, suit, proceeding or claim and the defense thereof and shall consider recommendations made by the other party with respect thereto. The Indemnified Party shall not agree to any settlement of such action, suit, proceeding or claim without the prior written consent of the Indemnifying Party. The Indemnifying Party shall not agree to any settlement of such action, suit, proceeding or claim that (x) does not include a complete release of the Indemnified Party from all liability with respect thereto, (y) includes any admission by, or finding adverse to, the Indemnified Party or (z) imposes any liability or obligation on the Indemnified Party, in each case, without the prior written consent of the Indemnified Party.

 

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(b)            Procedure for Claims Not Involving Third Parties. An Indemnified Party wishing to assert a claim for indemnification under this Article V that does not involve a third-party claim shall deliver to the Indemnifying Party a written notice (a “Claim Notice”) which contains (i) a description and the amount (the “Claim Amount”) of any Damages, (ii) a statement that the Indemnified Party is entitled to indemnification under this Article V and a reasonable explanation of the basis therefor and (iii) a demand for payment in the amount of such Damages. The Indemnifying Party shall deliver to the Indemnified Party a written response in which the Indemnifying Party shall (A) agree that the Indemnified Party is entitled to receive all of the Claim Amount (in which case such response shall be accompanied by a payment to the Indemnified Party of the Claim Amount by the Indemnifying Party by wire transfer of immediately available funds (or, if the Indemnifying Party is the Seller, an acknowledgement of the Buyer’s right to set off such amount in accordance with Section 5.7)), (B) agree that the Indemnified Party is entitled to receive part, but not all, of the Claim Amount (the “Agreed Amount”) (in which case such response shall be accompanied by a payment to the Indemnified Party of the Agreed Amount by the Indemnifying Party by wire transfer of immediately available funds (or, if the Indemnifying Party is the Seller, an acknowledgement of the Buyer’s right to set off such amount in accordance with Section 5.7)) or (C) contest that the Indemnified Party is entitled to receive any of the Claim Amount. If such dispute is not resolved within 30 days following the delivery by the Indemnifying Party of such response, the Indemnifying Party and the Indemnified Party shall each have the right to submit such dispute to a court of competent jurisdiction in accordance with the provisions of Section 6.10.

 

5.4.           Survival.

 

(a)            The representations and warranties of the Seller and the Buyer set forth in this Agreement shall survive the Closing and the consummation of the Contemplated Transactions and remain in full force and effect until three (3) months after the Closing Date, at which time they shall expire, provided, however that (i) the representations and warranties set forth in Section 2.4 (Intellectual Property) and Section 2.9 (Regulatory Matters) (collectively, the “Specified Reps”), shall survive until twelve (12) months after the Closing Date, and (ii) the representations and warranties set forth in Section 2.1 (Organization, Standing and Power), Section 2.2(a) (Authority), Section 2.10 (Brokers), Section 2.11 (Title to Transferred Assets), Section 3.1 (Organization, Standing and Power), Section 3.2(a) (Authority) and Section 3.5 (Brokers) (collectively, the “Fundamental Reps”), shall survive until the two (2) year anniversary of the Closing Date. The covenants and agreements of the Seller and the Buyer set forth in this Agreement shall survive the Closing and the consummation of the Contemplated Transactions in accordance with their terms or, if no time limit is stated therein, indefinitely.

 

(b)            If an indemnification claim is asserted in writing pursuant to Section 5.3 prior to the expiration as provided in Section 5.4(a) of the representation or warranty that is the basis for such claim, then such representation or warranty shall survive until, but only for the purpose of, the resolution of such claim.

 

5.5.           Limitations.

 

(a)            Notwithstanding anything to the contrary contained in this Agreement, except in the case of actual and intentional fraud (as defined under Delaware common law), (i) the amount of Damages that may be recovered by an Indemnified Party under Section 5.1(a) or Section 5.2(a) shall not exceed $350,000 (provided that (A) such limitation shall not apply to the Specified Reps and the Fundamental Reps and (B) the amount of Damages that may be recovered by an Indemnified Party under Section 5.1(a) or Section 5.2(a) with respect to the Specified Reps shall not exceed $1,000,000), and (ii) an Indemnified Party shall not be permitted to recover any Damages under Section 5.1(a) or Section 5.2(a), as the case may be, until the aggregate amount of all such Damages exceed an amount equal to $100,000 (the “Deductible”) (other than with respect to the Fundamental Reps) and then only to the extent of such excess. With respect to any Damages that may be recoverable by an Indemnified Party under Section 5.1(a) or Section 5.2(a), the Indemnifying Party shall not be liable for any individual or series of related Damages which do not exceed $10,000 (which Damages shall not be counted toward the Deductible).

 

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(b)            The amount of Damages recoverable by an Indemnified Party under this Article V with respect to an indemnity claim shall be reduced by the amount of any insurance payment or other third-party recovery actually received by such Indemnified Party with respect to such indemnity claim minus the amount of any increase in insurance premiums and reasonable costs of collection directly attributable to such recovery (the “Recovery”). If an Indemnified Party receives any insurance payment or third-party payment in connection with any claim for Damages for which it has already been indemnified by the Indemnifying Party, it shall pay to the Indemnifying Party, within 30 calendar days of receiving such insurance payment, an amount equal to the Recovery (up to the amount paid by the Indemnifying Party).

 

(c)            In no event shall any Indemnifying Party be responsible or liable for any Damages or other amounts under this Article V that are (i) consequential damages or Damages for lost profits or diminution in value, in each case except for those that are reasonably foreseeable and proximately caused by the asserted breach, or (ii) punitive, special, trebled or exemplary damages, in each case other than any amounts paid to an unaffiliated third party with respect to Third Party Claims based on a final judgment.

 

(d)            Except with respect to claims related to actual and intentional common law fraud or for specific performance as provided in Section 6.9, from and after the Closing the rights of the Indemnified Parties under this Article V shall be the sole and exclusive remedies of the Indemnified Parties with respect to claims under, or otherwise relating to the transactions that are the subject of, this Agreement. Without limitation of the foregoing, in no event shall any party, its successors or permitted assigns be entitled to claim or seek rescission of the Contemplated Transactions.

 

5.6.           Indemnification Payments. All indemnification payments made hereunder shall be treated by all parties as adjustments to the Aggregate Consideration for Tax purposes unless otherwise required by Law.

 

5.7.           Setoff. Except in the case of actual and intentional fraud (as defined under Delaware common law), the Buyer, as its sole source of recovery for any amounts payable by Seller under this Article V, shall have the right to set off any indemnification payment to which it becomes entitled to pursuant to this Article V against payment of any Milestone Payment that is owed or thereafter becomes payable and has not yet been paid to the Seller. In the event Buyer exercises its set off rights pursuant to this Section 5.7 and withholds from any Milestone Payment the amount of any claimed Damages, upon the final resolution of the claim for indemnification with respect to which such offset has been made, Buyer shall pay Seller the amount, if any, by which the amount offset exceeds the amount of Damages to which the Buyer has been finally determined to be entitled in connection with such resolution, together with interest thereon at the prime rate as published by the Wall Street Journal Online as of the date the applicable payment was due, plus one percent (1%).

 

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Article VI

 

MISCELLANEOUS

 

6.1.            Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly delivered (i) three (3) Business Days after being sent by registered or certified mail, return receipt requested, postage prepaid, (ii) one (1) Business Day after being sent for next Business Day delivery, fees prepaid, via a reputable nationwide overnight courier service or (iii) on the date of confirmation of receipt (or, the first Business Day following such receipt if the date of such receipt is not a Business Day) of transmission by facsimile, in each case to the intended recipient as set forth below:

 

(a)            if to the Buyer, to

 

14ner Oncology, Inc.

888 Seventh Avenue

12th Floor

New York, NY 10106

Attention: Steven Elms

 

with a copy (which shall not constitute notice) to:

 

Hutchison PLLC

3110 Edwards Mill Road, Suite 300

Raleigh, NC 27612

Attention:               William N. Wofford, Esq.

Daniel S. Fuchs, Esq.

 

(b)            if to the Seller, to

 

Merrimack Pharmaceuticals, Inc.

One Kendall Square, Suite B7201

Cambridge, Massachusetts 02139

 

with a copy (which shall not constitute notice) to:

 

Wilmer Cutler Pickering Hale and Dorr LLP

60 State Street

Boston, MA 02109

Attention:                Hal J. Leibowitz, Esq.

Christopher D. Barnstable-Brown, Esq.

Telecopy:                (617) 526-5000

 

Any party may give any notice or other communication hereunder using any other means (including personal delivery, messenger service, ordinary mail or electronic mail), but no such notice or other communication shall be deemed to have been duly given unless and until it actually is received by the party for whom it is intended. Any party may change the address to which notices and other communications hereunder are to be delivered by giving the other party notice in the manner herein set forth.

 

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6.2.           Entire Agreement. This Agreement (including the Disclosure Schedule and the Schedules and Exhibits hereto and the documents and instruments referred to herein that are to be delivered at the Closing, including the Ancillary Agreements) constitutes the entire agreement between the parties hereto and supersedes any prior understandings, agreements or representations by or between the parties, written or oral, with respect to the subject matter hereof, including the non-disclosure agreement, dated March 14, 2019, as amended on May 22, 2019, by and between the Buyer and the Seller.

 

6.3.           No Third Party Beneficiaries. This Agreement is not intended, and shall not be deemed, to confer any rights or remedies upon any Person other than the parties and their respective successors and permitted assigns, to create any agreement of employment with any Person or to otherwise create any third party beneficiary hereto.

 

6.4.           Assignment.

 

(a)            Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of Law or otherwise by either of the parties without the prior written consent of the other party, and any such assignment without such prior written consent shall be null and void, except that, subject to Section 6.4(b), (i) a party may assign any of its rights, interests and obligations under this Agreement, in whole or from time to time in part, to one (1) or more of its Affiliates and (ii) a party may assign this Agreement in its entirety to its successor in interest in connection with a merger, reorganization, sale of all or substantially all of such party’s assets or equity, dissolution, wind-down, receivership, liquidation, bankruptcy or similar proceeding; provided that in each case no such assignment shall limit, relieve or offset the assigning party’s obligation hereunder. Notwithstanding anything else herein to the contrary, the Seller may, without the Buyer's consent, assign, distribute, dividend or otherwise transfer its right to receive payment(s) from the Buyer under all or part of Section 1.9 of this Agreement, and the Buyer agrees that it shall make any such payment(s) to any such assignee or transferee or to any other beneficiary of such distribution or dividend designated in writing by the Seller, and the Buyer shall not raise any defense to making any such payment that arises or would arise solely from such assignment, transfer, distribution, or dividend. This Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties and their successors and permitted assigns.

 

(b)            In no event shall the Buyer or any of its Affiliates effect any Product Sale to any Person, unless such Product Sale is to a Qualified Transferee and all of the following requirements are satisfied: (a) such Qualified Transferee in such Product Sale agrees in writing to be bound by, and assumes and succeeds to, all of the applicable obligations of the Buyer under this Agreement with respect to each Product that is the subject of such Product Sale, and (b) prior to or simultaneously with the consummation of such Product Sale, (i) such Qualified Transferee delivers to the Seller an instrument of assumption, reasonably acceptable to the Seller, effecting the agreement, assumption and succession described in the foregoing clause (a), and (ii) the Buyer pays or causes to be paid to the Seller all Milestone Payments that have become due and payable under this Agreement prior to such consummation of such Product Sale. Following the consummation of any such Product Sale effected in accordance with this Section 6.4(b), the Buyer shall be liable for any obligations under this Agreement with respect to the Product that is the subject of such Product Sale. Notwithstanding anything in this Agreement to the contrary, (x) any purported Product Sale in contravention of this Section 6.4(b) shall be null and void and the Buyer shall remain solely liable for all obligations under this Agreement with respect to any Product that is the subject of such Product Sale, and (y) except to the extent expressly set forth herein, nothing in this Section 6.4(b) shall be construed to reduce, limit or otherwise modify any liability of the Buyer under this Agreement with respect to any conduct of any member of the Buyer Rights Group.

 

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6.5.           Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid or unenforceable, the parties agree that the court making such determination shall have the power to limit the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified. In the event such court does not exercise the power granted to it in the prior sentence, the parties agree to replace such invalid or unenforceable term or provision with a valid and enforceable term or provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid or unenforceable term.

 

6.6.           Counterparts and Signature. This Agreement may be executed in two (2) counterparts, each of which shall be deemed an original but both of which together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties and delivered to the other party, it being understood that both parties need not sign the same counterpart. This Agreement may be executed and delivered by facsimile or .pdf transmission.

 

6.7.           Interpretation. When reference is made in this Agreement to an Article or a Section, such reference shall be to an Article or Section of this Agreement, unless otherwise indicated. The table of contents and headings contained in this Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. The language used in this Agreement shall be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction shall be applied against any party. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural, and vice versa. Any reference to any federal, state or local Law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” Any reference to a “party” or “parties” shall mean a party or parties to this Agreement (and their respective successors and permitted assigns). For the purposes of this Agreement, “furnished to the Buyer” shall mean “furnished or made available to the Buyer or its Representatives, including in the Seller’s electronic data room prior to the Closing Date.”

 

6.8.           Governing Law. This Agreement and any claims arising therefrom shall be governed by and construed in accordance with the Laws of the State of Delaware, without giving effect to any choice or conflict of Law provision or rule that would cause the application of Laws of any jurisdiction other than those of the State of Delaware.

 

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6.9.            Remedies. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one (1) remedy will not preclude the exercise of any other remedy. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, this being in addition to any other remedy to which they are entitled at law or in equity without the necessity of demonstrating the inadequacy of monetary damages and without the posting of a bond.

 

6.10.           Submission to Jurisdiction. Each of the parties (a) consents to submit itself to the exclusive personal jurisdiction of any state or federal court sitting in the State of Delaware, County of New Castle, in any action or proceeding arising out of or relating to this Agreement or any of the Contemplated Transactions, (b) agrees that all claims in respect of such action or proceeding may be heard and determined in any such court, (c) agrees that it shall not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court and (d) agrees not to bring any action or proceeding arising out of or relating to this Agreement or any of the Contemplated Transactions in any other court. Each of the parties waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of any other party with respect thereto. Any party may make service on another party by sending or delivering a copy of the process to the party to be served at the address and in the manner provided for the giving of notices in Section 6.1. Nothing in this Section 6.10, however, shall affect the right of any party to serve legal process in any other manner permitted by law.

 

6.11.           Disclosure Schedule. The Disclosure Schedule shall be arranged in sections corresponding to the numbered sections contained in Article II and the disclosure with respect to a representation and warranty contained in Article II shall also qualify any other representations and warranties in Article II to the extent that it is reasonably apparent on the face of such disclosure that such disclosure also qualifies or applies to such other representations and warranties. The mere inclusion of an item in the Disclosure Schedule as an exception to a representation or warranty (or covenant, as applicable) shall not be deemed an admission that such item represents a material exception or material fact, event or circumstance or that such item has had or would reasonably be expected to have a Seller Material Adverse Effect or a Buyer Material Adverse Effect, as applicable.

 

6.12.           Fees and Expenses. Except as otherwise expressly provided herein, all fees and expenses incurred in connection with this Agreement and the Contemplated Transactions shall be paid by the party incurring such fees and expenses.

 

6.13.            Amendment. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties.

 

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6.14.        Extension; Waiver. The parties may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of the other parties, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party. Such extension or waiver shall not be deemed to apply to any time for performance, inaccuracy in any representation or warranty, or noncompliance with any agreement or condition, as the case may be, other than that which is specified in the extension or waiver. The failure of any party to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights.

  

Article VII

 

DEFINITIONS

 

For purposes of this Agreement, each of the following terms has the meaning set forth below.

 

Accountant” has the meaning set forth in Section 1.9(f).

 

Additional Transfer Documents” has the meaning set forth in Section 1.6(b)(iv).

 

Affiliate” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person, and, with respect to the foregoing, the term “control” (including the terms “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 such Person, whether through ownership of voting securities, by contract or otherwise.

 

Aggregate Consideration” means (a) the Closing Date Consideration plus (b) any Milestone Payments that become due and payable pursuant to this Agreement.

 

Agreed Amount” has the meaning set forth in Section 5.3(b).

 

Agreement” has the meaning set forth in the preamble.

 

Ancillary Agreements” has the meaning set forth in Section 1.6(b)(v).

 

Applicable Jurisdiction” means each of (a) the United States, (b) Japan, (c) collectively, France, Germany, Italy, Spain and the United Kingdom and (d) collectively, all other countries or territories.

 

Apportioned Obligations” has the meaning set forth in Section 4.6(b).

 

Assumed Liabilities” has the meaning set forth in Section 1.3.

 

Assumption Agreement” has the meaning set forth in Section 1.6(b)(v).

 

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Audit” has the meaning set forth in Section 1.9(f).

  

Bankruptcy Exception” has the meaning set forth in Section 2.2(a).

 

Bill of Sale” has the meaning set forth in Section 1.6(b)(ii).

 

BLA” means a Biologics License Application as described in 21 C.F.R. § 601.2 and submitted to the FDA or a comparable application submitted to an applicable Regulatory Authority outside the United States.

 

Business Day” means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions located in Boston, Massachusetts are permitted or required by Law, executive order or governmental decree to remain closed.

 

Buyer” has the meaning set forth in the preamble.

 

Buyer Material Adverse Effect” means any material adverse effect on the ability of the Buyer to consummate any of the Contemplated Transactions on a timely basis.

 

Buyer Rights Group” means (a) the Buyer; (b) with respect to any Product, any Person to which any right to sell such Product is licensed, sublicensed, assigned or transferred by the Buyer; (c) with respect to any Product, any Person to which the right to sell such Product is licensed, sublicensed, assigned or transferred by any Person described in clause (b) above; (d) with respect to any Product, any successor or assign of any Person described in clauses (a), (b) or (c) above with respect to such Person’s interest in such Product; and (e) with respect to any Product, any Affiliate of any Person described in clauses (a), (b), (c), or (d) involved in the development or commercialization of such Product with or on behalf of such Person. For the avoidance of doubt, Buyer Rights Group shall not include a reseller or distributer of a Product that (i) purchases such Product for resale and (ii) does not need a license from a Buyer Rights Group member to a Transferred Patent in order to resell such Product.

 

Claim Amount” has the meaning set forth in Section 5.3(b).

 

Claim Notice” has the meaning set forth in Section 5.3(b).

 

Closing” means the closing of the transactions contemplated by this Agreement.

 

Closing Date” has the meaning set forth in Section 1.6(a).

 

Closing Date Consideration” means a non-refundable payment of Three Million Five Hundred Thousand U.S. Dollars ($3,500,000).

 

Code” means the Internal Revenue Code of 1986, as amended.

 

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Commercially Reasonable Efforts” means, for purposes of Section 1.9(c) of this Agreement, the use of such efforts and resources as are used by a biopharmaceutical company of similar size and market capitalization as Buyer (or that of the applicable member of the Buyer Rights Group if it is of a larger size and market capitalization than Buyer) in the exercise of its commercially reasonable business practices relating to the development and commercialization of pharmaceutical or biological products with similar commercial potential as the relevant Product at a similar stage in product lifecycle, taking into consideration the safety and efficacy of the product, the risks inherent in the development and commercialization of the product, its competitiveness compared to alternative products, the proprietary position of the product (including scope and duration of relevant Patent Rights), the scope of marketing approval, the regulatory status of the product, whether the product is subject to a clinical hold, recall or market withdrawal and the anticipated profitability of the product.

  

Confidential Information” means (a) any nonpublic or confidential information relating to any Product or the Transferred Assets, except to the extent that such information (i) shall have become public knowledge other than through improper disclosure by the Seller, any of its Affiliates or any of their respective Representatives or (ii) shall have become known to the Seller or any of its Affiliates after the Closing from a source (other than the Buyer and its Affiliates) not known by it to be bound by a confidentiality obligation to any Person with respect to such information and (b) any Transferred Know-How; provided that any information contained in a Quarterly Report or in a statement delivered to the Seller pursuant to Section 1.9(e)(iv) shall be deemed not to constitute “Confidential Information” for all purposes hereunder.

 

Contemplated Transactions” means the transactions contemplated by this Agreement and the Ancillary Agreements.

 

Contracts” means all contracts, leases (other than real property leases), deeds, mortgages, licenses, instruments, notes, commitments, undertakings, indentures, engagement letters and all other agreements, commitments and legally binding arrangements, whether written or oral.

 

Damages” means losses, damages, fines, fees, penalties, interest, awards and judgments of any kind, including reasonable attorneys’ and consultants’ fees and expenses and other reasonable legal costs and expenses incurred in prosecution, investigation, remediation, defense or settlement.

 

Deductible” has the meaning set forth in Section 5.5(a).

 

Disclosure Schedule” means the disclosure schedule delivered by the Seller to the Buyer and dated as of the date of this Agreement.

 

Dispute Notice” has the meaning set forth in Section 1.9(f).

 

Domain Names” means all domain names, including all applications and registrations thereof, as may exist anywhere in the world.

 

Dyax” has the meaning set forth in Section 1.6(b)(x).

 

EMA” means the European Medicines Agency and any successor agency thereto or any equivalent agency in the United Kingdom or any other member state of the E.U.

 

European Union” or “E.U.” means (i) all countries that are member states of the European Union as of the date hereof or at any time thereafter and (ii) the United Kingdom.

 

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Excluded Assets” has the meaning set forth in Section 1.2.

  

Exclusions” means, with respect to Net Sales of any Product, the sum of the following, to the extent actually borne or incurred or accrued by the Buyer Rights Group and not reimbursed:

 

(a)            reasonable and customary freight, postage, shipping and insurance, handling and other transportation costs;

 

(b)            sales, use, value added and other similar Taxes (excluding, for the avoidance of doubt, income Taxes);

 

(c)            tariffs, customs duties, surcharges and other compulsory governmental charges;

 

(d)            government mandated rebates and discounts;

 

(e)           bona fide billing corrections and actual bad debt expense (not to exceed 5% of Net Sales and if any such amount is subsequently collected, such amount shall be re-included in Net Sales);

 

(f)            normal and customary trade discounts, credits or allowances (including volume) actually given; and

 

(g)          rebates, fees, credits, allowances and charge backs actually given, granted to any managed care organization, wholesaler, distributor, buying group, health care insurance carrier, chain pharmaceutical, mass merchandiser, staff model HMO, pharmacy benefit manager and hospital buying group/group purchasing organization and credits or allowances for returns, rejections or recalls (due to spoilage, damage, expiration of useful life or otherwise).

 

There shall be no double counting in determining the foregoing deductions from gross amounts invoiced to calculate Net Sales. The Exclusions shall be determined in accordance with GAAP or IFRS, as the case may be, as consistently applied by the applicable Buyer Rights Group member and its Affiliates across all of their products.

 

FDA” means the U.S. Food and Drug Administration and any successor agency thereto.

 

FDA Act” means the Federal Food, Drug and Cosmetic Act and applicable implementing regulations issued by the FDA, including, as applicable, those requirements relating to the FDA’s current good manufacturing and quality system practices, good laboratory practices and good clinical practices and investigational use.

 

Fundamental Reps” has the meaning set forth in Section 5.4(a).

 

GAAP” means United States generally accepted accounting principles consistently applied.

 

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Governmental Entity” means any national, multinational, state, provincial, local, foreign or other court, arbitrational tribunal, administrative agency or commission or other governmental or regulatory authority, agency or instrumentality.

  

Health Authorities” means the Governmental Entities which administer Health Laws, including the FDA.

 

Health Law” means any Law the purpose of which is to ensure the safety, efficacy and quality of medicines by regulating the research, development, manufacturing and distribution of such products, including any Law relating to good laboratory practices, good clinical practices, investigational use, product marketing authorization, manufacturing compliance and approval, good manufacturing practices, labeling, advertising, promotional practices, safety surveillance, record keeping and filing of required reports such as the FDA Act, the Public Health Service Act, as amended, their associated rules and regulations promulgated thereunder.

 

IFRS” means the International Financial Reporting Standards, consistently applied.

 

IND” means Investigational New Drug application.

 

Indemnified Party” has the meaning set forth in Section 5.3(a).

 

Indemnifying Party” has the meaning set forth in Section 5.3(a).

 

Intellectual Property” means any and all intellectual property rights and other similar proprietary rights in any jurisdiction, whether registered or unregistered, whether owned or held for use under license, including all rights and interests pertaining to or deriving from (a) Domain Names, copyrights and designs, (b) Patent Rights, (c) Trademarks, (d) Know-How and computer software programs and applications, including data files, source code, object code and software- related specifications and documentation, and (e) other tangible or intangible proprietary or confidential information and materials, including proprietary databases and data compilations, in each case, including any registrations of, applications to register, and renewals and extensions of, any of the foregoing with or by any Governmental Entity in any jurisdiction.

 

Know-How” means any and all information, know-how, trade secrets, ideas, inventions, invention disclosures, discoveries and improvements, data, files, plans, operating records, instructions, proprietary or other processes, formulas, formulation information, manufacturing or other technology, validations, package specifications, chemical specifications, chemical and finished goods analytical test or other methods, stability data, clinical data, nonclinical data, safety data, adverse event report data, databases, manufacturing know-how, product specifications, information with respect to expert opinions, drawings, schematics, reports and information (whether or not patented or patentable), technology and techniques. For the avoidance of doubt, Know-How excludes Patent Rights, Trademarks and Domain Names.

 

Knowledge” means with respect to the Seller, the actual knowledge of the following employees of the Seller: Richard Peters, M.D., Ph.D. and Daryl Drummond, Ph.D.

 

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Law” or “Laws” means any law, statute or ordinance, common law or any rule, regulation, standard, judgment, order, writ, injunction, decree or agency requirement of any Governmental Entity.

  

Liability” means any debt, liability or obligation (whether direct or indirect, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, known or unknown, determined or determinable or due or to become due), including all costs and expenses relating thereto.

 

Lien” means any mortgage, security interest, pledge, conditional sale or other title retention agreement, lien, charge or encumbrance.

 

Material Event” means any material development, regulatory, marketing, clinical or other similar event, in each case with respect to any Product, including without limitation, (a) becoming aware of the results of any preclinical study or clinical trial results, (b) receipt of material correspondence with or from any Governmental Entity, including regarding clinical trial or study design and/or approvability or a product candidate for any indication, or (c) material safety data and/or results.

 

Milestone Event” has the meaning set forth in Section 1.9(a).

 

Milestone Payment” has the meaning set forth in Section 1.9(a).

 

MM-121 Intellectual Property” means the MM-121 Patents and the MM-121 Know-How.

 

MM-121 Know-How” means any and all Know-How owned by Seller that is exclusively related to the monoclonal antibody referred to in clause (a) of the definition of “Product” herein.

 

MM-121 Patents” means the Patent Rights claiming or covering the monoclonal antibody referred to in clause (a) of the definition of “Product” herein and set forth in Section 7.01 of the Disclosure Schedule (including any continuation, divisional, continuation-in-part, substitution, reissue, renewal, reexamination, supplemental protection certificate, extension, and foreign counterpart of such Patent Rights).

 

MM-121 Product” means the Seller’s proprietary HER3 monoclonal antibody designated as MM-121, also known as Seribantumab, in any form or formulation, as further described on Schedule A.

 

Monthly Rate” has the meaning set forth in Section 1.9(d).

 

NDA” means a New Drug Application as described in 21 C.F.R. § 314.50 and submitted to the FDA or a comparable application submitted to an applicable Governmental Authority outside the United States.

 

Net Sales” means, with respect to any Product, the aggregate gross amount invoiced (or, if no invoice is issued, the price otherwise charged) for sales of such Product worldwide, regardless of indication, by the members of the Buyer Rights Group collectively, minus the Exclusions; provided that sales or other commercial dispositions of such Product among members of the Buyer Rights Group specifically for purposes of resale shall be excluded from the computation of Net Sales (but the subsequent resale shall be included).

 

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(a)         Product provided by a member of the Buyer Rights Group for clinical trial or other developmental purposes, sampling or promotional purposes (in customary amounts), test marketing, early access programs (including treatment INDs or protocols, named patient programs or compassionate use programs), humanitarian or charitable donations, or patient assistance programs, in each case where the Product is delivered without charge, will not be included in Net Sales.

 

(b)            If any Product is sold or transferred for consideration other than cash, or in a transaction that is not arm’s length, Net Sales from such sale or transfer shall be deemed to be Net Sales at which substantially similar quantities of such Product are sold for cash in an arm’s length transaction at such time in the relevant country or, if no such sales are made at such time, were most recently sold for cash in an arm’s length transaction in the relevant country or, if no such sales were ever made in the relevant country, for the fair market value of such quantity of such Product in such country.

 

Order” means any order, award, decree or injunction, ruling or writ issued, made or rendered by a Governmental Entity.

 

Ordinary Course of Business” means the ordinary course of business consistent in all material respects with past custom and practice.

 

Patent Assignment” has the meaning set forth in Section 1.6(b)(iii).

 

Patent Rights” means all issued patents and pending patent applications, including any provisional, continuation, divisional, continuation-in-part application, substitution, reissue, renewal, reexamination, supplemental protection certificate, extension, counterpart, registration or confirmation of or related to any such patent or patent application, as each of the foregoing may exist anywhere in the world.

 

Permits” has the meaning set forth in Section 1.1(b).

 

Permitted Liens” means (i) Liens disclosed on Section 7.02 of the Disclosure Schedule, (ii) Liens for Taxes, assessments or governmental charges or levies that are not yet due and payable or are being contested in good faith, (iii) statutory Liens (including mechanic’s, materialman’s, carrier’s, repairer’s and other similar Liens) arising or incurred in the Ordinary Course of Business, (iv) any restrictions, limitations or conditions contained in the Transferred Contracts or (v) any other Liens affecting the Transferred Assets that were not incurred in connection with the borrowing of money or the advance of credit and that do not materially impede the ownership or operation of, or materially impair the value of, the Transferred Assets, taken as a whole.

 

Person” means any individual, corporation, partnership, limited liability company, firm, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Entity or other entity.

 

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PMDA” means the Japanese Pharmaceuticals and Medical Devices Agency and any successor agency thereto.

  

Pre-Closing Tax Period” means (i) any Tax period ending on or before the Closing Date and (ii) with respect to a Tax period that commences on or before but ends after the Closing Date, the portion of such period up to and including the Closing Date.

 

Pricing and Reimbursement Approval” means, with respect to a Product in a country, the approval, license, registration or authorization of a Governmental Entity or relevant health authority to determine or set the price or reimbursement level of such Product in such country or, if earlier, the first commercial sale of a Product in such country for consideration above the cost of goods sold of such Product.

 

Product” means (a) any MM-121 Product or (b) the Seller’s proprietary HER2/3 bispecific antibody fusion protein designated as MM-111, in any form or formulation, as further described on Schedule B.

 

Product Sale” means any sale, conveyance, transfer, license or other disposition of all or substantially all of the Buyer’s and its Affiliates’ right, title and interest in and to any Product, to a third party, through one or more transactions or series of transactions (including any exclusive license, asset sale, sale of equity interests, merger or otherwise).

 

Qualified Transferee” means any entity that is engaged in the pharmaceutical or biotechnology business and at least as capable as the Buyer of, and has resources and assets comparable to or greater than the Buyer (determined as of immediately after the Closing) for, researching, developing and commercializing the Products.

 

Quarterly Report” has the meaning set forth in Section 1.9(e)(i).

 

Recovery” has the meaning set forth in Section 5.5(b).

 

Regulatory Approval” means the approval of the applicable Regulatory Authority necessary for the marketing and sale of a product in a country (or countries), and including the expansion or modification of the label for additional indications or uses.

 

Regulatory Authority” means the FDA, EMA or any other Governmental Entity in another country or jurisdiction that is a counterpart to the FDA and holds responsibility for granting Regulatory Approval for a product, or otherwise regulating the research, development or commercialization of a product, in such country, including the EMA, and any successor(s) thereto.

 

Representatives” means, with respect to any Person, such Person’s officers, directors, employees, consultants, independent contractors, accountants, legal and other representatives and agents.

 

Retained Liabilities” has the meaning set forth in Section 1.4.

 

Seller” has the meaning set forth in the preamble.

 

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Seller Material Adverse Effect” means any material adverse effect on the ability of the to consummate any of the Contemplated Transactions on a timely basis.

  

Seller Names and Marks” means any and all (a) Trademarks of Seller or any of its Affiliates, including the names, marks and logos set forth on Section 7.03 of the Disclosure Schedule, and (b) Trademarks derived from, confusingly similar to or including any of the foregoing.

 

Seller Permits” has the meaning set forth in Section 2.8.

 

Specified Reps” has the meaning set forth in Section 5.4(a).

 

Subsidiary” means, with respect to any Person, any entity of which (i) securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person or (ii) 50% or more of such entity’s equity interests are at the time directly or indirectly owned by such Person.

 

Taxes” means (a) all taxes, charges, fees, levies or other similar assessments or Liabilities in the nature of a tax, including income, gross receipts, ad valorem, premium, value- added, excise, real property, personal property, sales, use, service, transfer, withholding, employment, payroll and franchise taxes imposed by any Governmental Entity and (b) any interest, fines, penalties, assessments or additions to tax resulting from, attributable to or incurred in connection with any tax described in clause (a) or any contest or dispute thereof.

 

Tax Returns” means all reports, returns, declarations, statements or other information required to be supplied to any Governmental Entity in connection with Taxes (including any attachments thereto or amendments thereof).

 

Third Party Claim” has the meaning set forth in Section 5.3(a).

 

Third Party Claim Notice” has the meaning set forth in Section 5.3(a).

 

Third Party Claim Amount” has the meaning set forth in Section 5.3(a).

 

Trademarks” means all trademarks, service marks, trade names, logos, brands and other source identifiers, including all applications and registrations of the foregoing, as each of the foregoing may exist anywhere in the world.

 

Transfer Taxes” has the meaning set forth in Section 1.7(a).

 

Transferred Assets” has the meaning set forth in Section 1.1.

 

Transferred Books and Records” has the meaning set forth in Section 1.1(f).

 

Transferred Contracts” has the meaning set forth in Section 1.1(e).

 

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Transferred Intellectual Property” means the Transferred Patents and Transferred Know-How.

 

Transferred Inventory” has the meaning set forth in Section 1.1(d).

 

Transferred Know-How” has the meaning set forth in Section 1.1(c).

 

Transferred Patent Files” has the meaning set forth in Section 1.1(a).

 

Transferred Patents” has the meaning set forth in Section 1.1(a).

 

Transferred Permits” has the meaning set forth in Section 1.1(b).

 

United States” or “U.S.” means the United States of America and all of its territories and possessions.

 

[Remainder of Page Intentionally Left Blank.]

 

 

 

 

IN WITNESS WHEREOF, the Buyer and the Seller have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the date first written above.

 

  MERRIMACK PHARMACEUTICALS, INC.
     
     
  By: /s/ Richard Peters, M.D., Ph.D.
  Name: Richard Peters, M.D., Ph.D.
  Title: President and Chief Executive Officer
     
     
  14NER ONCOLOGY, INC.
     
     
  By:  /s/ Steven Elms
  Name:  Steven Elms
  Title: President & CEO

 

[Signature Page to Asset Purchase Agreement]

 

 

 

 

Exhibit A

 

FORM OF BILL OF SALE

 

This Bill of Sale (this “Bill of Sale”) dated ______________, 2019 is executed and delivered by Merrimack Pharmaceuticals, Inc., a Delaware corporation (the “Seller”), for the benefit of 14ner Oncology, Inc., a Delaware corporation (the “Buyer”). All capitalized words and terms used in this Bill of Sale and not defined herein shall have the respective meanings ascribed to them in the Asset Purchase Agreement dated May 28, 2019 between the Seller and the Buyer (the “Purchase Agreement”).

 

WHEREAS, pursuant to the Purchase Agreement, the Seller has agreed to sell, convey, transfer, assign and deliver to the Buyer the Transferred Assets, and the Buyer has agreed to assume the Assumed Liabilities.

 

NOW, THEREFORE, in consideration of the mutual promises set forth in the Purchase Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Seller hereby agrees as follows:

 

1.       The Seller hereby sells, conveys, transfers, assigns and delivers (or causes to be sold, conveyed, transferred, assigned or delivered) to the Buyer all of the right, title and interest in and to the Transferred Assets, free and clear of all Liens other than Permitted Liens.

 

2.       The Seller, by its execution of this Bill of Sale, and the Buyer, by its acceptance of this Bill of Sale, each hereby acknowledges and agrees that neither the representations and warranties nor the rights, remedies or obligations of any party under the Purchase Agreement shall be deemed to be enlarged, modified or altered in any way by this instrument. In the event of any conflict or inconsistency between the terms of the Purchase Agreement and the terms hereof, the terms of the Purchase Agreement shall govern and control.

 

3.       This Bill of Sale and any claims arising therefrom shall be governed by and construed in accordance with the Laws of the State of Delaware, without giving effect to any choice or conflict of Law provision or rule that would cause the application of Laws of any jurisdiction other than those of the State of Delaware.

 

[Signature Page Follows.]

 

 

 

 

IN WITNESS WHEREOF, the Seller and the Buyer have caused this instrument to be duly executed under seal as of and on the date first above written.

 

  SELLER
     
  MERRIMACK PHARMACEUTICALS, INC.
     
     
  By:  
     
  Title:  

 

ACCEPTED:  
     
BUYER  
     
14NER ONCOLOGY, INC.  
     
     
By:    
     
Title:    

 

[Signature page to Bill of Sale]

 

 

 

 

Exhibit B

 

FORM OF PATENT ASSIGNMENT

 

This Patent Assignment, dated as of May ______________, 2019 (this “Assignment”), is made by Merrimack Pharmaceuticals, Inc., a Delaware corporation (the “Assignor”), in favor of 14ner Oncology, Inc., a Delaware corporation (“Assignee”).

 

WHEREAS, Assignor and Assignee are parties to a Purchase Agreement dated as of May 28, 2019 (the “Purchase Agreement”), pursuant to which, among other things, Assignor has agreed to sell, convey, transfer, assign and deliver to Assignee, and Assignee has agreed to purchase from Assignor all of Assignor’s right, title, and interest in and to the patents and patent applications set forth on Schedule A attached hereto and in and to the inventions disclosed therein (collectively, the “Assigned Patent Rights”); and

 

WHEREAS, this Assignment is entered into pursuant to, and as a condition of the closing of the transactions contemplated under, the Purchase Agreement.

 

NOW, THEREFORE, for good and valuable consideration and pursuant to the terms of the Purchase Agreement, Assignor hereby agrees as follows:

 

1.       Assignor hereby sells, conveys, transfers, assigns and delivers to Assignee, and Assignee hereby accepts, purchases and assumes, all of Assignor’s right, title, and interest in and to the Assigned Patent Rights, together with all patents issuing on the Assigned Patent Rights, and any continuations, divisionals, continuations-in-part, substitutions, reissues, renewals, reexaminations, supplemental protection certificates, extensions of such patents and Assigned Patent Rights, and foreign counterparts of any of the foregoing, and together with all rights to sue for past, present, and future infringement or misappropriation thereof, for any relief in law or in equity, and to recover any and all damages for such infringement in whatever form, including but not limited to lost profits or royalties (including the right to sue for pre-issuance royalties).

 

2.       Assignor hereby agrees to execute and deliver any further instruments and documents as Assignee may request in order to carry out the purposes of this Agreement.

 

3.       Notwithstanding any other provisions of this Assignment to the contrary, nothing contained in this Assignment shall in any way supersede, modify, replace, amend, change, rescind, waive, exceed, expand, enlarge, or in any way affect the provisions, including warranties, covenants, agreements, conditions, representations, or in general any of the rights and remedies, or any of the obligations and indemnifications of Assignor or Assignee set forth in the Purchase Agreement. This Assignment is intended only to effect the transfer of certain property transferred pursuant to the Purchase Agreement and shall be governed entirely in accordance with the terms and conditions of the Purchase Agreement.

 

4.       This Assignment shall be binding on, and shall inure to the benefit of, Assignor, Assignee, and their respective successors and/or assigns, and all others acting by, through, with, or under their direction, and all those in privity therewith.

 

[Signature Page Follows.]

 

 

 

 

IN WITNESS WHEREOF, Assignor has caused this Assignment to be executed by its duly authorized representatives effective this      day ____ of ______________, 2019.

 

  ASSIGNOR:
     
  Merrimack Pharmaceuticals, Inc.
     
     
  By:  
  [Name:]  
  [Title:]  
     

 

 

ATTEST:  
   
   

 

CERTIFICATE OF ACKNOWLEDGEMENT

 

I, ______________, a Notary Public in and for __________________________ do hereby certify that _________________________, personally known to me to be the same person(s) whose name(s) is (are) subscribed to the foregoing instrument, appeared before me this day in person and acknowledged that they signed, sealed and delivered the said instrument as a free act and deed on behalf of the identified corporation, Merrimack Pharmaceuticals, Inc., with authority to do so.

 

IN WITNESS WHEREOF, I have hereunto set my hand and Notarial Seal, this ____ day of _____________ 2019.

 

  Notary Public
  Commission Expires:

 

[Signature page to Patent Assignment]

 

 

 

 

SCHEDULE A

 

ASSIGNED PATENT RIGHTS

 

APPL’N NO.  

PATENT/

PUBL’N. NO.

  FILING DATE  

ISSUE DATE/

PUBL’N DATE

  TITLE   COUNTRY

 

 

 

 

Exhibit C

 

FORM OF ASSUMPTION AGREEMENT

 

This Assumption Agreement (this “Assumption Agreement”) dated ______________, 2019, is made by and between 14ner Oncology, Inc., a Delaware corporation (“Buyer”), and Merrimack Pharmaceuticals, Inc., a Delaware corporation (the “Seller”). All capitalized words and terms used in this Assumption Agreement and not defined herein shall have the respective meanings ascribed to them in the Asset Purchase Agreement dated May 28, 2019 between the Seller and the Buyer (the “Purchase Agreement”).

 

WHEREAS, pursuant to the Purchase Agreement, the Seller has agreed to sell, convey, transfer, assign and deliver to the Buyer the Transferred Assets; and

 

WHEREAS, in partial consideration therefor, the Purchase Agreement requires the Buyer to assume the Assumed Liabilities;

 

NOW, THEREFORE, in consideration of the mutual promises set forth in the Purchase Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Buyer hereby agrees as follows:

 

1.       The Buyer hereby assumes and agrees to perform, pay, satisfy or discharge the Assumed Liabilities, on the terms and subject to the conditions set forth in the Purchase Agreement.

 

2.       The Buyer does not hereby assume or agree to perform, pay, satisfy or discharge when due, and the Seller shall remain liable for, the Retained Liabilities.

 

3.       Each of the Buyer and Seller, by their execution of this Assumption Agreement, each hereby acknowledge and agree that neither the representations and warranties nor the rights, remedies or obligations of either party under the Purchase Agreement shall be deemed to be enlarged, modified or altered in any way by this instrument. In the event of any conflict or inconsistency between the terms of the Purchase Agreement and the terms hereof, the terms of the Purchase Agreement shall govern and control.

 

4.       This Assumption Agreement and any claims arising therefrom shall be governed by and construed in accordance with the Laws of the State of Delaware, without giving effect to any choice or conflict of Law provision or rule that would cause the application of Laws of any jurisdiction other than those of the State of Delaware.

 

[Signature Page Follows.]

 

 

 

 

IN WITNESS WHEREOF, the Buyer and the Seller have caused this instrument to be duly executed under seal as of and on the date first above written.

 

  14NER ONCOLOGY, INC.
     
     
  By:  
     
  Title:  

 

ACCEPTED:  
     
MERRIMACK PHARMACEUTICALS, INC.  
     
     
By:    
     
Title:    

 

[Signature page to Assumption Agreement]

 

 

 

 

 

Exhibit D

 

FORM OF DYAX ASSUMPTION AND UNDERTAKING

 

This Assumption and Undertaking, dated as of [ ], 2019 (the “Assumption Date”), is made by 14ner Oncology, Inc., a Delaware corporation (“Assignee”), to Dyax Corp., a Delaware corporation (“Dyax”), and Merrimack Pharmaceuticals, Inc., a Delaware corporation (the “Assignor”).

 

WHEREAS, pursuant to the terms of the Asset Purchase Agreement dated as of May 28, 2019 (the “Asset Purchase Agreement”), by and between the Assignor and the Assignee, the Assignor is selling to the Assignee assets related to Seribantumab, a human immunoglobulin G2 monoclonal antibody against HER3 also known as MM-121;

 

WHEREAS, the Assignor and Dyax are party to (i) that certain Amended and Restated Collaboration Agreement dated January 24, 2007 between the Assignor and Dyax, as amended by that certain Amendment, dated July 31, 2008, by that certain Amendment, dated November 6, 2009, and by that certain Amendment, dated January 18, 2012 (the “Collaboration Agreement”), full and complete copies of which are attached as Annex 1 hereto, and (ii) that certain Sublicense Agreement dated June 30, 2008 between the Assignor and Dyax (the “Sublicense Agreement” and, together with the Collaboration Agreement, the “Agreements”), a full and complete copy of which is attached as Annex 2 hereto;

 

WHEREAS, pursuant to the Asset Purchase Agreement, the Assignor has agreed to assign to Assignee the rights and obligations arising under the Agreements from and after the Assumption Date;

 

WHEREAS, in order to assign such rights and obligations, pursuant to Section 10.3 of the Collaboration Agreement, Assignee is required to assume in writing all of the obligations of the Assignor under the Collaboration Agreement, and pursuant to Section 5 of the Sublicense Agreement, Assignee is required to undertake to Dyax to be bound by the terms of the Sublicense Agreement; and

 

WHEREAS, Assignee has agreed to assume all of the rights and obligations of the Assignor arising under the Agreements from and after the Assumption Date and to be bound by the terms of the Agreements.

 

NOW, THEREFORE, Assignee hereby undertakes to Dyax to be bound by the terms and conditions of the Agreements, and to assume all of the rights and obligations of the Assignor arising under the Agreements from and after the Assumption Date.

 

[Signature Page Follows.]

 

 

 

 

EXECUTED THIS      day of      2019.

 

  14NER ONCOLOGY, INC.
   
   
  By:                     

 

  Name:  

 

   Title:  

 

Acknowledged and agreed:  
   
MERRIMACK PHARMACEUTICALS, INC.  
   
By:                                       

   
Name:    

   
Title:    

 

 

 

 

AMENDMENT
NO. 1 TO

ASSET PURCHASE AGREEMENT

 

This AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT (this “Amendment”) is entered into as of June 24, 2019, by and between 14ner Oncology, Inc., a Delaware corporation (the “Buyer”), and Merrimack Pharmaceuticals, Inc., a Delaware corporation (the “Seller”). The Buyer and Seller are referred to collectively herein as the “Parties.” Capitalized terms used herein but not defined shall have the meanings ascribed to such terms in the Agreement (as defined below).

 

Recitals

 

WHEREAS, the Parties entered into that certain Asset Purchase Agreement, dated as of May 28, 2019 (the “Agreement”); and

 

WHEREAS, the Parties desire to amend the Agreement as set forth in this Amendment.

 

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth below, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

1.            Amendment to Agreement. Effective as the date of this Amendment, the Agreement is hereby amended as follows:

 

(a)            The first sentence of Section 1.6(a) of the Agreement is hereby amended and restated in its entirety as follows:

 

“(a) The Closing shall take place at 9:30 a.m. on June 28, 2019, or such earlier date as the parties mutually agree in writing (the “Closing Date”), at the offices of Wilmer Cutler Pickering Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109, unless another place is agreed to in writing by the Buyer and the Seller.”

 

2.            Agreement. Except to the extent expressed amended herein, the Agreement is hereby ratified and confirmed in all respects and will remain unmodified and in full force and effect in accordance with its terms.

 

3.            Governing Law. This Amendment and any claims arising therefrom shall be governed by and construed in accordance with the Laws of the State of Delaware, without giving effect to any choice or conflict of Law provision or rule that would cause the application of Laws of any jurisdiction other than those of the State of Delaware.

 

4.            Counterparts. This Amendment may be executed in two (2) counterparts, each of which shall be deemed an original but both of which together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties and delivered to the other party, it being understood that both parties need not sign the same counterpart. This Amendment may be executed and delivered by facsimile or .pdf transmission.

 

[Remainder of Page Intentionally Left Blank.]

 

 

 

 

IN WITNESS WHEREOF, the Parties have caused this Amendment to be signed by their respective officers thereunto duly authorized as of the date first written above.

 

  MERRIMACK PHARMACEUTICALS, INC.
   
  By: /s/ Richard Peters, M.D., Ph.D.
  Name: Richard Peters, M.D., Ph.D.
  Title: President and Chief Executive Officer
   
   
  14NER ONCOLOGY, INC.
   
  By: /s/ Steven Elms
  Name: Steven Elms
  Title: President & CEO

 

 

 

 

AMENDMENT NO. 2

TO

ASSET PURCHASE AGREEMENT

 

This AMENDMENT NO. 2 TO ASSET PURCHASE AGREEMENT (this “Amendment”) is entered into as of June 28, 2019, by and between 14ner Oncology, Inc., a Delaware corporation (the “Buyer”), and Merrimack Pharmaceuticals, Inc., a Delaware corporation (the “Seller”). The Buyer and Seller are referred to collectively herein as the “Parties.” Capitalized terms used herein but not defined shall have the meanings ascribed to such terms in the Agreement (as defined below).

 

Recitals

 

WHEREAS, the Parties entered into that certain Asset Purchase Agreement, dated as of May 28, 2019, as amended by Amendment No. 1 to the Asset Purchase Agreement, dated as of June 24, 2019 (as so amended, the “Agreement”); and

 

WHEREAS, the Parties desire to amend the Agreement as set forth in this Amendment.

 

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth below, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

1.            Amendment to Agreement. Effective as the date of this Amendment, the Agreement is hereby amended as follows:

 

(a)            The first sentence of Section 1.6(a) of the Agreement is hereby amended and restated in its entirety as follows:

 

“(a) The Closing shall take place at 9:30 a.m. on July 12, 2019, or such earlier date as the parties mutually agree in writing (the “Closing Date”), at the offices of Wilmer Cutler Pickering Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109, unless another place is agreed to in writing by the Buyer and the Seller.”

 

2.            Agreement. Except to the extent expressed amended herein, the Agreement is hereby ratified and confirmed in all respects and will remain unmodified and in full force and effect in accordance with its terms.

 

3.            Governing Law. This Amendment and any claims arising therefrom shall be governed by and construed in accordance with the Laws of the State of Delaware, without giving effect to any choice or conflict of Law provision or rule that would cause the application of Laws of any jurisdiction other than those of the State of Delaware.

 

4.            Counterparts. This Amendment may be executed in two (2) counterparts, each of which shall be deemed an original but both of which together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties and delivered to the other party, it being understood that both parties need not sign the same counterpart. This Amendment may be executed and delivered by facsimile or .pdf transmission.

 

[Remainder of Page Intentionally Left Blank.]

 

 

 

 

IN WITNESS WHEREOF, the Parties have caused this Amendment to be signed by their respective officers thereunto duly authorized as of the date first written above.

 

MERRIMACK PHARMACEUTICALS, INC.
   
By:  /s/ Jeffrey A. Munsie
  Name: Jeffrey A. Munsie
Title: General Counsel

 

14NER ONCOLOGY, INC.
   
By: /s/ Steven Elms
Name: Steven Elms
Title: President & CEO

 

 

 

 

 

 


Exhibit 10.6

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [*], HAS BEEN OMITTED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO ELEVATION ONCOLOGY, INC. IF PUBLICLY DISCLOSED.

 

AMENDED AND RESTATED

COLLABORATION AGREEMENT

 

This AMENDED AND RESTATED COLLABORATION AGREEMENT (“Agreement”), effective as of January 24, 2007 (the “Effective Date”), is between DYAX CORP., a Delaware corporation, with offices at 300 Technology Square, Cambridge, Massachusetts 02139, U.S.A. (“Dyax”), and MERRIMACK PHARMACEUTICALS, INC., a Massachusetts corporation with its principal place of business located at One Kendall Square, Building 700, 2nd Floor, Cambridge, MA 02139, U.S.A. (“Merrimack”).

 

WHEREAS, Dyax possesses intellectual property and know-how related to, among other things, the discovery of antibodies having novel binding properties using phage display;

 

WHEREAS, Merrimack is a biotechnology company focused on developing therapeutics in the fields of autoimmune disease and cancer;

 

WHEREAS, Dyax and Merrimack previously entered into a Collaboration Agreement, dated effective as of December 6, 2005 (the “Original Agreement”), under which Dyax agreed to perform research using Dyax Libraries (as hereinafter defined) to identify Dyax Antibodies (as hereinafter defined) to targets to be provided by Merrimack so that Merrimack may evaluate the utility of using and use such antibodies as therapeutics and/or diagnostics; and

 

WHEREAS, Dyax and Merrimack wish to expand the scope of the research activities to be performed by Dyax and amend certain other terms under the Original Agreement; and

 

WHEREAS, to accomplish the foregoing, the Parties have agreed to amend and restate the Original Agreement as set forth herein.

 

NOW, THEREFORE, in consideration of the mutual covenants set forth in this Agreement, the Parties hereby agree that, from and after the Effective Date hereof, the Original Agreement is hereby amended and restated as follows:

 

Article I
DEFINITIONS

 

1.1            Affiliate” means, with respect to either Party, a corporation or other legal entity that controls, is controlled by, or is under common control with such Party. For purposes of this definition, “control” means the ownership, directly or indirectly, of more than fifty percent (50%) of the outstanding equity securities of a corporation which are entitled to vote in the election of directors or a more than fifty percent (50%) interest in the net assets or profits of an entity which is not a corporation.

 

-1-

 

 

1.2            Antibody” means a molecule or a gene encoding such a molecule comprising or containing one or more immunoglobulin variable domains or parts of such domains or any existing or future fragments, variants, modifications or derivatives thereof.

 

1.3           CAT Agreement” means that certain Amendment Agreement dated January 3, 2003 by and between Cambridge Antibody Technology Limited (“CAT”) and Dyax, as amended by the Second Amendment Agreement between Dyax and CAT dated September 18, 2003. Redacted copies of these agreements were provided to Merrimack prior to the Effective Date.

 

1.4           CAT Gatekeeping Procedure” means the procedure set out in Appendix B hereto which CAT shall carry out in respect of a Nominated Target prior to the grant of the CAT Product License.

 

1.5            CAT Patent Rights” means the patents and patent applications listed in Appendix C hereto and any patents issuing from such patent applications, together with any divisionals, registrations, confirmations, reissues, extensions, renewals, continuations, continuations-in-part, revalidations, additions, substitutions, renewals or supplementary protection certificates thereof throughout the world and any other patent applications or patents licensed to Dyax under the CAT Agreement or the CAT Product License.

 

1.6            CAT Product License” means a license from CAT which is required, under the terms of the CAT Agreement, to be granted ([*] of a Therapeutic Antibody Product or [*] for any Diagnostic Antibody Product) in order to commercialize Dyax Antibodies to any Target, as described in more detail in Section 3.2. The form of CAT Product License is attached hereto as Appendix D.

 

1.7            CAT Valid Claim” means a claim of an issued and unexpired patent included within the CAT Patent Rights which has been licensed to CAT by the Medical Research Council which has not been held permanently revoked, unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction unappealed within the time allowed for appeal, and which has not been admitted to be invalid or unenforceable through reissue or disclaimer or otherwise.

 

1.8            Commercial Field” means all human therapeutic and diagnostic uses, excluding (i) Research Products, (ii) Separations Applications, (iii) therapeutic products designed to localize an additional non-antibody, active molecule to a Target for therapeutic purposes (e.g. radio-labeled therapeutics, antibody-toxin conjugates), and (iv) with respect to Antibodies directed against any Third Party In Vivo Target, in vivo diagnostic uses. For the avoidance of doubt, item (iii) in the foregoing sentence is not intended to exclude Products as a result of the incorporation of Poly-Specific Antibodies within such Products.

 

1.9            Commercial License” has the meaning set forth in Section 3.1(b) hereof.

 

1.10          Confidential Information” means all information, inventions, data and know-how disclosed to either party by the other party relating to any technology, use, process, method, trade secret, document, technical report, specification, diagram, research project, development program, clinical data, test result, or non-publicly available agreement or document, whether in written, oral, graphic, electronic or any other media or form.

 

-2-

 

 

1.11          Diagnostic Antibody Product” means any preparation in the form of a device, composition, compound, kit or service with utility in the diagnosis, prognosis, prediction or management or susceptibility to treatment of a disease or disorder which contains, comprises or the process of development or manufacture of which utilizes a Dyax Antibody. For the avoidance of doubt, the parties acknowledge and agree that [*].

 

1.12          Display Library” means a collection of at least 1,000 genetically different organisms that each contain genetic information encoding a different fusion protein, wherein such collection was created for the purpose of displaying such fusion protein on the outer surface of such organisms.

 

1.13          Dispose” means to transfer, assign, lease or in any other fashion dispose of control, ownership or possession, but shall not mean to license or sell. “Disposition” shall have the correlative meaning.

 

1.14          Dyax Antibody” means any Antibody that is delivered by Dyax to Merrimack in connection with the Research Program and which was identified, generated, developed, produced, optimized, or obtained by Dyax from a Dyax Library, and any variant, modification or derivative of such Antibody, including a Poly-Specific Antibody, whether synthesized by Merrimack or Dyax.

 

1.15          Dyax Antibody Information” means any data, know-how or other information relating, concerning or pertaining to a specific Dyax Antibody, including, [*] or [*] or [*] or [*], or [*] or [*].

 

1.16          Dyax Antibody IP” means any patent(s) and/or patent application(s) relating to one or more Dyax Antibodies.

 

1.17          Dyax Libraries” means Dyax’s proprietary phagemid-based Fab Display Libraries and phage-based Fab Display Libraries.

 

1.18          Dyax Patent Rights” means the patents and patent applications set forth in Appendix E [*] of the [*] and [*], together with any reissues, re-examinations, renewals, and extensions thereof, and all continuations, continuations-in-part and divisionals of the applications throughout the world.

 

1.19          Dyax Research Know-How” means any unpatented know-how, technical or other information generated or utilized by Dyax during the conduct of the Research Program that [*] to the [*] in the [*] of the [*], and/or [*] of the [*] that is [*] by the [*].

 

1.20          Dyax Research Materials” means any materials, including but not limited to Antibody coding expression vectors (but excluding the Dyax Antibodies) provided to Merrimack by Dyax in connection with the Research Program.

 

1.21          First Commercial Sale” means the first commercial sale of any Product by Merrimack, its Affiliates or sublicensees in any country after grant of a Marketing Authorization.

 

-3-

 

 

1.22           FTE” means the equivalent of the work time of a full-time scientist or a full-time project team leader over a twelve-month period (including normal vacations, sick days and holidays). In the case of less than a full-time person, the portion of an FTE year devoted by such person to the Research Program shall be determined by dividing the number of days during any twelve-month period devoted by such person to the Research Program by the total number of working days of such person’s full-time scientist during such twelve-month period. One person cannot be counted as more than one FTE for a given year.

 

1.23           FTE Rate” means $[*] per annum per FTE (or $[*] per hour based on an FTE year of [*] hours). The FTE Rate includes all salary, employee benefits, materials and all other expenses including support staff and overhead for or associated with Dyax scientists performing activities in connection with the Research Program.

 

1.24           Indication” means a new and distinct disease category (for example, cancer versus inflammation) and does not mean a different type or subpopulation within the same primary disease (for example, colon cancer versus breast cancer).

 

1.25           Major Market” any one of the following: (i) the United States of America, (ii) any country in Europe which is subject to the Marketing Authorization procedure of the European Medicines Evaluation Agency, or (iii) Japan.

 

1.26           Marketing Authorization” means any approval (including all applicable pricing and governmental reimbursement approvals) required from the relevant Regulatory Authority to market and sell a Product in a particular country.

 

1.27           Merrimack Materials” means the Merrimack Targets and other materials that are delivered to Dyax by Merrimack pursuant to the Research Program.

 

1.28           Merrimack Targets” means Targets that are delivered to Dyax by Merrimack and accepted by Dyax for inclusion in the Research Program as provided under Section 2.4(a). For the avoidance of doubt, the identity of Merrimack Targets shall constitute Confidential Information of Merrimack.

 

1.29           NDA” means New Drug Application as defined in 21 CFR 314 or other comparable regulation imposed by the U.S. Food and Drug Administration, or its foreign counterpart.

 

1.30           Net Sales” means, with respect to any Product sold by Merrimack, its Affiliates or sublicensees, the price invoiced by that party to the relevant purchaser (or in the case of a sale or other disposal otherwise than at arm’s length, the price which would have been invoiced in a bona fide arm’s length contract or sale) but [*] and [*] or [*], and [*] or [*] and [*] in the [*] to the [*]. In the event the Product is sold as part of a Combination Product (as defined below), the Net Sales from the Combination Product, for the purposes of determining royalty payments, shall be determined by [*] of the [*] the [*], by [*] is the [*] of the [*] and [*] in the [*] the [*] and the [*] in the [*] in which [*]. In the [*] the [*] and [*] in the [*] for the [*] shall be [*] of the [*] is the [*] of the [*] is the [*] of [*] in the [*]. As used above, the term “Combination Product” means any pharmaceutical or biologic product which contains a Product and other active compounds and/or active ingredients.

 

-4-

 

 

1.31            Nominated Target” has the meaning set forth in Section 3.2(a)(iii) hereof.

 

1.32            Party” means Dyax or Merrimack, and “Parties” means Dyax and Merrimack.

 

1.33            Patent Rights” means patent applications or patents, author certificates, inventor certificates, utility certificates, improvement patents, and models and certificates of addition, and all foreign counterparts of them and includes divisionals, renewals, continuations, continuations-in-part, extensions, reissues, substitutions, confirmations, registrations, revalidations, or additions of or to them as well as any supplementary protection certificate or any other post patent expiration extension of patent protection in respect to them.

 

1.34            Phase I Clinical Trial” means a human clinical trial in any country that is intended to initially evaluate the safety of an investigational Product in volunteer subjects or patients that would satisfy the requirements of 21 CFR 312.21(a), or other comparable regulation imposed by the U.S. Food and Drug Administration, or its foreign counterpart.

 

1.35            Phase III Clinical Trial” means a pivotal human clinical trial in any country the results of which could be used to establish safety and efficacy of a Product as a basis for a marketing application that would satisfy the requirements of 21 CFR 312.21(c) or other comparable regulation imposed by the U.S. Food and Drug Administration, or its foreign counterpart.

 

1.36            Poly-Specific Antibody” means a Dyax Antibody that is directed to more than one Nominated Target as described in Section 3.2 (e).

 

1.37            Product” means any Diagnostic Antibody Product and/or Therapeutic Antibody Product.

 

1.38            Quarter” means each period of three (3) months ending on March 31, June 30, September 30, or December 31 and “Quarterly” shall be construed accordingly.

 

1.39            Regulatory Authority” means the United States Food and Drug Administration, or any national or local agency, authority, department, inspectorate, minister, ministry official, parliament or public or statutory person (whether autonomous or not) of any government of any country having jurisdiction over any of the activities contemplated by this Agreement or the Parties, or any successor bodies thereto.

 

1.40            Research Campaign” means one of [*] separate funded research campaigns (referred to herein as “Campaign I”, [*]), each with its own Research Plan, designed to result in the identification of antibodies against each Merrimack Target. Each Research Campaign will include [*] Merrimack Targets.

 

1.41            Research Field” means use in in vitro and in vivo studies (excluding any studies in humans) in connection with Merrimack’s internal discovery and development programs, and not for any other purpose.

 

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1.42            Research Plan” means the written description of work to be performed by Dyax for each Research Campaign describing the activities to be conducted by Dyax and Merrimack in connection with the discovery, development and validation of Antibodies against Merrimack Targets. The Research Plan for Campaign I is attached hereto as Appendix A. The Research Plan for Campaigns [*] will be drafted, reviewed and approved prior to the commencement of each such Research Campaign.

 

1.43            Research Products” means (i) any kit, vial or array (protein chip) containing one or more Antibodies intended for sale to an end user solely for research purposes and (ii) any Antibodies sold to a Third Party for incorporation into any kit, vial or array (protein chip) that are intended for sale to an end user for research purposes. Research Products shall exclude Therapeutic Antibody Products and Diagnostic Products.

 

1.44            Research Program” means the research activities undertaken by Dyax and Merrimack in accordance with the Research Plan for each Research Campaign and the terms of this Agreement.

 

1.45            Research Term” has the meaning set forth in Section 9.1 hereof.

 

1.46            Research Steering Committee” has the meaning set forth in Section 2.3(a) hereof.

 

1.47            Research and Development” means, for the purposes of the XOMA Covenant and the restrictions applicable thereto, the identification, selection, isolation, purification, characterization, study and/or testing of an Antibody for any purpose, including, without limitation, the discovery and development of human therapeutics. Included within the definition of “Research and Development” shall be all [*]. “Research and Development” shall not include [*].

 

1.48            [*]

 

1.49            [*]

 

1.50            [*]

 

1.51            Selected Target” has the meaning set forth in Section 3.2(d) hereof.

 

1.52            Separations Applications” means the use of Antibodies for the development and manufacture of affinity chromatography purification media for use in the separation and purification of pharmaceuticals.

 

1.53            Target” means an antigen and/or DNA as identified by a full length protein sequence that it encodes.

 

1.54            Target Acceptance Notification” has the meaning set forth in Section 3.2(b)(iii) hereof.

 

1.55            Therapeutic Antibody Product” means any preparation which is intended for use in the Commercial Field which contains, comprises, or the process of development or manufacture of which utilizes a Dyax Antibody. For the avoidance of doubt, the parties acknowledge and agree that term “Therapeutic Antibody Product” shall not include [*].

 

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1.56            Third Party” means any entity other than Dyax or Merrimack or their respective Affiliates.

 

1.57            Third Party Phage Display Agreements” means the CAT Agreement and the XOMA Agreement.

 

1.58            Third Party In Vivo Target” means any Target to which Dyax has granted an undisclosed Third Party exclusive rights in the field of in vivo diagnostics pursuant to an agreement with such Third Party that was entered into prior to the date hereof. To the extent that the agreement with such undisclosed Third Party terminates or is amended or modified in any way that would allow Dyax to expand the Commercial Field to include rights to [*] in the field of in vivo diagnostics, Dyax will promptly notify Merrimack and grant such rights to Merrimack.

 

1.59            Transferred Materials” means, for the purposes of the XOMA Covenant and the restrictions applicable thereto, the Dyax Libraries, any Dyax Antibodies, Dyax Antibody Information or the product of the practice of any method that in each of the foregoing cases is within the scope of the XOMA Patent Rights.

 

1.60            Valid Claim” means (a) a claim of an issued and unexpired patent included in the Dyax Patent Rights, CAT Patent Rights or XOMA Patent Rights, as the case may be, which has not been held invalid in a final decision of a court of competent jurisdiction from which no appeal may be taken, and which has not been disclaimed or admitted to be invalid or unenforceable through reissue or otherwise, or (b) a claim of a pending patent application within the XOMA Patent Rights.

 

1.61            XOMA Agreement” means that certain License Agreement dated October 16, 2002 by and between XOMA Ireland Limited (“XOMA”) and Dyax, a redacted copy of which has been provided by Dyax to Merrimack on or prior to the Effective Date.

 

1.62            XOMA Covenant” has the meaning set forth in Section 3.1(c) hereof.

 

1.63            XOMA Know-How” means unpatented or unpatentable technical information, including ideas, concepts, inventions, discoveries, data, designs, formulas, specifications, procedures for experiments and tests and other protocols, results of experimentation and testing, fermentation and purification techniques, and assay protocols, whether now existing or obtained in the future, owned by XOMA which XOMA has the right to license or sublicense and which may be necessary for the practice of the XOMA Patent Rights or which would be misappropriated by the activities of Merrimack contemplated hereunder but for this Agreement. All XOMA Know-How shall be confidential information of XOMA.

 

1.64            XOMA Patent Rights” means the patent applications and patents set forth in Appendix F attached hereto and incorporated herein, and, solely to the extent any Valid Claim would cover or be included in the license grants provided for herein, all divisionals, continuations, continuations-in-part, applications claiming priority thereto, and substitutions thereof; all foreign patent applications corresponding to the preceding applications; all U.S. and foreign patents issuing on any of the preceding applications, including extensions, reissues and re-examinations; and any other patent rights owned by XOMA which XOMA has the right to license or sublicense and which would be infringed by the activities contemplated hereunder but for this Agreement. XOMA Patent Rights shall also include (i) any improvements of the foregoing that are owned or controlled by XOMA and (ii) any patents or patent applications, whether now existing or obtained in the future, owned or controlled by XOMA containing a claim that is dominating over the foregoing patent rights (i.e., is necessarily infringed by the practicing of a claim in one of the foregoing applications).

 

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The above definitions are intended to encompass the defined terms in both the singular and plural forms.

 

Article II
RESEARCH PROGRAM

 

2.1            Goal of Research Program. The initial goal of the Research Program is to identify Dyax Antibodies that bind to the Merrimack Targets provided to Dyax under the terms of the Research Plan for each Research Campaign. Each Party acknowledges that the outcome of the Research Program cannot be predicted and each Party agrees to cooperate in good faith with the other to modify the Research Plan for each Research Campaign as may be reasonably required to accomplish the goal of the Research Program.

 

2.2            Research Campaigns; Research Plans. The Research Program will be divided into [*] separate Research Campaigns (referred to herein as “Campaign I”, [*]). The Research Plan for each Research Campaign will be designed to result in the identification of antibodies against [*] Merrimack Targets. Unless otherwise agreed in writing, each of Research Campaigns [*] shall be initiated within [*] years after the Effective Date ([*] was initiated and completed prior to the Effective Date). The Research Plan for Campaign I is attached hereto as Appendix A. The parties acknowledge and agree that, as of the date of this Amended and Restated Collaboration Agreement, the research activities contemplated under the Research Plan for [*] have been completed. The Research Plan for Campaigns [*] will be drafted, reviewed and approved prior to the commencement of each such Research Campaign. During the Research Term, the Research Plan for each Research Campaign may be amended or revised, as appropriate, by the Research Steering Committee.

 

2.3            Research Steering Committee.

 

(a)            Structure and Function. A committee shall be established to manage the Research Program (the “Research Steering Committee”). The Research Steering Committee shall be composed of three (3) representatives appointed by Dyax and three (3) representatives appointed by Merrimack. The Research Steering Committee shall direct and administer the Research Program and shall perform the following functions: (a) oversee and monitor the activities contemplated by the Research Plan for each Research Campaign (provided that either Party may enforce the provisions of this Agreement irrespective of such oversight); (b) review and pre-approve external expenditures; (c) review the written progress reports of the parties and maintain frequent communication with the parties regarding the status of the Research Program; (d) amend or revise any Research Plan as necessitated by the outcome of the work conducted under such Research Plan; and (e) identify and select Dyax Antibodies that bind to the Merrimack Targets provided to Dyax under the terms of any Research Plan ([*]).

 

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(b)            Formation and Meetings. As soon as practical after the Effective Date, each Party shall identify to the other, its representatives on the Research Steering Committee. The Research Steering Committee shall meet as needed during each Research Campaign. Such meetings shall be at times and places or in such form (e.g., telephone or videoconference) as the members of the Research Steering Committee shall agree. A Party may change one or more of its representatives to the Research Steering Committee at any time upon notification to the other Party. A quorum for a meeting requires at least two representatives from each Party.

 

(c)            Attendance and Voting. A member of the Research Steering Committee may be represented at any meeting by another member of the Research Steering Committee from the same Party or by a deputy that will be entitled to vote for the absent member. All approvals, determinations and other actions must be made by unanimous consent of the members of the Research Steering Committee or their deputies present at the relevant Research Steering Committee meeting. In the event that the Research Steering Committee is unable to reach consensus with respect to any material matter and becomes deadlocked, the parties will seek to resolve the matter through their chief executive officers. Representatives of either Party who are not members of the Research Steering Committee or their deputies may attend meetings of the Research Steering Committee as agreed to by the representative members of the other Party.

 

(d)            Record Keeping and Communications. At or before the commencement of each meeting, the Research Steering Committee shall appoint one of its members to act as secretary for such meeting or shall arrange for a person to be present in such capacity. The Research Steering Committee shall keep accurate minutes of its meetings and shall record all proposed decisions and all actions recommended or taken. Copies of the minutes shall be provided to each member of the Research Steering Committee after each meeting and shall be approved, if appropriate, at the next meeting. In addition, the Research Steering Committee will arrange with the appropriate representatives of each Party for the preparation of written progress reports on the status of the Research Program at least [*] and the members of the Research Steering Committee will generally maintain close and frequent communication among themselves and with the parties. All records of the Research Steering Committee shall at all times be available to both parties.

 

2.4           Obligations of Parties During the Research Term.

 

(a)            Target Identification and Approval. Prior to commencing activities under any Research Campaign, Merrimack will first provide Dyax with a written notice identifying each Target that Merrimack wishes to include in such Research Campaign as a Target against which Dyax Antibodies would be directed (which must be accompanied by a GenBank® accession number, if available, or similar information which uniquely identifies each such Target). Dyax shall then have [*] business days to notify Merrimack (i) whether or not it will be able to perform research to identify Dyax Antibodies to such Target on a nonexclusive basis in accordance with the terms set forth in Section 2.4(d) below, and (ii) if any such Target is a Third Party In Vivo Target. If Dyax rejects any Target submitted by Merrimack, Merrimack shall have the option to identify a new Target for inclusion in such Research Campaign.

 

(b)            Merrimack Responsibilities. For each Merrimack Target for which Dyax has agreed to perform research under Section 2.4(a), Merrimack agrees to provide to Dyax a reasonable quantity of such Merrimack Targets and other Merrimack Materials as set forth in each Research Plan prior to the commencement of each Research Campaign. Dyax shall use such Merrimack Targets and other Merrimack Materials solely in accordance with the applicable Research Plan and nothing in this Agreement shall be construed as a grant by Merrimack to Dyax of any rights to any Merrimack Target after the term of this Agreement.

 

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(c)            Dyax Responsibilities. For each Merrimack Target for which Dyax has agreed to perform research under Section 2.4(a), Dyax agrees to [*] for each Research Campaign, and to [*]. Dyax shall deliver the Dyax Antibodies, Dyax Antibody Information, Dyax Research Materials [*]. Dyax’s activities under each Research Plan will be deemed complete [*]. Notwithstanding the foregoing, Merrimack acknowledges and agrees that the results of each Research Plan cannot be predicted and that Dyax’s sole obligation is to perform the work set forth in such Research Plan and to deliver the Deliverables to Merrimack that are contemplated by such Research Plan based on the outcome of Dyax’s activities thereunder. During the course of the work under any Research Plan, Dyax’s representatives primarily responsible for oversight of Dyax’s activities under such Research Plan shall consult with representatives of Merrimack [*], to respond to questions, facilitate the exchange of appropriate information and review the progress of such Research Plan.

 

(d)            Other Research and Licensing Activities. Without limiting Dyax’ confidentiality obligations hereunder, Merrimack acknowledges and agrees that:

 

(i)Dyax has previously licensed Dyax Libraries to Third Parties and may continue to do so in the future, and that such Third Parties may be using one or more Dyax Libraries to identify Antibodies to Merrimack Targets;

 

(ii)Dyax may have previously conducted research on behalf of Third Parties to identify and/or develop, or cooperate or participate to identify and/or develop, Antibodies to Merrimack Targets and may continue to do so during the Research Term and in the future; and

 

(iii)Dyax will not deliver to Merrimack any Antibodies that are identified by Dyax as a result of the Research Program if such Antibodies were previously delivered to Third Parties in connection with research activities conducted on behalf of Third Parties.

 

Article III
GRANT OF RIGHTS TO MERRIMACK

 

3.1            Dyax Grants.

 

(a)            Research License. Subject to the terms and conditions of this Agreement, including without limitation, the restrictions set forth in Section 3.2 and the payment obligations set forth in Article 4, Dyax hereby grants to Merrimack and its Affiliates a world-wide, non-exclusive, royalty-free, non-transferable license, without the right to sublicense, under the Dyax Patent Rights, Dyax Research Know-How, Dyax Antibody Information, Dyax Antibody IP, and CAT Patent Rights to use Dyax Research Materials and to research, develop and make Dyax Antibodies, solely in the Research Field.

 

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(b)            Commercial License. During the term of this Agreement and prior to the commencement of the first Phase I Clinical Trial of a Therapeutic Antibody Product or prior to the first filing for Marketing Authorization for any Diagnostic Antibody Product, provided that Merrimack is not then in breach of any material terms or conditions hereof, Merrimack shall have the option to obtain a worldwide, non-exclusive license, to use Dyax Antibodies to develop, make, have made, use, sell, offer for sale, import and export Therapeutic Antibody Products and Diagnostic Antibody Products to the applicable Merrimack Target in the Commercial Field (the “Commercial License”) on the following terms:

 

(i)Merrimack shall have no rights to obtain a Commercial License unless, prior to the commencement of the first Phase I Clinical Trial of a Therapeutic Antibody Product or prior to the first filing for Marketing Authorization for any Diagnostic Antibody Product, Merrimack obtains a sublicense to a CAT Product License with respect to the applicable Merrimack Target(s) as contemplated in Section 3.2(a) hereof;

 

(ii)Once Merrimack has obtained a sublicense to a CAT Product License to the applicable Merrimack Target(s), Dyax shall and hereby does grant to Merrimack a Commercial License to Dyax Antibodies and Products directed to the applicable Merrimack Target(s), including a license to the applicable Dyax Antibody Information and Dyax Antibody IP;

 

(iii)the Commercial License granted to Merrimack under Section 3.1(b) shall be subject to the terms and conditions of this Agreement, including without limitation, the restrictions set forth in Sections 3.2, and 3.3 and the payment obligations set forth in Article 4; and

 

(iv)subject to the terms and conditions of any applicable CAT Product License, Merrimack shall have the right to sublicense the Commercial License granted to Merrimack under this Section 3.1(b) to allow Third Parties to develop, make, have made, use, sell, offer for sale, import and export Therapeutic Antibody Products and Diagnostic Antibody Products directed to the applicable Merrimack Target(s) in the Commercial Field.

 

(c)            XOMA Covenant. Subject to the terms and conditions of this Agreement, including the provisions of Section 3.3 below, Dyax represents to Merrimack that, pursuant to a covenant running from XOMA to Dyax (the “XOMA Covenant”), XOMA has agreed that it shall not initiate or permit any Third Party over whom it has control to initiate or assist in any way in the initiation or prosecution of any action asserting a claim of infringement under the XOMA Patent Rights or misappropriation of the XOMA Know-How to the extent reasonably necessary to allow the parties to use the Dyax Libraries and Dyax Library Materials to conduct Research and Development activities under the terms of this Agreement. The XOMA Covenant extends to [*]. The XOMA Covenant expressly does not extend to use of the XOMA Patent Rights to make or the means or methods to make any amount of Dyax Antibodies other than quantities reasonably required for Research and Development purposes.

 

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3.2            Restrictions on the CAT Patent Rights. [*], the parties acknowledge and agree that the licenses granted to Merrimack under the CAT Patent Rights pursuant to Sections 3.1(a) and 3.1(b) above are subject to the following provisions:

 

(a)            CAT Product License.

 

(i)[*], in the event that Merrimack wishes to develop and commercialize any Product with respect to [*], then [*] in relation to any Therapeutic Antibody Product or [*] for any Diagnostic Antibody Product, Merrimack must first obtain a sublicense under a CAT Product License with respect to such Targets.

 

(ii)[*] of this Section 3.2. [*] and [*] or [*] with this Section 3.2.

 

(iii)In order [*] a CAT Product License [*] with respect to a Target, Merrimack must [*] that Dyax [*] through the CAT Gatekeeping Procedure described in Section 3.2(b).

 

(b)            CAT Gatekeeping.

 

(i)Any request by Merrimack that Dyax submit a Nominated Target through the CAT Gatekeeping Procedure shall be in writing and must identify the Nominated Target against which Dyax Antibodies are directed (which must be accompanied by a GenBank® accession number, if available, or similar information which uniquely identifies such Nominated Target).

 

(ii)If CAT notifies Dyax under the CAT Agreement that the Nominated Target has not passed the CAT Gatekeeping Procedure, then Dyax shall promptly notify Merrimack in writing that Dyax will not be granted a CAT Product License, and Merrimack shall have no rights pursuant to Section 3.1(b) with respect to such Nominated Target; provided, however, [*].

 

(iii)Upon receipt of a request by Merrimack under Section 3.2(b)(i), Dyax shall promptly [*] request that CAT subject the Nominated Target to CAT’s Gatekeeping Procedure (as described in Appendix B hereto) in accordance with the CAT Agreement. If CAT determines that the Nominated Target has passed the CAT Gatekeeping Procedure, then pursuant to the terms of the CAT Agreement, CAT is obligated to notify Dyax (the “Target Acceptance Notification”) that a CAT Product License is available for such Target [*].

 

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(c)            [*]. In certain circumstances described below, Dyax may allow Merrimack [*]. Pursuant to the terms of the CAT Agreement, Dyax [*] the CAT Gatekeeping Procedure [*]. For the purposes of this Section 3.2(c), [*] provided that, if, at any time [*], Dyax will then so notify Merrimack. Merrimack will then have [*] from the date of such notice to decide whether or not it wishes to take a CAT Product License for that Nominated Target. If Merrimack notifies Dyax within that period that it does not wish to take such a CAT Product License or fails to notify Dyax that it does wish to take such a CAT Product License, then [*] CAT may grant an exclusive license to a Third Party in respect of such Nominated Target.

 

Prior to [*] Merrimack shall have the [*]. In addition [*], both [*] Merrimack may [*] to [*] of a [*] will be [*] and [*] to [*] of [*] will be [*] at the [*].

 

[*] to the [*] of the [*] that [*] will be [*] of the [*] for the [*] be so [*].

 

(d)            Sublicense of CAT Product License. Upon receipt of a Target Acceptance Notification, [*], Merrimack may, by written notice, request that Dyax secure a CAT Product License for the Nominated Target (which shall thereafter be referred to as a “Selected Target”). In such event, Dyax [*] a CAT Product License with respect to such Selected Target, and to deliver to Merrimack a fully executed redacted copy thereof. [*], and subject to the prior payment by Merrimack to Dyax of the Product License Fee referred to in Section 4.3, Dyax and Merrimack shall enter into a written sublicense agreement, the form of which is attached hereto as Appendix H, under which Dyax shall grant to Merrimack a worldwide, non-exclusive sublicense under the rights granted to Dyax under Clause 2 of the CAT Product License to develop, make, have made, use, sell, offer for sale, import and export Products against such Selected Target in the Commercial Field. [*] after the [*] to the [*] with the [*] the [*] is [*] to [*] under [*].

 

(e)            Poly-Specific Antibodies. Notwithstanding anything to the contrary contained in this Section 3.2 or in the form of CAT Product License attached hereto as Appendix D, in the case where a Dyax Antibody is directed to multiple Targets, then each such Target shall be considered a Nominated Target and [*]. If CAT notifies Dyax that each [*] to which such Poly-Specific Antibody is directed has [*] then, pursuant to an amendment to the CAT Agreement, Dyax shall have the right to obtain a single CAT Product License that will [*] to which Poly-Specific Antibodies bind; provided however, that such CAT Product License shall be limited so as to allow Merrimack to exploit only Products that comprise or contain Poly-Specific Antibodies directed against all such [*]. For the avoidance of doubt, Dyax agrees that the [*] applicable to the development and commercialization of a Poly-Specific Antibody under such a CAT Product License [*], as described in Sections 4.2 through 4.8. Except as expressly provided for herein, the form of the CAT Product License that would be applicable to any such Poly-Specific Antibody would be negotiated between Dyax and CAT.

 

(f)            Effect of Termination of CAT Agreement. Pursuant to the terms of the CAT Agreement, upon termination of the CAT Agreement, Dyax represents and warrants that (i) [*] and the [*], and (ii) any sublicense granted by Dyax to Merrimack under a CAT Product License pursuant to this Agreement will continue in force provided [*]. The Parties acknowledge that Merrimack derives independent and significant value from the agreements set forth in the CAT Agreement and may rely thereon and to that extent only shall have the right to enforce the provisions of Section 3.2(f)(ii) above and be a Third Party beneficiary for that purpose only.

 

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(g)            Merrimack Acknowledgement. As required by the CAT Agreement, Merrimack hereby acknowledges and agrees that Dyax must request, and be granted a CAT Product License, in relation to a Therapeutic Antibody Product prior to Dyax or Merrimack’s commencement of the [*] in relation to a Therapeutic Antibody Products, or in relation to a Diagnostic Antibody Product prior to Dyax or Merrimack’s [*] on the relevant Dyax Antibody.

 

(h)            Third Party Beneficiary Right. As required by the CAT Agreement, Merrimack agrees that CAT shall be a Third Party beneficiary of the sublicense under the CAT Product License and CAT shall have the right to enforce (including claim damages as a result of any breach) of such sublicense. If at any time CAT does have to enforce its rights under such sublicense Dyax will, if requested by CAT, supply to CAT a copy of this Agreement as soon as possible.

 

3.3            XOMA Covenant. As required by the XOMA Agreement, the Parties acknowledge and agree that the XOMA Covenant is subject to the following provisions:

 

(a)            Merrimack will abide by each of the limitations, restrictions and other obligations applicable to Merrimack provided for in the XOMA Agreement including, without limitation, the restrictions on use of Transferred Materials for purposes other than Research and Development;

 

(b)            Merrimack covenants not to use the Transferred Materials for any purpose other than for Research and Development purposes;

 

(c)            Merrimack agrees that the “first sale” doctrine does not apply to any Disposition of Transferred Materials;

 

(d)            Merrimack shall Dispose of Transferred Materials only to a Third Party who otherwise meets the definition of a Dyax Collaborator under the XOMA Agreement and who executes a written agreement in which its undertakes all of the obligations set forth herein;

 

(e)            XOMA shall be an intended Third Party beneficiary with respect to the foregoing provisions of Section 3.3(a) through (d);

 

(f)             If Merrimack or any person or entity controlled by Merrimack contests the validity or enforceability of any of the XOMA Patent Rights hereunder, XOMA shall have the right to terminate (or cause Dyax to terminate) all of the rights hereby granted to Merrimack under the XOMA Patent Rights;

 

(g)             Merrimack acknowledges and agrees that it has received from Dyax, and is subject to the relevant provisions of, the following documents: (i) a redacted copy of the XOMA Agreement containing all of the limitation, restrictions and other obligations provided therein with respect to the XOMA Patent Rights; and (ii) the Form of Notice attached hereto as Appendix G and incorporated herein;

 

(h)             Merrimack acknowledges and agrees that nothing in this Agreement shall be construed as a release or waiver of past, present or future infringement of the XOMA Patent Rights by Merrimack acting outside the scope of this Agreement nor as a release from Dyax from any claim of infringement of the XOMA Patent Rights nor as any right to release any Third Party from any claim of infringement under the XOMA Patent Rights;

 

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(i)            Merrimack acknowledges and agrees that the XOMA Covenant shall not extend to infringement of the XOMA Patent Rights arising out of making or the means or methods used to make any amount of a Dyax Antibody or Product other than those quantities of Antibody reasonably required for Research and Development purposes; provided, however, that Dyax or Merrimack shall be permitted to make or have made any Dyax Antibody by any means of its selection other than those which otherwise infringe a Valid Claim of the XOMA Patent Rights;

 

(j)            Merrimack acknowledges and agrees that the XOMA Covenant shall become void and without effect as to Merrimack if Merrimack fails to materially discharge or comply with any terms of this Agreement with respect to the XOMA Patent Rights;

 

(k)            Merrimack acknowledges and agrees that the XOMA Covenant is personal to Dyax and Merrimack and Merrimack’s Affiliates and cannot be assigned or transferred;

 

(l)             Merrimack agrees that Dyax shall have the right to deliver to XOMA a written report which shall specify the name, address and contact person for Merrimack; and

 

(m)            In the event of the termination of the XOMA Agreement by Dyax, the covenants, licenses and rights granted to Dyax and Merrimack under the XOMA Agreement shall survive. In the event of the termination of the XOMA Agreement by XOMA, the licenses and rights granted to Dyax and Merrimack under the XOMA Agreement shall terminate.

 

Notwithstanding anything to the contrary in this Agreement, Merrimack’s sole and exclusive liability for any failure to comply with the foregoing provisions of this Section 3.3 shall be that the XOMA Covenant may not apply.

 

3.4            Limitation of Rights. Merrimack acknowledges that its rights with respect to the Dyax Libraries, Dyax Library Materials, Dyax Library Technology, CAT Patent Rights and XOMA Patent Rights are limited to those expressly granted in this Article 3. Each Party agrees that, except as expressly set forth in this Agreement, no other rights or licenses, express or implied, are granted to any patents, patent applications, inventions, trademarks, trade secrets or other intellectual property, or to any materials, information, data or know-how, of the other Party. Merrimack also agrees that no rights are granted to Merrimack by Dyax outside of the Research Field and, upon exercise of its option to obtain a Commercial License, the Commercial Field. Merrimack acknowledges that Dyax has previously licensed and will continue to license use of its phage display libraries and phage display patent rights to Third Parties for use in the Research Field and the Commercial Field and that these Third Party licensees of Dyax may discover antibodies or products that are the same or similar to the Dyax Antibodies or Products. Merrimack also acknowledges that, in connection with Dyax’s own internal research and development activities, Dyax has used and will continue to use its phage display libraries and phage display patent rights to discover antibodies or products that are the same or similar to the Dyax Antibodies or Products. Merrimack agrees that any expression vectors provided by Dyax to Merrimack are to be used for research purposes only.

 

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3.5            Diligence Requirement. Merrimack agrees to use commercially reasonable efforts to research and develop the Dyax Antibodies into commercial Products. Specifically, upon exercise of its option to obtain a Commercial License, Merrimack agrees to use commercially reasonable efforts to develop, pre-clinically and clinically test, market and sell Products in the Commercial Field. Until the first filing for Marketing Authorization for any Product, Merrimack shall provide Dyax with annual written reports summarizing its development and commercialization efforts for all Products during the period since the previous such report; provided that such reports shall not be required to include any non-public technical or scientific information.

 

Article IV
PAYMENTS AND REPORTS

 

4.1            Research Payments; FTEs.

 

(a)            In consideration for the obligations undertaken by Dyax under the Research Plan for each Research Campaign and the other terms and conditions of this Agreement, Merrimack shall compensate Dyax for the work performed by Dyax in accordance with each Research Plan in accordance with the budget established for such Research Campaign. For work performed by Dyax at Merrimack’s request in addition to the work set forth in the applicable Research Plan, Merrimack shall compensate Dyax at the FTE Rate; provided that the Parties shall agree on the scope of such work prior to Dyax’ commencement thereof. The FTE rate includes all salary, employee benefits, materials and all other expenses including support staff and overhead for or associated with Dyax scientists performing activities under each Research Plan. FTE payments shall be made as follows:

 

(i)            Campaign [*]. The parties acknowledge and agree that, as of the date of this Amended and Restated Collaboration Agreement, the research activities contemplated under the Research Plan for Campaign [*] have been completed and all FTE payments due in connection with such research activities have been paid. Additionally, the parties acknowledge and agree that as of the Effective Date, Campaign [*] Technical Milestones associated with 4.2(a)(i) in the amount of $[*] and Campaign [*] Technical Milestones associated with 4.2(a)(ii) in the amount of $[*] have been paid.

 

(ii)            Campaigns [*]. Prior to the commencement of each of Campaigns [*], Merrimack shall deliver to Dyax a payment equal to [*] percent ([*] %) of the total estimated FTEs that will be due under the Research Plan for each such Research Campaign. The remaining balance of the estimated FTEs for each such Research Campaign, plus any additional FTE expenses reasonably incurred by Dyax in connection with the conduct of such Research Plan, shall be delivered to Dyax within [*] days following the receipt of the report by Merrimack at the conclusion of each such Research Campaign.

 

(b)            Merrimack shall reimburse Dyax for any mutually agreed upon external costs and expenses incurred in connection with the Research Program.

 

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4.2            Technical Milestones

 

(a)            Campaigns [*].

 

(i)Upon completion of each Research Campaign, Merrimack shall pay to Dyax [*] US Dollars ($[*]) for each Merrimack Target against which Dyax was able to identify Antibodies.

 

(ii)Within [*] days of the commencement of the first [*] with respect to any Dyax Antibody directed against [*] Merrimack Targets, Merrimack shall pay to Dyax [*] US Dollars ($[*]) for each Merrimack Target against which Dyax was able to identify Antibodies.

 

(b)            Campaigns [*]. Merrimack shall pay to Dyax a technical milestone of [*] US Dollars ($[*]) upon delivery of Antibodies to Merrimack under each Research Campaign; provided however, that such fee shall not be due unless Dyax is able to identify Antibodies that bind to each Merrimack Target included in such Research Campaign. For the avoidance of doubt, Technical Milestones will be paid no more than once per Research Campaign.

 

4.3            Product License Fee. Prior to entering into a sublicense under a CAT Product License with respect to any Selected Target in accordance with Section 3.2(d), Merrimack shall pay to Dyax a Product License Fee of [*] US Dollars (US $[*]) by wire transfer. If, for any reason, Dyax has not executed the applicable sublicense within [*] business days after the receipt of such fee, Dyax shall, at Merrimack’s request, immediately return such fee.

 

4.4            Development Milestones. Within [*] days of the occurrence of each of the following events by Merrimack, its Affiliates or sublicensees with respect to Therapeutic Antibody Products against a particular Selected Target (or as described in Section 3.2(e), against more than one Selected Target), Merrimack shall make the following payments to Dyax:

 

(a)            Upon the first achievement of any of the foregoing milestones by a Therapeutic Antibody Product in any Indication:

 

Milestone Event  Payment 
Upon dosing of first patient in a Phase I Clinical Trial  US $[*] 
Upon dosing of first patient in a Phase III (or equivalent) Clinical Trial  US $[*] 
Upon first BLA/MAA filing in any Major Market Country  US $[*] 
Upon first BLA/MAA approval in any Major Market Country  US $[*] 
Upon second BLA/MAA approval in any Major Market Country  US $[*] 

 

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(b)            Upon the first achievement of any of the foregoing milestones by a Therapeutic Antibody Product in a second Indication:

 

Milestone Event  Payment 
Upon dosing of first patient in a Phase III (or equivalent) Clinical Trial  US $[*] 
Upon first BLA/MAA filing in any Major Market Country  US $[*] 
Upon first BLA/MAA approval in any Major Market Country  US $[*] 
Upon second BLA/MAA approval in any Major Market Country  US $[*] 

 

(c)            Upon the first achievement of any of the foregoing milestones by a Therapeutic Antibody Product in a third Indication:

 

Milestone Event  Payment 
Upon dosing of first patient in a Phase III (or equivalent) Clinical Trial  US $[*] 
Upon first BLA/MAA filing in any Major Market Country  US $[*] 
Upon first BLA/MAA approval in any Major Market Country  US $[*] 
Upon second BLA/MAA approval in any Major Market Country  US $[*] 

 

4.5            Diagnostic Antibody Product Milestones. Within US $[*] days of the occurrence of each of the following events by Merrimack, its Affiliates or sublicensees with respect to Diagnostic Antibody Products against a particular Selected Target (or as described in Section 3.2(e), against more than one Selected Target), Merrimack shall make the following payments to Dyax:

 

Milestone Event  Payment 
Upon first BLA/MAA approval in any Major Market Country  US $[*] 
Upon first BLA/MAA approval in any Major Market Country  US $[*] 

 

4.6            Therapeutic Antibody Product Royalties. Merrimack shall pay to Dyax the following royalties on Net Sales for Therapeutic Antibody Products commercialized by Merrimack, its Affiliates or sublicensees, calculated separately for each Therapeutic Antibody Product:

 

Annual Net Sales Worldwide  Royalty Rate  
Portion ≤ US$[*] in a calendar year  [*] %  
Portion > US$[*] but ≤ US$[*] in a calendar year  [*] %  
Portion > US$[*] in a calendar year  [*] %  

 

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4.7            Diagnostic Antibody Product Royalties. Merrimack shall pay a [*] % royalty on Net Sales for Diagnostic Antibody Products commercialized by Merrimack, its Affiliates or sublicensees, calculated separately for each Diagnostic Antibody Product.

 

4.8            Duration of Royalty Payments. The royalties payable by Merrimack to Dyax pursuant to Sections 4.6 and 4.7 shall be payable on a country-by-country and Product-by-Product basis for a period commencing with the First Commercial Sale and ending ten (10) years after First Commercial Sale; provided, however, in the event that such ten (10) years period for a Product in a particular country ends prior to the expiration of the last CAT Valid Claim in such country, then royalties shall be payable until the expiration of last CAT Valid Claim.

 

4.9            [*]. In the event that Merrimack, its Affiliates or sublicensees [*] to [*] or [*] to [*], then Merrimack, its Affiliates and sublicensees [*] to [*] to Dyax [*] to [*] the [*] Sections [*] above.

 

4.10            Reports, Payments, Records and Audits.

 

(a)            Merrimack shall make the payments due to Dyax under this Article 4 in United States Dollars. Where the payments due to Dyax under this Article 4 are being converted from a currency other than United States Dollars, Merrimack will use the conversion rate reported in The Wall Street Journal two (2) Business Days before the day on which Merrimack pays Dyax. Such payment will be made without deduction of exchange, collection or other charges.

 

(b)            All royalty payments will be made at Quarterly intervals. Within [*] days of the end of each Quarter after the First Commercial Sale of each Product in any country, Merrimack shall prepare a statement which shall show on a country-by-country basis for the previous Quarter Net Sales of each Product by Merrimack or its Affiliates or sublicensees and all monies due to Dyax based on such Net Sales and shall submit such statement to Dyax within such [*] day period together with remittance of the monies due.

 

(c)            All payments shall be made free and clear of and without deduction or deferment in respect of any disputes or claims whatsoever and/or as far as is legally possible in respect of any taxes imposed by or under the authority of any government or public authority. Any tax (other than VAT) which Merrimack is required to pay or withhold with respect of the payments to be made to Dyax hereunder shall be deducted from the amount otherwise due provided that, in regard to any such deduction, Merrimack shall give Dyax such assistance, which shall include the provision of such documentation as may be required by any revenue authority and other revenue services, as may reasonably be necessary to enable Dyax to claim exemption therefrom or obtain a repayment thereof or a reduction thereof and shall upon request provide such additional documentation from time to time as is needed to confirm the payment of tax. If by law, regulation or fiscal policy of a particular country, a remittance of royalties in the currency stipulated in Section 4.9(a) above is restricted or forbidden, notice thereof will be promptly given to Dyax, and payment of the royalty shall be made by the deposit thereof in local currency to the credit of Dyax in a recognized banking institution designated by Dyax or its Affiliates. When in any country a law or regulation that prohibits both the transmittal and deposit of such payments ceases to be in effect, all royalties or other sums that Merrimack would have been under obligation to transmit or deposit but for the prohibition, shall forthwith be deposited or transmitted promptly to the extent allowable.

 

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(d)            Merrimack shall keep and shall procure that its Affiliates and sublicensees keep true and accurate records and books of account containing all data necessary for the calculation of the amounts payable by it to Dyax pursuant to this Agreement. Those records and books of account shall be kept for [*] years following the end of the calendar year to which they relate. Upon Dyax’s written request, a firm of accountants appointed by agreement between the Parties or, failing such agreement within [*] business days of the initiation of discussions between them on this point Dyax shall have the right to cause an international firm of independent certified public accountants that has not performed auditing or other services for either Party or their Affiliates and is acceptable to Merrimack, such acceptance not to be unreasonably withheld, to inspect such records and books of account. In particular such firm:

 

(i)shall be given access to and shall be permitted to examine and copy such books and records of Merrimack and its Affiliates and sublicensees upon [*] business days notice having been given by Dyax and at all reasonable times on business days for the purpose of certifying that the Net Sales or other relevant sums calculated by Merrimack and its Affiliates and sublicensees during any calendar year were reasonably calculated, true and accurate or, if this is not their opinion, certify the Net Sales figure or other relevant sums for such period which in their judgment is true and correct;

 

(ii)prior to any such examination taking place, such firm of accountants shall undertake to Merrimack and its Affiliates and sublicensees, as applicable, that they shall keep all information and data contained in such books and records, strictly confidential and shall not disclose such information or copies of such books and records to any third person including Dyax, but shall only use the same for the purpose of calculations which they need to perform in order to issue the certificate to which this Section envisages;

 

(iii)any such access examination and certification shall occur no more than [*] per calendar year and will not go back over records more than [*] years old;

 

(iv)Merrimack and its Affiliates and sublicensees shall make available personnel to answer queries on all books and records required for the purpose of that certification; and

 

(v)the cost of the accountant shall be the responsibility of Merrimack if the certification shows it to have underpaid monies to Dyax by more than five percent (5%) and the responsibility of Dyax otherwise.

 

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(e)            All payments due to Dyax under the terms of this Agreement are expressed to be exclusive of value added tax (VAT) howsoever arising. If Dyax is required to charge VAT on any such payment, Dyax will notify Merrimack. Merrimack will then use all commercially reasonable endeavours to obtain a VAT registration as soon as reasonably possible in order to allow it to reclaim any VAT so chargeable. If Merrimack does obtain a VAT registration then VAT will be added to any relevant payment at the applicable rate. If having used all commercially reasonable endeavours Merrimack is not able to reclaim the VAT (in whole or in part) the parties agree that the amount of any VAT payable will be shared between them equally.

 

(f)            All payments made to Dyax under this Agreement shall be made by wire transfer to the following bank account of Dyax, or such other bank account as notified by Dyax to Merrimack from time to time:

 

To: [*]
Routing/Transit: [*]
For Credit to: Dyax Corp.
Account No.: [*]
By Order of: Name of Sender

 

4.11            Late Payments. If Merrimack fails to make any payment to Dyax hereunder on the due date for payment, without prejudice to any other right or remedy available to Dyax it shall be entitled to charge Merrimack interest (both before and after judgment) of the amount unpaid at the [*] rate plus [*] percent ([*] %) calculated on a daily basis until payment in full is made without prejudice to Dyax’s right to receive payment on the due date.

 

4.12            Merrimack Acknowledgement. Merrimack acknowledges and agrees that the amount of milestones and royalties due under this Article 4 and the duration of the royalty payments (set forth in Section 4.8) have been chosen for the convenience of the Parties as payment for Dyax’s services and use of the Dyax Libraries, Dyax Patent Rights, Dyax Research Know-How and Dyax Research Materials to discover Antibodies to Merrrimack Targets, and not as patent royalties.

 

Article V
INTELLECTUAL PROPERTY

 

5.1            Ownership.

 

(a)            Dyax Antibodies and Dyax Antibody Information. Subject to the licenses granted to Merrimack in Section 3.1, Dyax is and shall remain the owner of all Dyax Antibodies that are identified, generated, developed, produced, optimized, or obtained by Dyax from a Dyax Library that is delivered by Dyax to Merrimack in connection with the Research Program, together with the Dyax Antibody Information applicable thereto.

 

(b)            Dyax Libraries. Dyax is and shall remain the owner of the Dyax Libraries and all improvements thereon developed during the term of this Agreement.

 

(c)            Dyax Research Materials and Dyax Research Know-How. Subject to the licenses granted to Merrimack in this Agreement, Dyax is and shall remain the owner of the Dyax Research Materials and Dyax Research Know-How generated or utilized during the conduct of the Research Program.

 

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(d)            Merrimack Targets and Merrimack Materials. Merrimack is and shall remain the owner of the Merrimack Targets and Merrimack Materials.

 

5.2            Inventions. Title to all inventions and other subject matter not accounted for in Section 5.1, (including all intellectual property rights therein) conceived, reduced to practice or otherwise made solely by Dyax personnel in connection with this Agreement shall be owned by Dyax; title to all inventions and other subject matter (including all intellectual property rights therein) conceived, reduced to practice or otherwise made solely by Merrimack personnel in connection with this Agreement shall be owned by Merrimack or any of its Affiliates; and title to all inventions and other subject matter (including all intellectual property rights therein) conceived, reduced to practice or otherwise made jointly by personnel of Dyax and Merrimack in connection with this Agreement shall be jointly owned by Dyax and Merrimack or any of its Affiliates. Except as expressly provided in this Agreement, it is understood that neither Party shall have any obligation to account to the other for profits, or to obtain any approval of the other Party to license or exploit a joint invention, by reason of joint ownership of any invention or other intellectual property and each Party hereby waives any right it may have under the laws of any country to require such accounting or approval. Dyax shall promptly notify Merrimack of all Dyax Antibodies identified against Merrimack Targets in accordance with the applicable Research Plan, together with all Dyax Antibody Information applicable thereto.

 

5.3            Patenting Antibody Inventions under the Research Program.

 

(a)            Filing and Prosecution. Prior to the exercise of its option to obtain a Commercial License as set forth in Section 3.1(b), Dyax will at Merrimack’s request and expense file and prosecute any Patent Rights in any country for any invention solely owned by Dyax which is directed or relating to any Antibody that are identified, generated, developed, produced, optimized, or obtained by Dyax from a Dyax Library that is delivered by Dyax to Merrimack in connection with the Research Program. Thereafter, such Patent Rights shall be deemed to be included in the rights licensed to Merrimack under Section 3.1. Dyax shall (i) keep Merrimack fully informed as to the filing, prosecution and maintenance of such Patent Rights, (ii) furnish to Merrimack copies of all documents relevant to any such filing, prosecution and maintenance, and (iii) allow Merrimack [*] days to review and comment upon, and to incorporate Merrimack’s reasonable comments into, any such document filed with any patent office with respect to such Patent Rights prior to filing such documents.

 

Upon exercise of its option to obtain a Commercial License with respect to a Dyax Antibody, as set forth in Section 3.1(b), Merrimack may, at Merrimack’s expense (i) in Dyax’s name, file, maintain, defend and enforce Patent Rights for any invention solely owned by Dyax which is directed or relating to such Dyax Antibody and assume the prosecution of any such Patent Rights filed by Dyax pursuant to this Section 5.3, or (ii) require Dyax to assign to Merrimack any Patent Rights for any invention solely owned by Dyax which is directed or relating to such Dyax Antibody. Dyax will use reasonable efforts to cooperate with Merrimack in such activities. Dyax shall have [*] days to review and comment upon any patent application before it is filed by Merrimack pursuant to this Section 5.3, and Merrimack shall incorporate Dyax’s reasonable comments. For the avoidance of doubt, Dyax acknowledges and agrees that if, upon Merrimack’s election to obtain a Commercial License with respect to a Dyax Antibody, Dyax is unable to obtain a CAT Product License with respect to the Target against which such Dyax Antibody is directed because Dyax no longer has any CAT Product License options available to it under the terms of the CAT Agreement, Merrimack’s rights under clauses (i) and (ii) of this paragraph above shall apply notwithstanding such inability by Dyax to obtain a CAT Product License and Merrimack may, at Merrimack’s expense, require Dyax to assign to Merrimack any Patent Rights for any invention solely owned by Dyax which is directed or relating to such Dyax Antibody.

 

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(b)            Enforcement. Merrimack shall have the right but not the obligation, at its expense, to enforce any Patent Rights which relate to any Antibody that are identified, generated, developed, produced, optimized, or obtained by Dyax from a Dyax Library that is delivered by Dyax to Merrimack in connection with the Research Program. Dyax shall cooperate with Merrimack, at Merrimack’s expense, in pursuing any litigation or other enforcement action to enforce such Patent Rights, including allowing Merrimack to file suit in Dyax’s name, making Dyax employees available to Merrimack, and promptly executing any documents which may be required to pursue such action. Merrimack shall control any such litigation or other enforcement action and shall enter into, or permit, the settlement of any such litigation or other enforcement action. All monies recovered upon the final judgment or settlement of any suit to enforce such Patent Rights shall first be paid to recover the respective actual out-of-pocket expenses of Merrimack and Dyax, or equitable portion thereof, associated with the enforcement. The remainder of any such monies shall be deemed to be Net Sales for purposes of determining the royalties owed by Merrimack to Dyax under Sections 4.5. and 4.6.

 

5.4            Further Assurances. Each Party has and will have appropriate agreements with its employees and contractors necessary to fully effect the provisions of Sections 5.1, 5.2 and 5.3. Each Party agrees to execute such assignments and other documents, to cause its employees and agents to execute such assignments and other documents, and to take such other actions, as may reasonably be requested by the other Party from time to time to give effect to the provisions of Sections 5.1, 5.2 and 5.3.

 

Article VI
CONFIDENTIALITY, PUBLICITY AND PUBLICATIONS

 

6.1            Confidentiality. With respect to any Confidential Information received by one Party from the other Party, the receiving Party undertakes and agrees, during the term of this Agreement and for an additional period of [*] years thereafter, to:

 

(a)            only use the Confidential Information for the purposes envisioned under this Agreement and not to use the same for any other purpose whatsoever;

 

(b)            ensure that only those of its officers, directors, employees, consultants and permitted sublicensees who are directly concerned with the carrying out of this Agreement have access to the Confidential Information on a strictly “need to know” basis and are informed of the secret and confidential nature of it;

 

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(c)            keep the Confidential Information secret, confidential, safe and secure and shall not directly or indirectly disclose or permit to be disclosed the same to any Third Party, including any consultants or other advisors, without the prior written consent of the disclosing Party, except to the extent disclosure is in connection with its use as envisioned under this Agreement;

 

(d)            ensure that the Confidential Information will not be covered by any lien or other encumbrance in any way; and

 

(e)            not copy, reproduce or otherwise replicate for any purpose or in any manner whatsoever any documents containing the Confidential Information except in connection with its use as envisioned under this Agreement.

 

Merrimack acknowledges and agrees that Dyax shall be permitted to disclose this Agreement in confidence to CAT and XOMA to the extent reasonably necessary to comply with Dyax’s obligations pursuant to the CAT Agreement and XOMA Agreement.

 

Dyax agrees, at Merrimack’s request, to enforce the confidentiality and non-use provisions of the CAT Agreement and any CAT Product License against CAT if Merrimack reasonably believes that CAT has failed to adhere to such obligations with respect to any Merrimack Confidential Information that CAT learns through the CAT Gatekeeping Procedure set forth in Appendix B.

 

6.2            Exclusions. The obligations referred to in Section 6.1 above shall not extend to any Confidential Information which:

 

(a)            was in the public domain prior to this Agreement or becomes part of the public domain through no fault of the receiving Party, or

 

(b)            is known or becomes known to the receiving Party (having been generated independently by the receiving Party or by a Third Party in circumstances where it has not been derived directly or indirectly from any improper use of Confidential Information of the disclosing Party), or

 

(c)            is or was disclosed to the receiving Party at any time by a Third Party having no obligation of confidentiality with respect to such Confidential Information, or

 

(d)            is required to be disclosed by applicable law, rule, regulation or administrative or court proceeding (including as part of any regulatory submission or approval process) and then only when prompt written notice of this requirement has been given to the disclosing party so that it may, if so advised, seek appropriate relief to prevent such disclosure, provided always that in such circumstances such disclosure shall be only to the extent so required and shall be subject to prior consultation with the disclosing party with a view to agreeing on the timing and content of such disclosure (i.e., obligations under Section 6.1 shall not apply to such required disclosure), or

 

(e)            is information concerning Product which Merrimack is reasonably required to disclose to consultants (such as advertising agencies, reimbursement experts and marketing research companies), customers, healthcare professionals, consumers or regulatory agencies, or which is disclosed by Merrimack to Affiliates and distributors and sublicensees in order to allow them to market and sell Product (i.e., Merrimack’s obligations under Section 6.1 shall not extend to such disclosure by Merrimack, but nothing in this clause (e) shall relieve Dyax of obligations under Section 6.1); or

 

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(f)            is disclosed by Merrimack to a Third Party in exercising the rights and licenses granted under this Agreement, provided that such Third Party has confidentiality obligations similar to those of this Agreement (i.e., Merrimack’s obligations under Section 6.1 shall not extend to such disclosure by Merrimack, but nothing in this clause (f) shall relieve Dyax of obligations under Section 6.1).

 

6.3            Dyax Antibodies. Notwithstanding anything to the contrary contained herein, the fact that any given Dyax Antibody is identified in a Research Campaign against a Merrimack Target shall constitute Confidential Information of Merrimack.

 

6.4            Publicity. No public announcement or other disclosures concerning the terms of this Agreement shall be made to a Third Party, whether directly or indirectly, by either Party (except confidential disclosures to professional advisors) without first obtaining the approval of the other Party and agreement upon the nature and text of such announcement or disclosure except that: (i) a Party may disclose those terms which it is required by regulation or law to disclose, provided that it takes advantage of all provisions to keep confidential as many terms as possible; and (ii) a Party desiring to make such public announcement or other public disclosure shall obtain the consent of the other Party to the proposed announcement or public disclosure prior to public release. Each Party agrees that it shall cooperate fully with the other with respect to all disclosures regarding this Agreement as required under the regulations of the U.S. Securities and Exchange Commission, applicable stock exchanges, NASDAQ and any other comparable foreign body including requests for confidential information or proprietary information of either Party included in any such disclosure. Merrimack agrees that Dyax may include Merrimack on a list of Dyax licensees. In addition, a Party may disclose the terms and conditions of this Agreement to a Third Party in connection with an equity investment in such Party, a loan or other financing, a merger, consolidation, change in control or similar transaction by such Party, the transfer or sale of the assets of such Party relating to this Agreement, or in connection with the granting of a sublicense under this Agreement.

 

6.5            Publication. In the event that either Party (the “Publishing Party”) wishes to publish, in oral or written form, any Confidential Information of the other Party (the “Non-Publishing Party”), such Party will promptly notify the Non-Publishing Party and provide the Non-Publishing Party with a written copy of the proposed publication prior to its submission for publication. At the Non-Publishing Party’s request, such the Publishing Party will delay publication in order to permit the Non-Publishing Party to take the steps necessary to secure rights to any intellectual property arising from the Publishing Party’s use of Confidential Information, including the filing of one or more patent applications. In no event will such delay exceed [*] days from the date the Non-Publishing Party receives a written copy of the proposed publication. If the Non-Publishing Party makes such a request, the Publishing Party agrees to cooperate with the Non-Publishing Party in securing such intellectual property rights using the Non-Publishing Party’s choice of counsel and the Non-Publishing Party will bear all costs of such filing. No patent application describing an invention resulting from the Publishing Party’s use of Confidential Information will be filed or caused to be filed by the Publishing Party without first notifying the Non-Publishing Party as described above for proposed publications. Any publication or patent application will acknowledge the Non-Publishing Party’s contribution. No publication or patent application will disclose any Confidential Information of a Party without the prior written permission of that Party.

 

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Article VII
REPRESENTATIONS, WARRANTIES AND COVENANTS.

 

7.1            Authorization. Each Party represents and warrants to the other Party that it has the legal right and power to enter into this Agreement, to extend the rights and licenses granted to the other in this Agreement, and to fully perform its obligations hereunder, and that the performance of such obligations will not conflict with its charter documents or any agreements, contracts, or other arrangements to which it is a party.

 

7.2            Dyax Representations and Warranties. Dyax represents and warrants to Merrimack that:

 

[*]

 

7.3            Dyax Covenants. Dyax hereby covenants and agrees that [*] or [*] of the [*] of [*] to be [*] the [*] during the [*] of the [*] not be [*] with the [*] in the [*] the [*] or [*]; and [*], and to the [*] have the [*] to [*]. Merrimack agrees that Dyax shall not be deemed to have breached its obligations under this Section 7.3 unless Merrimack’s rights to research, develop and/or commercialize Products under this Agreement are adversely affected.

 

7.4            Disclaimer. Except as otherwise set forth in Section 5.3, nothing in this Agreement is or shall be construed as obligating Dyax to (a) bring or prosecute actions or suits against Third Parties for infringement of any of the patent rights licensed or sublicensed by Dyax to Merrimack hereunder, (b) maintain any patent or to continue to prosecute any patent application licensed or sublicensed by Dyax to Merrimack hereunder, or (c) granting by implication, estoppel, or otherwise (excluding explicit license and sublicense grants) any licenses or rights under patents or other rights of Dyax or Third Parties, regardless of whether such patents or other rights are dominant or subordinate to any patent rights licensed or sublicensed by one Party to the other Party hereunder.

 

7.5            No Other Warranties. Except as otherwise set forth in Section 7.1 and 7.2, nothing in this Agreement shall be construed as a warranty or representation by Dyax that the use of the Dyax Libraries or Dyax Library Materials and the practice of the patent rights and know-how licensed or sublicensed to Merrimack hereunder will result in any Dyax Antibodies or Products, or as a warranty or representation by Dyax that the exploitation of any of the foregoing will be free from infringement of patents of Third Parties. EXCEPT AS OTHERWISE SET FORTH IN SECTION 7.1 and 7.2 ABOVE, NEITHER PARTY HERETO MAKES ANY REPRESENTATIONS OR WARRANTIES WITH RESPECT TO ANY OF THE PATENT RIGHTS, MATERIALS (INCLUDING WITHOUT LIMITATION THE DYAX LIBRARIES AND DYAX MATERIALS) OR KNOW-HOW LICENSED HEREUNDER, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, OR THAT ANY PRODUCT OR SERVICE MADE, USED, SOLD, OR OTHERWISE DISPOSED OF UNDER ANY LICENSE OR SUBLICENSE GRANTED IN THIS AGREEMENT IS OR WILL BE FREE FROM INFRINGEMENT OF ANY PATENT RIGHTS OR OTHER INTELLECTUAL PROPERTY RIGHT OF ANY THIRD PARTY. EACH PARTY SPECIFICALLY DISCLAIMS ANY EXPRESS OR IMPLIED WARRANTY OF MERCHANTABILITY, OF FITNESS FOR A PARTICULAR PURPOSE, OF VALIDITY OR SCOPE OF SUCH PATENT RIGHTS, MATERIALS OR KNOW-HOW, ARISING FROM COURSE OF DEALING OR OF NON-INFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTY.

 

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7.6            Limitation of Liability. Neither Party shall be liable to the other for consequential, incidental, indirect or punitive damages arising from the performance or nonperformance of such Party under this Agreement whether such claim is based on contract, tort (including negligence) or otherwise, even if an authorized representative of such Party is advised of the possibility or likelihood of same.

 

Article VIII
INDEMNIFICATION

 

8.1            Indemnification by Merrimack. Merrimack shall indemnify, defend, and hold harmless Dyax and its Affiliates, directors, officers, employees, and agents and their respective successors, heirs and assigns (the “Dyax Indemnitees”) against any liability, damage, loss, or expense (including reasonable attorneys fees and expenses of litigation) incurred by or imposed upon the Dyax Indemnitees or any one of them in connection with any claims, suits, actions, demands, or judgments in each case initiated by a Third Party which arise out of: (a) any Product developed or commercialized by or on behalf of Merrimack; (b) the gross negligence or willful misconduct of Merrimack in connection with this Agreement; or (c) any breach of any obligation of Merrimack under this Agreement, including without limitation, the failure of Merrimack to comply with the provisions of Sections 3.3 through 4.6 of this Agreement. Notwithstanding the foregoing, Merrimack shall have no obligation under this Section 8.1 with respect to claims, suits, actions, demands or judgments to the extent the same is caused by the gross negligence or willful misconduct of a Dyax Indemnitee.

 

8.2            Indemnification by Dyax. Dyax shall indemnify, defend, and hold harmless Merrimack and its Affiliates, directors, officers, employees, and agents and their respective successors, heirs and assigns (the “Merrimack Indemnitees”) against any liability, damage, loss, or expense (including reasonable attorneys fees and expenses of litigation) incurred by or imposed upon the Merrimack Indemnitees or any one of them in connection with any claims, suits, actions, demands, or judgments in each case initiated by a Third Party which arise out of: (a) the gross negligence or willful misconduct of Dyax in connection with this Agreement; or (b) any breach of any obligation of Dyax under this Agreement. Notwithstanding the foregoing, Dyax shall have no obligation under this Section 8.2 with respect to claims, suits, actions, demands or judgments to the extent the same is caused by the gross negligence or willful misconduct of a Merrimack Indemnitee.

 

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8.3            Procedure. A Party (for purposes of this Section 8.3, the “Indemnitee”) that intends to claim indemnification under this Article 8 shall: (i) promptly notify the indemnifying party (the “Indemnitor”) in writing of any claim, action, suit, or other proceeding brought by Third Parties in respect of which the Indemnitee or any of its Affiliates, directors, officers, employees, successors or assigns intend to claim such indemnification hereunder; (ii) provide the Indemnitor sole control of the defense and/or settlement thereof, and (iii) provide the Indemnitor, at the Indemnitor’s request and expense, with reasonable assistance and full information with respect thereto. Notwithstanding the foregoing, the indemnity obligation in this Article 8 shall not apply to amounts paid in settlement of any loss, claim, damage, liability or action if such settlement is effected without the consent of the Indemnitor, to the extent such consent is not withheld unreasonably or delayed. Without limiting the foregoing provisions of this Section 8.3, the Indemnitor shall keep the Indemnitee reasonably informed of the progress of any claim, suit or action under this Section 8.3 and the Indemnitee shall have the right to participate in any such claim, suit or proceeding with counsel of its choosing at its own expense, but the Indemnitor shall have the sole right to control the defense or settlement thereof.

 

Article IX
TERM AND TERMINATION

 

9.1            Research Term. The term of the Research Program (the “Research Term”) commenced on the effective date of the Original Agreement, has continued in effect through the Effective Date hereof, and shall remain in effect until all activities required to be taken by Dyax and Merrimack under all Research Campaigns of the Research Program have been completed.

 

9.2            Term of Agreement. This Agreement commenced on the effective date of the Original Agreement, has continued in effect through the Effective Date hereof, and shall remain in effect, unless earlier terminated as provided in this Article 9, for so long as Merrimack or any of its Affiliates or sublicensees continues to develop and/or commercialize Products that are or may be royalty-bearing hereunder or under any CAT Product License and thereafter shall terminate, on a country-by-country and Product-by-Product basis on the earliest the date after which no payments are due to Dyax under Article 4 of this Agreement.

 

9.3            Termination by Merrimack. After the expiration of the term of the Research Program, Merrimack shall have the right to terminate this Agreement in its entirety or on a Product-by-Product basis at any time by providing ninety (90) days prior written notice to Dyax.

 

9.4            Termination by Dyax. In the event that Merrimack fails to make timely payment of any amounts due to Dyax under Article 5 of this Agreement, Dyax may terminate this Agreement upon thirty (30) days prior written notice to Merrimack, unless Merrimack pays all undisputed past-due amounts prior to the expiration of such thirty (30) day notice period.

 

9.5            Termination for Other Material Breach. In the event that either Party commits a material breach of any of its obligations under this Agreement, and such Party fails to remedy that breach within [*] days after receiving written notice thereof from the other Party, then the other Party may immediately terminate this Agreement upon written notice to the breaching Party.

 

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9.6            Effect of Termination.

 

(a)            Upon termination of this Agreement in its entirety or with respect to any particular Product pursuant to Section 9.3, 9.4 or 9.5 hereof, all of Merrimack’s rights and obligations under this Agreement (including any license rights) with respect to all Products or such particular Product, as applicable, shall terminate immediately and, except as set forth in Section 9.6(c), Merrimack shall cease the development and commercialization of all Products or such particular Product, as applicable; provided however that, subject to the terms of any Third Party Phage Display Agreement, [*].

 

(b)            The following provisions shall survive the expiration or termination of this Agreement: Articles 5, 6, 8 and 10 and Sections , 4.10, 4.11, 7.4, 7.5, 7.6, and this Section 9.6; as well as Merrimack’s obligation to make payments with respect to Products sold prior to the effective date of termination. In the event of the termination of this Agreement with respect to a Product in a country under Section 9.2, upon satisfaction of Merrimack’s payment obligations pursuant to Article 4, any license granted under Article 3 with respect thereto shall be fully paid up and royalty free.

 

(c)            Upon any termination of this Agreement in its entirety or with respect to a Product, at its option, Merrimack shall be entitled to complete production of and/or sell any in-process and/or completed inventory of Product under the licenses granted under this Agreement which remains on hand as of the date of termination, so long as Merrimack pays to Dyax the payments applicable to said subsequent sales in accordance with the same terms and conditions set forth in this Agreement.

 

(d)            Upon expiration or termination of this Agreement for any reason, nothing herein shall be construed to release either Party from any obligation that matured prior to the effective date of such expiration or termination.

 

(e)            In the event that Merrimack disputes a payment obligation and Merrimack notifies Dyax of such dispute and makes the payment under protest, then notwithstanding such payment, Merrimack shall have the right to bring an action as to whether or not Merrimack is obligated to make such payment and to the extent Merrimack prevails in such action, Dyax shall return such disputed payment to Merrimack.

 

(f)            This Agreement may be terminated only as expressly provided in this Article 9.

 

Article X
MISCELLANEOUS

 

10.1            Relationship of Parties. Nothing in this Agreement or in the course of business between Dyax and Merrimack shall make or constitute either Party a partner, employee or agent of the other. Neither Party shall have any right or authority to commit or legally bind the other in any way whatsoever including, without limitation, the making of any agreement, representation or warranty.

 

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10.2            Notices. All notices, requests, demands and other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be deemed to have been duly given upon the date of receipt if delivered by hand, recognized international overnight courier, confirmed facsimile transmission, or registered or certified mail, return receipt requested, postage prepaid to the following addresses or facsimile numbers:

 

If to Dyax:

Dyax Corp.
300 Technology Square
Cambridge, MA 02139
Attention: Vice President, Business Development
Attention: Corporate Counsel, Legal Department
Facsimile: (617) 225-2501

 

If to Merrimack:

Merrimack Pharmaceuticals, Inc.
One Kendall Square
Building 700, 2nd Floor
Cambridge, MA 02139
Attention: Senior Director, Business Development
Facsimile: (617) 491-1386

 

Either Party may change its designated address and facsimile number by notice to the other Party in the manner provided in this Section.

 

10.3            Assignment. This Agreement may not be assigned by either Party without the prior written consent of the other Party, except that either Party may assign this Agreement (i) to any of its Affiliates, (ii) in connection with the grant of a security interest, or (iii) or to a successor in connection with the merger, consolidation, or sale of all or substantially all of its assets or that portion of its business pertaining to the subject matter of this Agreement, with prompt written notice to the other Party of any such assignment and provided that the assignee assumes in writing all of the obligations of the assignor. This Agreement shall inure to the benefit of and be binding upon the Parties and their respective lawful successors and assigns

 

10.4            Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without regard to any choice of law principles that would dictate the application of the laws of another jurisdiction.

 

10.5            Compliance With Law. Nothing in this Agreement shall be construed so as to require the commission of any act contrary to law, and wherever there is any conflict between any provision of this Agreement and any statute, law, ordinance or treaty, the latter shall prevail, but in such event the affected provisions of the Agreement shall be conformed and limited only to the extent necessary to bring it within the applicable legal requirements.

 

10.6            Force Majeure. Neither Party shall be liable for failure or delay in performance of any obligation under this Agreement, other than payment of any amount due and payable, if such failure or delay is caused by circumstances beyond the control of the Party concerned, including, without limitation, failures resulting from fires, earthquakes, power surges or failures, accidents, labor stoppages, war, revolution, civil commotion, acts of public enemies, blockade, embargo, inability to secure materials or labor, any law, order, proclamation, regulation, ordinance, demand, or requirement having a legal effect of any government or any judicial authority or representative of any such government, acts of God, or acts or omissions of communications carriers, or other causes beyond the reasonable control of the Party affected, whether or not similar to the forgoing. Any such cause shall delay the performance of the affected obligation until such cause is removed.

 

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10.7            Amendment and Waiver. This Agreement may be amended, supplemented, or otherwise modified only by means of a written instrument signed by both Parties. Any waiver of any rights or failure to act in a specific instance shall relate only to such instance and shall not be construed as an agreement to waive any rights or fail to act in any other instance, whether or not similar.

 

10.8            Headings. All headings used in this Agreement are inserted for convenience only and are not intended to affect the meaning or interpretation of this Agreement or any Article or Section hereof.

 

10.9            Severability. In the event any provision of this Agreement should be held invalid, illegal or unenforceable, the remaining provisions shall not be affected or impaired and the Parties will use all reasonable efforts to replace the applicable provision with a valid, legal and enforceable provision which insofar as practical implements the purposes hereof, provided, however, that if the Parties fail to reach such agreement within [*] days, a Party whose rights or obligations are materially affected as a result of a provision being held invalid, illegal or unenforceable may terminate this Agreement.

 

10.10            Entire Agreement. This Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes any term sheets and all prior agreements or understandings between the Parties relating to the subject matter hereof.

 

10.11            Bankruptcy. All rights and licenses granted under or pursuant to this Agreement by Dyax to Merrimack are, and shall irrevocably be deemed to be, “intellectual property” as defined in Section 101(56) of the Bankruptcy Code. In the event of the commencement of a case by or against either Party under any Chapter of the Bankruptcy Code, this Agreement shall be deemed an executory contract and all rights and obligations hereunder shall be determined in accordance with Section 365(n) thereof. Unless a Party rejects this Agreement and the other Party decides not to retain its rights hereunder, the other Party shall be entitled to a complete duplicate of (or complete access to, as appropriate) all intellectual property and all embodiments of such intellectual property held by the Party and the Party shall not interfere with the rights of the other Party, which are expressly granted hereunder, to such intellectual property and all embodiments of such intellectual property from another entity.

 

10.12            Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original agreement.

 

10.13            Amends and Restates. This Agreement amends, restates and replaces in its entirety the Original Agreement.

 

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IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Agreement as a sealed instrument effective as of the date first above written.

 

DYAX CORP.   MERRIMACK PHARMACEUTICALS, INC.
     
     
By: /s/ Henry E. Blair   By: /s/ Robert J. Mulroy
     
Title: Chief Executive Officer   Title: President and Chief Executive Officer
     
Date: January 24, 2007   Date: January 25, 2007

 

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APPENDIX A

 

RESEARCH PLAN
FOR
CAMPAIGN I

 

Workplan Overview

 

The aim of the project is to identify [*] from Dyax’s antibody library against [*] targets provided by Merrimack Pharmaceuticals, Inc. (Merrimack). For [*] of the targets, [*] are available and will be used in the selection plan. A schematic showing the overall workplan is presented in Scheme 1. Dyax will perform [*] using the Dyax [*]. Selection output [*] will be tested using a [*] against the [*], and at [*] selection [*] per target showing a [*]. The [*] will be subjected to [*] target to screen approximately [*] per target. Confirmed [*] will be [*], and the [*] data will be used to identify up to [*] per target that will be [*]. The resulting [*] will be used to [*] based either on [*]. Based on the results from the [*] will be selected for [*]) to Merrimack for more extensive evaluation.

 

Deliverables to Merrimack for each of [*] targets

 

[*]

 

Reagent And Data Delivery To Dyax

 

Merrimack will supply Dyax with the following materials with respect to [*] targets for selections and screening:

 

[*]

 

 

Appendix A

 

 

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Scheme 1, Plan Overview:

 

[*]

 

Appendix A

 

 

CONFIDENTIAL DOCUMENT

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Target Validation, Selections, Screening, And Sequencing

 

The selection plan for soluble protein targets is dependent on the target format, and [*].

 

[*]

 

Appendix A

 

 

CONFIDENTIAL DOCUMENT

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Scheme 2, Representative Selection Strategies:

 

[*]

 

Appendix A

 

 

CONFIDENTIAL DOCUMENT

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Final Lead Selection And [*] Production

 

[*]

 

Key Dates And Timeline

 

A project timeline with a start date of Dec 2nd, 2005 has the following key dates:

 

[*]

 

Appendix A

 

 

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APPENDIX B

 

CAT GATEKEEPING PROCEDURE

 

For each Nominated Target (which must be accompanied by a GenBank® accession number or similar information which uniquely identifies that Nominated Target) submitted by Dyax under Clause 4.1, CAT will, on a Nominated -Target-by-Nominated -Target basis, not grant a Product License to Dyax, if:

 

1.CAT is, at the date of submission of the Target Option Notice by Dyax, contractually obligated on an exclusive basis in respect of the Nominated Target with a Third Party pursuant to an agreement with that Third Party which was entered into prior to the Commencement Date of this Agreement; or

 

2.CAT is, at the date of submission of the Target Option Notice by Dyax, engaged in internal research and/or development with respect to the Nominated Target (as can be measured by reliable or verifiable means).

 

NOTES

 

1. For the avoidance of doubt, CAT will not subject any Nominated Target to the CAT Gatekeeping Procedure unless and until Dyax supplies CAT with a GenBank® accession number or similar information which uniquely identifies that Nominated Target.

 

2. If Dyax supplies CAT with an incorrect GenBank® accession number for a Nominated Target or otherwise incorrectly identifies a Nominated Target which is then subjected to the CAT Gatekeeping Procedure, the result of the CAT Gatekeeping Procedure in respect of such Nominated Target shall prevail even if it is subsequently discovered that such incorrect GenBank® accession number or identifying information had been provided by Dyax.

 

3. Within one (1) month after notice is given to Dyax of a refusal by CAT to grant a Product License in respect of any Nominated Target, Dyax may notify CAT that it wishes to appoint an Expert to make such enquiries of CAT as may be reasonably necessary for the Expert to be able to confirm to Dyax that the CAT Gatekeeping Procedure had been correctly applied by CAT in respect of such Nominated Target. CAT shall provide such information to the Expert as the Expert may reasonably determine is required in order to make such confirmation. For the avoidance of doubt the Expert shall not be entitled (unless CAT consents) to enter CAT premises in order to carry out its enquiries, shall only provide the confirmation to Dyax on a “Yes/No” basis and shall not give or be obliged to give to Dyax any other information obtained from CAT in respect of the CAT Gatekeeping Procedure or the relevant Nominated Target. The Expert shall, prior to making any enquiries of CAT, enter into a confidential disclosure agreement with CAT. Notwithstanding the foregoing, CAT shall not be obliged to respond to the enquiries of the Expert if to do so would, or would reasonably be expected to, cause a breach in terms of any agreement CAT may have with any other Third parties; provided, however, that such disclosure subject to the confidential disclosure agreement shall be treated by CAT in the same manner as disclosure in its normal business operations. The Expert shall complete its investigations and provide the confirmation to Dyax (with a copy to CAT) within thirty (30) days after appointment by Dyax, and payment of the Expert’s fee shall be conditioned on such delivery being timely made. If such written confirmation is not made within such thirty (30) days period, then a replacement Expert shall be appointed within 10 days thereafter, subject to same terms and conditions stated above. If an Expert provides notice that he or she cannot complete the analysis because CAT has failed without good reason to provide any information requested as provided above, then CAT shall have no more than 30 days to provide the information and the Expert shall then have no more than 15 days after the information is provided to the Expert to evaluate the information and make a determination. Failure of the second Expert to provide such written confirmation to Dyax on a “Yes/No” basis within thirty (30) days after appointment shall be irrevocably deemed to be confirmation that CAT correctly applied the CAT Gatekeeping Procedure to the Nominated Target in question, provided, however that until (i) CAT provides all information that it is required to provide in accordance with this Schedule 2 and (ii) the expiration of any extension required for the Expert to evaluate such information, there shall not be deemed to be any such confirmation that CAT correctly applied the CAT Gatekeeping Procedure to the Nominated Target in question.

 

Appendix B

 

 

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If the Expert appointed by Dyax hereunder decides that CAT correctly applied, or is deemed to have correctly applied, the CAT Gatekeeping Procedure, Dyax shall be responsible for the Expert’s fees and CAT shall thereafter have no obligations to Dyax in respect of such Nominated Target. If the Expert decides that CAT did not correctly apply the CAT Gatekeeping Procedure Dyax shall be granted a Product License in relation to the Nominated Target in question (provided that CAT is not restricted by obligations to any Third Party in relation to the Nominated Target in question in which case the Product License will be subject to those restrictions) and CAT shall be responsible for the Expert’s fees. The procedure described in this paragraph 3 will not apply to any determination by CAT that the Primary Application of a Nominated Target is in the Excluded Field, where CAT’s decision will be final if made in good faith.

 

“Expert” means a patent agent who is independent of CAT and all of the other parties with an interest in the outcome of a determination regarding a Nominated Target, who has suitable knowledge and experience in the reasonable opinion of Dyax to perform the above activities, subject to CAT’s consent, which consent shall not be unreasonably withheld or delayed.

 

Appendix B

 

 

 

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APPENDIX C

  

CAT PATENT RIGHTS

 

[*]

 

Appendix C 

 

 

 

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EXHIBIT D 

 

CAT PRODUCT LICENSE

 

Private & Confidential

 

 

 

CAMBRIDGE ANTIBODY TECHNOLOGY LIMITED (1)

 

And

 

DYAX CORP. (2)

 

 

 

PRODUCT LICENSE FOR _____

 

 

 

Appendix D
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THIS AGREEMENT is made:

 

BETWEEN:

 

(1)CAMBRIDGE ANTIBODY TECHNOLOGY LIMITED (Registered in England No. 2451177) whose registered office is at The Milstein Building, Granta Park, Cambridge, Cambridgeshire, CB1 6GH, UK (“CAT”).

 

(2)DYAX CORP. a corporation organised and existing under the laws of the State of Delaware having its principal place of business at 300 Technology Square, Cambridge, Massachusetts 02139 USA (“Dyax”).

 

BACKGROUND:

 

(a)By the terms of the Amendment Agreement (as defined below), CAT granted Dyax certain options to be granted Product Licences under the Antibody Phage Display Patents and CAT Know How (all as defined below).

 

(b)Dyax has nominated the Target (which was identified prior to the execution of the Amendment Agreement), and this Target has passed the CAT Gatekeeping Procedure (each as defined below).

 

(c)By this Agreement CAT wishes to grant to Dyax a Product Licence in respect of Diagnostic Antibody Products and Therapeutic Antibody Products against the Target.

 

In consideration of the mutual covenants and undertakings set out below, THE PARTIES AGREE as follows:

 

1.Definitions

 

1.1In this Agreement, the terms defined in this Clause shall have the meanings specified below:

 

Acceptance Fee” means [*] Dollars (US $[*]).

 

[*]

 

Affiliate” means any company, partnership or other entity which directly or indirectly Controls, is Controlled by or is under common Control with any other entity.

 

Agreement” means this product licence and any and all Schedules, appendices and other addenda to it as may be amended from time to time in accordance with the provisions of this agreement.

 

Amendment Agreement” means the agreement executed by Dyax and CAT on 3 January 2003, as amended.

 

Appendix D
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Antibody” means a molecule or a gene encoding such a molecule comprising or containing one or more immunoglobulin variable domains or parts of such domains or any existing or future fragments, variants, modifications or derivatives thereof.

 

Antibody Library” means any Antibody library constructed using processes which are covered by a claim of an issued and unexpired patent included within the Antibody Phage Display Patents which has not been held permanently revoked, unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction unappealed within the time allowed for appeal, and which has not been admitted to be invalid or unenforceable through reissue or disclaimer or otherwise.

 

Antibody Phage Display Patents” means: (a) the patents and patent applications listed in Schedule 1 and any patents issuing from such patent applications, together with any divisions, registrations, confirmations, reissues, extensions, renewals, continuations, continuations-in-part, revalidations, additions, substitutions, renewals or supplementary protection certificates thereof throughout the world; and (b) any Patent Rights which claim or cover any invention or discovery which is developed by CAT or its Affiliates at any time during the term of this Agreement directly related to Antibody phage display or Antibody Services; provided, however, that Antibody Phage Display Patents shall always exclude (i) CAT Diabodies Patent Rights, (ii) any Patent Rights owned or controlled by CAT which claim or cover Catalytic Antibodies, (iii) any Patent Rights owned or controlled by CAT which claim ribosome display technology, (iv) any Patent Rights which claim Single Domain Antibodies, and (v) any Patent Rights acquired by CAT after the Commencement Date from any Third Party for consideration or as a result of CAT’s acquisition of or merger with such Third Party.

 

Antibody Services” means the provision of research and/or development services for the identification, generation, derivation or development of one or more Antibody Libraries or Antibodies derived therefrom.

 

Business Day” means a day (other than a Saturday or Sunday) on which the banks are ordinarily open for business in the City of London and the Commonwealth of Massachusetts.

 

CAT Diabodies Patent Rights” means (a) the Patent Rights entitled “Diabodies – multivalent and multispecific binding proteins, their manufacture and use”, PCT/GB93/02492 and (b) the Patent Rights entitled “Retargeting antibodies and diabodies”, PCT/GB94/02019.

 

CAT Gatekeeping Procedure” means the procedure set out in Schedule 2 of the Amendment Agreement which CAT has carried out in respect of the Target prior to the grant of this Product Licence.

 

CAT Know-How” means any Confidential Information of CAT which constitutes unpatented know-how, technical and other information related to the subject matter of the Antibody Phage Display Patents as identified in Schedule 2 and as amended from time to time in accordance with Schedule 2.

 

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CAT Licensable Antibody” means any Antibody to the Target (a) where such Antibody has been identified, generated, developed, produced or derived by Dyax or a Dyax Sublicensee or its sublicensees and (b) the identification, generation, development, production or derivation of such Antibody uses any of the processes claimed or covered by a claim of an issued and unexpired patent included within the Antibody Phage Display Patents (which has not been held permanently revoked, unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction unappealed within the time allowed for appeal, and which has not been admitted to be invalid or unenforceable through reissue or disclaimer or otherwise) or uses the CAT Know-How and (c) which is potentially useful for the development of any Diagnostic Antibody Product and/or any Therapeutic Antibody Product.

 

Catalytic Antibodies” means solely those Antibodies which bind to and catalyze the chemical transformation of a substrate and in which an Antibody binding region is involved in said catalysis.

 

Commencement Date” means the date of this Agreement first written above.

 

Competent Authority” means any national or local agency, authority, department, inspectorate, minister, ministry official, parliament or public or statutory person (whether autonomous or not) of any government of any country having jurisdiction over either any of the activities contemplated by this Agreement or the Parties including the European Commission, the Court of First Instance and the European Court of Justice.

 

Controls” means the ownership, directly or indirectly, of more than fifty percent (50%) of the outstanding equity securities of a corporation which are entitled to vote in the election of directors or a more than fifty percent (50%) interest in the net assets or profits of an entity which is not a corporation.

 

Diagnostic Antibody Product” means any preparation in the form of a device, compound, kit or service with utility in the diagnosis, prognosis, prediction or disease management of a disorder for any indication which contains, comprises or the process of development or manufacture of which utilises a CAT Licensable Antibody. The term “Diagnostic Antibody Product” shall not include any Research Product.

 

Dyax Therapeutic Antibody Product” means any Therapeutic Antibody Product identified, generated or derived by Dyax for itself or its Affiliates but not a Therapeutic Antibody Product identified, generated or derived by Dyax for, or on behalf of, a Third Party.

 

Dyax Sublicensee” means any sublicensee of Dyax under this Agreement.

 

Exploit” means to make, have made, use, sell or import.

 

FDA” means the United States Food and Drug Administration, the equivalent Competent Authority in any country of the Territory or any successor bodies thereto.

 

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First Commercial Sale” means the first commercial sale of any Product by Dyax or a Dyax Sublicensee (or its sublicensee) in any country after grant of a Marketing Authorisation.

 

Force Majeure” means any event outside the reasonable control of either Party affecting its ability to perform any of its obligations (other than payment) under this Agreement, including Act of God, fire, flood, lightning, war, revolution, act of terrorism, riot or civil commotion, but excluding strikes, lock-outs or other industrial action, whether of the affected Party’s own employees or others, failure of supplies of power, fuel, transport, equipment, raw materials or other goods or services.

 

GAAP” means United States generally accepted accounting principles, consistently applied.

 

IDE” means an Investigational Device Exemption application, as defined in Title 21 of the United States Code of Federal Regulations, filed with the FDA or an equivalent foreign filing.

 

IND” means an Investigational New Drug Application, as defined in Title 21 of the United States Code of Federal Regulations, that is required to be filed with the FDA before beginning Phase I Clinical Trials of any Therapeutic Antibody Product in human subjects, or an equivalent foreign filing.

 

Major Market” means any one of the following: (i) the United States of America, (ii) any country in Europe which is subject to the Marketing Authorisation procedure of the European Medicines Evaluation Agency, or (iii) Japan.

 

Marketing Authorisation” means any approval (including all applicable pricing and governmental reimbursement approvals) required from the FDA or relevant Competent Authority to market and sell a Product in a particular country.

 

Net Sales” means, with respect to a Product sold by Dyax or a Dyax Sublicensee (or its sublicensees) sold by Dyax or its sublicensee, the price invoiced by that party to the relevant purchaser (or in the case of a sale or other disposal otherwise than at arm’s length, the price which would have been invoiced in a bona fide arm’s length contract or sale) but deducting the costs of packing, transport and insurance, customs duties, any credits actually given for returned or defective Products, normal trade discounts actually given, and sales taxes, VAT or other similar tax charged on and included in the invoice price to the purchaser.

 

Party” means CAT or Dyax.

 

Patent Rights” means any patent applications and any patents issuing from such patent applications, author certificates, inventor certificates, utility certificates, improvement patents and models, and certificates of addition and all counterparts of them throughout the Territory, including any divisional applications and patents, filings, renewals, continuations, continuations-in-part, patents of addition, extensions, reissues, substitutions, confirmations, registrations, revalidation and additions of or to any of them, as well as any supplementary protection certificates and equivalent protection rights in respect of any of them.

 

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Pharmacia Agreement” means the agreement between CAT and Pharmacia P-L Biochemicals Inc. dated 11 September 1991.

 

Pharmacia P-L Biochemicals Inc.” means Pharmacia P-L Biochemicals Inc (now known as Amersham Biosciences).

 

Phase I Clinical Trial” means a human clinical trial in any country that is intended to initially evaluate the safety of an investigational Product in volunteer subjects or patients that would satisfy the requirements of 21 CFR 312.21(a), or its foreign equivalent and may evaluate the Product’s therapeutic or antigenic effects.

 

Phase III Clinical Trial” means a pivotal human clinical trial in any country the results of which could be used to establish safety and efficacy of a Product as a basis for a marketing application that would satisfy the requirements of 21 CFR 312.21(c).

 

Primary Application” means a major application of an Antibody against the Target as ascertained at the time of assessment using objective and reasonable scientific and/or commercial criteria, data and/or information. Primary Application shall not mean any minor or incidental application.

 

Product” means a Diagnostic Antibody Product or a Therapeutic Antibody Product.

 

Product Licence” means the licence granted to Dyax pursuant to Clause 2 of this Agreement.

 

Quarter” means each period of three (3) months ending on March 31, June 30, September 30, or December 31 and “Quarterly” shall be construed accordingly.

 

Research Products” means any product in relation to which Pharmacia P-L has an exclusive licence from CAT pursuant to the Pharmacia Agreement.

 

Single Domain Antibodies” means an Antibody containing only a single domain (heavy or light).

 

Status Report” has the meaning set forth in Clause 4.1.

 

Target” means _____________, as set out in Schedule 3.

 

Territory” means all countries of the world.

 

Therapeutic Antibody Product” means any preparation for the treatment or prevention of disease, infection or other condition in humans for any indication which contains, comprises, or the process of development or manufacture of which utilises, a CAT Licensable Antibody. The term “Therapeutic Antibody Product” shall not include any Research Product.

 

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Third Party” means any entity or person other than Dyax, CAT or their respective Affiliates.

 

Valid Claim” means a claim of an issued and unexpired patent included within the Antibody Phage Display Patents which have been licensed to CAT by the MRC which has not been held permanently revoked, unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction unappealed within the time allowed for appeal, and which has not been admitted to be invalid or unenforceable through reissue or disclaimer or otherwise.

 

Year” means initially the period from the Commencement Date to the end of that calendar year, and subsequently a calendar year.

 

1.2The headings to clauses are inserted for convenience only and shall not affect the interpretation or construction of this Agreement.

 

1.3Words imparting the singular shall include the plural and vice versa. References to persons include an individual, company, corporation, firm or partnership.

 

1.4The words and phrases “other”, “including” and “in particular” shall not limit the generality of any preceding words or be construed as being limited to the same class as any preceding words where a wider construction is possible.

 

1.5References to any statute or statutory provisions of the United Kingdom shall include (i) any subordinate legislation made under it, (ii) any provision which it has superseded or re-enacted (whether with or without modification), and (iii) any provision which subsequently supersedes it or re-enacts it (whether with or without modification. References to any statute or regulation of the United States of America means that statute or regulation as it may be amended, supplemented or otherwise modified from time to time, and any successor statute or regulation.

 

2.Grant of Product Licence

 

2.1Subject to Clause 2.4 below, CAT hereby grants to Dyax and its Affiliates a non-exclusive, royalty-bearing licence (on the terms of this Agreement) with the right to sublicense (on the terms of Clause 3) under the Antibody Phage Display Patents and CAT Know-How to Exploit Products against the Target in the Territory.

 

2.2The Product Licence granted under this Agreement is pursuant to Dyax’s exercise of one (1) option _____________ under the Amendment Agreement.

 

2.3For the avoidance of doubt, no rights are granted by CAT under this Agreement to any CAT Diabodies Patent Rights, and any Patent Rights owned or controlled by CAT which claim Catalytic Antibodies, ribosome display technology, any Patent Rights which claim Single Domain Antibodies and no rights are granted by CAT in this Agreement under the Antibody Phage Display Patents to Exploit Research Products.

 

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2.4This Product Licence shall come into effect upon the date that the Acceptance Fee is received by CAT. The Acceptance Fee shall not be refundable or creditable against any other sums which may be payable by Dyax or a Dyax Sublicensee to CAT pursuant to this Agreement.

 

3.Sub-Licensing

 

3.1Dyax will, if requested by CAT, inform CAT of the identity of all Dyax Sublicensees (and their sublicensees) in relation to this Agreement.

 

3.2Dyax (and where relevant each Dyax Sublicensee) will ensure that any sublicensee (to which it sublicences its rights in accordance with the terms of this Agreement) executes a written agreement which requires the sublicensee to abide by the terms of this Agreement.

 

3.3Dyax (and where relevant each Dyax Sublicensee) will be liable for any breach of the sublicences granted in accordance with Clause 3.2; provided, however, that Dyax’s liability for such breach by a sublicensee shall be limited to the amount that has been received or is thereafter received by Dyax directly or indirectly from such sublicensee pursuant to the sublicense agreement; and provided, further, that any written agreement with a sublicensee shall contain a provision pursuant to which CAT shall be a third party beneficiary of such sublicence agreement and shall have the right to enforce (including claim damages as a result of any breach) such sublicence agreement. If at any time CAT does have to enforce its rights under a sublicence agreement Dyax will, if requested by CAT, supply to CAT a copy of the relevant sublicence as soon as possible. For the avoidance of doubt, sublicensing by Dyax to a Dyax Sublicensee is permitted as is sublicensing by a Dyax Sublicensee to a sublicensee. No further sublicensing of the rights and obligations under this Agreement is permitted.

 

4.Status Report

 

4.1Dyax will provide to CAT a brief summary of the status of each Product against the Target that Dyax or Dyax Sublicensees desire to Exploit under this Agreement (“Status Report”). During the Term, Dyax will submit such Status Report to CAT for a particular Product prior to the time Dyax or Dyax Sublicensees begin the first human clinical trial with respect to such Product. [*]

 

5.Gatekeeping

 

5.1The Parties acknowledge that, as of the Commencement Date, the Target has passed CAT’s Gatekeeping Procedure under the Amendment Agreement.

 

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6.Consideration

 

6.1Therapeutic Antibody Products

 

6.1.1With respect to Therapeutic Antibody Products, Dyax shall pay to CAT the following payments upon achievement of the specified milestones by Dyax or a Dyax Sublicensee (or its sublicensee) for the first Therapeutic Antibody Product to achieve the relevant milestone:

 

Initiation of first Phase I Clinical Trial US $______________
Initiation of first Phase III Clinical Trial US $______________
First filing for Marketing Authorisation in one Major Market country US $______________
Marketing Authorisation granted in the United States US $______________

 

6.1.2With respect to Therapeutic Antibody Products, Dyax shall pay CAT royalties in an amount equal to ___ percent (___%) of Net Sales of the Therapeutic Antibody Product sold by or on behalf of Dyax or the Dyax Sublicensee.

 

6.2Diagnostic Products

 

6.2.1With respect to Diagnostic Antibody Products, Dyax shall pay to CAT the following payments upon achievement by Dyax or a Dyax Sublicensee (or its sublicensee) of the milestones set out below. For the avoidance of doubt the milestone payments shall be payable in respect of the first Diagnostic Antibody Product to achieve the relevant milestone:

 

First filing for Marketing Authorisation in one Major Market country US $______________
Marketing Authorisation granted in each Major Market Country US $______________

 

6.2.2With respect to Diagnostic Antibody Products, Dyax shall pay CAT royalties on a country-by-country basis in an amount equal to ___ percent (___%) of Net Sales of Diagnostic Antibody Products sold by or on behalf of Dyax or any Dyax Sublicensee.

 

6.3All royalties due to CAT pursuant to Clauses 6.1.2 and 6.2.2 shall be payable on a country-by-country basis until the last Valid Claim expires or ten (10) years from the date of First Commercial Sale of such Product, whichever occurs later.

 

7.Provisions Relating to Payment of Consideration

 

7.1All milestone payments shall be paid by Dyax within [*] days of the applicable milestone being achieved and no milestone payments shall be refundable or creditable against any other sum payable by Dyax hereunder for any reason.

 

7.2Dyax shall make the payments due to CAT under Clause 6 above in United States dollars (if Dyax in turn receives payment in dollars) or in pounds sterling (if Dyax in turn receives payment in pound sterling), or Euros (if Dyax in turn receives payment in Euros). Where Dyax receives payment in a currency other than United States dollars, pounds sterling or Euros, Dyax will convert the relevant sum into pounds sterling (or Euros if Euros have replaced pounds sterling at the time of payment). Dyax will use the conversion rate reported in the Financial Times two (2) Business Days before the day on which Dyax pays CAT. Such payment will be made without deduction of exchange, collection or other charges. All payments will be made at Quarterly intervals. Within [*] days of the end of each Quarter after the First Commercial Sale of each Product in any country, Dyax shall prepare a statement which shall show on a country-by-country basis for the previous Quarter Net Sales of each Product by Dyax or its Affiliates and all monies due to CAT based on such Net Sales. That statement shall include details of Net Sales broken down to show the country of the sales and the total Net Sales by Dyax or its Affiliates in such country and shall be submitted to CAT within such [*] day period together with remittance of the monies due. With respect to Net Sales of a Product by a Dyax Sublicensee (or its sublicensee) Dyax shall prepare a statement which will include the same information and remit that statement and any monies due within the same period except with regard to any Dyax Sublicensee with which Dyax has a licence agreement relating to the technology of Antibody phage display as of the Commencement Date where the remittance will be made at Quarterly intervals within [*] days of the date royalties are due to Dyax from such existing Dyax Sublicensees.

 

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7.3All payments shall be made free and clear of and without deduction or deferment in respect of any disputes or claims whatsoever and/or as far as is legally possible in respect of any taxes imposed by or under the authority of any government or public authority. [*].

 

7.4Dyax shall keep and shall procure that its Affiliates and Dyax Sublicensees keep true and accurate records and books of account containing all data necessary for the calculation of the amounts payable by it to CAT pursuant to this Agreement. Those records and books of account shall be kept for seven (7) years following the end of the Year to which they relate. Upon CAT’s written request, a firm of accountants appointed by agreement between the Parties or, failing such agreement within ten (10) Business Days of the initiation of discussions between them on this point CAT shall have the right to cause an international firm of independent certified public accountants that has not performed auditing or other services for either Party or their Affiliates (or, if applicable, any Dyax Sublicensee with rights to the Product in question) acceptable to Dyax or the Dyax Sublicensee such acceptance not to be unreasonably withheld to inspect such records and books of account. In particular such firm:

 

7.4.1shall be given access to and shall be permitted to examine and copy such books and records of Dyax and its Affiliates and Dyax Sublicensees upon twenty (20) Business Days notice having been given by CAT and at all reasonable times on Business Days for the purpose of certifying that the Net Sales or other relevant sums calculated by Dyax and its Affiliates and Dyax Sublicensees during any Year were reasonably calculated, true and accurate or, if this is not their opinion, certify the Net Sales figure or other relevant sums for such period which in their judgment is true and correct;

 

7.4.2prior to any such examination taking place, such firm of accountants shall undertake to Dyax that they shall keep all information and data contained in such books and records, strictly confidential and shall not disclose such information or copies of such books and records to any third person including CAT, but shall only use the same for the purpose of calculations which they need to perform in order to issue the certificate to which this Clause envisages;

 

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7.4.3any such access examination and certification shall occur no more than once per Year and will not go back over records more than two (2) years old;

 

7.4.4Dyax and its Affiliates and Dyax Sublicensees shall make available personnel to answer queries on all books and records required for the purpose of that certification; and

 

7.4.5the cost of the accountant shall be the responsibility of Dyax if the certification shows it to have underpaid monies to CAT by more than [*] and the responsibility of CAT otherwise.

 

7.5All payments due to CAT under the terms of this Agreement are expressed to be exclusive of value added tax (VAT) howsoever arising. [*].

 

7.6All payments made to CAT under this Agreement shall be made to the bank account of CAT as notified by CAT to Dyax from time to time.

 

7.7If Dyax fails to make any payment to CAT hereunder on the due date for payment, without prejudice to any other right or remedy available to CAT it shall be entitled to charge Dyax interest (both before and after judgment) of the amount unpaid at the annual rate of LIBOR (London Interbank Offering Rate) plus [*] calculated on a daily basis until payment in full is made without prejudice to CAT’s right to receive payment on the due date.

 

8.Confidentiality

 

8.1With respect to any confidential information received from the other Party (“Confidential Information”), each Party undertakes and agrees to:

 

(a)only use the Confidential Information for the purposes envisaged under this Agreement and not to use the same for any other purpose whatsoever;

 

(b)ensure that only those of its officers and employees who are directly concerned with the carrying of this Agreement have access to the Confidential Information on a strictly “need to know” basis and are informed of the secret and confidential nature of it;

 

(c)keep the Confidential Information secret, confidential, safe and secure and shall not directly or indirectly disclose or permit to be disclosed the same to any Third Party, including any consultants or other advisors, without the prior written consent of the disclosing Party except to the extent disclosure is necessary in connection with its use as envisaged under this Agreement;

 

(d)ensure that the Confidential Information will not be covered by any lien or other encumbrance in any way, and

 

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(e)not copy, reproduce or otherwise replicate for any purpose or in any manner whatsoever any documents containing the Confidential Information except to the extent necessary in connection with its use as envisaged under this Agreement.

 

For the avoidance of doubt, the Parties agree that the identity of the Target, any information related to the Target provided to CAT by Dyax, and the Status Report is the Confidential Information of Dyax.

 

8.2The obligations referred to in Clause 8.1 above shall not extent to any Confidential Information which:

 

(a)is or becomes generally available to the public otherwise than be reason of breach by a recipient Party of the provision of Clause 8.1;

 

(b)is known to the recipient Party and is at its free disposal (having been generated independently by the recipient Party or a Third Party in circumstances where it has not been derived directly or indirectly from the disclosing Party’s Confidential Information prior to its receipt from the disclosing Party), provided that evidence of such knowledge is furnished by the recipient Party to the disclosing Party within twenty-eight (28) days of recipient of that Confidential Information;

 

(c)is subsequently disclosed to the recipient Party without obligations of confidence by a Third Party owing no such obligations to the disclosing Party in respect of that Confidential Information;

 

(d)is required by law to be disclosed (including as part of any regulatory submission or approval process) and then only when prompt written notice of this requirement has been given to the disclosing Party so that it may, if so advised, seek appropriate relief to prevent such disclosure, provided always that in such circumstances such disclosure shall be only to the extent so required and shall be subject to prior consultation with the disclosing Party with a view to agreeing on the timing and content of such disclosure.

 

8.3No public announcement or other disclosures to Third Parties concerning the terms of this Agreement shall be made, whether directly or indirectly, by either Party (except confidential disclosures to professional advisors) without first obtaining the approval of the other Party and agreement upon the nature and text of such announcement or disclosure with the exceptions that:

 

(a)a Party may disclose those terms which it is required by regulation or law to disclose, provided that it takes advantage of all provisions to keep confidential as many terms of this Agreement as possible; and

 

(b)the Party desiring to make any such public announcement or other disclosure shall inform the other Party of the proposed announcement or disclosure in reasonably sufficient time prior to public release, and shall provide the other Party with a written copy thereof in order to allow such Party to comment upon such announcement or disclosure. Each Party agrees that it shall cooperate fully with the other with respect to all disclosures regarding this Agreement to the U.S. Securities Exchange Commission, the UK Stock Exchange and any other comparable body including requests for confidential information or proprietary information of either Party included in any such disclosure.

 

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9.Indemnification

 

9.1Dyax and hereby indemnifies CAT and its Affiliates and their directors, officers, employees and agents and their respective successors, heirs and assigns (the “CAT Indemnitees”) against any liability, damage, loss or expense (including attorneys fees and expenses of litigation) incurred by or imposed upon the CAT Indemnitees or any one of them in connection with any claims, suits, actions, demands or judgments by or in favour of any Third Party concerning any manufacture, use or sale of any Product by Dyax or any Dyax Sublicensee (or their sublicensee). In addition, each Dyax Sublicensee (or their sublicensee) shall indemnify the CAT Indemnitees against any liability, damage, loss or expense (including attorneys fees and expenses of litigation) incurred by or imposed upon the CAT Indemnitees or any one of them in connection with any claims, suits, actions, demands or judgments by or in favour of any Third Party concerning any manufacture, use or sale of any Product by such Dyax Sublicensee (or their sublicensee).

 

9.2CAT shall not be liable to Dyax and Dyax Sublicensee (or its sublicensee) in respect of any liability, loss, damage or expense (including attorneys fees and expenses of litigation) incurred or suffered by Dyax and Dyax Sublicensees (or its sublicensee) in connection with the manufacture, use or sale of any Products by Dyax and Dyax Sublicensees (or its sublicensee).

 

9.3CAT gives no warranty or representation that the Antibody Phage Display Patents are, or will be, valid or that the exercise of the rights granted under this Agreement will not result in the infringement of patents of Third Parties.

 

10.Infringement and Patent Prosecution

 

10.1Dyax shall notify CAT promptly of any proceedings or applications for revocation of any of the Antibody Phage Display Patents emanating from a Third Party that comes to its notice or if a Third Party takes or threatens to take any proceedings for infringement of any patents of that Third Party by reason of Dyax’s use or operation of the Antibody Phage Display Patents or manufacture, use or sale of the Products. Dyax shall notify CAT promptly of any infringement of the Antibody Phage Display Patents by a Third Party which may come to its attention during the term of the Product Licence, except Dyax shall have no obligation to so notify CAT with respect to any infringement by an academic or not-for-profit entity which occurs by reason of such entity carrying out research activities provided such activities are, as far as Dyax is aware, not being carried out with a view to commercialising a product or otherwise for profit.

 

10.2CAT shall have the sole right and responsibility, at its sole discretion and cost and with reasonable assistance from Dyax, to file, prosecute and maintain the Antibody Phage Display Patents and for the conduct of any lawsuits, claims or proceedings challenging the validity or enforceability thereof including, without limitation, any interference or opposition proceeding relating thereto in all countries. For the avoidance of doubt, Dyax and Dyax Sublicensees will have the right to conduct any proceedings relating to its Product including any proceedings relating to product liability.

 

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11.Termination

 

11.1Unless terminated under this Clause 11, this Agreement shall commence on the Commencement Date and shall terminate, on a country-by-country and Product-by-Product basis upon the last to expire of claims of an issued and unexpired patent within the Antibody Phage Display Patents (which has not been held permanently revoked, unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction unappealed within the time allowed for appeal, and which has not been admitted to be invalid or unenforceable through reissue or disclaimer or otherwise) or (b) the date upon which no payments are due to CAT under Clause 6 of this Agreement, whichever occurs later.

 

11.2CAT shall have the right to terminate this Agreement in the event that:

 

11.2.1Dyax or a Dyax Sublicensee (or its sublicensee) has not filed an IND for a Therapeutic Antibody Product, or a 510(k) or IDE for a Diagnostic Antibody Product within [*] after the Commencement Date; or

 

11.2.2Dyax or a Dyax Sublicensee (or its sublicensee) directly or indirectly opposes or assists any Third Party to oppose the grant of letters patent or any patent application within the Antibody Phage Display Patents, or disputes or directly or indirectly assists any Third Party to dispute the validity of any patent within the Antibody Phage Display Patents or any of the claims thereof.

 

11.3In the event that either Party commits a material breach of any of its material obligations with respect to this Agreement, and such Party fails to remedy that breach within ninety (90) days after receiving written notice thereof from the other Party, that other Party may immediately terminate this Agreement upon written notice to the breaching Party.

 

11.4Either Party may terminate this Agreement in its entirety by giving notice in writing to the other Party if any one or more of the following events happens:

 

(a)the other Party has any distress or execution levied on the major portion of its assets (as determined by its balance sheet in accordance with GAAP) which is not paid out within thirty (30) days of its being levied;

 

(b)the other Party calls a meeting for the purpose of passing a resolution to wind it up, or such a resolution is passed, or the other Party presents, or has presented, a petition for a winding up order, or presents, or has presented, a petition to appoint an administrator, or has an administrative receiver, or receiver, liquidator or other insolvency practitioner appointed over all or any substantial part of its business, undertaking, property or assets;

 

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(c)the other Party stops or suspends making payments (whether of principal or interest) with respect to substantially all of its debts or announces an intention to do so or the other Party suspends or ceases to carry on its business;

 

(d)a secured lender to the other Party holding a security interest over the major portion of the tangible assets (as determined by its balance sheet in accordance with GAAP) of such other Party takes any steps to obtain possession of the property on which it has security or otherwise to enforce its security;

 

(e)the other Party suffers or undergoes any procedure analogous to any of those specified in Clause 11.4(a)-(d) above or any other procedure available in the country in which the other Party is constituted, established or domiciled against or to an insolvent debtor or available to the creditors of such a debtor.

 

12.Consequences of Termination

 

12.1Upon termination of this Agreement for any reason whatsoever:

 

(a)the relationship of the Parties hereunder shall cease save as (and to the extent) expressly provided for in this Clause 12;

 

(b)any sublicenses granted by Dyax in accordance with the terms of this Agreement will continue in force provided that such sublicensees are not in breach of the relevant sublicense and that each sublicensee agrees to enter into a direct agreement with CAT upon the terms of this Agreement;

 

(c)Dyax shall immediately return or procure to be returned to CAT at such place as it directs and at the expense of Dyax (or if CAT so requires by notice to Dyax in writing, destroy) all CAT Know-How together with all copies of such CAT Know-How in its possession or under its control;

 

(d)The following provisions shall survive expiration or termination of this Agreement: Clauses 7 (in relation to any accrued payment obligations of Dyax prior to termination or expiry), 8, 9, 12, 13 and 15; and

 

(e)Expiry or termination of this Agreement shall not affect the rights and obligations of the Parties accrued prior to such expiry or termination including any accrued obligation for Dyax to make any payments under Clause 6.

 

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13.Dispute Resolution

 

13.1Any dispute arising between the Parties relating to, arising out of or in any way connected with this Agreement or any term or condition thereof, or the performance by either Party of its obligations hereunder, whether before or after termination of this Agreement, shall be referred to the Chief Executive Officers of each of the Parties. The Chief Executive Officers shall meet to resolve such deadlock within thirty (30) days of the date that the dispute is referred to them, at a time and place mutually acceptable to them. Any dispute that has not been resolved following good faith negotiations of the Chief Executive Officers for a period of thirty (30) days shall be referred to and finally settled by binding arbitration in accordance with the then current Commercial Arbitration Rules of the American Arbitration Association. There shall be three (3) arbitrators, each Party to designate one arbitrator and the two Party-designated arbitrators to select the third arbitrator. The Party initiating recourse to arbitration shall include in its notice of arbitration its appointment of an arbitrator. The appointing authority, in the event a Party does not or the Parties do not appoint arbitrator(s), shall be the American Arbitration Association in [*]. The place of arbitration shall be [*]. The language to be used in the arbitration shall be English. Any determination by the arbitration panel shall be final and conclusively binding. Judgement on any arbitration award may be entered in any court having jurisdiction thereof. Each Party shall bear its own costs and expenses incurred in the arbitration; provided that the arbitration panel may assess the costs and expenses of the prevailing Party, including reasonable attorneys fees, against the non-prevailing Party.

 

14.Notices

 

14.1All notices, requests, demands and other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be deemed to have been duly given upon the date of receipt if delivered by hand, recognized international overnight courier, confirmed facsimile transmission, or registered or certified mail, return receipt requested, postage prepaid to the following addresses or facsimile numbers:

 

If to Dyax: If to CAT:
Dyax Corp. Cambridge Antibody Technology Limited
300 Technology Square The Milstein Building
Cambridge, MA 02139 Granta Park, Cambridge
Attention: Chief Executive Officer Cambridgeshire CB1 6GH
Facsimile: (617) 225-2501 United Kingdom
  Attention: Company Secretary
  Facsimile: 011-44-(0)1223 471472
   

 

Either party may change its designated address and facsimile number by notice to the other party in the manner provided in this Clause.

 

15.Governing Law

 

15.1This Agreement shall be governed by and construed in accordance with the laws of the [*].

 

15.2Save as provided in this Clause, the United Kingdom Legislation entitled the Contracts (Rights of Third Parties) Act 1999 will not apply to this Agreement. No person, other than a CAT Indemnitee (as defined in Clause 9.1), who is not a Party to this Agreement (including any employee, officer, agent, representative or subcontractor of either Party) will have the right (whether under the Contracts (Rights of Third Parties) Act 1999 or otherwise) to enforce any term of this Agreement which expressly or by implication confers a benefit on that person without the express prior agreement in writing of the Parties which agreement must refer to this Clause, except that any Dyax Sublicensee shall have the right to enforce the provisions of Clause 12.1(b) of this Agreement and shall be a third party beneficiary for that purpose only.

 

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16.Specific Performance

 

16.1The parties agree that irreparable damage will occur in the event that the provisions of Clause 8 are not specifically enforced. In the event of a breach or threatened breach of any such provisions, each Party agrees that the other Party shall, in addition to all other remedies, be entitled to temporary or permanent injunction, without showing any actual damage or that monetary damages would not provide an adequate remedy and without the necessity of posting any bond, and/or a decree for specific performance, in accordance with the provisions hereof.

 

17.Assignment

 

17.1This Agreement may not be assigned by either party without the prior written consent of the other party, except that either Party may assign the benefit and/or burden of this Agreement to any Affiliate of it or any Third Party, provided that such Affiliate or Third Party undertakes to the other Party to be bound by the terms of this Agreement. This Agreement shall inure to the benefit of and be binding upon the parties and their respective lawful successors and assigns.

 

18.Compliance With Law

 

18.1Nothing in this Agreement shall be construed so as to require the commission of any act contrary to law, and wherever there is any conflict between any provision of this Agreement and any statute, law, ordinance, or treaty, the latter shall prevail, but in, such event the affected provisions of the Agreement shall be conformed and limited only to the extent necessary to bring it within the applicable legal requirements.

 

19.Amendment and Waiver

 

19.1This Agreement may be amended, supplemented, or otherwise modified only by means of a written instrument signed by both parties. Any waiver of any rights or failure to act in a specific instance shall relate only to such instance and shall not be construed as an agreement to waive any rights or fail to act in any other instance, whether or not similar.

 

20.Severability

 

20.1In the event that any provision of this Agreement shall, for any reason, be held to be invalid or unenforceable in any respect, such invalidity or unenforceability shall not affect any other provision hereof and the parties shall negotiate in good faith to modify the Agreement to preserve (to the extent possible) their original intent.

 

Appendix D

Page 17

 

 

 

 

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21.Entire Agreement

 

21.1This Agreement and the Amendment Agreement constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements or understandings between the parties relating to the subject matter hereof.

 

IN WITNESS OF THE ABOVE the Parties have signed this Agreement on the date written at the head of this Agreement.

 

SIGNED by )    
  )    
  )    
for and on behalf of )   General Counsel & Authorised Signatory
CAMBRIDGE ANTIBODY )    
TECHNOLOGY LIMITED )    
       
       
SIGNED by )    
  )    
  )    
for and on behalf of )   Senior Vice President &
DYAX CORP. )   Authorised Signatory
  )    

 

Appendix D

Page 18

 

 

 

 

CONFIDENTIAL DOCUMENT

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APPENDIX E

 

DYAX PATENT RIGHTS

 

Phage Display Patent Rights — [*]

 

Country Application/
Publication No.
Filing Date Patent No. Issue Date
[*] [*] [*] [*] [*]
[*] [*] [*] [*] [*]
[*] [*] [*] [*] [*]
[*] [*] [*] [*] [*]
[*] [*] [*]    
[*] [*] [*]    
[*] [*] [*]    
[*] [*] [*]    
[*] [*] [*]    
[*] [*] [*]   [*]
[*] [*] [*]   [*]
[*] [*] [*]   [*]
[*] [*] [*]   [*]
[*] [*] [*] [*] [*]
[*] [*] [*]    
[*] [*] [*] [*] [*]
[*] [*] [*]    
[*] [*] [*]   [*]
[*] [*] [*]   [*]
[*] [*] [*]   [*]
[*] [*] [*]   [*]

 

Appendix E

 

 

CONFIDENTIAL DOCUMENT

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Novel [*] Fragments - [*] et al.

 

Country Application/
Publication No.
Filing Date Patent No. Issue Date
[*] [*] [*]    
[*] [*] [*]    
[*] [*] [*]    
[*]   [*]    
[*] [*] [*]    
[*] [*] [*]    

 

CJ Library — [*] et al.

 

Country Application/
Publication No.
Filing Date Patent No. Issue Date
[*] [*] [*]    
[*] [*] [*]    
[*] [*] [*]    
[*] [*] [*]    
[*] [*] [*]    
[*] [*] [*]    
[*] [*] [*]    
[*] [*] [*]    

 

Antibody Reformatting Patents

 

Country Application/
Publication No.
Filing Date Patent No. Issue Date
[*] [*] [*]    
[*] [*] [*]    

 

Appendix E

 

 

 

CONFIDENTIAL DOCUMENT

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APPENDIX F

 

[*] PATENT RIGHTS

 

[*]

 

A total of three pages were omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

 

Appendix F

 

 

CONFIDENTIAL DOCUMENT

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APPENDIX G

 

XOMA NOTICE

 

XOMA owns a number of patents covering various aspects of bacterial antibody expression and phage display.

 

XOMA has licensed these patents on a non-exclusive basis to Dyax.

 

Under the license agreement with XOMA:

 

·                Dyax cannot provide phage display services or transfer phage display materials, products or information to you without first showing you a redacted copy of its license from XOMA and this notice.

 

·                If you and Dyax enter into a written agreement by which you become a “Dyax Collaborator,” then you will be permitted to use Dyax phage display services, Dyax phage display materials, products and information to research, develop and commercialize antibody products.

 

·                Collaborators do not, however, have the right to produce commercial quantities of such antibodies using XOMA’s patented technology. Rather, collaborators only have the right to make research and development quantities of antibodies using the XOMA patent rights. Thereafter, unless the collaborator obtains a commercial production license from XOMA (which may be available), the collaborator must produce commercial quantities of antibodies using a method that does not infringe XOMA patent rights.

 

·                Therefore, if you and Dyax enter into a written agreement, that agreement must contain certain provisions specified in the license agreement with XOMA, including: [**]

 

Terms pursuant to which you, as the recipient of any transferred materials, would agree to abide by each of the limitations, restrictions and other obligations provided for by the license agreement with XOMA, including, without limitation, the restrictions on use of such transferred materials for purposes other than research and development.

 

A covenant not to use transferred materials for any purpose other than for research and development purposes otherwise authorized by the license agreement with XOMA.

 

A provision that the “first sale” doctrine does not apply to any disposition of transferred materials.

 

An agreement by you to further dispose of transferred materials only to a third party who otherwise meets the definition of a “Dyax Collaborator” set forth in the license agreement with XOMA and who executes a written agreement in which it undertakes all of the obligations applied to the transferring party.

 

Appendix G

 

 

CONFIDENTIAL DOCUMENT

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APPENDIX H

 

SUBLICENSE AGREEMENT

 

This SUBLICENSE AGREEMENT (“Sublicense”), dated effective as of ______________, 20___ (the “Effective Date”), is entered into between DYAX CORP., a Delaware corporation, of 300 Technology Square, Cambridge, Massachusetts 02139 (“Dyax”), and ____________ of ____________ (“Sublicensee”).

 

WHEREAS, under the terms of that certain Amendment Agreement by and between Dyax and Cambridge Antibody Technologies Limited (“CAT”), dated January 3, 2003, as amended to date (the “Amended Agreement”) Dyax has the right to obtain product licenses, on a target-by-target basis, to develop and commercialize therapeutic and diagnostic antibody products identified using CAT’s proprietary technology and know-how;

 

WHEREAS, Dyax and CAT have executed one such product license, under which CAT granted Dyax rights to develop and commercialize therapeutic and diagnostic antibody products to the target described on Attachment A (the “Product License”);

 

WHEREAS, a redacted version of the Product License is attached hereto as Attachment B;

 

WHEREAS, pursuant to a Collaboration Agreement by and between Dyax and Sublicensee, dated effective ______________, 20___, (the “Collaboration Agreement”), Sublicensee has the right to obtain through Dyax a sublicense of the Product License; and

 

WHEREAS, Sublicensee desires to obtain through Dyax a sublicense of the Product License.

 

NOW THEREFORE, in consideration of the premises and the mutual covenants contained herein, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree as follows:

 

1.GRANT OF SUBLICENSE.

 

Subject to the terms and conditions set forth in Section 2 of this Sublicense, Dyax hereby grants to Sublicensee a world-wide, non-exclusive license of the rights granted to it under Clause 2.1 of the Product License. Sublicensee is permitted to sublicense its rights under this Sublicense in accordance with the terms and conditions set forth in Clauses 3.2 and 3.3 of the Product License.

 

2.SUBLICENSEE OBLIGATIONS.

 

2.1      Obligations Under Product License. Sublicensee agrees to abide by all of the terms and conditions applicable to Dyax and/or Sublicensee (as a Dyax Sublicensee) under the Product License and agrees that all obligations of Dyax to CAT under the Product License shall also be obligations of Sublicensee to Dyax, except for (i) any obligations of Dyax contained in Clause 6 (Consideration) and Clause 7 (Provisions Relating to the Payment of Consideration) of the Product License and (ii) any portion of the Product License that has been redacted by Dyax. Notwithstanding the foregoing, Sublicensee’s obligations pursuant to this Section 2.1 are conditional upon (i) Sublicensee receiving timely notice (in the manner provided in Section 10.2 of the Collaboration Agreement) from Dyax relating to (a) any change in such terms and conditions, and (b) any notice, claim or demand made by CAT under the Product License; and (ii) the parallel performance of Dyax to the extent both parties are required to perform to satisfy the obligations of Dyax or Sublicensee (as a Dyax Sublicensee) under the Product License.

 

Appendix H

 

 

CONFIDENTIAL DOCUMENT

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2.2       Obligations Under Collaboration Agreement. Sublicensee acknowledges and agrees that all of the terms and conditions contained in the Collaboration Agreement, as amended to date, remain in full force and effect, and Sublicensee agrees to abide by all of its obligations set forth thereunder.

 

2.3       Royalties. Notwithstanding anything to the contrary contained in the Product License, the sublicense granted to Sublicensee under Section 1 of this Sublicense shall be royalty bearing in accordance with the terms set forth in the Collaboration Agreement.

 

3.DYAX OBLIGATIONS.

 

3.1       Obligations Under Collaboration Agreement. Dyax acknowledges and agrees that all of the terms and conditions contained in the Collaboration Agreement, as amended to date, remain in full force and effect, and Dyax agrees to abide by all of its obligations set forth thereunder.

 

3.2       Amendment to Product License. Dyax agrees that it shall not amend the Product License in any way that materially and adversely affects or reduces the rights and licenses granted to Sublicensee under this Sublicense.

 

3.3       Indemnification for Dyax Breach. Dyax shall indemnify and hold Sublicensee and its officers, directors and agents (“Sublicensee Indemnified Parties”) harmless from and against any liability or loss incurred by the Sublicensee Indemnified Parties to CAT under the Product License, to the extent that such liability was incurred by Sublicensee as a result of a breach of the Product License by Dyax.

 

4.TERM AND TERMINATION.

 

This Sublicense shall expire upon expiration of the Product License and shall terminate upon termination of the Product License; provided that, at Sublicensee’s election, upon termination of the Product License, Sublicensee’s rights hereunder will continue in force provided that Sublicensee is not in breach of this Sublicense and agrees to enter into a direct agreement with CAT upon the terms of the Product License.

 

Appendix H

 

 

CONFIDENTIAL DOCUMENT

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5.MISCELLANEOUS.

 

CAT shall be a third party beneficiary of this Sublicense and shall have the right to enforce its terms (and claim damages as a result of any breach). This Sublicense shall be not be assignable by Sublicensee, except that Sublicensee may assign the benefit and/or burden of this Sublicense to any Affiliate of it or any Third Party (“Affiliate” and “Third Party” being defined in the Collaboration Agreement), provided that such Affiliate or Third Party undertakes to Dyax to be bound by the terms of this Sublicense. This Sublicense shall be binding upon, and shall inure to the benefit of, the parties hereto and their successors and assigns. This Sublicense may be not be amended except pursuant to a written instrument signed by parties hereto. No provisions of this Sublicense may be waived except by an instrument in writing signed by the party sought to be bound. Neither this Sublicense nor any part hereof, including this provision against oral modifications, may be modified, waived or discharged except pursuant to a written agreement signed by both parties.

 

IN WITNESS WHEREOF, the parties have caused this Sublicense to be executed by their respective duly authorized representatives as of the Effective Date.

 

DYAX CORP. SUBLICENSEE :
     
By:   By:  

 

Appendix H

 

 

AMENDMENT

 

This Amendment (this “Amendment”), effective as of July 31, 2008, amends the Amended and Restated Collaboration Agreement effective as of January 24, 2007 (the “Agreement”), between DYAX CORP., a Delaware corporation (“Dyax”), and MERRIMACK PHARMACEUTICALS, INC., a Massachusetts corporation (“Merrimack”). Capitalized terms used herein and not defined herein shall have the meanings ascribed to them in the Agreement.

 

WHEREAS, the Parties have agreed to amend the definition of Commercial Field;

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby amend the Agreement as follows:

 

1.              Section 1.8 of the Agreement is hereby amended and restated in its entirety to read as follows:

 

“1.8       Commercial Field” means all human therapeutic and diagnostic uses, excluding (i) Research Products and (ii) Separations Applications.”

 

2.              As amended hereby, the Agreement remains in full force and effect.

 

IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Amendment as a sealed instrument effective as of the date first above written.

 

DYAX CORP.   MERRIMACK PHARMACEUTICALS, INC.
     
     
By: /s/ Gustav Christensen   By: /s/ Edward J. Stewart
         
Title: EVP & Chief Business Officer   Title: Vice President, Bus. Dev.
         
Date: July 31, 2008   Date: July 17, 2008
         
         
      By: /s/ Lisa A. Evren
         
      Title: SVP & CFO
         
      Date: 7/17/08

 

 

 

 

 

 

AMENDMENT

 

This Amendment (this “Amendment”), effective as of November 6, 2009, further amends the Amended and Restated Collaboration Agreement, dated effective as of January 24, 2007 and previously amended on July 31, 2008 (the “Amended Agreement”), between DYAX CORP., a Delaware corporation (“Dyax”), and MERRIMACK PHARMACEUTICALS, INC., a Massachusetts corporation (“Merrimack”). Capitalized terms used herein and not defined herein shall have the meanings ascribed to them in the Amended Agreement.

 

WHEREAS, the Parties wish to amend the Amended Agreement to clarify certain intellectual property issues that have arisen in the course of the collaboration.

 

NOW, THEREFORE, in consideration of the foregoing and the covenants and premises contained in the Amended Agreement, the Parties hereby agree to the following amendments:

 

AMENDMENTS

 

1.              Article 1.33 of the Amended Agreement is hereby amended and restated in its entirety to read as follows:

 

1.33Patent Rights” means patent applications or patents, author certificates, inventor certificates, utility certificates, improvement patents, and models and certificates of addition, and all foreign counterparts of them and includes, provisionals, divisionals, renewals, continuations, continuations-in-part, extensions, reissues, substitutions, confirmations, registrations, revalidations, or additions of or to them as well as any supplementary protection certificate or any other post patent expiration extension of patent protection in respect to them.

 

2.             Article 5 of the Amended Agreement is hereby amended and restated in its entirety to read as follows:

 

ARTICLE V
INTELLECTUAL PROPERTY

 

5.1Ownership.

 

(a)Dyax Antibodies and Dyax Antibody Information. Subject to the licenses granted to Merrimack in Section 3.1 and the rights granted in Section 5.3, Dyax is and shall remain the owner of all Dyax Antibodies that are identified, generated, developed, produced, optimized, or obtained by Dyax from the Dyax Libraries in connection with the Research Program, together with the Dyax Antibody Information applicable thereto.

 

(b)Dyax Libraries. Dyax is and shall remain the owner of the Dyax Libraries and all improvements thereon developed during the term of this Agreement.

 

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(c)Dyax Research Materials and Dyax Research Know-How. Subject to the licenses granted to Merrimack in this Agreement, Dyax is and shall remain the owner of the Dyax Research Materials and Dyax Research Know-How generated or utilized during the conduct of the Research Program.

 

(d)Merrimack Targets and Merrimack Materials. Merrimack is and shall remain the owner of Merrimack Targets and Merrimack Materials.

 

5.2Inventions.

 

(a)Inventorship. Inventorship will be determined in accordance with United States patent laws.

 

(b)Inventions. The Parties acknowledge and agree that, regardless of inventorship:

 

(i)Dyax shall hold title to:

 

(A)any invention or other subject matter directed to a composition of matter comprising the [*] that were delivered by Dyax to Merrimack

 

(B)B)      any invention or other subject matter relating to [*], and

 

(C)any other invention or subject matter (including all intellectual property rights therein) that is conceived, reduced to practice or otherwise made solely by Dyax personnel in connection with this Agreement.

 

Collectively, the inventions referenced under this Section 5.2(b)(i) are referred to herein as the “Dyax Inventions”.

 

(ii)Merrimack shall hold title to any invention or other subject matter (including all Intellectual property rights therein) conceived, reduced to practice or otherwise made solely by Merrimack personnel in connection with this Agreement; [*]. Collectively, the inventions referenced under this Section 5.2(b)(ii) are referred to herein as the “Merrimack Inventions”.

 

(iii)The Parties shall jointly hold title to all inventions and other subject matter (including all intellectual property rights therein) conceived, reduced to practice or otherwise made jointly by personnel of Dyax and Merrimack; [*]. Collectively, the inventions referenced under this Section 5.2(b)(iii) are referred to herein as the “Joint Inventions”.

 

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Except as expressly provided in this Agreement, it is understood that neither Party shall have any obligation to account to the other for profits, or to obtain any approval of the other Party to license or exploit a joint invention, by reason of joint ownership of any invention or other intellectual property and each Party hereby waives any right it may have under the laws of any country to require such accounting or approval. Dyax shall promptly notify Merrimack of all Dyax Antibodies identified against Merrimack Targets in accordance with the applicable Research Plan, together with all Dyax Antibody Information applicable thereto.

 

5.3Patenting Antibody Inventions under the Research Program.

 

(a)Filing and Prosecution. Prior to the exercise of Merrimack’s option to obtain a Commercial License as set forth in Section 3.1(b), Merrimack may wish to file or to have Dyax file (as set forth below) a provisional application. Prior to filing a provisional application, Merrimack shall provide a draft of each such proposed provisional application to Dyax for review and comment and discussion related to inventorship [*] days prior to filing. During the [*] day review period:

 

(i)Dyax may review and comment upon any such provisional patent application and Merrimack shall incorporate Dyax’s reasonable comments; and

 

(ii)Merrimack and Dyax shall use reasonable and good faith efforts to reach a common understanding of inventorship of claims.

 

(A)If Merrimack and Dyax agree that the inventions claimed in the provisional application are Dyax Inventions as defined in Section 5.2(b)(i)(A) or Joint Inventions as defined in Section 5.2(b)(iii), then Dyax will, at Merrimack’s request and expense, file and prosecute any Patent Rights in any country requested by Merrimack with a patent counsel reasonably acceptable to Merrimack. For clarity, this means that Dyax will also file and prosecute any nonprovisional Patent Rights based on such provisional applications prior to Merrimack exercising its right to obtain a Commercial License as set forth in Section 3.1(b). Thereafter, Dyax’s Patent Rights in such Dyax Inventions or Joint Inventions shall be deemed to be included in the rights licensed to Merrimack under Section 3.1. Dyax shall (i) keep Merrimack fully informed as to the filing, prosecution and maintenance of such Patent Rights, (ii) furnish to Merrimack copies of all documents relevant to any such filing, prosecution and maintenance, and (iii) allow Merrimack [*] days to review and comment upon, and to incorporate Merrimack’s reasonable comments into, any such document filed with any patent office with respect to such Patent Rights prior to filing such documents.

 

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(B)If the inventions described in the provisional application are mutually agreed to be Merrimack Inventions or determined to be Merrimack Inventions pursuant to Section 5.3(a)(ii)(C) below, then Merrimack shall have the sole and exclusive right to file and prosecute any Patent Rights based on such provisional application in any country, at Merrimack’s expense.

 

(C)If Merrimack and Dyax cannot, despite reasonable and good faith efforts, reach a common understanding of inventorship of claims of any such draft provisional application, then Dyax shall file the provisional patent application. Merrimack and Dyax [*]reasonably acceptable to both Parties prior to the [*], who shall make a final determination of inventorship (in accordance with [*]) as to the [*] which was [*] to such [*]. Such [*] shall be [*] upon the [*] and their respective [*]. If the [*] is [*] to be a [*] under Section [*] or a [*] under Section [*], then [*]shall continue to [*] in any country requested by [*] at [*] expense. Thereafter, such [*] in such [*] or [*] shall be deemed to be included in the rights licensed to Merrimack under Section 3.1. Dyax shall (i) keep Merrimack fully informed as to the filing, prosecution and maintenance of such Patent Rights, (ii) furnish to Merrimack copies of all documents relevant to any such filing, prosecution and maintenance, and (iii) allow Merrimack [*] days to review and comment upon, and to incorporate Merrimack’s reasonable comments into, any such document filed with any patent office with respect to such Patent Rights prior to filing such documents.

 

(b)Upon exercise of Merrimack’s option to obtain a Commercial License with respect to a Dyax Antibody, as set forth in Section 3.1(b), Dyax shall assign (and cause its inventors to assign) to Merrimack any of Dyax’s Patent Rights in the Dyax Inventions as defined in Section 5.2(b)(i)(A) and any Joint Inventions as defined in Section 5.2(b)(iii) that are directed to or relating to such Dyax Antibody. Upon exercise of a Commercial License, Merrimack will also have the right to file and prosecute all pending and subsequent patent applications related to the Dyax Antibody(ies), the intellectual property rights for which are subject to an obligation of assignment to Merrimack hereunder, without providing Dyax with a draft application or other prosecution documents for review and comment prior to such filing. Dyax will use reasonable efforts to cooperate with Merrimack in such activities. For the avoidance of doubt, Dyax acknowledges and agrees that if, upon Merrimack’s election to obtain a Commercial License with respect to a Dyax Antibody, Dyax is [*] with respect to the Target against which such Dyax Antibody is directed [*], Merrimack’s rights under clauses of this paragraph above shall apply notwithstanding [*] and Merrimack may, at Merrimack’s expense, require Dyax to assign (and cause its inventors to assign) to Merrimack Dyax’s Patent Rights in any Dyax Inventions as defined in Section 5.2(b)(i)(A) and any Joint Inventions as defined in Section 5.2(b)(iii) that are directed to or relating to such Dyax Antibody.

 

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For clarity, If Merrimack does not exercise its option to obtain a Commercial License with respect to a Dyax Antibody, Dyax’s Patent Rights in any Dyax Inventions as defined in Section 5.2(b)(i)(A) directed to or relating to such Dyax Antibody shall remain owned by Dyax and Dyax’s joint ownership rights to Joint Inventions as defined in Section 5.2(b)(iii) directed to or relating to such Dyax Antibody shall remain owned by Dyax.

 

(c)Enforcement. Merrimack shall have the right but not the obligation, at its expense, to enforce any Patent Rights which relate to any Antibody that is identified, generated, developed, produced, optimized, or obtained by Dyax from a Dyax Library that is delivered by Dyax to Merrimack in connection with the Research Program. Dyax shall cooperate with Merrimack, at Merrimack’s expense, in pursuing any litigation or other enforcement action to enforce such Patent Rights, including allowing Merrimack to file suit in Dyax’s name, making Dyax employees available to Merrimack, and promptly executing any documents which may be required to pursue such action. Merrimack shall control any such litigation or other enforcement action and shall enter into, or permit, the settlement of any such litigation or other enforcement action. All monies recovered upon the final judgment or settlement of any suit to enforce such Patent Rights shall first be paid to recover the respective actual out-of-pocket expenses of Merrimack and Dyax, or equitable portion thereof, associated with the enforcement. The remainder of any such monies shall be deemed to be Net Sales for purposes of determining the royalties owed by Merrimack to Dyax under Sections 4.6. and 4.7.

 

5.4Further Assurances. Each Party has and will have appropriate agreements with its employees and contractors necessary to fully effect the provisions of Sections 5.1, 5.2 and 5.3. Each Party agrees to execute such assignments and other documents, to cause its employees and agents to execute such assignments and other documents, and to take such other actions, as may reasonably be requested by the other Party from time to time to give effect to the provisions of Sections 5.1, 5.2 and 5.3.

 

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3.             From and after the date of this Amendment, the term “Agreement” as used in the Amended Agreement shall mean the Amended Agreement, as further amended by this Amendment. Except as expressly amended hereby, the terms of the Amended Agreement shall remain in full force and effect and all such terms are hereby ratified and confirmed.

 

4.             This Amendment may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument.

 

5.              This Amendment shall be governed by the laws of the laws of the Commonwealth of Massachusetts.

 

[Remainder of this page intentionally left blank]

 

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IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Agreement as a sealed instrument effective as of the date first above written.

 

DYAX CORP.   MERRIMACK PHARMACEUTICALS, INC.
     
By: /s/ Ivana Magovcevic-Liebisch   By: /s/ Edward J. Stewart
Title: Executive Vice President, Corporate   Title: SVP, Business Development
Development and General Counsel      
Date: 11/6/09   Date: November 4, 2009

 

 

 

 

AMENDMENT
TO
AMENDED AND RESTATED COLLABORATION AGREEMENT

 

This AMENDMENT (the “Amendment”), dated as of January 18, 2012 (the “Amendment Date”), further amends the AMENDED AND RESTATED COLLABORATION AGREEMENT, dated January 24, 2007, as previously amended on July 31, 2008 and November 6, 2009 (the “Amended Agreement”) between DYAX CORP. (“Dyax”) and MERRIMACK PHARMACEUTICALS, INC, (“Merrimack”). Terms not otherwise defined herein shall have the respective meanings attributed to them in the Amended Agreement.

 

WHEREAS,. Dyax and Merrimack wish to amend the Amended Agreement to allow Merrimack to utilize the services and capabilities of third parties to research and develop Dyax Antibodies in accordance with the terms and conditions set forth in the Amended Agreement.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained in this Amendment, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

1.             Section 3.1(a) of the Amended Agreement is hereby deleted in its entirety and replaced with the following in lieu thereof:

 

(a)Research License. Subject to the terms and conditions of this Agreement, including the restrictions set forth in Section 3.2 and the payment obligations set forth in Article 4, Dyax hereby grants to Merrimack and its Affiliates a world-wide, non-exclusive, royalty-free, non-transferable license (with the right to sublicense), under the Dyax Patent Rights, Dyax Research Know-How, Dyax Antibody Information, Dyax Antibody IP and CAT Patent Rights to use Dyax Research Materials and to research, develop and make Dyax Antibodies, solely in the Research Field.

 

2.              Except as expressly provided otherwise in this Amendment, all provisions of the Amended Agreement remain in full force and effect without modification and all such terms are hereby ratified and confirmed.

 

3.              From and after the Amendment Date, the term “Agreement” as used in the Amended Agreement shall mean the Amended Agreement, as further amended hereby.

 

4.              This Amendment may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument.

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective duly authorized representatives as of the date set forth above.

 

DYAX CORP.   MERRIMACK PHARMACEUTICALS, INC.
     
     
By: /s/ Andrew Ashe   By: /s/ Edward J. Stewart
         
Name: Andrew Ashe   Name: Edward J. Stewart
         
Title: VP + GC   Title: SVP

 

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Exhibit 10.7

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [*], HAS BEEN OMITTED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO ELEVATION ONCOLOGY, INC. IF PUBLICLY DISCLOSED.

 

 

 

COMMERCIAL LICENSE AGREEMENT

 

ENTERED INTO WITH

 

Merrimack Pharmaceuticals, Inc.

 

 

 

 

CONFIDENTIAL

 

This Commercial License Agreement (the “Agreement”) is made effective on June 6, 2008 (the “Effective Date”),

 

by and between

 

Selexis SA, 18 ch. des Aulx, 1228 Plan-les-Ouates, Geneva, Switzerland SA (“Selexis”)

 

and

 

Merrimack Pharmaceuticals, Inc., One Kendall Square, Building 700, 2nd Fl, Cambridge, MA, 02139 (“Merrimack”).

 

BACKGROUND

 

Whereas, Merrimack is a biopharmaceutical company engaged in the research, development, manufacturing and sale of biopharmaceutical products; and

 

Whereas, Selexis is a biotechnology company engaged in the development and sale of recombinant cell lines based on proprietary technology (“Selexis Technology”, as defined further below); and

 

Whereas, Selexis is the owner of certain proprietary and confidential information and know-how (“Selexis Know-How”, as defined further below), and intellectual property (“Selexis Patent Rights”, as defined further below); and

 

Whereas, Selexis is willing to grant Merrimack, and Merrimack is willing to receive from Selexis, Selexis Know-How and Selexis Patent Rights and licenses thereto related to the Selexis Technology, on the terms and conditions set forth herein.

 

 

 

 

CONFIDENTIAL

 

AGREEMENT

 

Now, therefore, the Parties, intending to be legally bound hereby, do hereby agree as follows:

 

1.            Definitions

 

The following capitalized terms, whether used in the singular or the plural, shall have the following meanings as used in this Agreement, unless otherwise specifically indicated:

 

1.1“Affiliate” shall mean any Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with the Party specified. For the purposes of this definition, “control” shall mean the possession, direct or indirect, of the power to cause the direction of the management and policies of a Person, whether through ownership of fifty percent (50%) or more of the voting securities of such Person, by contract or otherwise. A Person shall only be considered an Affiliate for so long as such control exists.

 

1.2“Agreement” shall mean as defined on Page 2, 1st paragraph.

 

1.3“Calendar Quarter” shall mean for each Calendar Year, each of the three month periods ending March 31, June 30, September 30 and December 31.

 

1.4“Calendar Year” shall mean the period commencing on January 1 and ending twelve (12) consecutive calendar months later on December 31.

 

1.5“Cell Line” shall mean a mammalian cell line that is developed using the Selexis Technology.

 

1.6“Clinical Trials” shall mean human studies designed to measure the safety and/or efficacy of the Product. Clinical Trials include Phase I Clinical Trials, Phase II Clinical Trials, and Phase Ill Clinical Trials.

 

1.7“Collaboration Partner” shall mean a Third Party with which Merrimack collaborates on the development of the production process and/or commercialization of a Product or to which Merrimack has granted a license for the development of the production process and/or commercialization of a Product.

 

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1.8“Combination Product” shall mean a therapeutic composed of at least two components in which at least one component of the therapeutic is a Product and the other component is any other active ingredient, device or component.

 

1.9“Combination Product Adjustment” shall mean the following:

 

1.9.1If, on a country-by-country basis, the Product is sold as part of a Combination Product, in addition to being sold separately and the other component(s) are also sold separately, then the Net Sales for such Combination Product will be adjusted by multiplying actual Net Sales of such Combination Product by the fraction A/B where A is the average invoice price of the Licensed Product, when sold separately, and B is the sum of the average invoice price of any other active ingredient(s), device(s), or component(s) in the Combination Product, when sold separately.

 

1.9.2If, on a country-by-country basis, any of the Product or any of the other active ingredient(s), device(s) or component(s) of the Combination Product is not sold separately, Net Sales for such Combination Product shall be determined by the Parties in good faith based on the proportional value added to the Product by such Licensed Product and such other active ingredient(s), device(s) and other component(s).

 

In the event of any dispute between the Parties regarding the determination of any Combination Product Adjustment, such dispute shall be resolved in accordance with Sections 9.4 and 9.8 of this Agreement; provided that, in any arbitration of such dispute pursuant to Section 9.8, the arbitrator designated to conduct the arbitration shall be a person with business expertise in the commercialization of pharmaceutical products.

 

1.10“Commercial License” shall mean as defined in Section 2.1.

 

1.11“Confidential Information” shall mean, subject to Section 8.2, information of one Party communicated to the other Party that, if written, is marked “confidential” by the providing Party or, if oral, is reduced to writing and marked “confidential” by the providing Party, and delivered to the receiving Party, within [*] days of the oral disclosure, under, or as a result of or in connection with, this Agreement.

 

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1.12“Contract Manufacturing Organization” shall mean an entity at least fifty percent (50%) of the business of which is directed toward the commercial production of recombinant proteins pursuant to contract manufacturing and supply agreements.

 

1.13“Contractor” shall mean a Third Party contractor who: (i) develops the production process for Products or (ii) manufactures and supplies Products by using such production process.

 

1.14“Default” shall mean as defined in Section 7.2.

 

1.15“Defaulting Party” shall mean as defined in Section 7 .2.

 

1.16“Effective Date” shall have the meaning as given on Page 2, 1st paragraph.

 

1.17“FDA” shall mean the United States Food and Drug Administration, or any successor agency.

 

1.18“First Commercial Sale” shall mean, with respect to any Product in any country, the first sale of such Product for use or consumption by the general public in such country after Regulatory Approval as well as Pricing and Reimbursement Approval for such Product has been obtained in such country. For the avoidance of doubt, sales prior to receipt of all Regulatory Approvals and Pricing and Reimbursement Approvals necessary to commence regular commercial sales, such as so-called “treatment IND sales”, “named patient sales” and “compassionate use sales”, shall not be construed as a First Commercial Sale.

 

1.19“Force Majeure” shall mean any occurrence beyond the reasonable control of a Party that prevents or, substantially interferes with the performance by the Party of any of its obligations hereunder.

 

1.20Merrimackshall mean as defined on Page 2, 1st paragraph.

 

1.21“IND” shall mean an Investigational New Drug Application for the Product filed with the FDA pursuant to 21 C.F.R. Part 312, or any comparable filing made with a Regulatory Authority in another country (including the submission to a competent authority of a request for an authorisation concerning a clinical trial, as envisaged in Article 9, paragraph 2, of European Directive 2001/20/EC).

 

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1.22“Invention” shall mean any invention, idea, innovation, enhancement, improvement or feature, whether or not patentable or registrable, together with any intellectual property rights relating thereto (including without limitation Patent Rights and rights in confidentiality and proprietary information).

 

1.23“Know-How” shall mean information in whatever form, including in any electronic, tangible or intangible medium, and includes information and materials relating to Inventions and other know-how, trade secrets, data (including amongst other things all data from pre-clinical and clinical studies and other studies intended for regulatory submission), results, formulae, DNA and amino acid sequence information and developments.

 

1.24“Licensed Field of Use” shall mean the development, manufacture and sale of Products for any field of use.

 

1.25“Licensed Products” shall mean any pharmaceutical preparation containing Selexis Materials, produced using any Cell Line or covered by Valid Claims.

 

1.26“Losses” shall mean Losses as defined in Section 6.1 .

 

1.27“Net Sales” shall mean the amount collected by Merrimack, its Affiliates and/or its sublicensees on account of sales of Product to Third Parties in the Territory, less the following deductions:

 

1.27.1sales and excise taxes and duties paid or allowed by the selling party and any other governmental charges imposed upon the production, importation, use or sale of the Products;

 

1.27.2customary trade, quantity and cash discounts allowed on Products;

 

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1.27.3compulsory government discounts and rebates and discounts and rebates actually granted, paid or credited to any governmental agency or any third party payor, administrator or contractee,

 

1.27.4refunds, chargebacks and any other allowances or credits to customers on account of rejection or return of Product or on account of retroactive price reductions affecting the Product;

 

1.27.5freight and insurance costs, if they are included in the selling price for the product invoiced to Third Parties, provided always that such deduction shall not be greater than the balance between the selling price actually invoiced to the Third Party and the standard selling price which would have been charged to such Third Party for such Product exclusive of freight and insurance in the respective country or in a comparable country; and

 

1.27.6fees paid to wholesalers in consideration for inventory management agreements relating to the Product.

 

1.27.7In the event that Products are sold in any country in the form of a Combination Product containing one or more other therapeutically active ingredient(s), device(s), or component(s) the Net Sales for any such product shall be computed pursuant to the Combination Product Adjustment.

 

1.28“Non-Defaulting Party” shall have the meaning as given in Section 7.2.

 

1.29“Notice of Default” shall have the meaning as given in Section 7.2.

 

1.30“Party” shall mean Selexis or Merrimack, as the case may be; and “Parties” shall mean Selexis and Merrimack, collectively.

 

1.31“Patent Rights” shall mean any and all of the following: (i) patent applications (including provisional patent applications) and patents (including the inventor’s certificates); (ii) any substitution, extension (including patent term extensions and supplementary protection certificate), registration, confirmation, reissue, continuation, divisional, continuation-in-part, re-examination, renewal, patent of addition or the like thereof or thereto; (iii) any foreign counterparts of any of the foregoing; and (iv) any utility model applications and utility models (whether or not corresponding to any of the foregoing).

 

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1.32“Person” shall mean an individual, a partnership, a joint venture, a corporation, a limited liability company, a trust, an estate, an unincorporated organization, or any other entity, or a government or any department or agency thereof, whether acting in an individual, fiduciary or other capacity.

 

1.33“Phase I Clinical Trial” shall mean a clinical trial conducted in humans which is principally intended to obtain data on the safety, tolerability, pharmacokinetic or pharmacodynamic properties of a product. Phase I shall be deemed to have commenced when the first patient in the study has been treated. Phase I shall be deemed to have completed when the last patient has completed his or her treatment being investigated by that clinical trial as described in its protocol, the database is locked, and data from all patients, according to protocol, has been analyzed for the primary endpoint.

 

1.34“Phase II Clinical Trial” shall mean a clinical trial conducted in humans in which the primary objective is a preliminary determination of therapeutic efficiency and/or to find an optimal dose range in patients with the disease target being studied. Phase II shall be deemed to have commenced when the first patient in the study has been treated. Phase II shall be deemed to have completed when the last patient has completed his or her treatment being investigated by that clinical trial as described in its protocol, the database is locked, and data from all patients, according to protocol, has been analyzed for the primary endpoint.

 

1.35“Phase III Clinical Trial” shall mean a clinical trial conducted in humans in which the primary objective is a determination of therapeutic efficiency in patients with the disease target being studied. Phase III shall be deemed to have commenced when the first patient in the study has been treated. Phase III shall be deemed to have completed when the last patient has completed his or her treatment being investigated by that clinical trial as described in its protocol, the database is locked, and data from all patients, according to protocol, has been analyzed for the primary endpoint.

 

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1.36“Pricing and Reimbursement Approval” shall mean any approvals, licences, registrations or authorisations of any supranational, national, regional, state or local Regulatory Authority or other regulatory agency, department, bureau or governmental entity, necessary to determine or set the pricing of a Product, and/or its reimbursement level by the relevant health authorities, providers or other funding institutions, at supranational, national, regional, state or local level.

 

1.37“Product” shall mean any pharmaceutical preparation in final form containing any Licensed Products for sale by prescription, over-the-counter or any other method, in any dosage form, formulation, presentation, line extension or package configurations, including such Product in development where the context so requires in this Agreement.

 

1.38“Regulatory Approval” shall mean any approvals, licences, registrations or authorisations of any supranational, national, regional, state or local Regulatory Authority or other regulatory agency, department, bureau or governmental entity, necessary for the manufacture, marketing or sale of the Product or conduct of clinical trials in a regulatory jurisdiction, excluding Pricing and Reimbursement Approval.

 

1.39“Regulatory Authority” shall mean (i) the FDA or (ii) any and all governmental or supranational agencies, ministries, authorities or other bodies with similar regulatory authority with respect to approval or registration of pharmaceutical or biologic products in any other jurisdiction anywhere in the world.

 

1.40“Royalty Term” means with respect to each Product sold in a particular country, the period beginning on the date of First Commercial Sale in such country and terminating on the expiration of the last-to-expire or lapse of any Valid Claims covering the Product in such country.

 

1.41Selexisshall have the meaning as given on Page 2, 1st paragraph.

 

1.42Selexis Know-How’’ shall mean SelexisConfidential Information and Know-How relating to the construction and development of recombinant cell lines for the manufacture of biopharmaceutical products and existing as of the Effective Date or obtained thereafter during the term of this Agreement.

 

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1.43Selexis Materials” shall mean the materials provided by Selexis to Merrimack under this Agreement and all modifications and improvements thereof made by Selexis during the term hereof.

 

1.44Selexis Patent Rights” shall mean Patent Rights that: (i) are owned or controlled by Selexis or any of its Affiliates, (ii) which cover Selexis Know-How, Selexis Materials or any Cell Line or are necessary or useful for the use of Selexis Know-How, the use of Selexis Materials or the use, construction or development of any Cell Line, and (iii) are existing as of the Effective Date or obtained thereafter during the term of this Agreement. Without limiting the definition set forth in this Section 1.44 the Selexis Patent Rights as of the Effective Date are listed in Exhibit 1 hereto.

 

1.45Selexis Technology’’ shall mean the Selexis Patent Rights, Selexis Know-How and Selexis Materials.

 

1.46“Taxes” shall mean all excises, taxes and duties, including without limitation VAT.

 

1.47“Term” shall mean as defined in Section 7.1.

 

1.48“Territory” shall mean the entire world.

 

1.49“Third Party” shall mean a Person other than Selexis, Merrimack or an Affiliate of Selexis or Merrimack.

 

1.50“Valid Claim” shall mean any issued or granted claim of the Selexis Patent Rights that has not been revoked or held unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction, that is unappealable or remains unappealed at the end of the time allowed for appeal, and that has not been disclaimed, denied or admitted to be invalid or unenforceable through reissue, re-examination, disclaimer or otherwise.

 

1.51“VAT” shall mean value added tax and any other similar turnover, sales or purchase tax or duty levied by any jurisdiction, whether central, regional or local.

 

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2.            Commercial Licenses

 

2.1Commercial Licenses. Selexis hereby grants to Merrimack and its Affiliates a non-exclusive license (“Commercial License”) in the Territory, with the limited right to sublicense as per clause 2.2 hereafter, under the Selexis Technology, subject to the terms and conditions of the Agreement, to use Cell Lines for the manufacture of Products in the Licensed Field of Use and to develop, make, have made, use, offer for sale, sell, import and otherwise exploit Products, including the use of Products in research and Clinical Trials.

 

2.2Sublicenses. Merrimack may grant sublicenses under the foregoing Commercial License and transfer the Cell Lines and Selexis Know-How only to Contractor(s) and/or Collaboration Partner(s) and only with respect to of the development, manufacture, use, offer for sale, sale, importation and/or other exploitation of Products in the Licensed Field of Use. In any event, Merrimack is fully liable and responsible for any breach of any of its obligations hereunder committed by an Affiliate, a Collaboration Partner or Contractor, a consultant or agent to whom the Cell Line and the Selexis Technology or parts thereof are made available under any such sublicense.

 

2.3Transfer of Selexis Materials. Merrimack and its Affiliates shall not transfer the Selexis Materials to any Third Party, except to Contractors or Collaboration Partners and in such case solely in connection with a sublicense under the Commercial License or for the development, manufacture, use, offer for sale, sale, importation and/or other exploitation of Products in the Licensed Field of Use.

 

2.4Merrimack is fully liable and responsible for any breach of any of its obligations hereunder committed by an Affiliate, Contractor, Collaboration Partner, consultant or agent to whom a Licensed Cell Line, Selexis Materials or Selexis Technology was made available by Merrimack.

 

2.5All rights and licenses granted under this Agreement by Selexis to Merrimack are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the United States Bankruptcy Code, as amended from time to time (the “Bankruptcy Code”), licenses of rights to “intellectual property” as defined under Section 101(35A) of the Bankruptcy Code. The Parties agree that Merrimack shall retain and may fully exercise all of its rights and elections under the Bankruptcy Code in the event of a bankruptcy of Selexis.

 

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3.            Consideration

 

3.1Payments.

 

3.1.1Commercial License Exercise Payment. Within ten (10) business days after the Effective Date, Merrimack shall pay Selexis the sum of fifty thousand Euros (€ 50,000).

 

3.1.2Commercial License Milestone Payments. As consideration for the rights and licenses granted by Selexis to Merrimack under this Agreement, Merrimack shall make the following milestone payments to Selexis with respect to the first occurrence of such milestone events for each Licensed Product (except that the milestone payment set forth in Section 3.1.2(a) shall not be payable with respect to the first Licensed Product):

 

(a)upon [*] produced using the Selexis Technology: [*] Euros (€ [*]);

 

(b)upon [*] produced using the Selexis Technology: [*] Euros (€ [*]);

 

(c)upon [*] produced using the Selexis Technology: [*] Euros (€ [*]);

 

(d)upon [*] produced using the Selexis Technology: [*] Euros (€ [*]).

 

3.1.3Commercial License Royalty Payments: In addition to the milestone payments set forth in Sections 3.1.1 and 3.1.2, during the Royalty Term Merrimack shall pay Selexis on a Product-by-Product and country-by-country basis a minimum Calendar Year royalty equal to the greater of (a) [*] Euros (€ [*]) (provided that such amount shall be pro rated for any partial Calendar Year during the Royalty Term) or (b) [*] percent ([*] %) of Net Sales of such Product sold in such country. In the case where royalties are due in respect of the sale of Product directly by Merrimack, such royalties shall be paid for each [*] within [*] ([*]) days of the end of that [*]. Where royalties are due in respect of the sale of Licensed Product by a sub-licensee of Merrimack, payment shall be made within [*] ([*]) days of the end of that [*]. For the avoidance of doubt no royalty payments shall be due in any country after the Royalty Term has expired in such country. Where royalties are no longer due in accordance with the foregoing in respect of any Product in any country, the Commercial Licences granted to Merrimack under this Agreement shall become perpetual, irrevocable, fully paid up and royalty free in respect of such Product in such country.

 

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3.2Mechanism of Payment. The payments due to Selexis under this Agreement shall be made by wire transfer or electronic fund transfer (at Merrimack’s discretion) to the credit and account of Selexis as follows:

 

Bank Name:

[*]

[*]

[*]

   
Account:

[*]

[*]

[*]

[*]

   
To:

Selexis S.A.

18, ch. Des Aulx

1228 Plan-les-Ouates

Geneva, Switzerland

 

3.3Payment Terms. Except as otherwise provided in Section 3.1:1 or 3.1.3, Merrimack shall make payments due to Selexis under this Agreement at the latest [*] ([*]) business days after receipt of invoice except where such fees are due from a Merrimack licensee, in which case Merrimack shall have [*] ([*]) days after receipt of invoice to make such payments. All such fees and payments are exclusive of any applicable Taxes, except as otherwise provided in Section 3.5.

 

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3.4Records. Merrimack and its Affiliates shall keep (and Merrimack shall use its best endeavours to procure that its sub-licensees shall keep and make available to Merrimack) true accounts of Net Sales of Licensed Products and Merrimack shall deliver to Selexis at the same time as the payments due under Section 3.1.3. a written account, including quantities of Net Sales of each such Licensed Product, broken down on a country-by-country basis in respect of those payments. Selexis is entitled to have such accounts for the [*] most recently completed Calendar Years audited by a reputable international independent accounting firm of its choice. Such independent accounting firm shall be bound by confidentiality terms at least as restrictive as the terms of Section 8 of this Agreement and shall be authorized to disclose to Selexis only the results of its audit. Merrimack shall provide access to all information reasonably requested by such independent accounting firm. The cost of any audit shall be borne by Selexis unless the audit shows that Merrimack underpaid Selexis by more than 3% of the amounts due in any Calendar Year in which case the cost of the audit shall be borne by Merrimack.

 

3.5Taxes.

 

3.5.1All Taxes levied on account of any payment made by Merrimack to Selexis pursuant to this Agreement (other than withholding taxes (which shall be paid as set forth in Section 3.5.2), taxes on income, gains or profits levied against Selexis by any competent Swiss tax authority) will be the responsibility of and shall be paid by Merrimack. Any VAT applicable to payments made by Merrimack to Selexis pursuant to this Agreement shall be payable by Merrimack upon receipt of a valid VAT invoice.

 

3.5.2Withholding by Merrimack

 

(a)In the event laws or regulations require withholding of Taxes from payments hereunder, such Taxes will be withheld from the applicable payments to Selexis hereunder and remitted by Merrimack to the appropriate tax authority. Merrimack will furnish Selexis with proof of payment of such Taxes. In the event that documentation is necessary in order for Selexis to secure an exemption from or a reduction in any withholding of Taxes, Selexis shall provide such documentation in a timely manner to Merrimack.

 

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(b)Merrimack’s Right of Offset. In the event that the governing tax authority retroactively determines that a payment made to Selexis pursuant to this Agreement should have been subject to withholding (or to additional withholding) for Taxes, Merrimack will have the right to offset such amount (including any interest and penalties that may be imposed thereon) against future payment obligations of Merrimack under this Agreement; provided however, that if no further payments or insufficient further payments are available against which offset may be pursued, Selexis shall promptly (and in any event within [*] ([*]) days after Merrimack’s request for reimbursement) reimburse Merrimack any portion of such amount that Merrimack is unable to offset. Notwithstanding the above, Selexis shall have no liability for interest or penalties imposed as a result of Merrimack’s failure to withhold Taxes if such failure was due to Merrimack’s negligence.

 

3.6Single Royalty and Milestone. Nothing shall oblige Merrimack or its sublicensees to pay or cause to be paid to Selexis more than one royalty on any unit of Product, irrespective of how many Selexis Patent Rights may cover such Product. Each milestone described in Section 3.1.2 shall be payable only once in relation to each Licensed Product, irrespective of the number of Products which incorporate that Licensed Product and undergo the events described in Section 3.1.2 (a) - (d). For example, if two different Products each contain the same active ingredient (or active ingredients that are materially the same for therapeutic purposes - e.g., an antibody and a fragment of the same antibody shall be considered to be materially the same active ingredient for therapeutic purposes) that constitutes a Licensed Product, then the milestones payments set forth in Section 3.1.2 shall each be payable no more than once with respect to such Products, even though such Products may be in different dosages, formulated differently or delivered differently.

 

4.            Intellectual Property

 

4.1Ownership. Each Party shall retain the entire right and title in and to its Inventions and Know-How which exists on the Effective Date of this Agreement or which is thereafter developed independently of the performance of this Agreement.

 

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4.2Each Party represents that it has valid and sufficient arrangements and agreements with its directors, officers and employees (which term shall include agents, consultants and subcontractors) such that ownership of intellectual property rights in and to any Inventions made by its directors, officers and employees vests in the employer.

 

4.3Any Invention developed solely by Merrimack shall be Merrimack’s sole property and any Invention developed solely by Selexis shall be Selexis’ sole property. Selexis shall during the Term pay all renewal fees and do all such acts and things as may be necessary to maintain and keep on foot the Selexis Patent Rights.

 

4.4Any Invention developed jointly by the Parties, but which represents an expansion or extension of the Patent Rights or Know-How of Selexis only, shall be owned solely by Selexis.

 

4.5Any Invention developed jointly by the Parties, but which represents an expansion or extension of the Patent Rights or Know-How of Merrimack only, shall be owned solely by Merrimack.

 

4.6Any Invention developed jointly by the Parties, which is not owned solely by one Party or the other in accordance with this Agreement, shall be owned jointly by Merrimack and Selexis and shall be handled as follows:

 

4.6.1If both Parties agree to file an- application for a patent in respect of any such Invention (a “Joint Patent”) then the Parties shall share equally the filing and prosecution costs related to such applications, the maintenance costs and the costs of defending any resulting patent from attack, and the ownership and control of any Joint Patent (or other form of intellectual property protection) issuing thereon shall vest equally with Merrimack and Selexis with each Party having the right to use and sublicense the Invention provided that a fair and reasonable share of net revenues, as agreed between the Parties acting in good faith, received by such Party as a result of such use or sublicense shall be payable to the other Party.

 

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4.6.2If one Party is unwilling to pay for costs of obtaining, maintaining or defending a Joint Patent, such Party shall assign all its rights in and to such Invention (including its rights in any Joint Patent, its right to a share in revenues received in relation to such Invention and its rights to use and sublicense the use of the Invention) to the Party willing to pay those costs, whereupon it shall cease to be deemed a Joint Patent. The Party declining to share such payment shall, at the reasonable cost of the other Party, render to the other Party such assistance, do such acts and execute such documents as might reasonably be required to give that Party the full benefit of this Section 4.6.

 

4.6.3Each Party shall promptly notify the other Party of any infringement of any Joint Patent which comes to its attention and the parties shall consult in good faith with a view to agreeing on a joint response to such infringement, including any proceedings against any infringer. In the event that the Parties agree to respond jointly to the infringement, the Parties shall, unless otherwise agreed in writing, share equally all costs associated therewith and any damages or account of profits awarded to the Parties or settlement sum negotiated by the Parties. Where one Party alone (the “Responding Party’’) wishes to take such proceedings, the other Party shall provide all reasonable co-operation including but not limited to allowing (and doing all things reasonably necessary to allow) the other Party to prosecute those proceedings in their joint names, provided that (i) the Responding Party shall be responsible for the entire cost of any such legal proceedings and shall indemnify the other Party with regard to all costs, expenses, damages or account of profits awarded against the other Party as a result of the other Party’s name being used in any proceedings, but the Responding Party shall be entitled to all costs, damages, or account of profits that may be obtained or awarded; (ii) the Responding Party shall not make any admissions, or consent to the making of any order by any court, regarding the scope, validity or enforceability of the Joint Patent without the prior, written consent of the other Party; and (iii) the Responding Party shall keep the other Party_informed with regards to any steps taken in response to an infringement and shall consult the other Party over proposed future steps that are likely to have a material effect on the conduct of any legal action.

 

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4.7Each of the Parties hereto will promptly notify the other of any Invention arising in connection with this Agreement provided that Merrimack is only obliged to notify Selexis of such Inventions to the extent they relate to the Selexis Technology.

 

4.8In the event Selexis possesses, acquires, creates or is licensed any improvements to the Selexis Technology, subject to any bona fide obligations owed by Selexis to third parties (in respect of which Selexis has notified Merrimack prior to the Effective Date), Selexis shall promptly notify Merrimack of such improvements and such improvements shall automatically be included in the Selexis Patent Rights and/or the Selexis Know-How and thereby licensed at no extra cost to Merrimack in accordance with this Agreement. At a minimum, Selexis will provide Merrimack with an annual report at the end of each calendar year ending during the term of this Agreement summarizing all improvements developed during the year.

 

4.9Third Party Patent Rights. Selexis covenants that if Selexis becomes aware that Merrimack’s exploitation of its rights hereunder would, or would allegedly, infringe any Third Party proprietary rights, Selexis shall use its best efforts to resolve such infringement at Selexiscost to ensure Merrimack’s freedom to continue to use the licenses pursuant to this Agreement, including using its best efforts to obtain a license from the Third Party owner of the proprietary rights which entitles Selexis to continue to grant the rights to Merrimack as mentioned herein. Should such efforts not be successful, Selexis shall inform Merrimack in writing and thereafter either Party may terminate this Agreement with immediate effect, save that Selexis shall not have such right to the extent that Merrimack agrees to waive any liability Selexis would otherwise have to Merrimack hereunder in respect of the infringement of the Third Party proprietary right in question; provided that, notwithstanding any such waiver of liability, Merrimack shall be entitled to offset any and all Losses, including without limitation litigation costs and expenses, amounts paid in settlement and license fees, milestone payments and royalties, paid by Merrimack, or any of its Affiliates or sublicensees, and arising from such infringement of Third Party proprietary rights, against any amounts otherwise payable by Merrimack, its Affiliates or sublicensees to Selexis hereunder. For the avoidance of doubt, the right of offset set forth in the immediately preceding sentence shall not entitle Merrimack to any refund of amounts previously paid to Selexis or amounts accrued and payable to Selexis up to the date of receipt of the aforementioned waiver.

 

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4.10Enforcement of Selexis Patent Rights. If during the Term, either Party becomes aware of any infringement or potential infringement of the Selexis Technology it shall promptly notify the other Party in writing and the Parties shall consult with each other to decide the best way to respond to such infringement or misuse. Selexis covenants that if Selexis becomes aware of an infringement of the Selexis Patent Rights by Third Parties in the Licensed Field of Use, Selexis shall use its best efforts to prevent or enjoin such infringement. In the event Selexis is unable or unwilling to sue the alleged infringer within (i) [*] ([*]) days of the date of notice of such infringement, or (ii) [*] ([*]) days before the time limit, if any, set forth in the applicable laws in regulations for the filing of such actions, whichever comes first, then Merrimack may, but shall not be required to take such action as Merrimack may deem appropriate to prevent or enjoin the alleged infringement or threatened infringement of Selexis Patent Rights. In such event, Merrimack shall act at its own expense, and Selexis shall cooperate reasonably with Merrimack at the expense of Merrimack, and Selexis agrees to be named as a nominal Party. In the event of such action by Merrimack, any recovery obtained shall be paid to Merrimack.

 

4.11Merrimack Intellectual Property. Subject to Section 4.6, Merrimack shall retain all right, title and interest in (and the unrestricted right to use) any and all information, data, results, Know-How, products and the like, whether patentable or not, arising out of the conduct of the licenses granted hereunder and all intellectual property appurtenant thereto, including without limitation the Product composition or sequence and any related intellectual property. Merrimack shall have the unrestricted right to publish or otherwise disclose the results and data obtained by the practice of the Selexis Technology provided such disclosure does not include the Confidential Information of Selexis. The name of Selexis shall be given proper recognition in such publication(s) as scientifically appropriate.

 

4.12Further assurance. Each Party agrees to execute and do all things at the cost of the other Party (if not specifically agreed otherwise) as the other Party may reasonably require to give that other Party the full benefit of the provisions of this Section 4.

 

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5.            Representations, Warranties, and Covenants

 

5.1Corporate Power. Each Party hereby represents and warrants that such Party is duly organized and validly existing under the laws of the state (or country or other jurisdiction, as the context requires) of its incorporation and has full corporate power and authority to enter into this Agreement and to carry out the provisions hereof.

 

5.2Due Authorization. Each Party hereby represents and warrants that such Party is duly authorized to execute and deliver this Agreement and to perform its obligations hereunder and the person executing this Agreement on its behalf has been duly authorized to do so by all requisite corporate actions.

 

5.3Binding Agreement. Each Party hereby represents and warrants that this Agreement is a legal and valid obligation binding upon it and is enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights generally and by general equitable principles and public policy.

 

5.4No Conflicts. Each Party hereby represents and warrants that the execution, delivery and performance of this Agreement by such Party does not conflict with any agreement, instrument or understanding, oral or written, to which it is a Party or-by which it may be bound, nor violate any law or regulation of any court, governmental body or administrative or other agency having authority over it.

 

5.5Additional Warranties by Selexis. Selexis hereby warrants, represents and covenants to Merrimack that:

 

5.5.1As of the Effective Date, to the best of its knowledge, there are no Third Party intellectual property rights that may be asserted against Merrimack claiming that the use by Merrimack of the Selexis Technology under this Agreement constitutes an infringement thereof;

 

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5.5.2As of the Effective Date, there is no pending litigation which alleges that the use of Selexis Technology has infringed or misappropriated any of the intellectual property rights of any Third Party, and Selexis has not received any claim that the use of Selexis Technology infringes on any intellectual property rights of a Third Party or a request or demand from any Third Party for the licensing of any intellectual property rights of such party in connection with the practice of the Selexis Technology;

 

5.5.3Selexis is the owner of or controls the Selexis Technology, and has the right to grant Merrimack the rights granted Merrimack under this Agreement, and will not during the Term grant any rights to any Third Party that would adversely affect Merrimack’s rights granted under this Agreement;

 

5.5.4The Selexis Technology is free and clear of any encumbrance, lien, mortgage, charge, restriction or to its best knowledge liability of any kind whatsoever, whether equitable or legal, that would conflict with or impair the rights granted to Merrimack under this Agreement;

 

5.5.5As of the Effective Date, none of the Selexis Patent Rights are involved in any interference or opposition proceeding, and Selexis has not received any request, demand or notice from any Third Party threatening or disclosing such a proceeding with respect to any of the Selexis Patent Rights; and

 

5.5.6As of the Effective Date, Selexis has not received any statement or assertion that (i) any claim in any of the Selexis Patent Rights is, or may be or become rendered, invalid or unenforceable, (ii) any Third Party is aware of any basis as to the future potential invalidity or unenforceability of any claim of any of the Selexis Patent Rights, or (iii) the Selexis Patent Rights do not list all required inventors.

 

5.5.7Any replacement Selexis Materials shall be free of mycoplasma or other pathogenic contamination.

 

5.6Notification. Selexis shall notify Merrimack promptly during the Term, if:

 

5.6.1Selexis Patent Rights become involved in any interference or opposition proceeding, or Selexis receives any request, demand or notice from any Third Party threatening or disclosing such a proceeding with respect to any of the Selexis Patent Rights; or

 

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5.6.2Selexis receives any statement or assertion that (i) any claim in any of the Selexis Patent Rights is, or may be or become rendered, invalid or unenforceable, (ii) any Third Party is aware of any basis as to the future potential invalidity or unenforceability of any claim of any of the Selexis Patent Rights,-or (iii) the Selexis Patent Rights do not list all required inventors.

 

5.7Disclaimer of Warranties by Selexis. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, SELEXIS DOES NOT .MAKE ANY REPRESENTATION OR WARRANTY TO Merrimack OF ANY NATURE, EXPRESS OR IMPLIED, THAT THE SELEXIS TECHNOLOGY WILL BE USEFUL FOR, OR ACHIEVE ANY PARTICULAR RESULTS AS A RESULT OF ANY USE BY Merrimack OF THE SELEXIS TECHNOLOGY PURSUANT TO ANY LICENSE GRANTED TO Merrimack UNDER THIS AGREEMENT. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, SELEXIS SPECIFICALLY DISCLAIMS ANY WARRANTY OF NONINFRINGEMENT, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE.

 

6.            Indemnification

 

6.1Indemnification by Selexis. During the Term and thereafter, Selexis hereby agrees to save, defend and hold Merrimack, its Affiliates, and their respective officers, directors, employees, consultants and agents harmless from and against any and all liability, damage, loss or expense (collectively, “Losses”) claimed by a Third Party resulting from the breach of any representation, warranty or covenant in this Agreement by Selexis, except to the extent that such Losses result from the gross negligence or intentional misconduct of Merrimack, its Affiliates, and their respective officers, directors, employees, consultants and agents; provided however that, if such Losses result from the negligence or gross negligence of Selexis, but not from any breach of any representation or warranty and not from intentional misconduct of Selexis, its Affiliates, or any of their respective officers, directors, employees, consultants and agents, Selexis shall not be responsible for such Losses in excess of the aggregate amount paid by Merrimack to Selexis under this Agreement. In the event Merrimack seeks indemnification under this Section 6.1, Merrimack shall inform Selexis of a claim as soon as reasonably practicable after it receives notice of the claim, shall permit Selexis to assume direction and control of the defense of the claim (including the right to settle the claim solely for monetary consideration), and shall cooperate as requested (at Selexisexpense) in the defense of the claim but provided always that Selexis may not settle any such claim or otherwise consent to an adverse judgment or order in any relevant action or other proceeding or make any admission as to liability or fault without the express written permission of Merrimack.

 

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6.2Indemnification by Merrimack. During the Term and thereafter, Merrimack hereby agrees to save, defend and hold Selexis and its officers, directors, employees, consultants and agents harmless from and against any and all Losses claimed by a Third Party resulting from personal injury or damage to property caused by any Licensed Products, except to the extent that Merrimack is indemnified by Selexis in respect of those Losses pursuant to Section 6.1 or that such Losses result from the gross negligence or intentional misconduct of Selexis. In the event Selexis seeks indemnification under this Section 6.2, Selexis shall inform Merrimack of a claim as soon as reasonably practicable after it receives notice of the claim, shall permit Merrimack to assume direction and control of the defense of the claim (including the right to settle the claim solely for monetary consideration), and shall cooperate as requested (at Merrimack’s expense) in the defense of the claim.

 

6.3Insurance. Merrimack shall obtain and maintain during the Term and for [*] ([*]) years thereafter product liability insurance in respect of any Products with a reputable and solvent insurance provider in a commercially adequate amount. Such liability insurance shall insure against all mandatory liability including liability for personal injury, physical injury and property damage. Merrimack shall provide Selexis with written proof of the existence of such insurance upon request.

 

7.            Term and Termination

 

7.1Term. This Agreement shall enter into effect on the Effective Date. Unless earlier terminated pursuant to Sections 7.2, 7.3 or 7.4 of this Agreement shall remain in full force and effect until expiration of the last to-expire of the Selexis Patent Rights (such period, the “Term”).

 

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7.2Termination for Default. In addition to any other remedies which may be available at law or equity, in the event of any material breach of this Agreement by a Party (“Default”), the Party not in default (“Non Defaulting Party”) shall have the right to give the other Party (“Defaulting Party”) written notice thereof (“Notice of Default”), which notice must state the nature of the Default in reasonable detail and request that the Defaulting Party cure such Default within [*] ([*]) days. If such Default is not cured within the period set forth herein after receipt of a Notice of Default by the Defaulting Party or if such Default is not capable of being cured, then the Non-Defaulting Party, at its option, may terminate this Agreement by written notice effective upon receipt. Notwithstanding the foregoing, if the Defaulting Party notifies the Non-Defaulting Party that the Defaulting Party disputes the existence of the Default prior to the expiration of the foregoing cure period, and if such dispute is made in good faith, the running of such cure period shall be tolled until the earlier of such time-as such dispute is finally resolved in accordance with Sections 9.4 and 9.8 or until such time as the Defaulting Party ceases to dispute such Default in good faith; provided that during the pendency-of any such bona fide dispute, the Defaulting Party continues to perform its undisputed obligations hereunder, including without limitation the payment of all undisputed amounts owed by the Defaulting Party.

 

7.3Termination for Bankruptcy. In the event Merrimack shall become insolvent or make any arrangement with its creditors or has a receiver or administration appointed to the whole or any part of its assets or if an order shall be made or a resolution passed for its winding up unless such order or resolution is part of a scheme for its amalgamation or reconstruction, Selexis shall have the right to serve immediate notice of termination of this Agreement effective upon receipt; provided that Selexis shall not have such right of termination if, notwithstanding such insolvency, arrangement, appointment, order or resolution, Merrimack continues to perform its obligations under this Agreement.

 

7.4Termination by Merrimack. Merrimack may terminate this Agreement at any time by giving sixty (60) days written notice to Selexis.

 

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7.5Effects of Expiration or Termination.

 

7.5.1Termination of Licenses. In the event of a termination of this Agreement by Merrimack pursuant to Section 7.2 or 7.4 or by Selexis pursuant to Section 7.2 or 7.3, the rights and licenses granted under this Agreement shall terminate other than those licenses which have become perpetual as described in Section 3.1.3; provided that, in the event of a termination by Selexis pursuant to Section 7.2 or 7.3, if Merrimack has granted a sublicense prior to such termination and such termination is not the result of a Default caused by the sublicensee’s breach of the sublicense agreement, such sublicensee shall have the right to retain its sublicense (which sublicense shall survive as a direct license from Selexis notwithstanding the termination of this Agreement); provided further that, in the event of any such sublicense survival, the sublicensee shall be obligated to pay Selexis all amounts payable under Section 3 of this Agreement based on such sublicensee’s development and commercialization of Products.

 

7.5.2Selexis Confidential Information. Upon termination of this Agreement Merrimack shall dispose of all tangible embodiments, including Selexis Materials, and render inaccessible or useless all electronic embodiments, of Selexis Confidential Information provided to Merrimack by Selexis hereunder, except that Merrimack may retain one (1) copy thereof for legal archival purposes.

 

7.5.3Merrimack Confidential Information. Upon any expiration or termination of this Agreement, Selexis shall dispose of all tangible embodiments, and render “inaccessible or useless all electronic embodiments, of Merrimack Confidential Information provided to Selexis by Merrimack hereunder, except that Selexis may retain one (1) copy thereof for legal archival purposes.

 

7.5.4Accrued Obligations. Expiration or termination of this Agreement shall not relieve the Parties of any obligation or liability accruing prior to such expiration or termination and all ancillary provisions necessary for the implementation of this Section 7.5.5 shall survive termination.

 

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7.5.5Survival. Sections 3.1.3, 3.4, 4, 6, 7, 8 and 9 shall survive termination or expiration of this Agreement.

 

8.            Confidentiality

 

8.1Nondisclosure. During the Term; and for a period of five (5) years thereafter, each Party will maintain all Confidential Information of the other Party as confidential and will not disclose any Confidential Information to any Third Party except to its Affiliates, sublicensees, employees, agents, consultants and other representatives, who have a need to know such Confidential Information and who are bound by obligations of confidentiality at least as restrictive as set forth herein. Each Party may use such Confidential Information only to the extent required to accomplish the purposes of this Agreement. Each Party will use at least the same standard of care as it uses to protect proprietary or confidential information of its own to ensure that its Affiliates, employees, agents, consultants and other representatives do not disclose or make any unauthorized use of the Confidential Information.

 

8.2Exceptions. Confidential Information shall not include any information that the receiving Party can prove by competent evidence is:

 

8.2.1now, or hereafter becomes, through no act or failure to act on the part of the receiving Party, generally known or available;

 

8.2.2known by the receiving Party at the time of receiving such information, as evidenced by its records;

 

8.2.3hereafter furnished to the receiving Party by a Third Party, as a matter of right and without restriction on disclosure;

 

8.2.4independently developed by the receiving Party without the aid, application or use of Confidential Information; or

 

8.2.5the subject of a written permission to disclose provided by the providing Party.

 

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8.3Authorized Disclosures. Each Party shall be permitted to disclose Confidential Information of the other Party:

 

8.3.1to the extent that, such Confidential Information is required to be disclosed to comply with applicable laws or regulations (such as pursuant to securities law disclosure rules or disclosure rules of the United States Securities and Exchange Commission or any stock exchange or to comply with the request or order of any applicable Regulatory Authority, whether or not having the force of law) or with a court or administrative order; provided however, that such Party shall first have given written notice of such required disclosure to the other Party, shall make reasonable efforts to narrow the scope of Confidential Information of the other Party required to be disclosed, and shall take reasonable steps to allow the other Party at its own expense to seek a protective order to protect the confidentiality of the Confidential Information required to be disclosed;

 

8.3.2to establish rights or enforce obligations under this Agreement, but only to the extent such disclosure is necessary and provided that such Party seeks confidential treatment of the Confidential Information to be disclosed; or

 

8.3.3to the disclosing Party’s investors, acquirors, lenders and collaborators, and potential acquirors, lenders and collaborators, under obligations of confidentiality and non-use no less restrictive than those set forth in this Section 8.

 

9.            Miscellaneous

 

9.1Assignment. Neither this Agreement nor any interest hereunder shall be assignable by either Party without the prior written consent of the other Party; provided, that either Party may assign this Agreement and all of its rights and obligations hereunder, without such consent, to an entity which acquires all or substantially all of the business or assets of such Party (or the business or assets to which this Agreement pertains) whether by merger, consolidation, reorganization, acquisition, sale, license or otherwise; and Merrimack may assign this Agreement and all of its rights and obligations hereunder, without such consent, to an Affiliate if Merrimack remains liable and responsible for the performance and observance of all of the Affiliate’s duties and obligations hereunder, and provided that such Affiliate is not a Contract Manufacturing Organization. This Agreement shall be binding upon the successors and permitted assigns of the Parties and the name of a Party appearing herein shall be deemed to include the names of such Party’s successors and permitted assigns to the extent necessary to carry out the intent of this Agreement. Any assignment not in accordance with this Section 9.1 shall be null and void.

 

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9.2Compliance with Governmental Obligations. Each Party shall comply, upon reasonable notice from the other Party, with all governmental requests directed to either Party and provide all information and assistance necessary to comply with the governmental requests.

 

9.3Counterparts. This Agreement may be executed in any number of counterparts, each of which need not contain the signature of more than one Party but all such counterparts taken together shall constitute one and the same agreement, and may be executed through the use of facsimiles.

 

9.4Dispute Resolution. The Parties agree that in the event of a dispute between them arising from, concerning or in any way relating to this Agreement, the Parties shall undertake good faith efforts to resolve any such dispute in good faith with the matter being referred at the request of either Party to the general counsel for each Party and, if remaining unresolved after [*] ([*]) days, then to the chief executive officers of each Party (or their designees). If after [*] ([*]) days of the matter first being referred to the general counsel the Parties are unable to resolve such dispute, either Party may submit such matter to binding arbitration pursuant to Section 9.8 of this Agreement.

 

9.5Entire Agreement. This Agreement (including the Exhibits attached hereto, which are incorporated herein by reference) sets forth all of the covenants, promises, agreements, warranties, representations, conditions and understandings between the Parties hereto with respect to the subject matter hereof; constitutes and contains the complete, final, and exclusive understanding and agreement of the Parties with respect to the subject matter hereof; and cancels, supersedes and terminates all prior agreements and understanding between the Parties with respect to the subject matter hereof. There are no covenants, promises, agreements, warranties, representations conditions or understandings, whether oral or written, between the Parties other than as set forth herein. No subsequent alteration, amendment, change or addition to this Agreement shall be binding upon the Parties hereto unless reduced to writing and signed by the respective authorized officers of the Parties.

 

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9.6Force Majeure. Neither Party shall be liable to the other for loss or damages for any default or delay attributable to any Force Majeure, if the Party affected shall give prompt notice of any such cause to the other Party. The Party giving such notice shall thereupon be excused from such of its obligations hereunder as it is thereby disabled from performing for so long as it is so disabled, provided, however, that such affected Party commences and continues to take reasonable and diligent actions to cure such cause; and provided further that if any Force Majeure delays or prevents the performance of the obligations of either party for a continuous period in excess of six months, the party not so affected shall then be entitled to give notice to the affected party to terminate this Agreement, specifying the date (which shall not be less than 30 days after the date on which the notice is given) on which termination will take effect. Such a termination notice shall be irrevocable, except with the consent of both parties, and upon termination the provisions of Section 7.5 shall apply.

 

9.7Further Actions. Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of the Agreement.

 

9.8Governing Law and Arbitration. This Agreement shall be governed by and interpreted in accordance with the substantive laws of Germany. Any dispute, controversy or claim arising out of or relating to this Agreement, or to a breach thereof, including its interpretation, performance or termination, shall be submitted to and finally resolved by binding arbitration. The arbitration shall be conducted by a single arbitrator in accordance with the arbitration rules of the International Chamber of Commerce, which shall administer the arbitration and act as appointing authority. The arbitration, including the rendering of the award, shall take place in London, England, and shall be the exclusive forum for resolving such dispute, controversy or claim. Notwithstanding the foregoing, either party may seek interim relief or bring action(s) in aid of arbitration in any court of competent jurisdiction.

 

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9.9Independent Contractors. The relationship between Selexis and Merrimack created by this Agreement is one of independent contractors and neither Party shall have the power or authority to bind or obligate the other Party except as expressly set forth in this Agreement.

 

9.10Interpretation of Agreement. Article and other descriptive headings used in this Agreement are for reference purposes only and shall not constitute a part hereof or affect the meaning or interpretation of this Agreement. Whenever the context so requires, the use of the singular shall be deemed to include the plural and vice versa.

 

9.11License Obligations. Nothing in this Agreement imposes any obligation upon a Party to enter into any other license or agreement with the other Party.

 

9.12Non-Disclosure. Except as otherwise required by law or regulation, and only after compliance with this Section 9.12, neither Party shall issue a press release or make any other public disclosure of the existence of or the terms of this Agreement, or otherwise use the name or trademarks or products of the other Party or the names of any employee thereof, without the prior approval of such press release or disclosure by the other Party. However if, in the reasonable opinion of such Party’s counsel, a public disclosure shall be required by law, regulation, or court order, including without limitation in a filing with the United States Securities and Exchange Commission, the United States Food and Drug Administration, the European Medicines Agency or any similar governmental or regulatory agency in any country of the Territory, the disclosing Party shall use reasonable efforts to provide a copy of the disclosure reasonably in advance of such filing or other disclosure for the non-disclosing Party’s prior review and comment, and the non-disclosing Party shall provide its comments as soon as practicable. No disclosure permitted by this Section 9.12 shall contain any Confidential Information of the other Party unless otherwise permitted in accordance with Section 8 herein.

 

9.13Notices. All notices and other communications required by this Agreement shall be in writing in the English language and shall be deemed given if delivered personally or by facsimile transmission (receipt verified), mailed by registered or certified mail (return receipt requested), postage prepaid, or sent by express courier service, to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice, provided, however, that notices of a change of address shall be effective only upon receipt thereof):

 

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  If to Merrimack, addressed to:
   
   

Merrimack Pharmaceuticals

One Kendall Square

Building 700, 2nd Floor

Cambridge, MA USA 02139

Attention: Vice President, Business Development

     
    With a copy to:
     
   

WilmerHale

60 State Street

Boston, MA 02109 USA

Attention: Steven D. Barrett, Esq.

     
  If to Selexis, addressed to:
   
   

Selexis, S.A.

18 Chemin des Aulx

1228 Plan-les-Ouates

Geneva, Switzerland

Attention: Accountant, Patricia Ghommidh

     
    With a copy to:
     
   

CEO, Igor Fisch, Ph.D.

Facsimile: +41 22 308-9361

 

or to such addresses or addresses as the Parties hereto may designate for such purposes during the Term. Notices shall be deemed to have been sufficiently given or made: (i) if by facsimile with confirmed transmission, when performed, and (ii) if by air courier upon receipt by the Party.

 

9.14Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of Merrimack and Selexis (and their permitted successors and assigns) and nothing in this Agreement (express or implied) is intended to or shall confer upon any Third Party any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement.

 

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9.15Severability. If any term, covenant or condition of this Agreement or the application thereof to any Party or circumstance shall, to any extent, be held to be invalid or unenforceable, then the remainder of this Agreement, or the application of such term, covenant or condition to parties or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term, covenant or condition of this Agreement shall be valid and be enforced to the fullest extent permitted by law.

 

9.16Use of Name. No right, express or implied, is granted to either Party by this Agreement to use in any manner any trademark or trade name of the other Party including the names “Merrimack” and “Selexis” without the prior written consent of the owning Party.

 

9.17Waiver. The failure on the part of a Party to exercise or enforce any rights conferred upon it hereunder shall not be deemed to be a waiver of any such rights nor operate to bar the exercise or enforcement thereof at any time or times hereafter.

 

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In Witness Whereof, the Parties, having read the terms of this Agreement and intending to be legally bound hereby, do hereby execute this Agreement.

 

SELEXIS S.A.

 

By: /s/ Igor Fisch   By: /s/ Pierre-Alain Girod
Name: Dr Igor Fisch   Name: Pierre-Alain Girod
Title: CEO   Title: Duly Authorized-CSO
Date: 6th June 2008   Date: 6th June 2008

 

 

MERRIMACK

 

 

By:

 

/s/ Edward J. Stewart

 

 

By:

 

/s/ Lisa A. Evren

Name: Edward J. Stewart   Name: Lisa A. Evren
Title: Vice President, Business Development   Title: SVP & CFO
Date: 5/23/08   Date: 5/23/08

 

 

 

 

CONFIDENTIAL

 

EXHIBIT 1

 

SELEXIS PATENT RIGHTS
 
Patent 1.  
   
Title [*]
   
Priority date [*]
   
Priority ID [*]
   
Publication ID [*]
   
Geographies [*]
   
Status [*]
   
Content [*]
   
Comments [*]
   
   
Patent 2.  
   
Title [*]
   
Priority date [*]
   
Priority ID [*]
   
Publication ID [*]
   
Geographies [*]
   
Status [*]
   
Content [*]
   
Comments [*]

 

 

 

 

Logo, company name

Description automatically generated

 

AMENDMENT NO. 1 TO

 

NON-EXCLUSIVE PATENT LICENSE AGREEMENT

 

This Amendment No.  1 (this “Amendment”) to the Non-exclusive Patent License Agreement dated as of April 26, 2006 (the “Agreement”) by and between Merrimack Pharmaceuticals, Inc. (“Merrimack”) and Selexis, S.A. (“Selexis”), is entered into by Merrimack and Selexis as of January 8, 2010 (the “Amendment Effective Date”). Capitalized terms not otherwise defined herein shall have the meaning given to them under the-Agreement.

 

WHEREAS, Merrimack wishes to extend the term of the Agreement.

 

WHEREAS, Selexis accepts an extension of the term of the Agreement, upon the terms and conditions set forth in this Amendment.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Merrimack and Selexis hereby agree to the following:

 

1.            Term Extensions. The parties hereto acknowledge and agree that the current Term of the Agreement, as extended, expires on April 26, 2010. Notwithstanding anything in Section 7.1.2 of the Agreement to the contrary, the first paragraph of Section 7.1.2 is hereby superseded and replaced by the following:

 

“Merrimack shall have the continuing option to extend the Term of the Agreement and the R&D licenses granted hereunder for up to ten (10) additional one (1) year extension periods, commencing with the current one (1) year extension period which expires on April 26, 2010, in return for an annual non-refundable payment in the following amounts, payable within [*] ([*]) days of each anniversary of the Effective Date:

 

(a)For Extension Year 1 and Year 2: [*] shall be payable by Merrimack (retroactively or otherwise) to extend the Term for the current one-year extension period which expires on April 26, 2010 (Extention Year 1) or for the one-year extension period commencing on April 27, 2010 and expiring on April 26, 2011 (Extension Year 2);

 

(b)For Extension Year 3: [*] Euros (€[*]);

 

(c)For Extension Year 4: [*] Euros (€[*]);

 

(d)For Extension Year 5: [*] (€[*]); and

 

(e)For Each of the Extension Years 6 through 10: [*] Euros (€[*]).”

 

2.           Entire Agreement. The Agreement, as amended by this Amendment, contain the entire agreement among the parties with respect to the subject matter hereof and amend, restate and supersede all prior and contemporaneous arrangements or understandings with respect thereto.

 

 

 

 

 

3.            Ratification. The Agreement, as amended by this Amendment, is hereby ratified and confirmed and remains in full force and effect.

 

4.            Counterparts. This Amendment may be executed in any number of counterparts, each of which need not contain the signature of more than one party hereto but all such counterparts taken together shall constitute one and the same agreement, and may be executed through the use of facsimiles.

 

* * * * *

 

2

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the Amendment Effective Date.

 

SELEXIS, S.A.  
   

 

By:

 

/s/ Igor Fisch

 

 

By:

 

/s/ Regine Brokamp

  Name: Igor Fisch     Name: Regine Brokamp
  Title: CEO     Title: COO

 

MERRIMACK PHARMACEUTICALS, INC.

 

 

By:

 

/s/ Edward J. Stewart

 
  Name: Edward J. Stewart  
  Title: SVP, Bus. Dev.  

 

3

 

 

AMENDMENT TO
NON-EXCLUSIVE PATENT LICENSE AGREEMENT,
COMMERCIAL LICENSE AGREEMENT
AND
NON-EXCLUSIVE LICENSE AGREEMENT

 

This Amendment (this “Amendment”) is made and entered into as of the latest dated signature on the signature page hereto by and between Selexis, S.A. (“Selexis”) and Merrimack Pharmaceuticals, Inc., a Delaware corporation (the “Company”).

 

WHEREAS, Selexis and the Company are parties to the following agreements: (i) Non Exclusive Patent License Agreement, dated April 26, 2006, as amended January 8, 2010 (the “Research License”); (ii) Commercial License Agreement, dated June 6, 2008 (the “Commercial License”); and (iii) Non-Exclusive License Agreement, dated January__, 2010 (the “CHO License”, and together with the Research License and Commercial License, collectively the “Original Agreements”); and

 

WHEREAS, Selexis and the Company desire to narrow the scope of improvements to Merrimack Technology (as defined in the CHO License) that Selexis is obligated to license to the Company, in exchange for which the milestones and royalties set forth in the Commercial License and the Research License will be reduced for the next two Company products which require a commercial license from Selexis (pursuant to the Research License and Commercial License).

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.            Amendment to CHO License. The first sentence of Section 3 of the CHO License is hereby deleted and replaced with the following:

 

Selexis hereby grants to Merrimack a fully paid-up, royalty-free, worldwide, perpetual, nonexclusive license, without the right to sublicense (except as set forth below), under Selexis' rights to any modifications or derivatives of or improvements to any know-how disclosed by Merrimack to Selexis directly relating to [*], made by or on behalf of Selexis (“Improvements solely (a) for Merrimack's own internal use and (b) to use such Improvements to develop, make, have made, use, offer for sale, sell, import and otherwise exploit Products (as defined in the Commercial License).”

 

2.            Amendment to Research License and Commercial License. Appendix B to the Research License and Section 3.1 of the Commercial License are each revised as follows:

 

2.1            Appendix B to Research License. The following shall be inserted at the end of Appendix B:

 

Notwithstanding the foregoing, all Milestones and Royalties otherwise due (including the minimum amount of royalty) shall each be [*] (a) [*] ([*] %) for the first commercial license entered into after November l, 2014, and (b) [*] ([*] %) for the second commercial license entered into after November l, 2014.

 

 

 

 

2.2            Commercial License. The following shall be inserted as Section 3.1.4:

 

3.1.4 Payment Discount. Notwithstanding Sections 3.1.2 and 3.1.3 above, all milestones otherwise due under Section 3.1.2 and all royalties otherwise due under Section 3.1.3 shall each be [*] (a) [*] ([*] %) for the first commercial license entered into after November 1, 2014, and (b) [*] ([*] %) for the second commercial license entered into after November 1, 2014.

 

3.      Miscellaneous. Except as provided herein, each of the Original Agreements shall remain unchanged and in full force and effect. This Amendment may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

IN WITNESS WHEREOF, the parties have executed this Amendment as of the dates set forth below.

 

MERRIMACK PHARMACEUTICALS, INC.

 

By:

 

/s/ Brian Kickham

 
  Name: Brian Kickham  
 

Title: Corporate Counsel

Date: December 10, 2014

 
     
     

SELEXIS, S.A.  
   

 

By:

 

/s/ Igor Fisch

 

 

By:

 

/s/ Regine Brokamp

  Name: Igor Fisch     Name: Regine Brokamp
 

Title: CEO

Date: November 24, 2014

   

Title: COO

Date: November 24, 2014

 

5

 

 


Exhibit 10.8

 

ELEVATION ONCOLOGY, INC.

 

November ___, 2020

 

[Name] 

[Address] 

[Address]

 

Re: Initial Public Offering Participation Rights

 

Ladies and Gentlemen:

 

This letter agreement (this “Letter”) will confirm our agreement that that, subject to and in consideration of the purchase of shares of Series B Preferred Stock of Elevation Oncology, Inc., a Delaware corporation (the “Company”), [•] (the “Investor”) shall be entitled to the following rights in connection with an IPO (as defined below) of the Company:

 

1.             Initial Public Offering Participation Rights.

 

(a)             In the event the Company undertakes an initial public offering (an “IPO”) of its Common Stock, par value $0.0001 per share (the “Common Stock”), the registration statement for which is first filed with or confidentially submitted to the Securities and Exchange Commission after the date of this Letter, and to the extent permitted by applicable law, rules and regulations, the Company shall use commercially reasonable efforts to grant, or cause the managing underwriter of such offering to grant, to the Investor the opportunity to purchase a minimum of 10% of the shares of Common Stock offered by the Company in the IPO, on the same terms as are applicable to the public in the IPO.

 

(b)             The Investor acknowledges that notwithstanding the terms hereof, the sale of any shares in an IPO to any person will only be made in compliance with FINRA Rules 5110 and 5130 and applicable federal, state, and local laws, rules and regulations and that nothing herein constitutes an offer or the commitment to purchase any shares of Common Stock in an IPO.

 

(c)             The Investor acknowledges that, despite the Company’s use of its commercially reasonable efforts, the managing underwriter(s), in its or their reasonable discretion, may reduce the number of shares of Common Stock allocated to the Investor in the IPO if such underwriter(s) determine that the full allocation described in Section 1 above may adversely impact the success of the IPO or is not otherwise in the Company’s best interests. In such case, the number of such shares to be sold to the Investor may be reduced, including to zero, in accordance with the underwriter(s)’ determination.

 

(d)             The rights of the Investor to purchase shares in the IPO will be conditioned upon the completion of the IPO. The Company may withdraw its registration statement for an IPO at any time without incurring any liability under this Letter to the Investor.

 

(e)             The rights of the Investor under this Letter shall not be assignable except to an Affiliate (as such term is defined in that certain Investors’ Rights Agreement, dated as of the date of this letter, by and among the Company and the other parties thereto (the “Investors’ Rights Agreement”)) of the Investor who is a transferee of Registrable Securities (as such term is defined in the Investors’ Rights Agreement) from the Investor, in accordance with the Investors’ Rights Agreement. 

 

 

2.             This letter agreement may not be amended except by a written instrument signed by the Investor and the Company.

 

3.             The Investor acknowledges that nothing in this Letter constitutes an offer or the commitment to make a future offer of any shares of Common Stock or to consummate an IPO. The Company and the Investor further acknowledge and agree that any shares of Common Stock that may be purchased by the Investor pursuant to the terms hereof shall be excluded from and shall not be subject to the “Market Stand-off Agreement” as provided in Section 2.11 of the Investors’ Rights Agreement.

 

4.             The rights of the Investor described herein will terminate and be of no further force or effect upon the earliest to occur of the following: (i) the closing of an IPO; (ii) at such time as the Investor no longer holds at least [•]1 shares of the Company’s Series B Preferred Stock (as adjusted for stock splits, recapitalizations and other similar events); and (iii) a Deemed Liquidation Event (as defined in the Company’s Second Amended and Restated Certificate of Incorporation as in effect on the date hereof); provided, that, the Investor’s rights to seek remedy for any breach of the Company’s obligations under this Letter shall survive any such termination.

 

5.             This letter 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. Counterparts may be delivered via facsimile, electronic mail (including pdf) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

6.             This letter agreement shall be governed by the internal law of the State of Delaware, without regard to principles of conflicts of law.

 

7.             This letter agreement constitutes the full and entire understanding and agreement between the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly superseded.

 

[Signature Page Follows] 

 

 

1To be equal to 50% of the Series B Preferred Stock purchased by the Investor.

 2

 

  Sincerely,
     
  ELEVATION ONCOLOGY, INC.
     
  By:  

  Name:  

  Title:  

 

Acknowledge and Accepted:

 

[INVESTOR]

 

By:    

Name:    

Title:    

 

[Elevation Oncology, Inc. – Letter Agreement] 

 


 

Exhibit 23.1

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We consent to the inclusion in this Registration Statement on Form S-1 of Elevation Oncology, Inc. of our report dated April 9, 2021, which includes an explanatory paragraph related to Elevation Oncology, Inc’s ability to continue as a going concern, on our audits of the financial statements of Elevation Oncology, Inc. as of December 31, 2019 and 2020 and for the period from April 29, 2019 (Inception) through December 31, 2019, and the year ended December 31, 2020. We also consent to the reference to our firm under the heading “Experts.”

 

/s/ CohnReznick LLP

 

Tysons, Virginia

June 4, 2021