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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-K
(Mark One)
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☒
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the fiscal year ended
December 31,
2022
OR
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
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Commission File Number
001-39103
CABALETTA BIO, INC.
(Exact name of Registrant as specified in its Charter)
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Delaware
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82-1685768
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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2929 Arch Street,
Suite 600
Philadelphia,
PA
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19104
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code:
(267)
759-3100
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class
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Trading
Symbol(s)
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Name of each exchange on which registered
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Common Stock, par value $0.00001 per share
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CABA
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The Nasdaq Global Select Market
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Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes
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No
☒
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
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No
☒
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes
☒
No
☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files).
Yes
☒
No
☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
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Large accelerated filer
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Accelerated filer
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.
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Non-accelerated filer
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☒
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Smaller reporting company
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Emerging growth company
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☒
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act.
☐
Indicate by check mark whether the registrant has filed a report on
and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the
registered public accounting firm that prepared or issued its audit
report.
☐
If securities are registered pursuant to Section 12(b) of the Act,
indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an
error to previously issued financial statements.
☐
Indicate by check mark whether any of those error corrections are
restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers
during the relevant recovery period pursuant to
§240.10D-1(b).
☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act). Yes
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No
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As of June 30, 2022 (the last business day of the registrant's most
recently completed second fiscal quarter), the aggregate market
value of the registrant's common stock held by non-affiliates was
approximately $29
million based on the last reported sale price of the registrant's
common stock on the Nasdaq Global Select Market on June 30,
2022.
The number of shares of registrant’s Common Stock outstanding as of
March 10, 2023 was
31,340,989.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Annual Report on Form 10-K incorporates by
reference certain information from the registrant’s definitive
Proxy Statement for its 2023 annual meeting of shareholders, which
the registrant intends to file pursuant to Regulation 14A with the
Securities and Exchange Commission not later than 120 days after
the registrant’s fiscal year end of December 31, 2022. Except with
respect to information specifically incorporated by reference in
this Form 10-K, the Proxy Statement is not deemed to be filed as
part of this Form 10-K.
Table of Contents
i
Summary of the Material and Other Risks Associated with Our
Business
•
We are a clinical-stage company with a limited operating history,
have incurred significant losses since our inception, and
anticipate that we will continue to incur significant losses for
the foreseeable future.
•
We are highly dependent on our relationship with University of
Pennsylvania, or Penn, for our preclinical research and development
activities, key technology and our current manufacturing needs for
our clinical trial of DSG3-CAART, or the
DesCAARTesTM
trial, and if Penn’s manufacturing capacity is reduced or otherwise
delayed or limited, this could adversely impact enrollment in our
DesCAARTesTM
trial.
•
We are reliant on intellectual property licensed to us by Penn and
IASO, and termination of one of these license agreements would
result in the loss of significant rights, which would have a
material adverse effect on our business.
•
If we are unable to obtain and maintain sufficient intellectual
property protection for our current product candidates and
technologies or any future product candidates, we may not be able
to compete effectively in our markets.
•
We will need to raise substantial additional funding before we can
expect to complete development of any of our product candidates or
generate any revenues from product sales.
•
Our limited operating history may make it difficult for you to
evaluate the success of our business to date and to assess our
future viability.
•
If we are unable to successfully develop our current programs into
a portfolio of product candidates, or experience significant delays
in doing so, we may not realize the full commercial potential of
our current and future product candidates.
•
If we encounter difficulties enrolling patients in our
DesCAARTesTM
trial, our Phase 1 clinical trial for MuSK-CAART, or the
MusCAARTesTM
trial, or future clinical trials, including our planned clinical
trial for CABA-201, these clinical development activities could be
delayed or otherwise adversely affected.
•
If we are unable to advance our product candidates through clinical
development, obtain regulatory approval and ultimately
commercialize our product candidates, or experience significant
delays in doing so, our business will be materially
harmed.
•
Results of earlier studies may not be predictive of future study or
trial results, and we may fail to establish an adequate safety and
efficacy profile to conduct clinical trials or obtain regulatory
approval for our product candidates.
•
If serious adverse events, undesirable side effects or unexpected
characteristics are identified during the development of any of our
product candidates, we may need to delay, abandon or limit our
further clinical development of those product
candidates.
•
Manufacturing and administering our product candidates is complex
and we may encounter difficulties in technology transfer from Penn
to a contract manufacturing organization.
•
Our product candidates are uniquely manufactured. If we, Penn, WuXi
or any third-party manufacturers encounter difficulties in
manufacturing our product candidates, our ability to provide supply
of our product candidates for clinical trials or, if licensed, for
commercial sale, could be delayed or stopped, or we may be unable
to maintain a commercially viable cost structure.
•
We face substantial competition, which may result in others
discovering, developing or commercializing products before or more
successfully than we do.
•
We may establish our own manufacturing facility and infrastructure
in addition to or in lieu of relying on third parties for the
manufacture of our product candidates, which will be costly and
time-consuming, and which may not be successful.
•
Our future success depends in part upon our ability to retain our
key employees, consultants and advisors and to attract, retain and
motivate other qualified personnel.
1
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, including the sections entitled
“Risk Factors” and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” contains express or
implied forward-looking statements that are based on our
management’s belief and assumptions and on information currently
available to our management. Although we believe that the
expectations reflected in these forward-looking statements are
reasonable, these statements relate to future events or our future
operational or financial performance, and involve known and unknown
risks, uncertainties and other factors that may cause our actual
results, performance or achievements to be materially different
from any future results, performance or achievements expressed or
implied by these forward-looking statements. Forward-looking
statements in this Annual Report on Form 10-K include, but are not
limited to, statements about:
•
the success, cost and timing and conduct of our clinical trial
program, including our clinical trial of DSG3-CAART, or the
DesCAARTesTM
trial, our Phase 1 clinical trial of MuSK-CAART, or the
MusCAARTesTM
trial, our plans for clinical development of CABA-201, and our
other product candidates, including statements regarding the timing
of initiation and completion of the clinical trials and the period
during which the results of the clinical trials will become
available;
•
the expected timing and significance around the announcement of
safety, biologic activity and/or any additional clinical data from
our DesCAARTesTM
trial;
•
the timing of and our ability to obtain and maintain regulatory
approval of our product candidates, including DSG3-CAART,
MuSK-CAART, CABA-201, DSG3/1-CAART and PLA2R-CAART, in any of the
indications for which we plan to develop them, and any related
restrictions, limitations, and/or warnings in the label of an
approved product candidate;
•
Our expectations for the tolerability and clinical activity of
CABA-201 and ability to advance this product candidate through our
license agreement with Nanjing IASO Biotherapeutics Co., Ltd., or
IASO;
•
the impact of any business interruptions to our operations,
including the timing and enrollment of patients in our ongoing and
planned clinical trials and our planned Investigational New Drug
application submissions, or to those of our clinical sites,
manufacturers, suppliers, or other vendors resulting from the
COVID-19 pandemic or similar public health crisis;
•
our expected use of proceeds from the initial public offering and
from sales of our common stock in “at-the-market” offerings and the
period over which such proceeds, together with existing cash, will
be sufficient to meet our operating needs;
•
our plans to pursue research and development of other product
candidates;
•
our plan to infuse our DSG3-CAART product candidate without
lymphodepletion or other preconditioning agents initially in our
DesCAARTesTM
trial, and our plan to implement a cohort where a preconditioning
regimen with a lymphodepleting agent and an immunomodulatory agent
will be administered in the DesCAARTesTM
and MusCAARTesTM
trial;
•
the potential advantages of our proprietary Cabaletta Approach for
B cell Ablation platform, called our CABATM
platform, and our product candidates;
•
the extent to which our scientific approach and
CABATM
platform may potentially address a broad range of
diseases;
•
the potential benefits and success of our arrangements and our
expanded sponsored research agreement with the Trustees of the
University of Pennsylvania, or Penn, and the Children’s Hospital of
Philadelphia, or CHOP, and our scientific co-founders, Drs. Milone
and Payne;
•
our ability to successfully commercialize our product candidates,
including DSG3-CAART, MuSK-CAART, CABA-201 and our other product
candidates;
•
the potential receipt of revenue from future sales of DSG3-CAART,
MuSK-CAART, CABA-201 and our other product candidates;
•
the rate and degree of market acceptance and clinical utility of
DSG3-CAART, MuSK-CAART, CABA-201 and our other product
candidates;
•
our estimates regarding the potential market opportunity for
DSG3-CAART, MuSK-CAART, CABA-201 and our other product candidates,
and our ability to serve those markets;
2
•
our sales, marketing and distribution capabilities and strategy,
whether alone or with potential future collaborators;
•
our ability to establish and maintain arrangements or a facility
for manufacture of DSG3-CAART, MuSK-CAART, CABA-201 and our other
product candidates;
•
our ability to obtain funding for our operations, including funding
necessary to initiate and complete our
DesCAARTesTM
trial, our MusCAARTesTM
trial and our ongoing preclinical studies of CABA-201,
DSG3/1-CAART, and PLA2R-CAART;
•
the potential achievement of milestones and receipt of payments
under our collaborations;
•
our ability to enter into additional collaborations with existing
collaborators or other third parties;
•
our expectations regarding our ability to obtain and maintain
intellectual property protection for our product candidates and our
ability to operate our business without infringing on the
intellectual property rights of others;
•
the success of competing therapies that are or become available,
and our competitive position;
•
the accuracy of our estimates regarding expenses, future revenues,
capital requirements and needs for additional
financing;
•
the impact of government laws and regulations in the United States
and foreign countries; and
•
our ability to attract and retain key scientific or management
personnel.
These factors should not be construed as exhaustive and should be
read in conjunction with the other cautionary statements that are
included in this Annual Report on Form 10-K. The forward-looking
statements contained in this Annual Report on Form 10-K are made as
of the date of this Annual Report on Form 10-K, and we undertake no
obligations to publicly update or review any forward-looking
statement, whether as a result of new information, future
developments or otherwise.
3
PART
I
Item 1. Business.
Overview
We are a clinical-stage biotechnology company focused on the
discovery and development of engineered T cell therapies that have
the potential to provide a deep and durable, perhaps curative,
treatment for patients with autoimmune diseases. The Cabaletta
Approach to B cell Ablation, or our CABA™ platform, encompasses two
strategies – chimeric antigen receptor T cells for autoimmunity, or
CARTA, and our proprietary chimeric autoantibody receptor T cells,
or CAART. We believe these two strategies, which comprise our CABA™
platform, have the potential to be applied across a broad range of
autoimmune diseases.
The initiation or maintenance of many autoimmune diseases involves
B lymphocytes, also called B cells, which create a type of protein
called an antibody, which bind to pathogens, such as bacteria or
viruses, or to foreign substances, such as toxins, to neutralize
them. Additional B cell effects include releasing cytokines,
presenting antigens to T cells, and co-stimulating other immune
cells to eliminate the foreign pathogens or substances. When these
B cell functions become misdirected to the healthy tissues or cells
in the body, they can contribute to the initiation or maintenance
of an autoimmune disease. Current treatment options for these
autoimmune diseases are generally limited to corticosteroids and
generalized immunosuppressants that offer only temporary disease
suppression, may require chronic dosing, in-hospital
administration, and are associated with potentially severe side
effects. Optimal therapy would either reset the immune system or
selectively eliminate only the disease-causing B cells, while
sparing the normal protective B cells.
Our CABA™ platform encompasses two strategies that seek to address
both of these potentially curative approaches for patients with
autoimmune diseases. The CARTA strategy is designed to achieve
transient depletion of all B cells following a single treatment by
using T cells engineered to express an antibody fragment that
recognizes a B cell receptor expressed on the surface of all B
cells, which is designed to allow for the complete elimination of B
cells that contribute to disease with subsequent repopulation by
healthy naïve B cells, offering the potential for durable and
complete clinical responses through an immune system reset without
the need for chronic immunosuppression in patients with autoimmune
diseases. The CAART strategy is designed to selectively engage and
eliminate only the pathogenic B cells responsible for driving
disease by using T cells engineered to express disease specific
targeting domains which are designed to mimic the antigen that is
the subject of attack in an autoimmune disease. Our CAARs differ
from chimeric antigen receptors, or CARs, in the use of the
autoantigen rather than an antibody fragment, which enables the
CAAR T cells to serve as a “decoy” for specific autoreactive B cell
receptors expressed on the surface of B cells, causing the
pathogenic B cells to engage with the CAAR T cells, mistaking them
for a target antigen, and resulting in their elimination. We
believe our CABA™ platform has potential applicability across
dozens of autoimmune diseases that we have identified, evaluated
and prioritized.
Academic clinical data published in
Nature Medicine
in September 2022 demonstrated that a CD19-CAR T cell therapy with
a 4-1BB co-stimulatory domain following standard doses of
lymphodepletion with fludarabine and cyclophosphamide induced
clinical remission in 5 out of 5 patients with moderate to severe,
refractory systemic lupus erythematosus, SLE, with up to 17 months
of follow up in the first treated patient (Mackensen, Andreas, et
al. "Anti-CD19 CAR T cell therapy for refractory systemic lupus
erythematosus." Nature Medicine (2022): 1-9). Grade 1 cytokine
release syndrome, or CRS, was observed in 3 out of 5 patients, and
there was no observation of neurotoxicity of any grade. New naïve B
cells repopulated within 2-5 months of CAR T infusion in all
patients, with no evidence of recurrence of disease or
autoantibodies following repopulation. In summary, the data suggest
the potential to reset the immune system in these patients.
Extending the observation of the potential of 4-1BB containing
CD19-CAR T beyond SLE, in February 2023, a clinical case report was
published in
Lancet Rheumatology
which reported that the same 4-1BB containing CD19-CAR T cell
therapy was administered at the same dose following a similar
preconditioning regimen with fludarabine and cyclophosphamide to a
patient with anti-synthetase syndrome, which is a form of myositis
(Müller, Fabian, et al. “CD19-targeted CAR T cells in refractory
antisynthetase syndrome.” The Lancet (2023)). This patient
experienced rapid, durable and profound decreases in muscle
inflammation, improvement in muscle function and reduction of
autoantibody titers as early as three months after therapy and
lasting for at least six months following therapy with
reconstitution of the B cell population occurring within the
follow-up period. Grade 1 CRS and no immune effector
cell-associated neurotoxicity, or ICANS, were reported.
CABA-201 was designed for use in autoimmune patients to closely
replicate the design of the academic product that has produced the
clinical data reported above. The fully human CD19 binder in
CABA-201, which was exclusively licensed from Nanjing IASO
Biotherapeutics Co., Ltd., or IASO, was designed through screening
of 100 billion antibody fragments to be a fully human equivalent of
the murine FMC63 CD19 binder that was used in the
Nature Medicine
and
Lancet Rheumatology
papers referenced above. T cells expressing a 4-1BB-containing CAR
with our fully human binder have been demonstrated to possess
similar biologic activity
in vitro
and
in vivo
when compared to T cells expressing a 4-1BB-containing CAR
utilizing the murine FMC63 CD19 binder employed in the academic
studies (Dai, Zhenyu, et al. “Development and functional
characterization of novel
4
fully human anti‐CD19 chimeric antigen receptors for T‐cell
therapy.” Journal of Cellular Physiology 236.8 (2021): 5832-5847).
The fully human binder has been clinically evaluated in a
dual-CD19xCD22 CAR T candidate under development for B cell
leukemia and lymphoma in an investigator-initiated trial in China,
and IASO has reported a tolerability profile that we believe is
favorable for development in autoimmune diseases. We believe
CABA-201 may have the potential to transform treatment of
autoimmune diseases with high unmet need through a potential immune
system reset given the similarity of the overall design to the
construct used in the
Nature Medicine
and
Lancet Rheumatology
studies specifically the similarities in the targeting domain as
well as the use of the same 4-1BB costimulatory domain. Subject to
the FDA review, we expect a potential IND clearance of CABA-201 in
the first half of 2023, and initial clinical data by the first half
of 2024.
In addition to a product candidate that we believe is specifically
designed for use in autoimmune patients, we have established an
exclusive translational research partnership with Dr. Georg Schett,
who is a pioneer and global leader in the application of
CD19-targeting cell therapies in autoimmunity and the senior author
on the Nature Medicine and Lancet Rheumatology papers cited above.
The collaboration is designed to allow Dr. Schett to share his
patient samples with us in order for us to generate translational
data on his patients, which will be combined with real time
clinical data to generate insights and a deeper understanding of
the immunologic mechanisms of response from ongoing and continued
clinical studies in multiple autoimmune diseases. With the addition
of CABA-201 to our cell therapy pipeline as the lead product in our
CARTA strategy, informed by confidential clinical and translational
insights from this scientific collaboration, we believe we can
potentially address a broad range of autoimmune diseases in which B
cells have a role initiating or maintaining disease.
Within the CAART strategy, our initial therapeutic focus is on
mucosal pemphigus vulgaris, or mPV, a chronic, autoimmune
blistering skin disease that affects the mucous membranes. mPV is
caused by autoantibodies against the cell adhesion protein
desmoglein 3, or DSG3. Despite a current standard of care that
includes corticosteroids and adjunctive immunosuppressive agents,
pemphigus vulgaris, or PV, remains associated with frequent
recurrences as well as substantial morbidity and mortality. Our
lead product candidate, DSG3-CAART, is being evaluated for the
treatment of mPV, a subtype of PV that affects the epithelium of
the mucous membranes. mPV is caused by autoantibodies against DSG3.
In January 2020, the United States Food and Drug Administration, or
FDA, granted orphan drug designation to DSG3-CAART for the
treatment of PV. In May 2020, DSG3-CAART received fast track
designation from the FDA for improving healing of mucosal blisters
in patients with mPV. DSG3-CAART is currently being evaluated in
the Phase 1 DesCAARTesTM
trial, which is currently enrolling patients. As recently presented
at the 31st
European Academy of Dermatology and Venereology (EADV) Congress in
September 2022 and at the 29th
European Society of Gene and Cell Therapy (ESGCT) Congress in
October 2022, when administered as a monotherapy without
combination therapy, we observed no dose-limiting toxicities
through cohort A5, at up to a 7.5 billion DSG3-CAART cell dose.
Though no clear trends in antibody levels or disease activity
reduction were observed through cohort A5, one subject in cohort A4
had no disease activity by three months post-infusion while
reducing steroid usage during that period, an antibody titer that
dropped more than 20% by three months post-infusion, and was the
only patient in the first four cohorts that had detectable
DSG3-CAART persistence at the three month time point following
initial DSG3-CAART infusion. Based on the data observed from these
cohorts, we announced that the combination sub-study, incorporating
a pre-treatment combination regimen with IVIG and cyclophosphamide,
would be prioritized to follow cohort A5. We anticipate reporting
one month safety and persistence data from the combination
sub-study in the first half of 2023, and six month clinical data
from the combination sub-study by the first half of
2024.
Our second clinical product candidate, MuSK-CAART, is designed to
treat a subset of patients with myasthenia gravis, or MG. MG is an
autoimmune disease induced by autoantibodies targeting the
neuromuscular junction, or NMJ, which can lead to life-threatening
muscle weakness. Our product candidate targets autoreactive B cells
that differentiate into antibody secreting cells that produce
autoantibodies against a transmembrane protein, muscle-specific
kinase, or MuSK, and is being developed for the treatment of MuSK
MG. In the fourth quarter of 2021, we submitted an Investigational
New Drug, or IND, application for the first-in-human studies of
MuSK-CAART to the FDA, which became effective in January 2022. In
February 2022, MuSK-CAART received fast track designation from the
FDA for improving activities of daily living and muscle strength in
patients with MuSK antibody-positive myasthenia gravis. In June
2022, we received a no objection letter from Health Canada,
allowing us to initiate clinical trial activities in Canada. In
October 2022, MuSK-CAART received orphan drug designation for the
treatment of MuSK MG. We initiated the Phase 1 MusCAARTes™ trial in
November 2022. We anticipate reporting six month clinical data from
the combination cohort by the first half of 2024.
Our CAART pipeline also includes product candidates currently in
discovery-stage or preclinical development for the treatment of
mucocutaneous PV, or mcPV and PLA2R-associated membranous
nephropathy, or PLA2R MN, in addition to two undisclosed targets.
DSG3/1-CAART, is being developed for mcPV, which affects both
mucosal and skin surfaces and is caused by autoantibodies against
DSG3 and desmoglein 1, or DSG1. PLA2R-CAART is being developed to
treat patients with PLA2R-assoicated membranous nephropathy, an
autoimmune disease that is typically caused by production of
autoantibodies directed to phospholipase A2 receptor (PLA2R), a
single-pass transmembrane protein expressed in the glomerulus of
the kidney.
5
Our manufacturing strategy is comprised of three stages, designed
to initially leverage the extensive early-stage manufacturing
expertise of our academic partners while migrating to contract
manufacturing organization, or CMO, partnerships and ultimately
aiming to achieve full manufacturing independence through
establishment of our own manufacturing facilities and/or through a
strategic partnership. Stage 1 leverages the expertise in cell and
vector manufacturing of our partners at the Children’s Hospital of
Philadelphia, or CHOP, and the University of Pennsylvania, or Penn.
This stage included early development work, IND support and cell
and vector product manufacturing for CABA-201 and DSG3-CAART. We
believe these partnerships and use of these established facilities
have allowed us to move efficiently and reliably into clinical
trials, but will not be sufficient to support a commercial license.
Stage 2, which is
ongoing, is designed to engage partners who are positioned for
manufacturing of vectors and cell processing at commercial grade
and scale. In January 2021, we initiated a collaboration with WuXi
Advanced Therapies, Inc. or WuXi, to serve as our cell processing
manufacturing partner, and have completed enabling engineering runs
in preparation for our MusCAARTesTM
trial. In December 2021, we entered into a license and supply
agreement with Oxford Biomedica (UK) Limited, or Oxford Biomedica,
to supply lentiviral vector for the clinical and commercial
development of our DSG3-CAART candidate. Contingent on sufficient
clinical evidence from our product candidates, we plan to advance
the third stage of our manufacturing strategy which will include
leasing, building, qualifying and operating our own manufacturing
facility and/or establishing a strategic partnership to rapidly and
reliably scale manufacturing leveraging the partner’s manufacturing
expertise. We believe this additional stage will enable full
control of product development and commercial supply for products
arising from our CABA™ platform, enabling us to achieve continuous
improvement of our product candidates. Our Chief Executive Officer
and our President, Science and Technology, have both, in prior
roles, built and led organizations that have constructed and
commissioned cell therapy facilities which we believe will enable
us to build our own manufacturing organizations and facilities, if
desirable.
We plan to build upon our first mover advantage in the field of
engineered T cell therapy for autoimmune diseases and further
advance the discovery, development, and commercialization of our
product candidate portfolio. Our preclinical, regulatory and
clinical development experience have enabled the successful
clearance of two cell therapy INDs for first-in-human studies in
patients with autoimmune diseases within the routine review period.
We have a track record of successful manufacturing and timely
clinical trial execution, with robust capabilities in clinical
operations and manufacturing in order to manage the complex
logistics and to implement clinical trials of engineered T cell
therapy in autoimmune diseases involving oncologists and medical
specialists, such as dermatologists and neurologists, across a
dozen sites in the United States, requiring coordination of
multiple stakeholders across therapeutic areas. We believe this
experience has the potential to be a significant operating
advantage. Our scientific founders are leading experts in
autoimmune diseases and CAR T technology, and we are led by an
experienced team with demonstrated success in discovering,
developing, manufacturing and evaluating novel cell therapy
products in clinical trials. We have assembled a Scientific
Advisory Board with relevant experience in discovery, clinical and
regulatory science for autoimmunity and cell and gene therapy. In
addition, we have partnered our discovery and initial development
efforts with Penn, a pioneer in cell and gene therapy with a proven
track record of expertise in the translational research, clinical
development, and manufacturing of cell therapy products, in order
to advance multiple product candidates in clinical trials along
with continued progress with our preclinical product
candidates.
Our History and Team
Our scientific co-founders, Aimee Payne, M.D., Ph.D., and Michael
Milone, M.D., Ph.D., began partnering at Penn in 2013 to combine
Dr. Payne’s expertise in B cell-mediated autoimmune diseases with
Dr. Milone’s deep and experienced insights into the design and
implementation of CAR T products. Dr. Payne is a worldwide leader
in characterizing B cell-mediated autoantibody repertoires in PV
and other autoimmune diseases. Dr. Milone is a renowned scientist
in CAR T therapy and was a co-inventor of and a key driver in the
preclinical discovery and development efforts that yielded
Kymriah®, the first FDA-approved CAR T therapy for the treatment of
B cell cancers. Dr. Payne’s laboratory surmised that by
incorporating an antigen instead of an antibody fragment as the
extracellular domain of the CAAR, specific pathogenic B cells could
be targeted. This resulted in a collaboration between the two
investigators to apply the scientific foundation of CAR T
technology as it has been advanced by Drs. Payne and Milone in
order to address B cell-mediated autoimmune diseases.
Their first scientific publication, “Reengineering chimeric antigen
receptor T cells for targeted therapy of autoimmune disease”
(Science,
July 2016), attracted the attention of a colleague, Steven
Nichtberger, M.D., who is an adjunct professor at the Wharton
School at the University of Pennsylvania, teaching a class on
biotech company formation, financing and leadership in the Vagelos
Life Sciences & Management Program. Additionally, Dr.
Nichtberger has experience creating and building companies,
including a novel cellular therapy company, which required
transferring the technology from an academic institution,
establishing a research and development organization, hiring of
manufacturing and quality teams, creating novel manufacturing
processes, reaching agreement with the FDA on novel clinical
development pathways and constructing a commercial-scale Good
Manufacturing Practices, or GMP, facility that manufactured
autologous cell therapy products for clinical trials. In 2017,
based on over a year of
6
interaction and discussions regarding the optimal strategy to
advance the scientific opportunity into a commercially developed
product portfolio that could offer potentially curative treatment
options to patients, Drs. Payne, Milone and Nichtberger decided to
launch Cabaletta Bio.
The longstanding and highly productive partnership between our
co-founders has been complemented by additional management
experience that brings a successful history of translating academic
cellular therapy research from Penn and elsewhere into commercially
sponsored clinical trials and the establishment of a GMP
manufacturing facility and organization.
Gwendolyn Binder, Ph.D., our President, Science and Technology, was
an early member of the Translational Research Program Operations
team at Penn for over five years and participated in the submission
and acceptance of multiple INDs for novel engineered T cell therapy
products. As part of the cell therapy organization at Penn, Dr.
Binder partnered with Dr. Milone and others to drive the
IND-enabling translational studies that facilitated the initial CAR
T clinical trial in B cell cancers at Penn. Dr. Binder also built
and led a clinical stage biotechnology company’s manufacturing
operations and quality teams, including creation of a fully
functioning commercial grade GMP facility. Dr. Binder also built
the translational research program and ultimately led the company’s
research organization.
Our Chief Medical Officer, David Chang, M.D. was the late-stage
clinical development leader of the only two drugs approved for SLE
in the United States in over 60 years, belimumab, or Benlysta, and
anifrolumab, or Sapnelo, through his roles at GlaxoSmithKline plc
and AstraZeneca Pharmaceuticals LP prior to joining the team at
Cabaletta Bio. Dr. Chang completed his fellowship in Rheumatology
and was a faculty member in the Division of Rheumatology at the
Perelman School of Medicine at the University of Pennsylvania prior
to his transition to the biopharmaceutical industry.
Over the past five years, Cabaletta has implemented two
clinical-stage CAART cell therapy programs in autoimmunity, which
have required collaborations between specialists in current
therapeutic areas of interest – dermatologists and neurologists –
and oncologists who are responsible for administering the cell
therapy at each site. Given our track record of timely clinical
trial implementation with CAART cell therapy in autoimmune diseases
over the past five years at a dozen sites across the United States,
we believe that our team’s successful management of the complicated
planning and logistics involved with implementation of these
clinical trials has the potential to be an operating advantage. The
safety data from the Phase 1 DesCAARTes™ trial, evaluating
DSG3-CAART, the lead CAART candidate, has been encouraging in
patients at doses up to 7.5 billion cells. Based on emerging
translational data, combination strategies to increase DSG3-CAART
activity are being evaluated. The next CAART candidate, MuSK-CAART
for patients with MuSK-associated myasthenia gravis, is being
evaluated in the recently initiated Phase 1
MusCAARTesTM
trial and has benefitted from our deep understanding of cell
therapy in autoimmunity through application of our learnings to the
trial design, including a higher starting cell dose delivered as a
single infusion, smaller patient cohorts and earlier implementation
of combination strategies. Our robust clinical execution is
demonstrated through our positive regulatory interactions since
2018, with two IND applications cleared within the routine 30-day
period, implementation of multiple clinical trial protocol
modifications, two Fast Track Designations and two Orphan Drug
Designations granted to pipeline candidates, as well as our
successful manufacturing of our novel cell therapy product
candidates with academic and industry partners.
As we have established our position in the field of autoimmunity,
we continue to evaluate novel approaches that have the potential to
cure autoimmune diseases. We were encouraged to see the results
generated in an academic clinical study published in
Nature Medicine
in September 2022, showing the potential for CD19-CAR T to
transform the course of systemic lupus erythematosus (SLE). In five
patients with SLE, one-time treatment with a 4-1BB-containing
CD19-CAR T cell therapy induced deep and durable clinical responses
in all five patients within three months after treatment, with
favorable tolerability. Healthy B cells repopulated in all patients
within five months of treatment, and responses remained durable off
SLE-associated medications for up to 17 months of follow-up. These
findings demonstrate the potential for CD19-CAR T to “reset the
immune system,” eliminating the cause of autoimmune disease with
restoration of the healthy immune system.
Building on these results, we announced in October 2022 the
development of CABA-201, a 4-1BB-containing CD19-CAR T
investigational therapy, for the treatment of severe autoimmune
diseases. The product has been designed to be highly similar to the
construct used by Dr. Schett in the
Nature Medicine
paper. We are employing a fully human CD19 binder that has high
similarity, including similar binding activity, to the construct
employed in the academic study. Our exclusive translational
research partnership with Dr. Schett, involves our robust
translational research laboratory combined with confidential
sharing of his unpublished clinical data to generate early and
actionable insights from his trials that are informing our clinical
development strategy and plans.
7
Accelerated by our team’s deep expertise in cell therapy, robust
clinical experience in autoimmunity, and demonstrated track record
of strong execution, we are uniquely positioned to advance
CD19-targeting strategies to further our mission to develop
therapies that deliver deep, durable and potentially curative
responses for patients with autoimmune diseases.
Our Research and Manufacturing Collaboration with Penn
Our CABA™ platform has already produced multiple product candidates
through our sponsored research agreements, or SRAs, with Penn for
the laboratories of our scientific co-founders, Drs. Payne and
Milone. Our continuing relationship with our scientific co-founders
provides important advice and insights to us. Our contractual
relationship with Penn through ongoing licensing and research
arrangements also provides important services around manufacturing
supply.
In May 2020 and October 2021, we amended and restated our worldwide
license agreement with Penn to develop our CAAR T technology to
treat B cell-mediated autoimmune and alloimmune diseases. This
license agreement provides us with access to multiple patent
families covering CAAR T therapy as applied to the field of B
cell-mediated autoimmune and alloimmune diseases and to the robust
intellectual property portfolio created by Penn under these SRAs in
this field. See “—Our Material Agreements—Amended and Restated
License Agreement with Penn.”
Our ongoing collaboration with Penn is also based on a Master
Translational Research Services Agreement, or the Services
Agreement, that we entered into in October 2018, along with
multiple additional agreements under the Services Agreement to
engage and partner in individual Penn entities, including cell
product manufacturing, correlative research, vector manufacturing,
clinical trial operations and protocol development. In addition to
the Services Agreement, we have agreements in place with various
functional areas and centers that provide additional resources to
Penn as well as contractual commitments from Penn with the goal of
providing the capacity to manufacture certain of our product
candidates. Penn has also agreed to manufacture vector product for
use in our clinical trials. Penn’s obligations are subject to
certain limitations and termination rights. See “—Our Material
Agreements—Master Translational Research Services Agreement with
Penn”.
We believe Penn is uniquely suited to be our partner in our efforts
to develop product candidates leveraging our CAR T and CAAR T
technology based on a decade of experience, including manufacturing
and clinical support for approximately a dozen active cell therapy
clinical trials. The original manufacturing process for the first
FDA-approved CAR T therapy was developed at Penn before being
transferred to Novartis Pharmaceuticals Corporation during
late-stage clinical trials. We are leveraging Penn’s experience,
validated standard operating procedures, manufacturing facilities
and staffing to accelerate development efforts for our lead product
candidate.
Our Strategy
Our goal is to build upon our expertise in engineered T cell
therapies for autoimmune diseases enhanced by our exclusive
translational research partnership with Dr. Georg Schett to
accelerate the discovery, development and commercialization of our
product candidates. We believe achieving this goal could result in
potentially curative therapies for patients with unmet medical
needs who suffer from a broad range of autoimmune diseases with B
cell involvement. To achieve this goal, key elements of our
strategy include:
•
Achieving clinical proof-of-concept for our lead product candidate,
CABA-201, across multiple autoimmune diseases where B cells are
involved.
Academic clinical data published in
Nature Medicine
in September 2022 demonstrated that a CD19-CAR T cell therapy with
a 4-1BB co-stimulatory domain following lymphodepletion with
fludarabine and cyclophosphamide induced a clinical remission in 5
out of 5 patients with moderate to severe, refractory SLE, with up
to 17 months of follow up. In addition, in February 2023, a case
report was published in
Lancet Rheumatology
which demonstrated that the same CD19-CAR T cell therapy at the
same dose with a 4-1BB co-stimulatory domain was administered
following a similar preconditioning regimen with fludarabine and
cyclophosphamide to a patient with anti-synthetase syndrome, which
is a form of myositis. This patient experienced profound and rapid
reductions in muscle inflammation, improvement in muscle function
and reduction of autoantibody titers for up to six months following
therapy with reconstitution of the B cell population occurring
within the follow-up period. Our exclusive translational
partnership with Dr. Schett, the lead investigator of the study, is
focused on generation of additional translational data to gain a
deeper understanding of the immunologic mechanisms of response and
clinical insights from ongoing and continued clinical studies in
multiple autoimmune disease indications. Due to the high level of
similarity between CABA-201 and the construct used in these
studies, we believe CABA-201 may have the potential to transform
the treatment of autoimmune diseases.
8
•
Leveraging our cellular therapy knowledge and experience in
addition to development efficiencies gained through our
longstanding Penn collaboration to rapidly build fully integrated
internal infrastructure.
We have differentiated expertise that we believe is uniquely suited
to the continued buildout of our CABA™ platform, focused on
autoimmune diseases. Our management team has expertise in
conducting complex, interdisciplinary autoimmune-focused cell
therapy clinical trials with a track record of positive regulatory
interactions to support cell therapies in autoimmune diseases since
2018. We have had two INDs for autoimmune cell therapies cleared
within the routine 30-day period with fast-track designations
granted for each product candidate. In addition, we have a
successful track record of manufacturing novel cell therapy product
candidates with academic and industry partners. Not only does our
team possesses significant experience in the manufacturing of cell
therapy product candidates, but our partnership with Penn allows us
to utilize their existing infrastructure, which has accelerated our
early development activities. In parallel, we continue to build out
our internal capabilities while developing and continuing to
implement a path to manufacturing independence, with established
partnerships to provide vector and cell processing capabilities at
commercial grade and scale.
•
Continuing execution of the DesCAARTes™ trial to achieve clinical
proof-of-concept for DSG3-CAART when administered in a combination
regimen or at very high doses for the CAART strategy, and leverage
insights and learnings to advance additional product
candidates.
We believe our Phase 1 clinical trial evaluating DSG3-CAART for the
treatment of mPV represents an optimal first opportunity to
establish initial clinical proof-of-concept for the CAART strategy
in our CABA™ platform. We intend to continue to apply our
proprietary learnings from DSG3-CAART, including scientific and
regulatory strategies, to most effectively advance these additional
opportunities with both the CAART and CARTA product
candidates.
•
Expanding upon our established IP position and first mover
advantage in CAAR T therapy targeted towards B cell-mediated
autoimmune diseases.
We are focused on protecting our intellectual property as we
continue to pursue the development of future product candidates. We
believe U.S. patent 10,301,370, relating to our initial CAAR
constructs, is the first patent covering cells engineered to
express the known pathogenic epitopes recognized by DSG3 and DSG1
autoantibodies. We have supplemented this initial U.S. patent with
additional U.S. patents relating to our DSG3- and DSG1-CAAR
constructs, which cover the constructs themselves, nucleic acids
encoding these constructs, and methods of treatment using the same.
We are working to expand our existing patent protection with
additional patent filings. The design of a broadly effective CAAR
requires a deep understanding of the location of immunogenic
epitopes targeted by autoantibodies, a competency that we believe
we are uniquely positioned to utilize in product candidate
development. We believe there is a particularly high value to the
first mover advantage including, but not limited to, experience in
discovery, preclinical development, regulatory efforts,
intellectual property and insights from clinical trials that can be
translated across programs.
9
B Cells in Autoimmune Diseases: Overview and Current Treatment
Paradigm
The body’s immune system, which is designed to protect the body
from infection and cancer, includes B cells and T cells. In
addition to producing antibodies against antigens that the body
perceives as foreign, B cells are responsible for producing
inflammatory cytokines, co-stimulating other immune cells, and
presenting antigen to T cells to enable cell-mediated immunity.
Autoimmune disease occurs when the immune response becomes
mistakenly targeted to healthy tissues and cells, and B cells can
contribute to the incitement and/or maintenance of these processes
through their varied immune mechanisms. In the case of B
cell-mediated autoimmune diseases, B cells are responsible for
driving disease through production of autoantibodies, or antibodies
against the ‘self,’ that lead to disease. While these
autoantibodies are the major effectors of B cell-mediated
autoimmune diseases, the underlying root cause of disease is the
defective B cells that mistakenly differentiate into
autoantibody-secreting cells. These pathogenic B cells express
autoantibodies on their surface with the same antigen specificity
as the circulating pathogenic autoantibodies, which can be used to
distinguish them from the healthy B cell population, as shown in
the figure below.
Thomas G. Forsthuber, et al. “B cell-based therapies in CNS
autoimmunity: differentiating CD19 and CD20 as therapeutic
targets.” Therapeutic Advances in Neurological Disorders (2018):
Vol 11: 1-13
Antibodies are B cell receptors that drive B cell
maturation.
CD19 serves as a B cell marker from the pro B cell phase until
differentiation to plasma cells, while CD20 is a surface marker
expressed in a narrower range of the B cell maturation process.
CABA-201 is directed to the CD19 B cell marker. CAAR T product
candidates are designed to eliminate antigen specific B cells in
each targeted disease, preventing their further development to
antibody secreting plasma cells. IgM: immunoglobulin M; IgD:
immunoglobulin D; IgA: immunoglobulin A; sIg: surface
immunoglobulin, representing the autoantibody on the B cell
surface.
Current treatment options for autoimmune diseases involve
generalized immune suppression, achieved through corticosteroids,
immunosuppressive medications and biologics. Most commonly,
corticosteroids are used on both a chronic and acute basis to
control disease and act via a variety of mechanisms to control or
downregulate multiple inflammatory pathways. In many cases,
systemic immunosuppressive medications often used in chemotherapy
such as mycophenolate, azathioprine and methotrexate, are added in
an effort to minimize symptoms and manage the expected recurrences
in patients. Biologic therapies have emerged as a new class of
therapies and have a variety of targets including cytokines, B
cells, and co-stimulation molecules. Currently existing treatment
options target parts of the immune system in addition to
disease-causing B cells, and in general require chronic
administration to reduce recurrence rates. We believe the ideal
therapy in autoimmune diseases would completely and specifically
eliminate the pathogenic B cells while sparing the immune cells
that protect against infection, without requiring chronic
administration.
10
Our Approach
Our CABA™ platform encompasses two strategies. The CARTA (chimeric
antigen receptor T cells for autoimmunity) strategy is designed to
achieve transient depletion of all B cells following a single
infusion, allowing for the elimination disease-causing B cells and
subsequent repopulation by healthy B cells, providing potentially
meaningful clinical responses to patients without long-term
immunosuppression. The CAART (chimeric autoantibody T cells)
strategy is designed to engineer T cells to express CAARs that
selectively engage and eliminate pathogenic B cells. Our CAARs
build upon the scientific foundation of CARs, differing primarily
in the use of the antigen rather than an antibody fragment, which
enables the CAAR T cells to serve as a “decoy” for specific
autoreactive B cell receptors expressed on the surface of B cells.
This allows these pathogenic B cells to engage with the CAAR T
cells instead of benign antigens, resulting in their elimination.
We believe our CABA™ platform has potential applicability across
dozens of autoimmune diseases.
Our CARTA Strategy
Engineered T cell therapy is a type of immunotherapy in which human
T cells are genetically modified to express specific receptors,
enabling the T cells to recognize and eliminate pathogenic cells. A
key application of engineered cell therapy involves the use of
CARs, which are engineered molecules that enable T cells to
identify specific antigens present on the surface of diseased
cells. When expressed on the patient’s T cells, the CAR directs the
T cells to kill cells that express a particular antigen. CAR T
technology has been used to develop treatments for B cell cancers,
which have led to regulatory approvals for certain types of
leukemias and lymphomas. In these B cell cancers, CAR T therapy has
resulted in complete remission of disease in many patients, even in
patients with severe, refractory cancer.
Academic clinical data published in
Nature Medicine
in September 2022 demonstrated that a CD19-CAR T cell therapy with
a 4-1BB co-stimulatory domain following lymphodepletion with
standard doses of fludarabine and cyclophosphamide induced clinical
remission in 5 out of 5 patients with moderate to severe,
refractory SLE, with up to 17 months of follow up in the first
treated patient. Grade 1 CRS was observed in 3 out of 5 patients,
and there was no observation of neurotoxicity of any grade. New
naïve B cells repopulated within 2-5 months of CAR T infusion in
all patients, with no evidence of recurrence of disease or
autoantibodies following repopulation. In summary, the data suggest
the potential for a reset of the immune system in these
patients.
Our licensed fully human CD19 binder has been designed to be highly
similar to the construct used in the
Nature Medicine
paper. The fully human binder has been clinically evaluated in a
dual-CD19xCD22 CAR T candidate under development for B cell
leukemia and lymphoma in an investigator-initiated trial in China,
where IASO has reported
a tolerability profile that we believe is favorable for development
in autoimmune diseases. The activity of T cells expressing a
4-1BB-containing CAR with our binder was evaluated against T cells
expressing a 4-1BB-containing CAR utilizing the CD19 binder
employed in the
Nature Medicine
study cited above, FMC63-CART, as a benchmark. Compared to
FMC63-CART, CABA-201 exhibited comparable biologic activity in
vitro and in vivo.(Dai, Zhenyu, et al). Given its similarity to the
CD19-CAR T construct employed in the trial conducted by
Dr.
11
Georg Schett and his colleagues, including incorporation of a 4-1BB
co-stimulatory domain, we believe the data inform the dosing of
CABA-201, which may have the potential to transform treatment of
autoimmune diseases with high unmet need.
Our CAART Strategy
Our CAART strategy builds upon the scientific foundation of CARs to
enable targeted B cell elimination in an autoimmune setting, which
may lead to complete and durable remission of disease while sparing
all other B cell populations that can provide beneficial immunity
from infection. The co-stimulatory domain and the signaling domain
of both a CAR T cell and CAAR T cell carry out the same activation
and cytotoxic functions once the engineered cell therapy engages
its relevant target expressed on a B cell. CAAR T cells differ from
CAR T cells primarily in their extracellular targeting domain.
Rather than containing an antibody fragment, the CAAR domain
incorporates the relevant components of the autoantigen that is
subject to attack in a certain autoimmune disease.
The current standard of care for B cell-mediated autoimmune disease
often provides limited and transient therapeutic benefit while also
weakening the humoral immune system. We believe our CAAR T cells
have the potential to eliminate the reactive, antibody-producing B
cells that are ultimately responsible for disease through precise
targeting of cells that contain autoantibodies on their surface,
while sparing normal B cells. As a result, we believe CAAR T cell
therapy used in B cell-mediated autoimmune disease has the
potential for durable elimination of pathogenic B cells and an
associated elimination of clinical recurrences with an improved
adverse event, or tolerability, profile relative to the current
standard of care. Additionally, because self-reactive B cells make
up only 0.01% to 1% of the normal B cell population, we believe the
risk of on-target toxicity may be reduced compared to systemically
immunosuppressive medications that non-specifically weaken the
immune system.
Pipeline
We are a clinical-stage biotechnology company focused on the
discovery and development of engineered T cell therapies that have
the potential to provide a deep and durable, perhaps curative,
treatment for patients with autoimmune diseases. Our CABA™ platform
encompasses two approaches – CARTA and CAART. Our current product
candidate pipeline is illustrated below.
Two additional undisclosed disease targets, currently in discovery
stage, and part of our pipeline portfolio through our Sponsored
Research Agreement with Penn are not shown. We have discontinued
work on the FVIII product candidate. This decision is due to the
prioritization of other product candidates.
12
Our Product Candidates
CABA-201 for multiple autoimmune indications
Our lead product candidate for the CARTA strategy, CABA-201, is
designed to achieve transient depletion of all CD19-positive B
cells following a single infusion, allowing for the elimination
disease-causing B cells with subsequent repopulation by naïve
healthy B cells, providing potentially meaningful clinical
responses to patients without long-term immunosuppression. Through
immune system reset, we believe CABA-201 has the potential to
transform the treatment in a broad range of autoimmune
diseases.
CABA-201 is comprised of a fully-human anti-CD19 binder, which is
the extracellular targeting domain. In addition, it contains a
4-1BB costimulatory domain and a CD3-zeta signaling domain, as
shown in the figure below:
Image showing the design of CABA-201, with a fully human anti-CD19
binder, the 4-1BB costimulatory domain and the CD3-Zeta signaling
domain. The costimulatory and signaling domain are identical to the
construct used in the academic clinical studies published in
Nature Medicine
and
Lancet Rheumatology
that were evaluated in SLE and myositis, respectively.
Academic clinical data published in
Nature Medicine
in September 2022 demonstrate that a CD19-CAR T cell therapy with a
4-1BB co-stimulatory domain following lymphodepletion with
fludarabine and cyclophosphamide induced a clinical remission in 5
out of 5 patients with moderate to severe, refractory SLE, with up
to 17 months of follow up. (Mackensen, Andreas, et al). Grade 1 CRS
was observed in 3 out of 5 patients, and there was no observation
of neurotoxicity of any grade. Naïve immature B cells repopulated
within 2-5 months of CAR T infusion in all patients, with no
evidence of recurrence of disease or autoantibodies following
repopulation. In addition, in February 2023, a case report was
published in
Lancet Rheumatology
which demonstrated that the same CD19-CAR T cell therapy with a
4-1BB co-stimulatory domain at the same dose was administered
following a similar preconditioning regimen with fludarabine and
cyclophosphamide to a patient with anti-synthetase syndrome, which
is a form of myositis. This patient experienced profound decreases
in muscle inflammation, improvement in muscle function and
reduction of autoantibody titers six months following therapy with
reconstitution of the B cell population occurring within the
follow-up period. Grade 1 CRS and no ICANS were
reported.
Our licensed fully human CD19 binder has been clinically evaluated
in a dual-CD19xCD22 CAR T candidate under development for B cell
leukemia and lymphoma in an investigator-initiated trial in China,
where IASO has reported a tolerability profile that we believe is
favorable for development in autoimmune diseases. The activity of T
cells expressing a 4-1BB-containing CAR with our binder was
evaluated against T cells expressing a 4-1BB containing CAR
utilizing the CD19 binder employed in the
Nature Medicine
study cited above, FMC63-CART, as a benchmark. Compared to
FMC63-CART, CABA-201 exhibits comparable biologic activity in vitro
and in vivo, as shown in the figure below. (Dai, Zhenyu, et
al).
13
In vitro
(top) and
in vivo
(bottom) data illustrating the binding affinity and body weight
effects of a CD19-CAR T with the FMC63 binder vs. the binder
utilized in CABA-201 (clone 78). Binding affinities and body weight
impact are most similar between the FMC63 binder and Clone 78,
which is the binder in CABA-201.
Given its structural and functional similarity to the CD19-CAR T
construct employed in the academic clinical study published
in
Nature Medicine,
including incorporation of a 4-1BB co-stimulatory domain, we
believe CABA-201 may have the potential to reset the immune system
and transform treatment of autoimmune diseases with high unmet
need.
DSG3-CAART for Mucosal PV
Our lead product candidate for the CAART strategy, DSG3-CAART, is a
CAAR T cell therapy expressing DSG3 as the extracellular domain of
a chimeric immunoreceptor, and is designed to enable specific
cytotoxicity toward B cells autoreactive to DSG3. We believe this
strategy has the potential to directly eliminate the
disease-causing cells in mPV, which may lead to lasting clinical
remission without damage to the healthy immune system.
Disease Background
PV is a potentially fatal, chronic autoimmune disease characterized
by acantholysis, which is the loss of adhesion between cells of the
skin or mucous membranes. Desmosomes are a collection of proteins
that provide the structure for epithelial cells to connect with
each other. PV results when specific pathogenic autoantibodies
disrupt desmosomes by targeting DSG3 and/or DSG1, which are
proteins that are part of the desmosomes. These autoantibodies
cause the upper layer of the epidermis to split away from its base
resulting in characteristic erosions and blisters. Widespread
damage to the skin and mucous membranes increases susceptibility to
life-threatening systemic infections. PV has two major subtypes:
(1) mPV, which is caused by DSG3 autoantibodies and affects the
mucous membranes; and (2) mcPV, which is caused by DSG3 and DSG1
autoantibodies, affecting both the mucous membranes and the skin.
PV affects 11,000-19,000 prevalent patients in the United States,
of which approximately 25% have mPV and 75% have mcPV.
Like most autoimmune diseases, the current standard of care for PV
relies on general immune suppression, which is often transiently
effective but can lead to severe infection, potentially resulting
in hospitalization and death. First-line therapy for PV typically
consists of corticosteroids in moderate to high doses in
combination with the anti-CD20 monoclonal antibody rituximab where
clinically appropriate. Second-line therapy focuses on the several
systemically immunosuppressive medications such as mycophenolate,
azathioprine, and methotrexate. Additional options used in the
acute setting include plasmapheresis, or infusions of intravenous
immunoglobulin.
14
B cell depletion with rituximab was approved by the FDA for the
treatment of PV in 2018 and is playing an increasing role as part
of the standard of care because it has proven to be one of the more
effective therapies for PV. Despite its recent approval for use as
a therapy with corticosteroids in PV, rituximab has several
limitations in terms of efficacy, safety, and convenience.
Rituximab treatment frequently results in relapse, which is reduced
but still occurs despite chronic treatment every six months in PV.
It does not specifically target the pathogenic B cells, but rather
it depletes all CD20-expressing B cells, which leads to an ongoing
risk of severe infection and death. As such, there remains not only
an unmet medical need in PV, but also a need for safer therapies
that can provide a reliable, durable, and complete remission
without long-term immunosuppression.
Preclinical & Clinical Development Plan
A variety of
in vitro
and
in vivo
studies were conducted to evaluate DSG3-CAART from a preclinical
activity and toxicity perspective and to support the IND for
DSG3-CAART. The FDA cleared our IND for a Phase 1 trial of
DSG3-CAART in September 2019. The FDA granted DSG3-CAART orphan
drug designation for the treatment of PV in January 2020 and fast
track designation for improving healing of mucosal blisters in
patients with mPV in May 2020. We announced that the first patient
was dosed in the DesCAARTesTM
trial in December 2020, and enrollment is currently
ongoing.
The DesCAARTesTM
trial is an open-label trial to assess the safety and tolerability
of various dosing regimens of DSG3-CAART in the treatment of
subjects with active mPV. We expect that the Phase 1 trial will
have three parts and a combination sub-study:
•
Part A: Fractionated dose escalation
•
Combination Sub-study: Fractionated dose administered following
pre-treatment with IVIG and cyclophosphamide
•
Part B: Fractionation reduction at the selected dose
•
Part C: Expansion phase at the selected dose and administration
scheme
In Part A, the split dose uses dose fractionation to accommodate a
low number of cells in the first infusion while still advancing the
dose within the cohort up to 7.5 billion DSG3-CAART cells. In the
combination sub-study, a dose of 2.5 billion DSG3-CAART cells is
administered in combination with IVIG and cyclophosphamide
pre-treatment. In Part B, the dose selected from Part A will be
delivered in a decreased number of dose fractionations to determine
the dose fractionation strategy. In Part C, subjects will be
enrolled at the dose and fractionation, as determined in Part A and
B, to generate additional safety and outcome data to support the
rationale for and design of future clinical trials.
Patients are eligible to be enrolled if they have a confirmed
diagnosis of mPV based on biopsy for histology and positive DSG3
ELISA; active disease at screening; elevated DSG3 by ELISA at
screening; and previously been inadequately managed by, or
refractory to, or relapsed after, or with contraindications to or
intolerance of at least one prior systemic therapy. The primary
objective of the trial is to evaluate the safety of DSG3-CAART
cells, and secondary objectives include evaluating the initial
signs of target engagement. The FDA has requested, and we have
agreed, that we will share data from cohort A to inform a
discussion on the optimal design of cohort C. According to FDA
guidance, the submission of cohort A data is not gating to planned
enrollment in cohort B and the FDA plans to provide feedback, if
any, in a timely manner.
In December 2021, we reported top-line biologic activity data for
the first two low dose cohorts, where no clear evidence of biologic
activity was observed at doses that represented less than 2% of the
current planned maximum dose in the trial, as well as the continued
absence of any dose-limited toxicities, or DLTs, or clinically
relevant adverse events. Furthermore, we announced the addition of
a planned fifth cohort to receive a higher dose with a more
consolidated dosing regimen. In May 2022, abstracts for our posters
presented on May 17, 2022 at the American Society of Gene &
Cell Therapy 25th Annual Meeting (ASGCT) were made available
publicly, which summarized clinical and translational data from the
first three cohorts in the DesCAARTesTM
trial where we reported no DLTs, serious adverse events or
clinically relevant adverse events within three months of
DSG3-CAART infusion. The observed dose-dependent increase in
persistence indicated that DSG3-CAART cells were not eliminated by
soluble anti-DSG3 antibodies. Peak persistence in cohort A4 was at
the lower end of the range observed with CAR T therapy in B cell
cancers; however, the range of persistence observed with CD19-CART
therapy in oncology has not been confirmed to be necessary or
sufficient for clinical response in patients with mPV. In August
2022, we announced that two additional dose cohorts are planned
after cohort A5: A6m (multi-dose regimen at 10 to 15 billion cells)
and a combination cohort (2.5 billion cells in addition to patient
pre-treatment with intravenous immunoglobulin (IVIG) and
cyclophosphamide). We also announced that the A5e cohort (enhanced
manufacturing process at 5.0 to 7.5 billion cells) was no longer
planned to occur immediately after cohort A5. In September 2022, we
presented updated clinical and translational data through six
months of follow-up in cohorts A1 through A4 as well as 28-day
safety data and DSG3-CAART persistence data through day 29 for
cohorts A1 through A5 from the DesCAARTesTM
trial at the 31st European Academy of Dermatology and Venereology
(EADV) Congress. In October 2022, we presented additional clinical
and translational data on those cohorts at the 29th European
Society of Gene and Cell Therapy (ESGCT) Congress. Additionally, we
have disclosed
15
that no DLTs were observed through cohort A5, and that no clear
trends in antibody levels or disease activity reduction were
observed through cohort A5, though one subject in cohort A4 had no
disease activity by three months post-infusion while reducing
steroid usage during that period, an antibody titer that dropped
more than 20% by three months post-infusion, and was the only
patient in the first four cohorts that had detectable DSG3-CAART
persistence at the three month time point following initial
DSG3-CAART infusion. Based on the data observed from these cohorts,
we announced that the combination sub-study would be prioritized to
follow cohort A5.
DSG3/1-CAART for mcPV
Disease Background
Our next PV product candidate, DSG3/1-CAART, is being designed to
target DSG3 and/or DSG1 autoreactive B cell receptors on pathogenic
B cells that cause mcPV. mcPV is the most severe and most common
subtype of PV and affects approximately 75% of PV patients. While
mPV is caused by DSG3 autoantibodies, mcPV involves autoantibodies
to both DSG3 and DSG1, resulting in the additional involvement of
skin erosion and blistering. Similar to mPV, mcPV is typically
treated with immune suppression, which has a high rate of relapse
and potential for hospitalizations and fatal infections.
CAAR development for mcPV, based on the targeting of DSG3- and/or
DSG1-specific B cells, has shown promising preclinical results.
DSG1 CAAR T cells specifically killed DSG1-specific B cells
in vitro.
In addition, we observed that with a 1:1 mixture of DSG3 and DSG1
CAAR T cells had killing capabilities without synergistic or
antagonistic effect. The activity and toxicity of DSG3 and
DSG1-CAAR T cells was evaluated using human skin xenografts in
comparison with anti-CART19 cells, which are known from human
clinical trials not to cause direct skin toxicity. A 1:1 mixture of
DSG3 and DSG1 CAAR T cells did not show off-target toxicity
in vivo.
Preclinical & Clinical Development Plan
From a regulatory and clinical trial design perspective, we
anticipate that many of the elements incorporated into the
DesCAARTesTM
trial will carry over to DSG3/1-CAART, including trial design
features as well as site selection. We believe that, because mcPV
is the most prevalent subset of PV and the patients are generally
followed by the same subspecialists, it will allow for a wider
patient pool eligible for a clinical trial.
The size of the DSG3/1 product candidate will likely require us to
incorporate additional technologies to accommodate the size of the
final CAAR construct. While a product that administers a DSG3 CAAR
and DSG1 CAAR as two separate products may be feasible, we believe
that there would be significant advantages to developing a combined
product from a regulatory and commercial perspective.
MuSK-CAART for MuSK Myasthenia Gravis
Disease Background
MG is an autoimmune disease induced by autoantibodies targeting the
neuromuscular junction, or NMJ, which can lead to life-threatening
muscle weakness. Generalized MG, or gMG, is characterized by
profound muscle weakness throughout the body, which may result in
motor impairment, disabling fatigue, shortness of breath due to
respiratory muscle weakness and episodes of respiratory failure.
gMG affects approximately 50,000 to 80,000 patients in the United
States. The majority of patients who develop gMG have
autoantibodies against some part of the NMJ that are known to be
pathogenic. 80% to 90% of patients with gMG have autoantibodies
against the acetylcholine receptor, or AChR, detectable in their
serum. Approximately 6% to 7.5% of patients with gMG have
autoantibodies against MuSK, which is a different target on the
surface of the muscle membrane.
Patients diagnosed with MuSK MG have a different recommended
treatment course compared to patients with AChR MG. Importantly,
many patients with MuSK MG respond poorly to cholinesterase
inhibitors, which are often the first line of therapy in AChR MG.
Consequently, patients with MuSK MG are typically started on
corticosteroids in addition to one or more steroid-sparing
immunosuppressive agents. Corticosteroids are tapered to the extent
possible to prevent disease relapse, though many remain dependent
on corticosteroid despite concomitant treatment with
immunosuppressive medications. In the acute setting, plasma
exchange or intravenous immunoglobulin may be used to address
severe disease. Rituximab is often considered as a second-line
therapeutic option in patients with an inadequate response to
initial immunosuppressive medications. Importantly, complement is
not thought to be meaningfully implicated in the pathophysiology of
MuSK MG, and complement inhibitors are not indicated for treatment
of disease.
16
Preclinical & Clinical Development Plan
Data from the
in vitro
and
in vivo
studies used to support the IND for MuSK-CAART were recently
published in
Nature Biotechnology,
which showed preclinical data demonstrating that MuSK-CAART had
similar efficacy as CD19-CAR T cells for depletion of MuSK-specific
B cells and retained cytolytic activity in the presence of soluble
anti-MuSK antibodies. These data contributed to the Company’s IND
application for the recently initiated Phase 1 MusCAARTes™ clinical
study of MuSK-CAART (Oh, S., Mao, X., Manfredo-Vieira, S. et al.
Precision targeting of autoantigen-specific B cells in
muscle-specific tyrosine kinase myasthenia gravis with chimeric
autoantibody receptor T cells. Nat Biotechnol (2023)). In the
fourth quarter of 2021, we submitted an IND to the FDA for
MuSK-CAART, which became effective in January 2022. In February
2022, MuSK-CAART received fast track designation from the FDA for
improving activities of daily living and muscle strength in
patients with MuSK antibody-positive myasthenia gravis. We
initiated the MusCAARTesTM trial in November 2022.
The MusCAARTesTM trial is an open-label trial to assess the safety
and tolerability of various dosing regimens of MuSK-CAART in the
treatment of subjects with active MuSK MG. MuSK-CAART is
administered by intravenous infusion, using a single infusion of
MuSK-CAART cells at a starting dose informed by initial clinical
data from the DesCAARTesTM
trial and prior CAR T trials. We expect the Phase 1 trial will have
two parts:
•
Part A: Dose escalation
•
Part B: Expansion phase at the selected dose
In Part A, the dose will initially begin at 500 million MuSK-CAART
cells with plans to escalate up to 7.5 billion MuSK-CAART cells in
three dose cohorts. Cohort A2 is planned at 2.5 billion MuSK-CAART
cells, cohort A3 is planned at 7.5 billion MuSK-CAART cells and
cohort A4 is planned at 2.5 billion MuSK-CAART cells in combination
with cyclophosphamide pre-treatment. Cohorts A3 and A4 will be
enrolled concurrently, subject to cohort A2 being well-tolerated
with a preference for enrollment into A4. We plan to enroll at
least two patients per cohort and plan to dose a total of 6
subjects at the selected dose for Part A. In Part B, subjects will
be enrolled at the dose determined in Part A to generate additional
safety and outcome data to support the rationale for and design of
future clinical trials. We plan to enroll approximately 12 subjects
in Part B.
Patients are eligible to be enrolled if they have a confirmed
diagnosis of MuSK MG based on a positive anti-MuSK antibody test;
myasthenia gravis severity Class I-IVa, a Myasthenia Gravis
Composite Score ≥4 and a history of a negative anti-AChR antibody
test. The primary objective of the trial is to evaluate the safety
of MuSK-CAART cells, and a key secondary objective is to evaluate
the initial signs of biologic activity. The primary endpoint of the
study is the incidence of adverse events within three months of
MuSK-CAART infusion, including dose limiting toxicity defined as
occurring within 28 days of infusion.
PLA2R-CAART for PLA2R MN
Disease Background
Primary MN is an immune-mediated kidney disease caused by
autoantibodies against phospholipase A2 receptor (PLA2R), a
single-pass transmembrane protein expressed in the glomerulus of
the kidney. Since the discovery of anti-PLA2R autoantibodies in
2009, evidence has shown that these autoantibodies accumulate as
immune complexes in the glomeruli of the kidney and damage the
filtration barrier, leading to nephrotic syndrome as characterized
by proteinuria. Many patients with PLA2R-associated MN are at risk
for progression to kidney failure.
Primary MN affects approximately 15,000 patients in the United
States and is associated with autoantibodies directed to PLA2R in
70-80% of patients. Immunosuppressive treatments are commonly used
to treat MN, with increasing use of B cell-depleting therapies such
as rituximab in the first line for medium to high-risk patients.
However, high unmet need remains, as a significant fraction of
patients either relapse or fail to respond following treatment with
immunosuppressive therapies. By selectively depleting the PLA2R
autoantibody expressing B cells that cause disease, we believe
PLA2R-CAART could provide a potentially safe, effective, and
durable therapeutic option for patients with PLA2R-associated
MN.
Preclinical & Clinical Development Plan
As presented at the American Society of Nephrology Kidney Week in
the fourth quarter of 2021,
in vitro
cytotoxicity and patient IgG adsorption assays have established the
preliminary activity of PLA2R-CAART cells for antigen-specific B
cell depletion in PLA2R MN. Multiple PLA2R-CAART cells caused
specific lysis of anti-PLA2R hybridomas, and PLA2R CAARS adsorbed
the majority (>95%) of anti-PLA2R IgG autoantibodies in MN sera.
PLA2R-CAART cytotoxicity was preserved over time with physiologic
levels of PLA2R MN plasma IgG. Though PLA2R MN IgG inhibited
PLA2R-CAART cytotoxicity initially, the cytotoxicity increased with
time, likely due to CAART cell proliferation and/or new CAAR
synthesis.
17
To evaluate for preclinical signals of safety, high throughput
screening for off-target PLA2R CAAR interactions was performed, and
no off-target binding interactions were identified.
We anticipate that many of the learnings from our more advanced
CAART programs will provide expertise in developing a clinical and
regulatory strategy for PLA2R-CAART, and we plan to employ
therapeutic area-specific strategies, such as the fact that PLA2R
antibody levels correlate with proteinuria, a commonly used
surrogate endpoint in clinical trials. We conducted a pre-IND
interaction with the FDA to discuss the development path for
PLA2R-CAART in the fourth quarter of 2021.
Manufacturing
Manufacturing Strategy
We intend to implement a three-stage plan that we believe will
ultimately enable us to achieve manufacturing independence. Part of
our strategy relies on engaging non-profit and commercial suppliers
early and in a staged manner. We believe partnering with proven and
reputable manufacturing partners will allow us to efficiently
deploy financial and personnel resources. Stage 1 of this plan is
in place and utilizes the deep expertise in cell and vector
manufacturing from our partners at Children’s Hospital of
Philadelphia, or CHOP, and Penn. This included early development
work, support of the DSG3-CAART IND, and cell and vector product
manufacturing for our DesCAARTesTM
trial. We believe these facilities will allow us to move
efficiently into clinical trials but are not sufficient to support
a commercial license.
Stage 2 of our plan is designed to engage partners who are
qualified for manufacturing of vector at commercial grade and scale
and cell therapy products. We are aware that changes in any
manufacturing process or facility introduces regulatory and
scientific risk to a development program, if the changes result in
a product that is not comparable. We plan to mitigate these risks
primarily in two ways:
•
By securing contract manufacturing organizations, or CMOs, as
partners during Stage 2 of our manufacturing strategy early on for
both vector and cell manufacturing.
We plan to prioritize potential partners who are qualified to, and
have an established track record of, the commercial production of
vector and cell products. We believe this allows us to make one
change in our supply partners during an early period of clinical
development to facilitate
in vitro
comparability testing and clinical validation, prior to controlled
clinical studies. As part of this strategy, in January 2021, we
initiated a collaboration with WuXi to serve as our cell processing
manufacturing partner for our MusCAARTesTM
trial. Engineering runs confirming successful technology transfer
of our manufacturing process have been completed in preparation for
the MusCAARTesTM
trial. In December 2021, we entered into a license and supply
agreement with Oxford Biomedica to supply lentiviral vector for the
clinical and commercial development of our DSG3-CAART
candidate.
•
By licensing the cell manufacturing process used for our Phase 1
DSG3-CAART first-in-human study from Penn.
This is allowing us the time to understand the process used in
order to reduce the chance of changes that may impact
comparability.
In addition to Stage 2, and contingent on sufficient clinical
evidence from our planned clinical trials, we are further planning
to pursue Stage 3 in manufacturing supply. During Stage 3, we plan
to lease, build, qualify and run our own manufacturing facility, or
establish a strategic partnership to leverage the partner’s
manufacturing expertise. We believe this additional stage will
enable full control of continuous improvement, product development
and commercial supply for products arising from our CABA™
platform.
Vector Manufacturing
The lentiviral vector that we have used in the initial subjects in
our DesCAARTesTM
trial was manufactured at CHOP. The lentiviral vector that we plan
to use in the initial subjects in our MusCAARTesTM
trial, and for CABA-201, was manufactured at Penn. We have reserved
additional vector manufacturing slots at Penn and CHOP, which we
may use in our subsequent clinical trials. In parallel, we have
engaged in development work with multiple CMOs to secure production
slots for vector which may be used in our DSG3-CAART or subsequent
clinical trials. In December 2021, we entered into a license and
supply agreement with Oxford Biomedica to supply lentiviral vector
for the clinical and commercial development of our DSG3-CAART
candidate. We believe these efforts will provide us with sufficient
clinical-grade vector to move forward with our anticipated clinical
trials.
18
Cell Manufacturing
We have entered into a collaboration with the Clinical Cell and
Vaccine Production Facility, or CVPF, at Penn, to provide focused
scientific, technical and regulatory support for CAAR T and CAR T
cell manufacture. CVPF is accredited by the Foundation for the
Accreditation of Cellular Therapy and is capable of and experienced
at supporting manufacture for early-phase clinical trials of novel
cell therapy products in first-in-man clinical trials. We expect to
rely upon CVPF to provide initial Phase 1 clinical trial drug
supply for CABA-201 and DSG3-CAART. Penn’s manufacturing process
for DSG3-CAART is directly related to the process developed at Penn
for early clinical trials of CART19, which subsequently became
known commercially as Kymriah. The process was later transferred to
Novartis Pharmaceuticals Corporation and further modified for the
Kymriah program.
As we scale our manufacturing of DSG3-CAART and our other product
candidates to meet our expected needs for further clinical trials,
we may or may not rely on Penn, but we also expect to rely on CMOs
and other third parties for the manufacturing and processing of our
clinical trial materials. Any CMO that we select will be subject to
cGMP requirements. We believe the use of contract manufacturing for
our pipeline programs will be cost-effective and allow us to
rapidly prepare for clinical trials in accordance with our
development plans. In preparation for this transition, we have
engaged multiple third-party contractors to manufacture clinical
grade viral vector used to deliver the applicable CAAR or CAR gene
into the T cells. We have also initiated development work with
certain contractors for cGMP and commercial vector production. We
expect third-party manufacturers will be capable of providing and
processing sufficient quantities of our product candidates to meet
anticipated clinical trial demands and commercial need. In January
2021, we initiated a collaboration with WuXi to serve as our cell
processing manufacturing partner for our ongoing
MusCAARTesTM
trial, which collaboration was amended in August 2022.
Commercialization
Our aim is to become a fully integrated cellular therapy company
focused on improving the lives of patients with autoimmune
diseases. The product candidates from our CABA™ platform are
designed to address autoimmune indications where there is a
compelling opportunity to improve clinical outcomes in comparison
with the current standard of care.
Our lead CARTA product candidate, CABA-201, is under development
for autoimmune diseases with serious unmet medical need. Based on
the differentiated expertise of Cabaletta’s team members and our
years of experience in conducting cell therapy clinical trials in
autoimmunity, we are focused on being the first company to launch a
cell therapy product for patients with autoimmune diseases, while
continuing to innovate on next-generation approaches and
differentiation strategies to deliver an optimal product candidate
profile. Our CAART product candidates are focused on rare disease
populations where we believe there is potential to commercialize
independently due to the concentration of treatment paradigms and
limited but easily identified patient populations.
We aim to achieve full manufacturing independence through
establishment of our own manufacturing facilities and/or through a
strategic partnership. Our development and commercialization
efforts will focus initially on the United States, with expansion
to the European Union and Asia-Pacific geographies, potentially
with the support of strategic partners.
Competition
The biotechnology and pharmaceutical industries are characterized
by rapidly advancing technologies, intense competition and a strong
focus on intellectual property. We face competition from many
different players, including large and specialty pharmaceutical and
biotechnology companies, academic research organizations and
governmental agencies. Any therapeutic candidates we successfully
develop and commercialize will compete with the existing standard
of care as well as any novel therapies that may gain regulatory
approval in the future.
There are multiple companies with marketed CAR T therapies for the
treatment of hematologic cancers, including Novartis
Pharmaceuticals Corporation, Gilead Sciences, Inc., Bristol Myers
Squibb, Johnson and Johnson, Inc. and Legend Biotech Corporation. A
subset of these companies along with other biopharmaceutical
companies have announced CD19-targeting therapies in development
for the treatment of autoimmune diseases. There are also a number
of companies with leading autoimmune franchises but without
disclosed cell therapy platforms who may become
competitors.
Existing treatment options for PV are limited. Rituximab, marketed
by Roche Holding AG, is the first drug to have received approval
for PV in the United States in over 60 years. In Europe, the
approved therapies for PV are corticosteroids, azathioprine, and
rituximab. Other standard of care treatments include various
immunosuppressants, plasmapheresis, and intravenous immunoglobulin
infusions given monthly or on another periodic chronic basis.
Additionally, multiple biopharmaceutical companies have therapies
in clinical development. Competition in the MuSK MG autoimmune
space is currently dominated by the current
19
standard of care, rituximab. A second approved approach to treating
patients is IVIG, which is available through CSL Behring LLC,
Grifols, S.A., and Mitsubishi Tanabe Pharma Corporation.
Additionally, multiple biopharmaceutical companies have therapies
in clinical development. We believe we are the first and only
company developing CAAR T drug candidates for the treatment of B
cell-mediated autoimmune diseases.
Within the CAR T field we recognize that a subset of companies with
an investment and expertise in CAR T cell development for oncology
indications have announced they intend to leverage their technology
in autoimmune disease-affected populations. We are aware of other
pharmaceutical and biotechnology companies that are exploring
CART-19 as well as other methods of engineering T cells, natural
killer (NK) cells or bispecific antibodies for the treatment of
autoimmune conditions.
Many of the companies against which we are competing or against
which we may compete in the future 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 industry may result in even more resources being
concentrated among a smaller number of our competitors. Smaller or
early-stage companies may also prove to be significant competitors,
particularly through collaborative arrangements with large and
established companies. These competitors also compete with us in
recruiting and retaining qualified scientific and management
personnel and establishing clinical trial sites and patient
registration for clinical trials, as well as in acquiring
technologies complementary to, or necessary for, our
programs.
Intellectual Property and Barriers to Entry
We strive to protect the proprietary technologies that we believe
are important to our business, including pursuing and maintaining
patent protection intended to cover our product candidates and
their use, as well as other inventions that are important to our
business. In addition to patent protection, we also rely on
know-how, confidentiality agreements, invention assignment
agreements and trade secrets to protect aspects of our business
that are not amenable to, or that we do not consider appropriate
for, patent protection, to develop and maintain our proprietary
position. The confidentiality agreements are designed to protect
our proprietary information and the invention assignment agreements
are designed to grant us ownership of technologies that are
developed for us by our employees, consultants or certain other
third parties. We seek to preserve the integrity and
confidentiality of our data and trade secrets by maintaining
physical security of our premises and physical and electronic
security of our information technology systems. While we have
confidence in our agreements and security measures, either may be
breached, and we may not have adequate remedies. In addition, our
trade secrets may otherwise become known or independently
discovered by competitors.
Our commercial success depends in part upon our ability to obtain
and maintain patent and other proprietary protection for
commercially important technologies, inventions and trade secrets
related to our business, defend and enforce our intellectual
property rights, particularly our patent rights, preserve the
confidentiality of our trade secrets and operate without infringing
valid and enforceable intellectual property rights of
others.
The patent positions for biotechnology companies like us are
generally uncertain and can involve complex legal, scientific and
factual issues. In addition, the coverage claimed in a patent
application can be significantly reduced before a patent is issued,
and its scope can be reinterpreted and even challenged after
issuance. As a result, we cannot guarantee that any of our product
candidates will be protectable or remain protected by enforceable
patents. We cannot predict whether the patent applications we are
currently pursuing will issue as patents in any particular
jurisdiction or whether the claims of any issued patents will
provide sufficient proprietary protection from competitors. Any
patents that we hold may be challenged, circumvented or invalidated
by third parties.
As of March 1, 2023, our patent estate (all of which has been
in-licensed) included five issued U.S. patents, two granted foreign
patents, seven pending U.S. patent applications, and 50 pending
foreign patent applications. See “—Our Material Agreements—IASO
Agreement” and “—Our Material Agreements—Amended and Restated
License Agreement with the Trustees of the University of
Pennsylvania and the Children’s Hospital of
Philadelphia.”
With regard to our CABA-201 product candidate, we have one pending
U.S. patent application and counterpart patent applications pending
in Australia, Canada, China, Europe, Hong Kong and Japan, which are
directed to a CD19 specific chimeric antigen receptor and a
CD19-specific antibody binding site. These patent applications, if
issued, would be expected to expire in 2040. This patent family is
owned by IASO and is exclusively licensed to us in the field of the
license.
With regard to our DSG3-CAART and DSG3/1-CAART product candidates,
we have five issued U.S. patents with claims directed to a CAAR
containing an extracellular domain containing DSG3, DSG1 or
fragments thereof, nucleic acids encoding the CAAR, genetically
modified cells comprising the CAAR, and methods of treatment using
the same. These patents are scheduled to
20
expire between 2035 and 2037, without taking potential patent term
extensions into account. We also have one pending U.S. patent
application and counterpart patents granted in Europe and China,
which are scheduled to expire in 2035, and patent applications
pending in Canada, China, Europe and Hong Kong. This patent family
is owned by Penn and exclusively licensed to us in the field of the
license.
With regard to our MuSK-CAAR T cell product candidate, we have one
pending U.S. patent application and counterpart patent applications
pending in Australia, Canada, China, Europe, Hong Kong, Israel,
Japan, Korea, Mexico and New Zealand, which if issued, would be
expected to expire in 2039. We have one pending international
patent application filed under the patent cooperation treaty. Any
patents claiming priority to the international patent application
would be expected to expire in 2042. These patent families are
owned by Penn and exclusively licensed to us in the field of the
license.
With regard to our PLA2R-CAAR T cell product candidate, we have two
pending U.S. patent applications and counterpart patent
applications pending in Australia, Canada, China, Europe, Israel,
Japan, Korea, Mexico, New Zealand, and Russia, which if issued,
would be expected to expire in 2039. This patent family is owned by
Penn and exclusively licensed to us in the field of the
license.
The term of individual patents depends upon the legal term of the
patents in the countries in which they are obtained. In most
countries in which we file, the patent term is 20 years from the
earliest date of filing a non-provisional patent
application.
In the United States, the term of a patent covering an FDA-approved
drug may be eligible for a patent term extension under the
Hatch-Waxman Act as compensation for the loss of patent term during
the FDA regulatory review process. The period of extension may be
up to five years beyond the expiration of the patent, but cannot
extend the remaining term of a patent beyond a total of 14 years
from the date of product approval. Only one patent among those
eligible for an extension may be extended, and a given patent may
only be extended once. Similar provisions are available in Europe
and in certain other jurisdictions to extend the term of a patent
that covers an approved drug. It is possible that issued U.S.
patents covering each of our product candidates may be entitled to
patent term extensions. If our product candidates receive FDA
approval, we intend to apply for patent term extensions, if
available, to extend the term of patents that cover the approved
product candidates. We also intend to seek patent term extensions
in any jurisdictions where they are available, however, there is no
guarantee that the applicable authorities, including the FDA, will
agree with our assessment of whether such extensions should be
granted, and even if granted, the length of such
extensions.
In addition to patent protection, we also rely on know-how and
trade secret protection for our proprietary information that is not
amenable to, or that we do not consider appropriate for, patent
protection, to develop and maintain our proprietary position.
However, trade secrets can be difficult to protect. Although we
take steps to protect our proprietary information, including
restricting access to our premises and our confidential
information, as well as entering into agreements with our
employees, consultants, advisors and potential collaborators, third
parties may independently develop the same or similar proprietary
information or may otherwise gain access to our proprietary
information. As a result, we may be unable to meaningfully protect
our know-how, trade secrets, and other proprietary
information.
In addition, we plan to rely on regulatory protection based on
orphan drug exclusivities, data exclusivities, and market
exclusivities. See “—Government Regulation” for additional
information.
21
Our Material Agreements
IASO Agreement
On October 7, 2022, we entered into an Exclusive License Agreement
(the IASO Agreement) with IASO. Pursuant to the IASO Agreement, we
received an exclusive, worldwide license under certain IASO
intellectual property to use a novel clinical-stage anti-CD19
binder to develop, manufacture, commercialize and otherwise exploit
T cell products directed to CD19 for the purpose of diagnosis,
prevention or treatment of any autoimmune or alloimmune indications
in humans. IASO has the right of first negotiation if we desire to
grant a third party an exclusive license to develop, manufacture,
commercialize or otherwise exploit the licensed products in the
Greater China region. Pursuant to the IASO Agreement, we and IASO
have agreed, subject to certain exceptions, to refrain from
engaging in certain competitive activities with respect to certain
programs. As partial consideration for the exclusive license, IASO
received an upfront payment of $2.5 million. IASO is also eligible
to receive up to mid double digit millions in milestone payments
based upon the achievement of specified pre-clinical, development
and regulatory milestones, and up to an additional low triple digit
millions in milestone payments based upon achievement of specified
sales milestones, for a total consideration, inclusive of the
upfront payment, of up to $162 million, along with tiered
mid-single digit royalties on future net sales for licensed
products that may result from the IASO Agreement. We also may
sublicense through multiple tiers the rights granted to it by IASO
under the IASO Agreement at any time, however, we must pay IASO a
low double-digit percentage of any revenue obtained from
sublicenses or options to third parties, subject to certain
customary exclusions. The IASO Agreement will continue on a
country-by-country, licensed product-by-licensed product basis
until the expiration of the royalty term as identified in the IASO
Agreement, unless earlier terminated. We and IASO may terminate the
IASO Agreement for a material, uncured breach or insolvency of the
other party. We may also terminate the IASO Agreement at will upon
advance written notice and in the event IASO rejects the IASO
Agreement due to bankruptcy-related matters. IASO may also
terminate the IASO Agreement if we fail to achieve certain
specified diligence milestones in a timely manner and/or if we
commence any patent challenges with respect to the patents and
patent applications relating to the licensed sequence, in each case
upon advance written notice.
Amended and Restated License Agreement with the Trustees of the
University of Pennsylvania and the Children’s Hospital of
Philadelphia
In July 2019, we entered into an amended and restated license
agreement, or the License Agreement, as further amended in May 2020
and October 2021, with Penn and CHOP, collectively the
Institutions, pursuant to which we obtained (a) a non-exclusive,
non-sublicensable, worldwide research license to make, have made
and use products in two subfields of use, (b) effective as of
October 2018, an exclusive, worldwide, royalty-bearing license,
with the right to sublicense, under certain patent rights of the
Institution to make, use, sell, offer for sale and import products
in the same two subfields of use, and (c) effective as of October
2018, a non-exclusive, worldwide, royalty-bearing license, with
limited rights to sublicense, under certain of Penn’s know-how,
which know-how satisfies certain criteria and is listed on a
mutually agreed-to schedule, to make, have made, use, sell, offer
for sale, import and have imported products in the same two
subfields of use. Our rights are subject to the rights of the U.S.
government and certain rights retained by the Institutions. The
License Agreement was amended in May 2020 to add certain
intellectual property relating to one of the two undisclosed
disease targets and in October 2021 to extend certain dates by
which we must achieve certain financial and regulatory
milestones.
Unless earlier terminated, the License Agreement expires on the
expiration or abandonment or other termination of the last valid
claim in the intellectual property we license from Penn. We may
terminate the License Agreement at any time for convenience upon 60
days written notice. In the event of an uncured, material breach,
Penn may terminate the License Agreement upon 60 days written
notice.
Penn maintains control of all filing, prosecution and maintenance
of the Institutions’ patent rights licensed by us, and we are
responsible for all ongoing patent costs during the term of the
agreement. We also reimbursed Penn for its out-of-pocket expenses
incurred prior to the effective date of the agreement with respect
to the filing, prosecution and maintenance of the patent rights
licensed by us. Under the terms of the License Agreement, we were
also obligated to pay $2.0 million annually for three years
beginning August 2018 for funding to the laboratories of each of
Drs. Milone and Payne. See “—Sponsored Research Agreements with the
Trustees of the University of Pennsylvania.”
Under the License Agreement, we must use commercially reasonable
efforts to develop and commercialize a product in each subfield.
During the term of the License Agreement until the first commercial
sale of the first product, we are obligated to pay Penn a
non-refundable, non-creditable annual license maintenance fee of
$10,000. We are required to pay certain milestone payments upon the
achievement of specified clinical and commercial milestones.
Milestone payments are reduced by a certain percentage
for
22
the second product that achieves a milestone, by an additional
percentage for the third product that achieves a milestone, and so
on, for each subsequent product that achieves a milestone. In the
event that we are able to successfully develop and launch multiple
products under the License Agreement, total milestone payments
could be approximately $21.0 million. Penn is also eligible to
receive tiered royalties at percentage rates in the low
single-digits, subject to an annual minimum royalty, on annual
worldwide net sales of any products that are commercialized by us,
our affiliates or our sublicensees that contain, use, embody,
result from the use of or incorporate, or are covered by, the
intellectual property licensed by us. To the extent we sublicense
our license rights under the License Agreement, Penn would be
eligible to receive tiered sublicense income at percentage rates in
the mid-single to low double-digits. We have also entered into a
subscription and technology transfer agreement with Penn, pursuant
to which we owed Penn an upfront subscription fee, which was paid
in 2019, and a nominal non-refundable royalty on the net sales of
products, a portion of which will be credited toward milestone
payments and royalties under this License Agreement. Technology
transfer activities would be at our cost and subject to agreement
as to the technology to be transferred.
Sponsored Research Agreements with Penn
Dr. Michael Milone
In April 2018, we entered into a Sponsored Research Agreement with
Penn for the laboratory of Dr. Milone, or the Milone SRA, pursuant
to which we agreed to sponsor certain research related to the
development of (i) T cell based immunotherapies for autoimmune and
alloimmune antibodies of pathologic significance and (ii) a
clinical grade microfluidic device designed for single step
selection and activation of T cells from blood samples to be
conducted in Dr. Milone’s laboratory at Penn. Under the Milone SRA,
Penn granted us a perpetual, irrevocable, non-transferable,
non-exclusive license to use all intellectual property resulting
from the research sponsored by us for internal research purposes.
In addition, Penn granted us an option to include, in exchange for
a fee, any intellectual property resulting from the research
sponsored by us that relates to CAAR T cell therapies for
hemophilia and/or pemphigus within the scope of the License
Agreement. Penn also granted us an option to negotiate a license to
all other intellectual property resulting from the research
sponsored by us. In April 2021 and October 2021, the Milone SRA was
amended to extend the term of the original research plan. The
Milone SRA expired in November 2022.
Dr. Aimee Payne
In April 2018, we entered into a Sponsored Research Agreement, or
SRA, with Penn for the laboratory of Dr. Payne, or the Payne SRA,
pursuant to which we agreed to sponsor certain research related to
the development of T cell based immunotherapies for autoimmune and
alloimmune antibodies of pathologic significance to be conducted in
Dr. Payne’s laboratory at Penn. In May 2020, the Payne SRA was
amended to include CAAR design and optimization efforts in three
additional B cell-mediated autoimmune diseases. In August 2020,
this agreement was further amended to extend the term of the
original research plan. In December 2021, we further amended the
Payne SRA to extend the term and expand the workplan to include
additional correlative studies related to the
DesCAARTesTM
trial. Unless earlier terminated, the Payne SRA will expire in
December 2024. In December 2022, we signed a budget amendment for
the Payne SRA. Under the Payne SRA, Penn granted us a perpetual,
irrevocable, non-transferable, non-exclusive license to use all
intellectual property resulting from the research sponsored by us
for internal research purposes. In addition, Penn granted us an
option to include, in exchange for a fee, any intellectual property
resulting from the research sponsored by us that relates to CAAR T
cell therapies for hemophilia, MG and/or pemphigus within the scope
of the License Agreement. Penn also granted us an option to
negotiate a license to all other intellectual property resulting
from the research sponsored by us.
The total cost of the two SRAs was $12.6 million, which satisfies
the $2.0 million annual obligation under the License Agreement. As
of December 31, 2022, the activities under the Payne and Milone
SRAs have been completed and the full cost has been
incurred.
Master Translational Research Services Agreement with
Penn
In October 2018, we entered into a Master Translational Research
Services Agreement with Penn, or the Services Agreement, pursuant
to which Penn agreed to perform certain services related to the
research and development of the technology licensed to us under the
License Agreement, as well as certain clinical, regulatory and
manufacturing services. The Services Agreement will expire on the
later of (i) October 19, 2021 or (ii) completion of the services
for which we have engaged Penn under the Services Agreement. Either
party may terminate this agreement with or without cause upon a
certain number of days’ prior written notice. The services
encompassed by the Services Agreement are performed by different
organizations at Penn pursuant to certain addenda to the Services
Agreement, including the Center for Advanced Retinal and Ocular
Therapeutics, or CAROT, Addendum, as amended in May 2020, and the
CVPF Addendum. In addition, in July 2019 we entered into an
Alliance Agreement with Penn, pursuant to which we will pay Penn a
nominal annual fee in order for Penn to provide an adequate and
consistent level of support to the services that it provides to
us.
23
The CAROT Addendum
Under the CAROT Addendum, Penn manufactures vector that is then to
be used by the CVPF in the manufacture of our product candidates.
In the event that certain materials owned by Penn are incorporated
into a product developed for us, Penn has agreed to grant us a
limited license to use those materials. Further, Penn agreed to
grant us an exclusive, paid-up, royalty-free, transferable,
irrevocable, perpetual exclusive license to any deliverables
produced under the CAROT Addendum, except with respect to certain
technical information of Penn that is contained or incorporated in
the deliverables, to which Penn agreed to grant us a limited
nonexclusive license. However, any necessary technology transfer
would be pursuant to the subscription and technology transfer
agreement described above.
The CVPF Addendum
Under the CVPF Addendum, Penn conducts process validation studies
and large-scale engineering runs for our product candidates. Under
the CVPF Addendum, CVPF will contractually agree to manufacture
agreed upon quantities of DSG3-CAART material for use in connection
with our DesCAARTesTM
trial, unless the agreement is terminated by either party. Any
necessary technology transfer would be pursuant to the subscription
and technology transfer agreement described above.
Oxford Biomedica
In December 2021, we entered into a Licence and Supply agreement,
or LSA, with Oxford Biomedica (UK) Limited wherein the LSA grants
us a non-exclusive license to Oxford’s LentiVector® platform for
its application in our DSG3-CAART program and puts in place a
multi-year vector supply agreement. Under the terms of the
agreement, we were required to pay Oxford an upfront fee, as well
as costs associated with initial vector manufacturing activities
for a total cost of up to approximately $4.0 million. Oxford is
eligible to receive regulatory and sales milestones in the low tens
of millions and royalties in the low single digits on net sales of
products that incorporate the Oxford technology. We can terminate
the agreement at will upon advance written notice and subject to
certain manufacturing slot cancellation fees.
Wuxi Agreement
In January 2021, we entered into an agreement with WuXi, or the
Wuxi Agreement, to serve as our cell processing manufacturing
partner for the MuSK-CAART Phase 1 clinical trial, or
MusCAARTes
TM
trial. The WuXi Agreement will expire the later of January 2024, or
upon completion of WuXi’s services related to the
MusCAARTesTM
trial. We have the right to terminate the WuXi Agreement for
convenience or other reasons specified in the WuXi Agreement upon
prior written notice. If we terminate the WuXi Agreement, we will
be obligated to pay an early termination fee of up to
$1,500.
Government Regulation
U.S. Regulation
As a biopharmaceutical company that operates in the United States,
we are subject to extensive regulation. Our cell products will be
regulated as biologics. With this classification, commercial
production of our products will need to occur in registered
facilities in compliance with cGMP for biologics. The FDA
categorizes human cell- or tissue-based products as either
minimally manipulated or more than minimally manipulated, and has
determined that more than minimally manipulated products require
clinical trials to demonstrate product safety and efficacy and the
submission of a BLA for marketing authorization. Our products are
considered more than minimally manipulated and will require
evaluation in clinical trials and the submission and approval of a
BLA before we can market them.
Government authorities in the United States (at the federal, state
and local level) and in other countries extensively regulate, among
other things, the research, development, testing, manufacturing,
quality control, approval, labeling, packaging, storage,
record-keeping, promotion, advertising, distribution, post-approval
monitoring and reporting, marketing and export and import of
biopharmaceutical products such as those we are developing. Our
product candidates must be approved by the FDA before they may be
legally marketed in the United States and by the appropriate
foreign regulatory agency before they may be legally marketed in
foreign countries. Generally, our activities in other countries
will be subject to regulation that is similar in nature and scope
as that imposed in the United States, although there can be
important differences. Additionally, some significant aspects of
regulation in Europe are addressed in a centralized way, but
country-specific regulation remains essential in many respects. The
process for
24
obtaining regulatory marketing approvals and the subsequent
compliance with appropriate federal, state, local and foreign
statutes and regulations require the expenditure of substantial
time and financial resources.
U.S. Biological Product Development
In the United States, the FDA regulates biologics under the Federal
Food, Drug, and Cosmetic Act, or FDCA, and the Public Health
Service Act, or PHSA, and their implementing regulations. Biologics
are also subject to other federal, state and local statutes and
regulations. The process of obtaining regulatory approvals and the
subsequent compliance with appropriate federal, state, local and
foreign statutes and regulations require the expenditure of
substantial time and financial resources. Failure to comply with
the applicable U.S. requirements at any time during the product
development process, approval process or after approval, may result
in delays to the conduct of a study, regulatory review and approval
or subject an applicant to administrative or judicial sanctions.
These sanctions could include, among other actions, the FDA’s
refusal to approve pending applications, withdrawal of an approval,
license suspension or revocation, refusal to allow an applicant to
proceed with clinical trials, imposition of a clinical hold,
issuance of untitled or warning letters, product recalls or
withdrawals from the market, product seizures, total or partial
suspension of production or distribution, injunctions, fines,
refusals of government contracts, restitution, disgorgement of
profits, or civil or criminal investigations or penalties. Any
agency or judicial enforcement action could have a material adverse
effect on us.
Our drug product candidates must be approved by the FDA through the
Biologics License Application, or BLA, process before they may be
legally marketed in the United States. The process required by the
FDA before a biologic may be marketed in the United States
generally involves the following:
•
completion of extensive nonclinical, sometimes referred to as
preclinical, laboratory tests, animal studies and formulation
studies in accordance with applicable regulations, including the
FDA’s Good Laboratory Practice, or GLP, regulations and
standards;
•
submission to the FDA of an IND which must become effective before
human clinical trials may begin;
•
approval by an independent institutional review board, or IRB,
representing each clinical site before each clinical trial may be
initiated;
•
performance of adequate and well-controlled human clinical trials
in accordance with applicable IND regulations, good clinical
practices, or GCPs, and other clinical trial-related regulations to
establish the safety and efficacy of the proposed drug product
candidate for its proposed indication;
•
submission to the FDA of a BLA, which includes not only the results
of the clinical trials, but also, detailed information on the
chemistry, manufacture and quality controls for the product
candidate and proposed labeling;
•
satisfactory completion of an FDA pre-approval inspection of the
manufacturing facility or facilities where the product is produced
to assess compliance with the FDA’s current good manufacturing
practice, or cGMP, requirements to assure that the facilities,
methods and controls are adequate to preserve the product’s
identity, strength, quality, purity and potency;
•
potential FDA audit of the preclinical trial sites and/or clinical
trial sites that generated the data in support of the BLA;
and
•
FDA review and approval of the BLA prior to any commercial
marketing or sale of the product in the United States.
The data required to support a BLA is generated in two distinct
development stages: preclinical and clinical. The preclinical
development stage generally involves laboratory evaluations of drug
chemistry, formulation and stability, as well as studies to
evaluate toxicity in animals, which support subsequent clinical
testing. The conduct of the preclinical studies must comply with
federal regulations, including GLPs. The sponsor must submit the
results of the preclinical studies, together with manufacturing
information, analytical data, any available clinical data or
literature and a proposed clinical protocol, as well as other
information, to the FDA as part of the IND. An IND is a request for
authorization from the FDA to administer an investigational drug
product to humans. The central focus of an IND submission is on the
general investigational plan and the protocol(s) for human trials.
The IND automatically becomes effective 30 days after receipt by
the FDA, unless the FDA raises concerns or questions regarding the
proposed clinical trials and places the IND on clinical hold within
that 30-day time period. In such a case, the IND sponsor and the
FDA must resolve any outstanding concerns before the clinical trial
can begin. The FDA may also impose clinical holds on a drug product
candidate at any time before or during clinical trials due to
safety concerns, non-compliance, or other issues affecting the
integrity of the trial. Accordingly, we cannot be sure that
submission of an IND will result in the FDA allowing clinical
trials to begin, or that, once begun, issues will not arise that
could cause the trial to be suspended or terminated.
In addition to the submission of an IND to the FDA before
initiation of a clinical trial in the United States, certain human
clinical trials involving recombinant or synthetic nucleic acid
molecules are subject to oversight of institutional biosafety
committees,
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or IBCs, as set forth in the NIH Guidelines for Research Involving
Recombinant or Synthetic Nucleic Acid Molecules, or NIH Guidelines.
Under the NIH Guidelines, recombinant and synthetic nucleic acids
are defined as: (i) molecules that are constructed by joining
nucleic acid molecules and that can replicate in a living cell
(i.e., recombinant nucleic acids); (ii) nucleic acid molecules that
are chemically or by other means synthesized or amplified,
including those that are chemically or otherwise modified but can
base pair with naturally occurring nucleic acid molecules (i.e.,
synthetic nucleic acids); or (iii) molecules that result from the
replication of those described in (i) or (ii). Specifically, under
the NIH Guidelines, supervision of human gene transfer trials
includes evaluation and assessment by an IBC, a local institutional
committee that reviews and oversees research utilizing recombinant
or synthetic nucleic acid molecules at that institution. The IBC
assesses the safety of the research and identifies any potential
risk to public health or the environment, and such review may
result in some delay before initiation of a clinical trial. While
the NIH Guidelines are not mandatory unless the research in
question is being conducted at or sponsored by institutions
receiving NIH funding of recombinant or synthetic nucleic acid
molecule research, many companies and other institutions not
otherwise subject to the NIH Guidelines voluntarily follow
them.
The clinical stage of development involves the administration of
the drug product candidate to healthy volunteers and patients under
the supervision of qualified investigators, generally physicians
not employed by or under the trial sponsor’s control, in accordance
with GCPs, which include the requirement that all research subjects
provide their informed consent for their participation in any
clinical trial. Clinical trials are conducted under protocols
detailing, among other things, the objectives of the clinical
trial, dosing procedures, subject selection and exclusion criteria,
and the parameters to be used to monitor subject safety and assess
efficacy. Each protocol, and any subsequent amendments to the
protocol, must be submitted to the FDA as part of the IND. Further,
each clinical trial must be reviewed and approved by an IRB at or
servicing each institution at which the clinical trial will be
conducted. An IRB is charged with protecting the welfare and rights
of trial participants and considers such items as whether the risks
to individuals participating in the clinical trials are minimized
and are reasonable in relation to anticipated benefits. The IRB
also approves the informed consent form that must be provided to
each clinical trial subject or his or her legal representative and
must monitor the clinical trial until completed.
There are also requirements governing the reporting of ongoing
clinical trials and completed clinical trial results to public
registries. Sponsors of certain clinical trials of FDA-regulated
products, including biologics, are required to register and
disclose certain clinical trial information, which is publicly
available at www.clinicaltrials.gov.
Clinical trials are generally conducted in three sequential phases,
known as Phase 1, Phase 2 and Phase 3, and may overlap. Phase 1
clinical trials generally involve a small number of healthy
volunteers who are initially exposed to a single dose and then
multiple doses of the drug product candidate. The primary purpose
of these clinical trials is to assess the metabolism, pharmacologic
action tolerability, adverse effects, and safety of the drug
product candidate and, if possible, to gain early evidence on
effectiveness. Phase 2 clinical trials typically involve studies in
disease-affected patients to determine the dose required to produce
the desired benefits. At the same time, safety and further
pharmacokinetic and pharmacodynamic information is collected, as
well as identification of possible adverse effects and safety risks
and preliminary evaluation of efficacy. Phase 3 clinical trials
generally involve large numbers of patients at multiple sites, in
multiple countries, and are designed to provide the data necessary
to demonstrate the efficacy of the product for its intended use,
its safety in use, and to establish the overall benefit/risk
relationship of the product and provide an adequate basis for
product approval. Phase 3 clinical trials may include comparisons
with placebo and/or other comparator treatments. The duration of
treatment is often extended to mimic the actual use of a product
during marketing. Generally, two adequate and well-controlled Phase
3 clinical trials are required by the FDA for approval of a BLA. In
certain instances, FDA may condition approval of a BLA on the
sponsor’s agreement to conduct additional clinical trials to
further assess the biologic’s safety and effectiveness after BLA
approval. Such post-approval trials are sometimes referred to as
Phase 4 clinical trials. These trials are used to gain additional
experience from the treatment of patients in the intended
therapeutic indication and further document clinical benefit in the
case of drugs approved under Accelerated Approval regulations.
Failure to exhibit due diligence with regard to conducting Phase 4
clinical trials could result in withdrawal of approval for
products.
Progress reports detailing the results of the clinical trials,
among other information, must be submitted at least annually to the
FDA, and written IND safety reports must be submitted to the FDA
and the investigators for serious and unexpected suspected adverse
events, findings from other studies suggesting a significant risk
to humans exposed to the biologic, findings from animal or in vitro
testing that suggest a significant risk for human subjects, and any
clinically important increase in the rate of a serious suspected
adverse reaction over that listed in the protocol or investigator
brochure. Phase 1, Phase 2 and Phase 3 clinical trials may not be
completed successfully within any specified period, if at all. The
FDA, the IRB, or the sponsor may suspend or terminate a clinical
trial at any time on various grounds, including a finding that the
research subjects or patients are being exposed to an unacceptable
health risk. Similarly, an IRB can suspend or terminate approval of
a clinical trial at its institution if the clinical trial is not
being conducted in accordance with the IRB’s requirements or if the
drug has been associated with unexpected serious harm to patients.
Additionally, some clinical trials are overseen by an independent
group of qualified experts organized by the clinical trial sponsor,
known as a data safety monitoring board or committee. This group
provides authorization for whether or not a trial may move forward
at designated intervals based on access to certain data from the
trial and may halt the clinical trial if it determines
that
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there is an unacceptable safety risk for subjects or other grounds,
such as interim data suggesting a lack of efficacy. We may also
suspend or terminate a clinical trial based on evolving business
objectives and/or competitive climate. Concurrent with clinical
trials, companies usually complete additional animal studies and
must also develop additional information about the chemistry and
physical characteristics of the drug product candidate as well as
finalize a process for manufacturing the product in commercial
quantities in accordance with cGMP requirements. The manufacturing
process must be capable of consistently producing quality batches
of the drug product candidate and, among other things, must develop
methods for testing the identity, strength, quality, potency and
purity of the final product. Additionally, appropriate packaging
must be selected and tested and stability studies must be conducted
to demonstrate that the drug product candidate does not undergo
unacceptable deterioration over its shelf life.
BLA and FDA Review Process
Following trial completion, trial data are analyzed to assess
safety and efficacy. The results of preclinical studies and
clinical trials are then submitted to the FDA as part of a BLA,
along with proposed labeling for the product and information about
the manufacturing process and facilities that will be used to
ensure product quality, results of analytical testing conducted on
the chemistry of the drug product candidate, and other relevant
information. The BLA is a request for approval to market the
biologic for one or more specified indications and must contain
proof of safety, purity, potency and efficacy, which is
demonstrated by extensive preclinical and clinical testing. The
application may include both negative or ambiguous results of
preclinical and clinical trials as well as positive findings. Data
may come from company-sponsored clinical trials intended to test
the safety and efficacy of a use of a product, or from a number of
alternative sources, including studies initiated by investigators.
To support marketing approval, the data submitted must be
sufficient in quality and quantity to establish the safety and
efficacy of the investigational product to the satisfaction of the
FDA. FDA approval of a BLA must be obtained before a biologic may
be marketed in the United States.
Under the Prescription Drug User Fee Act, or PDUFA, as amended,
each BLA must be accompanied by a significant user fee, which is
adjusted on an annual basis. PDUFA also imposes an annual
prescription drug product program fee. Fee waivers or reductions
are available in certain circumstances, including a waiver of the
application fee for the first application filed by a small
business.
Once a BLA has been accepted for filing, which occurs, if at all,
sixty days after the BLA’s submission, the FDA’s goal is to review
BLAs within 10 months of the filing date for standard review or six
months of the filing date for priority review, if the application
is for a product intended for a serious or life-threatening
condition and the product, if approved, would provide a significant
improvement in safety or effectiveness. The FDA has substantial
discretion in the approval process and may refuse to accept any
application or decide that the data is insufficient for approval,
and may require additional preclinical, clinical or other studies
before it accepts the filing. Additionally, the review process is
often significantly extended by FDA requests for additional
information or clarification.
After the BLA submission is accepted for filing, the FDA reviews
the BLA to determine, among other things, whether the proposed drug
product candidate is safe and effective for its intended use, and
whether the drug product candidate is being manufactured in
accordance with cGMP to assure and preserve the drug product
candidate’s identity, strength, quality, purity and potency. The
FDA may refer applications for novel drug product candidates or
drug product candidates which present difficult questions of safety
or efficacy to an advisory committee, typically a panel that
includes clinicians and other experts, for review, evaluation and a
recommendation as to whether the application should be approved and
under what conditions. The FDA is not bound by the recommendations
of an advisory committee, but it considers such recommendations
carefully when making decisions. The FDA will likely re-analyze the
clinical trial data, which could result in extensive discussions
between the FDA and us during the review process. The review and
evaluation of a BLA by the FDA is extensive and time consuming and
may take longer than originally planned to complete, and we may not
receive a timely approval, if at all.
Before approving a BLA, the FDA will conduct a pre-approval
inspection of the manufacturing facilities for the new product to
determine whether the facilities comply with cGMPs. The FDA will
not approve the product unless it determines that the manufacturing
processes and facilities are in compliance with cGMP requirements
and adequate to assure consistent production of the product within
required specifications. In addition, before approving a BLA, the
FDA may also audit data from clinical trials to ensure compliance
with GCP requirements. After the FDA evaluates the application,
manufacturing process and manufacturing facilities, it may issue an
approval letter or a Complete Response Letter. An approval letter
authorizes commercial marketing of the product with specific
prescribing information for specific indications. A Complete
Response Letter indicates that the review cycle of the application
is complete and the application will not be approved in its present
form. A Complete Response Letter usually describes all of the
specific deficiencies in the BLA identified by the FDA. The
Complete Response Letter may require additional clinical data
and/or an additional pivotal Phase 3 clinical trial(s), and/or
other significant and time-consuming requirements
related
27
to clinical trials, preclinical studies or manufacturing. If a
Complete Response Letter is issued, the applicant may either
resubmit the BLA, addressing all of the deficiencies identified in
the letter, withdraw the application or request a hearing. Even if
such data and information is submitted, the FDA may ultimately
decide that the BLA does not satisfy the criteria for approval.
Data obtained from clinical trials are not always conclusive, and
the FDA may interpret data differently than we interpret the same
data.
There is no assurance that the FDA will ultimately approve a
product for marketing in the United States, and we may encounter
significant difficulties or costs during the review process. If a
product receives marketing approval, the approval may be
significantly limited to specific populations, severities of
allergies, and dosages or the indications for use may otherwise be
limited, which could restrict the commercial value of the product.
Further, the FDA may require that certain contraindications,
warnings or precautions be included in the product labeling or may
condition the approval of the BLA on other changes to the proposed
labeling, development of adequate controls and specifications, or a
commitment to conduct post-market testing or clinical trials and
surveillance to monitor the effects of approved products. For
example, the FDA may require Phase 4 testing which involves
clinical trials designed to further assess the product’s safety and
effectiveness and may require testing and surveillance programs to
monitor the safety of approved products that have been
commercialized. The FDA may also place other conditions on
approvals including the requirement for a Risk Evaluation and
Mitigation Strategy, or REMS, to assure the safe use of the
product. If the FDA concludes a REMS is needed, the sponsor of the
BLA must submit a proposed REMS. The FDA will not approve the BLA
without an approved REMS, if required. A REMS could include
medication guides, physician communication plans, or elements to
assure safe use, such as restricted distribution methods, patient
registries and other risk minimization tools. Any of these
limitations on approval or marketing could restrict the commercial
promotion, distribution, prescription or dispensing of products.
Product approvals may be withdrawn for non-compliance with
regulatory standards or based on the results of post-market studies
or surveillance programs. Additionally, post-approval, many types
of changes to the approved product, such as adding new indications,
changing manufacturing processes and adding labeling claims, are
subject to further testing requirements and FDA review and
approval. Such post-approval requirements can be costly and
time-consuming and can affect the potential market and
profitability of the product.
Orphan Designation and Exclusivity
Under the Orphan Drug Act, the FDA may grant orphan designation to
a drug or biological product 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 and for which there is no
reasonable expectation that the cost of developing and making the
product available in the United States for this type of disease or
condition will be recovered from sales of the product.
Orphan drug designation must be requested before submitting an NDA
or BLA. After the FDA grants orphan drug designation, the identity
of the therapeutic agent and its potential orphan use are disclosed
publicly by the FDA. Orphan drug designation does not convey any
advantage in or shorten the duration of the regulatory review and
approval process.
If a product that has orphan drug 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 or biologic for the same
indication for seven years from the date of such approval, except
in limited circumstances, such as a showing of clinical superiority
to the product with orphan exclusivity on the basis of greater
effectiveness or safety or providing a major contribution to
patient care or in instances of drug supply issues. Competitors,
however, may receive approval of either a different product for the
same indication or the same product for a different indication but
that could be used off-label in the orphan indication. Orphan drug
exclusivity also could block the approval of one of our products
for seven years if a competitor obtains approval before we do for
the same product, as defined by the FDA, for the same indication we
are seeking approval, or if our product is determined to be
contained within the scope of the competitor’s product for the same
indication or disease. If we pursue marketing approval for an
indication broader than the orphan drug designation we have
received, we may not be entitled to orphan drug exclusivity. Orphan
drug status in the European Union has similar, but not identical,
requirements and benefits.
Expedited Development and Review Programs
The FDA has a fast track program that is intended to expedite or
facilitate the process for reviewing new drugs and biological
products that meet certain criteria. Specifically, new drugs and
biological products are eligible for fast track designation if they
are intended to treat a serious or life-threatening condition and
nonclinical or clinical data demonstrate the potential to address
unmet medical needs for the condition. Fast track designation
applies to the combination of the product and the specific
indication for which it is being studied. The sponsor of a new drug
or biologic may request the FDA to designate the drug or biologic
as a fast track product concurrently with, or at any time after,
submission of an IND, and the FDA must determine if the product
qualifies for fast track designation within 60 days of receipt of
the sponsor’s request. Under the fast track designation, the FDA
may consider for
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review sections of the marketing application on a rolling basis
before the complete application is submitted, if the sponsor
provides a schedule for the submission of the sections of the
application, the FDA agrees to accept sections of the application
and determines that the schedule is acceptable, and the sponsor
pays any required user fees upon submission of the first section of
the application.
Any product submitted to the 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 and accelerated approval. Any product is eligible for
priority review, or review within a six-month timeframe from the
date a complete BLA is accepted for filing, if it has the potential
to provide a significant improvement in safety and effectiveness
compared to available therapies. The FDA will attempt to direct
additional resources to the evaluation of an application for a new
drug or biological product designated for priority review in an
effort to facilitate the review.
Additionally, a product may be eligible for accelerated approval.
An investigational drug may obtain accelerated approval if it
treats a serious or life-threatening condition and generally
provides a meaningful advantage over available therapies and
demonstrates an effect on a surrogate endpoint that is reasonably
likely to predict clinical benefit or on a clinical endpoint that
can be measured earlier than irreversible morbidity or mortality,
or IMM, that is reasonably likely to predict an effect on IMM or
other clinical benefit. As a condition of approval, the FDA may
require that a sponsor of a drug or biological product receiving
accelerated approval perform adequate and well-controlled
post-marketing clinical trials and, under the Food and Drug Omnibus
Reform Act of 2022, or FDORA, the FDA is now permitted to require,
as appropriate, that such trials be underway prior to approval or
within a specific time period after the date of approval for a
product granted accelerated approval. Under FDORA, the FDA has
increased authority for expedited procedures to withdraw approval
of a drug or indication approved under accelerated approval if, for
example, the confirmatory trial fails to verify the predicted
clinical benefit of the product. In addition, the FDA currently
requires as a condition for accelerated approval pre-approval of
promotional materials, which could adversely impact the timing of
the commercial launch of the product. Fast track designation,
priority review and accelerated approval do not change the
standards for approval but may expedite the development or approval
process.
Breakthrough Designation
A product can be designated as a breakthrough therapy if it is
intended to treat a serious or life-threatening condition and
preliminary clinical evidence indicates that it may demonstrate
substantial improvement over existing therapies on one or more
clinically significant endpoints. A sponsor may request that a drug
product candidate be designated as a breakthrough therapy
concurrently with, or at any time after, the submission of an IND,
and the FDA must determine if the drug product candidate qualifies
for breakthrough therapy designation within 60 days of receipt of
the sponsor’s request. If so designated, the FDA shall act to
expedite the development and review of the product’s marketing
application, including by meeting with the sponsor throughout the
product’s development, providing timely advice to the sponsor to
ensure that the development program to gather preclinical and
clinical data is as efficient as practicable, involving senior
managers and experienced review staff in a cross-disciplinary
review, assigning a cross-disciplinary project lead for the FDA
review team to facilitate an efficient review of the development
program and to serve as a scientific liaison between the review
team and the sponsor, and taking steps to ensure that the design of
the clinical trials is as efficient as practicable.
Accelerated Approval for Regenerative Medicine Advanced
Therapies
FDA’s regenerative medicine advanced therapy (RMAT) program is
intended to facilitate efficient development and expedite review of
regenerative medicine advanced therapies, which are intended to
treat, modify, reverse, or cure a serious or life-threatening
disease or condition. A drug sponsor may request that FDA designate
a drug as an RMAT concurrently with or at any time after submission
of an IND. FDA has 60 calendar days to determine whether the drug
meets the criteria, including whether there is preliminary clinical
evidence indicating that the drug has the potential to address
unmet medical needs for a serious or life-threatening disease or
condition. A BLA for an RMAT may be eligible for priority review or
accelerated approval through (1) surrogate or intermediate
endpoints reasonably likely to predict long-term clinical benefit
or (2) reliance upon data obtained from a meaningful number of
sites. Benefits of such designation also include early interactions
with FDA to discuss any potential surrogate or intermediate
endpoint to be used to support accelerated approval. An RMAT that
is granted accelerated approval and is subject to post approval
requirements may fulfill such requirements through the submission
of clinical evidence, clinical studies, patient registries, or
other sources of real world evidence, such as electronic health
records; the collection of larger confirmatory data sets; or post
approval monitoring of all patients treated with such therapy prior
to its approval.
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Pediatric Trials
Under the Pediatric Research Equity Act, or PREA, a BLA or
supplement to a BLA must contain data to assess the safety and
efficacy of the product for the claimed indications in all relevant
pediatric subpopulations and to support dosing and administration
for each pediatric subpopulation for which the product is safe and
effective. The FDCA requires that a sponsor who is planning to
submit a marketing application for a drug or biological product
that includes a new active ingredient, new indication, new dosage
form, new dosing regimen or new route of administration submit an
initial Pediatric Study Plan, or PSP, within sixty days of an
end-of-Phase 2 meeting or as may be agreed between the sponsor and
FDA. The initial PSP must include an outline of the pediatric study
or studies that the sponsor plans to conduct, including study
objectives and design, age groups, relevant endpoints and
statistical approach, or a justification for not including such
detailed information, and any request for a deferral of pediatric
assessments or a full or partial waiver of the requirement to
provide data from pediatric studies along with supporting
information. The FDA and the sponsor must reach agreement on the
PSP. A sponsor can submit amendments to an agreed-upon initial PSP
at any time if changes to the pediatric plan need to be considered
based on data collected from nonclinical studies, early phase
clinical trials, and/or other clinical development programs. The
FDA may, on its own initiative or at the request of the applicant,
grant deferrals for submission of data or full or partial
waivers.
Post-Marketing Requirements
Following approval of a new product, a manufacturer and the
approved product are subject to continuing regulation by the FDA,
including, among other things, monitoring and recordkeeping
activities, reporting to the applicable regulatory authorities of
adverse experiences with the product, providing the regulatory
authorities with updated safety and efficacy information, product
sampling, distribution, and tracking and tracing requirements, and
complying with promotion and advertising requirements, which
include, among others, standards for direct-to-consumer
advertising, restrictions on promoting products for uses or in
patient populations that are not described in the product’s
approved labeling (known as “off-label use”), limitations on
industry-sponsored scientific and educational activities, and
requirements for promotional activities involving the internet.
Although physicians may prescribe legally available drugs and
biologics for off-label uses, manufacturers may not market or
promote such off-label uses.
Modifications or enhancements to the product or its labeling or
changes of the site of manufacture are often subject to the
approval of the FDA and other regulators, which may or may not be
received or may result in a lengthy review process. Prescription
drug promotional materials must be submitted to the FDA in
conjunction with their first use.
In the United States, once a product is approved, its manufacture
is subject to comprehensive and continuing regulation by the FDA.
The FDA regulations require that products be manufactured in
specific approved facilities and in accordance with cGMPs. We rely,
and expect to continue to rely, on third parties for the production
of clinical and commercial quantities of our products in accordance
with cGMP regulations. cGMP regulations require, among other
things, quality control and quality assurance as well as the
corresponding maintenance of records and documentation and the
obligation to investigate and correct any deviations from cGMP.
Manufacturers and other entities involved in the manufacture and
distribution of approved products are required to register their
establishments with the FDA and certain state agencies, and are
subject to periodic unannounced inspections by the FDA and certain
state agencies for compliance with cGMP and other laws.
Accordingly, manufacturers must continue to expend time, money, and
effort in the area of production and quality control to maintain
cGMP compliance. These regulations also impose certain
organizational, procedural and documentation requirements with
respect to manufacturing and quality assurance activities. BLA
holders using contract manufacturers, laboratories or packagers are
responsible for the selection and monitoring of qualified firms,
and, in certain circumstances, qualified suppliers to these firms.
These firms and, where applicable, their suppliers are subject to
inspections by the FDA at any time, and the discovery of violative
conditions, including failure to conform to cGMP, could result in
enforcement actions that interrupt the operation of any such
facilities or the ability to distribute products manufactured,
processed or tested by them. Discovery of problems with a product
after approval may result in restrictions on a product,
manufacturer, or holder of an approved BLA, including, among other
things, recall or withdrawal of the product from the
market.
The FDA also may require post-approval testing, sometimes referred
to as Phase 4 testing, REMS and post-marketing surveillance to
monitor the effects of an approved product or place conditions on
an approval that could restrict the distribution or use of the
product. Discovery of previously unknown problems with a product or
the failure to comply with applicable FDA requirements can have
negative consequences, including adverse publicity, judicial or
administrative enforcement, untitled or warning letters from the
FDA, mandated corrective advertising or communications with
doctors, and civil or criminal penalties, among others. Newly
discovered or developed safety or effectiveness data may require
changes to a product’s approved labeling, including the addition of
new warnings and contraindications, and also may require the
implementation of other risk management measures. Also, new
government requirements, including those resulting from new
legislation, may be established, or the FDA’s policies may change,
which could delay or prevent regulatory approval of our products
under development.
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Other Regulatory Matters
Manufacturing, sales, promotion and other activities following
product approval are also subject to regulation by numerous
regulatory authorities in addition to the FDA, including, in the
United States, the Centers for Medicare & Medicaid Services, or
CMS, other divisions of the Department of Health and Human
Services, or HHS (e.g., the Office of Inspector General, or OIG,
and Office for Civil Rights), the Drug Enforcement Administration,
the Consumer Product Safety Commission, the Federal Trade
Commission, the Occupational Safety & Health Administration,
the Environmental Protection Agency and state and local
governments. In the United States, sales, marketing and
scientific/educational programs must also comply with federal and
state fraud and abuse laws, data privacy and security laws,
transparency laws, and pricing and reimbursement requirements in
connection with governmental payor programs, among others. The
handling of any controlled substances must comply with the U.S.
Controlled Substances Act and Controlled Substances Import and
Export Act. Products must meet applicable child-resistant packaging
requirements under the U.S. Poison Prevention Packaging Act.
Manufacturing, sales, promotion and other activities are also
potentially subject to federal and state consumer protection and
unfair competition laws.
The distribution of pharmaceutical products is subject to
additional requirements and regulations, including extensive
record-keeping, licensing, storage and security requirements
intended to prevent the unauthorized sale of pharmaceutical
products.
The failure to comply with regulatory requirements subjects firms
to possible legal or regulatory action. Depending on the
circumstances, failure to meet applicable regulatory requirements
can result in criminal prosecution, fines or other penalties,
injunctions, recall or seizure of products, total or partial
suspension of production, denial or withdrawal of product
approvals, or refusal to allow a firm to enter into supply
contracts, including government contracts. In addition, even if a
firm complies with FDA and other requirements, new information
regarding the safety or efficacy of a product could lead the FDA to
modify or withdraw product approval. Prohibitions or restrictions
on sales or withdrawal of future products marketed by us could
materially affect our business in an adverse way.
Changes in regulations, statutes or the interpretation of existing
regulations could impact our business in the future by requiring,
for example: (i) changes to our manufacturing arrangements; (ii)
additions or modifications to product labeling; (iii) the recall or
discontinuation of our products; or (iv) additional record-keeping
requirements. If any such changes were to be imposed, they could
adversely affect the operation of our business.
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U.S. Patent Term Restoration and Marketing Exclusivity
Depending upon the timing, duration and specifics of the FDA
approval of our drug product candidates, some of our U.S. patents
may be eligible for limited patent term extension under the Drug
Price Competition and Patent Term Restoration Act of 1984, commonly
referred to as the Hatch-Waxman Amendments. The Hatch-Waxman
Amendments permit a patent restoration term of up to five years as
compensation for patent term lost during product development and
the FDA regulatory review process. However, patent term restoration
cannot extend the remaining term of a patent beyond a total of 14
years from the product’s approval date. The patent term restoration
period is generally one-half the time between the effective date of
an IND and the submission date of a BLA plus the time between the
submission date of a BLA and the approval of that application,
except that the review period is reduced by any time during which
the applicant failed to exercise due diligence. Only one patent
applicable to an approved drug is eligible for the extension and
the application for the extension must be submitted prior to the
expiration of the patent. The U.S. PTO, in consultation with the
FDA, reviews and approves the application for any patent term
extension or restoration. In the future, we may apply for
restoration of patent term for our currently owned or licensed
patents to add patent life beyond its current expiration date,
depending on the expected length of the clinical trials and other
factors involved in the filing of the relevant BLA.
An abbreviated approval pathway for biological products shown to be
biosimilar to, or interchangeable with, an FDA-licensed reference
biological product was created by the Biologics Price Competition
and Innovation Act of 2009, or BPCI Act, which was part of the
Patient Protection and Affordable Care Act, as amended by the
Health Care and Education Reconciliation Act of 2010, or
collectively the ACA. This amendment to the PHSA attempts to
minimize duplicative testing. Biosimilarity, which requires that
the biological product be highly similar to the reference product
notwithstanding minor differences in clinically inactive components
and that there be no clinically meaningful differences between the
product and the reference product in terms of safety, purity, and
potency, can be shown through analytical studies, animal studies,
and a clinical trial or trials. Interchangeability requires that a
biological product be biosimilar to the reference product and that
the product can be expected to produce the same clinical results as
the reference product in any given patient and, for products
administered multiple times, that the product and the reference
product 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 biological product.
However, complexities associated with the larger, and often more
complex, structure of biological products as compared to small
molecule drugs, as well as the processes by which such products are
manufactured, pose significant hurdles to implementation that are
still being worked out by the FDA.
A reference biological product is granted twelve years of
exclusivity from the time of first licensure of the product, and
the FDA will not accept an application for a biosimilar or
interchangeable product based on the reference biological product
until four years after first licensure. “First licensure” typically
means the initial date the particular product at issue was licensed
in the United States. This does not include a supplement for the
biological product or a subsequent application by the same sponsor
or manufacturer of the biological product (or licensor, predecessor
in interest, or other related entity) for a change that results in
a new indication, route of administration, dosing schedule, dosage
form, delivery system, delivery device, or strength, unless that
change is a modification to the structure of the biological product
and such modification changes its safety, purity, or potency.
Whether a subsequent application, if approved, warrants exclusivity
as the “first licensure” of a biological product is determined on a
case-by-case basis with data submitted by the sponsor.
Pediatric exclusivity is another type of regulatory market
exclusivity in the United States. Pediatric exclusivity, if
granted, adds six months to existing exclusivity periods and patent
terms. This six-month exclusivity, which attaches to the
twelve-year exclusivity period for reference biologics, may be
granted based on the voluntary completion of a pediatric trial in
accordance with an FDA-issued “Written Request” for such a
trial.
32
Pricing and Reimbursement
United States
Sales of our products will depend, in part, on the extent to which
our products, once approved, will be covered and reimbursed by
third-party payors, such as government health programs, commercial
insurance and managed healthcare organizations. These third-party
payors are increasingly reducing reimbursements for medical
products and services. The process for determining whether a
third-party payor will provide coverage for a drug product,
including a biologic, typically is separate from the process for
setting the price of a drug product or for establishing the
reimbursement rate that a payor will pay for the drug product once
coverage is approved. Third-party payors may limit coverage to
specific drug products on an approved list, also known as a
formulary, which might not include all of the approved drugs for a
particular indication.
In order to secure coverage and reimbursement for any drug product
candidate that might be approved for sale, we may need to conduct
expensive pharmacoeconomic studies in order to demonstrate the
medical necessity and cost-effectiveness of the drug product
candidate, in addition to the costs required to obtain FDA or other
comparable regulatory approvals. Whether or not we conduct such
studies, our drug product candidates may not be considered
medically necessary or cost-effective. A third-party payor’s
decision to provide coverage for a drug product does not imply that
an adequate reimbursement rate will be approved. Third party
reimbursement may not be sufficient to enable us to maintain price
levels high enough to realize an appropriate return on our
investment in product development. In the United States, the
principal decisions about reimbursement for new drug products are
typically made by CMS, an agency within HHS. CMS decides whether
and to what extent a new drug product will be covered and
reimbursed under Medicare, and private payors tend to follow CMS to
a substantial degree. However, no uniform policy of coverage and
reimbursement for drug products exists among third-party payors and
coverage and reimbursement levels for drug products can differ
significantly from payor to payor. Additionally, one third-party
payor’s decision to cover a particular product or service does not
ensure that other payors will also provide coverage for the product
or service, and the level of coverage and reimbursement can differ
significantly from payor to payor. As a result, the coverage
determination process will often require us to provide scientific
and clinical support for the use of our products to each payor
separately and can be a time-consuming process, with no assurance
that coverage and adequate reimbursement will be applied
consistently or obtained in the first instance.
The containment of healthcare costs has become a priority of
federal and state governments, and the prices of drugs, including
biologics, have been a focus in this effort. The U.S. government,
state legislatures and foreign governments have shown significant
interest in implementing cost-containment programs, including price
controls, restrictions on reimbursement and requirements for
substitution of generic products. In many countries, the prices of
drug products are subject to varying price control mechanisms as
part of national health systems. In general, the prices of drug
products under such systems are substantially lower than in the
United States. Other countries allow companies to fix their own
prices for drug products, but monitor and control company profits.
Accordingly, in markets outside the United States, the
reimbursement for drug products may be reduced compared with the
United States. Adoption of price controls and cost-containment
measures, and adoption of more restrictive policies in
jurisdictions with existing controls and measures, could further
limit our net revenue and results. Decreases in third-party
reimbursement for our drug product candidate or a decision by a
third-party payor to not cover our drug product candidate could
reduce physician usage of the drug product candidate and have a
material adverse effect on our sales, results of operations and
financial condition.
Outside of the United States, the pricing of pharmaceutical
products is subject to governmental control in many countries. For
example, in the European Union, pricing and reimbursement schemes
vary widely from country to country. Some countries provide that
products may be marketed only after a reimbursement price has been
approved. Some countries may require the completion of additional
studies that compare the cost effectiveness of a particular therapy
to currently available therapies or so-called health technology
assessments, in order to obtain reimbursement or pricing approval.
Other countries may allow companies to fix their own prices for
products, but monitor and control product volumes and issue
guidance to physicians to limit prescriptions. Efforts to control
prices and utilization of pharmaceutical products will likely
continue as countries attempt to manage healthcare expenditures.
Historically, products launched in the European Union do not follow
price structures of the United States and generally prices tend to
be significantly lower.
33
Other Healthcare Laws and Compliance Requirements
Healthcare providers, physicians, and third-party payors will play
a primary role in the recommendation and prescription of any
products for which we obtain marketing approval. Our business
operations in the United States and our current and future
arrangements with clinical investigators, healthcare providers,
consultants, third-party payors and patients may expose us to
broadly applicable federal and state fraud and abuse and other
healthcare laws and regulations that may constrain the business or
financial arrangements and relationships through which we market,
sell and distribute any drugs for which we obtain marketing
approval. In the United States, these laws include: the federal
Anti-Kickback Statute, the False Claims Act, and HIPAA.
The Anti-Kickback Statute makes it illegal for any person,
including a prescription drug manufacturer (or a party acting on
its behalf), to knowingly and willfully solicit, receive, offer or
pay any remuneration, directly or indirectly, in cash or in kind,
that is intended to induce or reward referrals, including the
purchase, recommendation, order or prescription of a particular
drug, for which payment may be made under a federal healthcare
program, such as Medicare or Medicaid. Violations of this law are
punishable by imprisonment, criminal fines, administrative civil
money penalties and exclusion from participation in federal
healthcare programs. In addition, a person or entity does not need
to have actual knowledge of the statute or specific intent to
violate it. Moreover, the ACA provides that the government may
assert that a claim including items or services resulting from a
violation of the federal Anti-Kickback Statute constitutes a false
or fraudulent claim for purposes of the federal civil False Claims
Act. The Anti-Kickback Statute has been interpreted to apply to
arrangements between pharmaceutical manufacturers on the one hand
and prescribers, purchasers, and formulary managers on the other.
There are a number of statutory exceptions and regulatory safe
harbors protecting some common activities from
prosecution.
Although we would not submit claims directly to payors, drug
manufacturers can be held liable under the federal civil False
Claims Act, which imposes civil penalties, including through civil
whistleblower or qui tam actions, against individuals or entities
(including manufacturers) for, among other things, knowingly
presenting, or causing to be presented to federal programs
(including Medicare and Medicaid) claims for items or services,
including drugs, that are false or fraudulent, claims for items or
services not provided as claimed, or claims for medically
unnecessary items or services. Penalties for a False Claims Act
violation include three times the actual damages sustained by the
government, plus mandatory civil penalties for each separate false
claim, the potential for exclusion from participation in federal
healthcare programs and, although the federal False Claims Act is a
civil statute, conduct that results in a False Claims Act violation
may also implicate various federal criminal statutes. The
government may deem manufacturers to have “caused” the submission
of false or fraudulent claims by, for example, providing inaccurate
billing or coding information to customers or promoting a product
off- label. Claims which include items or services resulting from a
violation of the federal Anti-Kickback Statute are false or
fraudulent claims for purposes of the False Claims Act. The federal
False Claims Act also permits a private individual acting as a
“whistleblower” to bring actions on behalf of the federal
government alleging violations of the federal False Claims Act and
to share in any monetary recovery. Our future marketing and
activities relating to the reporting of wholesaler or estimated
retail prices for our products, if approved, the reporting of
prices used to calculate Medicaid rebate information and other
information affecting federal, state and third-party reimbursement
for our products, and the sale and marketing of our product
candidates, are subject to scrutiny under this law.
The civil monetary penalties statute imposes penalties against any
person or entity that, among other things, is determined to have
presented or caused to be presented a claim to a federal health
program that the person knows or should know is for an item or
service that was not provided as claimed or is false or
fraudulent.
Additionally, we may be subject to data privacy and security
regulations by both the federal government and states in which we
conduct our business. For example, HIPAA created new federal
criminal statutes that prohibit among other things, knowingly and
willfully executing, or attempting to execute, a scheme to defraud
or to obtain, by means of false or fraudulent pretenses,
representations or promises, any money or property owned by, or
under the control or custody of, any healthcare benefit program,
including private third party payors, knowingly and willfully
embezzling or stealing from a healthcare benefit program, willfully
obstructing a criminal investigation of a healthcare offense, and
knowingly and willfully falsifying, concealing or covering up by
trick, scheme or device, a material fact or making any materially
false, fictitious or fraudulent statement in connection with the
delivery of or payment for healthcare benefits, items or services.
Like the federal Anti-Kickback Statute a person or entity does not
need to have actual knowledge of the statute or specific intent to
violate it in order to have committed a violation.
34
HIPAA, as amended by the Health Information Technology for Economic
and Clinical Health Act of 2009 (“HITECH”), and its implementing
regulations, mandates, among other things, the adoption of uniform
standards for the electronic exchange of information in common
healthcare transactions, as well as standards relating to the
privacy and security of individually identifiable health
information, which require the adoption of administrative, physical
and technical safeguards to protect such information. Among other
things, HITECH makes HIPAA’s security standards directly applicable
to business associates, defined as independent contractors or
agents of covered entities, which include certain health care
providers, health plans, and healthcare clearinghouses, that
create, receive or obtain protected health information in
connection with providing a service for or on behalf of a covered
entity. HITECH also increased the civil and criminal penalties that
may be imposed against covered entities and business associates,
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, certain state
laws govern the privacy and security of health information and
other personal data in certain circumstances, some of which are
more stringent or otherwise different than HIPAA and many of which
differ from each other in significant ways and may not have the
same effect, thus complicating compliance efforts. Failure to
comply with these laws, where applicable, can result in the
imposition of significant civil and criminal penalties.
Further, the federal Physician Payments Sunshine Act, or the
Sunshine Act, within the ACA, and its implementing regulations,
require that certain manufacturers of drugs, devices, biological
and medical supplies for which payment is available under Medicare,
Medicaid or the Children’s Health Insurance Program (with certain
exceptions) report annually to CMS information related to certain
payments or other transfers of value made or distributed to
physicians (defined to include doctors, dentists, optometrists,
podiatrists and chiropractors), certain other licensed health care
practitioners and teaching hospitals, as well as ownership and
investment interests held by the physicians described above and
their immediate family members. In addition, many states also
govern the reporting of payments or other transfers of value, many
of which differ from each other in significant ways, are often not
pre-empted, and may have a more prohibitive effect than the
Sunshine Act, thus further complicating compliance
efforts.
We may become subject to federal government price reporting laws,
which would require us to calculate and report complex pricing
metrics in an accurate and timely manner to government programs, as
well as federal consumer protection and unfair competition laws,
which broadly regulate marketplace activities and activities that
potentially harm consumers.
Similar federal, state and foreign fraud and abuse laws and
regulations, such as state anti-kickback and false claims laws, may
apply to sales or marketing arrangements and claims involving
healthcare items or services. Such laws are generally broad and are
enforced by various state agencies and private actions. Also, many
states have similar fraud and abuse statutes or regulations that
may be broader in scope and may apply regardless of payor, in
addition to items and services reimbursed under Medicaid and other
state programs. Some state laws require pharmaceutical companies to
comply with the pharmaceutical industry’s voluntary compliance
guidelines and the relevant federal government compliance guidance,
and require drug manufacturers to report information related to
payments and other transfers of value to physicians and other
healthcare providers or marketing expenditures.
In order to distribute products commercially, we must comply with
state laws that require the registration of manufacturers and
wholesale distributors of drug and biological products in a state,
including, in certain states, manufacturers and distributors who
ship products into the state even if such manufacturers or
distributors have no place of business within the state. Some
states also impose requirements on manufacturers and distributors
to establish the pedigree of product in the chain of distribution,
including some states that require manufacturers and others to
adopt new technology capable of tracking and tracing product as it
moves through the distribution chain. Several states have enacted
legislation requiring pharmaceutical and biotechnology companies to
establish marketing compliance programs, file periodic reports with
the state, make periodic public disclosures on sales, marketing,
pricing, clinical trials and other activities, and/or register
their sales representatives, as well as to prohibit pharmacies and
other healthcare entities from providing certain physician
prescribing data to pharmaceutical and biotechnology companies for
use in sales and marketing, and to prohibit certain other sales and
marketing practices. All of our activities are potentially subject
to federal and state consumer protection and unfair competition
laws.
35
The scope and enforcement of each of these laws is uncertain and
subject to rapid change in the current environment of healthcare
reform, especially in light of the lack of applicable precedent and
regulations. Federal and state enforcement bodies have recently
increased their scrutiny of interactions between healthcare
companies and healthcare providers, which has led to a number of
investigations, prosecutions, convictions and settlements in the
healthcare industry. 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 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, contractual
damages, reputational harm, diminished profits and future earnings,
individual imprisonment, exclusion of drugs from government funded
healthcare programs, such as Medicare and Medicaid, and the
curtailment or restructuring of our operations, any of which could
adversely affect our ability to operate our business and our
financial results. If any of the physicians or other healthcare
providers or entities with whom we expect to do business is found
to be not in compliance with applicable laws, they may be subject
to criminal, civil or administrative sanctions, including
exclusions from government funded healthcare programs. Ensuring
business arrangements comply with applicable healthcare laws, as
well as responding to possible investigations by government
authorities, can be time- and resource- consuming and can divert a
company’s attention from the business.
Current and Future Legislation
In the United States and some foreign jurisdictions, there have
been, and likely will continue to be, a number of legislative and
regulatory changes and proposed changes regarding the healthcare
system directed at broadening the availability of healthcare,
improving the quality of healthcare, and containing or lowering the
cost of healthcare.
For example, in 2010, the ACA was enacted in the United States. The
ACA includes measures that have significantly changed, and are
expected to continue to significantly change, the way healthcare is
financed by both governmental and private insurers. Among the
provisions of the ACA of greatest importance to the pharmaceutical
industry are that the ACA:
•
made several changes to the Medicaid Drug Rebate Program, including
increasing pharmaceutical manufacturers’ rebate liability by
raising the minimum basic Medicaid rebate on average manufacturer
price, or AMP, on most branded prescription drugs and adding a new
rebate calculation for “line extensions” (i.e.,
new formulations, such as extended release formulations) of solid
oral dosage forms of branded products, as well as potentially
impacting their rebate liability by modifying the statutory
definition of AMP;
•
imposed a requirement on manufacturers of branded drugs to provide
a 70% point-of-sale discount as a condition for a manufacturer’s
outpatient drugs being covered under Medicare Part D;
•
extended a manufacturer’s Medicaid rebate liability to covered
drugs dispensed to individuals who are enrolled in Medicaid managed
care organizations;
•
expanded the entities eligible for discounts under the 340B Drug
Discount Program;
•
imposed an annual, nondeductible fee on any entity that
manufactures or imports certain branded prescription drugs,
apportioned among these entities according to their market share in
certain government healthcare programs, and
•
established a Patient-Centered Outcomes Research Institute to
oversee, identify priorities in, and conduct comparative clinical
effectiveness research, along with funding for such research. The
research conducted by the Patient-Centered Outcomes Research
Institute may affect the market for certain pharmaceutical
products. The ACA established the Center for Medicare and Medicaid
Innovation within CMS to test innovative payment and service
delivery models to lower Medicare and Medicaid spending,
potentially including prescription drug spending.
36
Other legislative changes have been proposed and adopted in the
United States since the ACA was enacted:
•
The Budget Control Act of 2011 and subsequence legislation, among
other things, created measures for spending reductions by Congress
that include aggregate reductions of Medicare payments to providers
of 2% per fiscal year, which remain in effect through 2031. Due to
the Statutory Pay-As-You-Go Act of 2010, estimated budget deficit
increases resulting from the American Rescue Plan Act of 2021, and
subsequent legislation, Medicare payments to providers will be
further reduced starting in 2025 absent further
legislation.
•
The American Taxpayer Relief Act of 2012, which, among other
things, further reduced Medicare payments to several providers and
increased the statute of limitations period for the government to
recover overpayments to providers from three to five years. Any
reduction in reimbursement from Medicare or other government
programs may result in a similar reduction in payments from private
payors, which may adversely affect our future
profitability.
•
On May 30, 2018, the Right to Try Act was signed into law. The law,
among other things, provides a federal framework for certain
patients to request access to certain IND products that have
completed a Phase I clinical trial and that are undergoing
investigation for FDA approval. There is no obligation for a
pharmaceutical manufacturer to make its drug products available to
eligible patients as a result of the Right to Try Act.
•
On April 13, 2017, CMS published a final rule that gives states
greater flexibility in setting benchmarks for insurers in the
individual and small group marketplaces, which may have the effect
of relaxing the essential health benefits required under the ACA
for plans sold through such marketplaces.
•
On May 23, 2019, CMS published a final rule to allow Medicare
Advantage Plans the option of using step therapy for Part B drugs
beginning January 1, 2020.
In addition, there has been increasing legislative and enforcement
interest in the United States with respect to specialty drug
pricing practices. Specifically, there have been several recent
U.S. Congressional inquiries and proposed and enacted federal and
state legislation designed to, among other things, bring more
transparency to drug pricing, review the relationship between
pricing and manufacturer patient assistance programs, and reform
government program reimbursement methodologies for drugs. President
Biden has issued multiple executive orders that have sought to
reduce prescription drug costs. In February 2023, HHS issued a
proposal in response to an October 2022 executive order from
President Biden that includes a proposed prescription drug pricing
model that will test whether targeted Medicare payment adjustments
will sufficiently incentivize manufacturers to complete
confirmatory trials for drugs approved through FDA’s accelerated
approval pathway. Although a number of these and other proposed
measures may require authorization through additional legislation
to become effective, and the Biden administration may reverse or
otherwise change these measures, both the Biden administration and
Congress have indicated that they will continue to seek new
legislative measures to control drug costs.
The Inflation Reduction Act of 2022, or IRA includes several
provisions that may impact our business to varying degrees,
including provisions that reduce the out-of-pocket spending cap for
Medicare Part D beneficiaries from $7,050 to $2,000 starting in
2025, thereby effectively eliminating the coverage gap; impose new
manufacturer financial liability on certain drugs under Medicare
Part D, allow the U.S. government to negotiate Medicare Part B and
Part D price caps for certain high-cost drugs and biologics without
generic or biosimilar competition; require companies to pay rebates
to Medicare for certain drug prices that increase faster than
inflation; and delay until January 1, 2032 the implementation of
the HSS rebate rule that would have limited the fees that pharmacy
benefit managers can charge. Further, under the IRA, orphan drugs
are exempted from the Medicare drug price negotiation program, but
only if they have one rare disease designation and for which the
only approved indication is for that disease or condition. If a
product receives multiple rare disease designations or has multiple
approved indications, it may not qualify for the orphan drug
exemption. The effects of the IRA on our business and the
healthcare industry in general is not yet known.
Individual states in the United States have also become
increasingly active in passing legislation and implementing
regulations designed to control pharmaceutical and biological
product pricing, including price or patient reimbursement
constraints, discounts, restrictions on certain drug access and
marketing cost disclosure and transparency measures, and designed
to encourage importation from other countries and bulk purchasing.
Legally mandated price controls on payment amounts by third-party
payors or other restrictions could harm our business, financial
condition, results of operations and prospects. In addition,
regional healthcare authorities and individual hospitals are
increasingly using bidding procedures to determine what
pharmaceutical products and which suppliers will be included in
their prescription drug and other healthcare programs. This could
reduce the ultimate demand for our drugs or put pressure on our
drug pricing, which could negatively affect our business, financial
condition, results of operations and prospects.
37
We cannot predict what healthcare reform initiatives may be adopted
in the future. Further federal, state and foreign legislative and
regulatory developments are likely, and we expect ongoing
initiatives to increase pressure on drug pricing. Such reforms
could have an adverse effect on anticipated revenues from product
candidates and may affect our overall financial condition and
ability to develop product candidates.
The Foreign Corrupt Practices Act
The FCPA prohibits any U.S. individual or business from paying,
offering, or authorizing payment or offering of anything of value,
directly or indirectly, to any foreign official, political party or
candidate for the purpose of influencing any act or decision of the
foreign entity 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
accounting provisions requiring the company to maintain books and
records that accurately and fairly reflect all transactions of the
corporation, including international subsidiaries, and to devise
and maintain an adequate system of internal accounting controls for
international operations.
Additional Regulation
In addition to the foregoing, state and federal laws regarding
environmental protection and hazardous substances, including the
Occupational Safety and Health Act, the Resource Conservancy and
Recovery Act and the Toxic Substances Control Act, affect our
business. These and other laws govern our use, handling and
disposal of various biological, chemical and radioactive substances
used in, and wastes generated by, our operations. If our operations
result in contamination of the environment or expose individuals to
hazardous substances, we could be liable for damages and
governmental fines. We believe that we are in material compliance
with applicable environmental laws and that continued compliance
therewith will not have a material adverse effect on our business.
We cannot predict, however, how changes in these laws may affect
our future operations.
Europe / Rest of World Government Regulation
In addition to regulations in the United States, we may be subject
to a variety of regulations in other jurisdictions that we may in
the future select governing, among other things, clinical trials
and any commercial sales and distribution of our products. Whether
or not we obtain FDA approval of a product, we would need to obtain
the requisite approvals from regulatory authorities in foreign
countries prior to the commencement of clinical trials or marketing
of the product in those countries. Certain countries outside of the
United States have a similar process that requires the submission
of a clinical trial application much like the IND prior to the
commencement of human clinical trials. In the EU, for example, a
clinical trial application must be submitted to each country’s
national health authority and an independent ethics committee, much
like the FDA and IRB, respectively. Once the clinical trial
application is approved in accordance with a country’s
requirements, clinical trial development may proceed. Because
biologically sourced raw materials are subject to unique
contamination risks, their use may be restricted in some
countries.
The requirements and process governing the conduct of clinical
trials, product licensing, pricing and reimbursement vary from
country to country. In all cases, the clinical trials must be
conducted in accordance with GCP and the applicable regulatory
requirements and the ethical principles that have their origin in
the Declaration of Helsinki.
To obtain regulatory approval of an investigational drug or
biological product under EU regulatory systems, we must submit an
MAA. The application used to file the BLA in the United States is
similar to that required in the EU, with the exception of, among
other things, country-specific document requirements.
For other countries outside of the EU, such as countries in Eastern
Europe, Latin America or Asia, the requirements governing the
conduct of clinical trials, product licensing, pricing and
reimbursement vary from country to country. In all cases, again,
the clinical trials must be conducted in accordance with GCP and
the applicable regulatory requirements and the ethical principles
that have their origin in the Declaration of Helsinki.
If we or our potential collaborators fail to comply with applicable
foreign regulatory requirements, we may be subject to, among other
things, fines, suspension or withdrawal of regulatory approvals,
product recalls, seizure of products, operating restrictions and
criminal prosecution.
European Union General Data Protection Regulation
In addition to EU regulations related to the approval and
commercialization of our products, we may be subject to the EU’s
General Data Protection Regulation, or GDPR. The GDPR imposes
stringent requirements for controllers and processors of personal
data of persons in the EU, including, for example, more robust
disclosures to individuals and a strengthened individual data
rights regime, shortened timelines for data breach notifications,
limitations on retention of information, increased requirements
pertaining to special categories of data, such as health data, and
additional obligations when we contract with third-party processors
in
38
connection with the processing of the personal data. The GDPR also
imposes strict rules on the transfer of personal data out of the
European Union to the United States and other third countries. In
addition, the GDPR provides that EU member states may make their
own further laws and regulations limiting the processing of
personal data, including genetic, biometric or health
data.
The GDPR applies extraterritorially, and we may be subject to the
GDPR because of our data processing activities that involve the
personal data of individuals located in the European Union, such as
in connection with our EU clinical trials. Failure to comply with
the requirements of the GDPR and the applicable national data
protection laws of the EU member states may result in fines of up
to €20,000,000 or up to 4% of the total worldwide annual turnover
of the preceding financial year, whichever is higher, and other
administrative penalties. GDPR regulations may impose additional
responsibility and liability in relation to the personal data that
we process and we may be required to put in place additional
mechanisms to ensure compliance with the new data protection
rules.
Human Capital Resources
As of December 31, 2022, we had 60 employees, 58 of whom were
full-time and two who were part-time. Of those, 51 were engaged in
research and development activities. All company employees are
located in the United States. We do not have any employees that are
represented by a labor union or covered under a collective
bargaining agreement. We consider our relationship with our
employees to be good.
Our future success depends on our ability to attract, develop and
retain key personnel, maintain our culture, and ensure diversity
and inclusion in our board, management and broader workforce. Our
human resources objectives include, as applicable, identifying,
recruiting, retaining, incentivizing and integrating our existing
and additional employees. The principal purposes of our equity
incentive plans are to attract, retain and motivate selected
employees, consultants and directors through the granting of
stock-based compensation awards. As these areas directly impact our
ability to compete and innovate, they are key focus areas for our
board of directors and senior executives. A testament to our strong
culture is the strong results from our annual employee
survey.
Corporate History and Trademarks
We were incorporated under the laws of the State of Delaware in
April 2017 under the name Tycho Therapeutics, Inc. In August 2018,
our corporate name was changed to Cabaletta Bio, Inc. Our principal
executive offices are located at 2929 Arch Street, Suite 600,
Philadelphia, PA 19104 and our telephone number is (267) 759-3100.
Our website address is www.cabalettabio.com. We do not incorporate
the information on or accessible through our website into this
Annual Report on Form 10-K, and you should not consider any
information on, or that can be accessed through, our website to be
part of this Annual Report on Form 10-K. We have included our
website address in this Annual Report on Form 10-K solely as an
inactive textual reference.
We view our operations and measure our business as one reportable
segment. All of the Company's tangible assets are held in the
United States. Refer to Note 2, Summary of Significant Accounting
Policies, to our financial statements appearing elsewhere in this
Annual Report on Form 10-K for additional information.
We own or have rights to various trademarks, service marks and
trade names that we use in connection with the operation of our
business. This Annual Report on Form 10-K may also contain
trademarks, service marks and trade names of third parties, which
are the property of their respective owners. Our use or display of
third parties’ trademarks, service marks, trade names or products
in this Annual Report on Form 10-K is not intended to, and does not
imply a relationship with, or endorsement or sponsorship by us.
Solely for convenience, the trademarks, service marks and trade
names referred to in this Annual Report on Form 10-K may appear
without the ®, ™ or SM symbols, but the omission of such references
is 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 owner of these trademarks, service marks and
trade names.
Available Information
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K and any amendments to these reports
filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended, are available free of
charge on our website located at www.cabalettabio.com as soon as
reasonably practicable after they are filed with or furnished to
the SEC. These reports are also available at the SEC’s Internet
website at www.sec.gov.
A copy of our Corporate Governance Guidelines, Code of Conduct and
Business Ethics and the charters of the Audit Committee,
Compensation Committee and Nominating and Corporate Governance
Committee are posted on our website, www.cabalettabio.com, under
the heading “Investors & Media.”
39
Item 1A.
Risk Factors.
Our business involves material and other risks, some of which are
summarized and described below. You should carefully consider the
risks and uncertainties described below, together with all of the
other information contained in this Annual Report on Form 10-K,
including "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the condensed financial
statements and the related notes. If any of the following risks
actually occur, it could harm our business, prospects, operating
results and financial condition and future prospects. In such
event, the market 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 may also impair our business operations. This Annual
Report on Form 10-K also contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ
materially from those anticipated in the forward-looking statements
as a result of factors that are described below and elsewhere in
this Annual Report.
Risks Related to Our Business, Technology and Industry
Risks Related to Clinical Development
We are early in our development efforts. If we are unable to
advance our product candidates through clinical development, obtain
regulatory approval and ultimately commercialize our product
candidates, or experience significant delays in doing so, our
business will be materially harmed.
We are early in our development efforts and we have not yet
completed any clinical trials. 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 one or more of our product
candidates. Even if we are able to develop and commercialize a
marketable product, we may face challenges generating revenue from
product sales. The success of our product candidates will depend on
several factors, including the following:
•
successful completion of preclinical studies resulting in data that
is supportive of advancing to an IND submission;
•
successful submission and acceptance of INDs or comparable
applications;
•
successful initiation of clinical trials;
•
demonstration of adequate safety to progress to a therapeutic dose
level;
•
successful patient enrollment in and completion of clinical
trials;
•
receipt and related terms of regulatory and marketing approvals and
licensures from applicable regulatory authorities;
•
establishing commercial manufacturing capabilities or making
arrangements with third-party manufacturers for clinical supply and
commercial manufacturing of our product candidates;
•
making arrangements with various medical divisions across hospitals
for administration of our product candidates, including with cancer
treatment centers to conduct leukapheresis and with the relevant
hospital divisions to perform infusion;
•
obtaining and maintaining patent and trade secret protection and
regulatory exclusivity for our product candidates;
•
establishing sales, marketing and distribution and patient
administration capabilities and launching commercial sales of our
products, if and when licensed, whether alone or in collaboration
with others;
•
acceptance of our products, if and when licensed, by patients, the
medical community and third-party payors;
•
effectively competing with established and emerging therapies
targeting the same indications as our product
candidates;
•
obtaining and maintaining third-party coverage and adequate
reimbursement; and
•
maintaining a continued acceptable safety profile of our products
following licensure.
40
If we do not achieve one or more of these factors in a timely
manner or at all, we could experience significant delays or be
unable to successfully commercialize our product candidates, which
would materially harm our business. If we do not receive regulatory
approvals for our product candidates, we may not be able to
continue our operations.
Cellular therapies, including our engineered
chimeric
antigen
receptor
T
cell, or CAR T,
chimeric
autoantibody
receptor
T cell, or CAAR T, product candidates, represent a novel approach
to the treatment of autoimmune diseases, which creates significant
challenges for us. Negative perception or increased regulatory
scrutiny of any product candidates that we develop could adversely
affect our ability to conduct our business or obtain regulatory
approvals for such product candidates.
Cellular therapies are a novel approach and negative perception or
increased regulatory scrutiny of any product candidates that we
develop could adversely affect our ability to conduct our business
or obtain regulatory approvals for such product candidates.
Cellular therapies remain novel in general, and there are no
cellular immunotherapies licensed to date in the United States or
the European Union to treat autoimmune diseases or alloimmune
responses. CAR T or CAAR T cell therapies for autoimmune or
alloimmune diseases may not gain the acceptance of the public or
the medical community. For example, CAR Ts and other cellular
therapies have in some cases caused severe side effects, including
death, and their broader use may therefore be limited. Even if CAR
T therapies and other cellular therapies are accepted by the public
and medical community in the short term, long-term adverse events
observed in these therapies may increase negative perception and
regulatory scrutiny. Public perception may be influenced by claims
that gene therapy, including the insertion of a transgene, is
unsafe, and products incorporating gene therapy may not gain the
acceptance of the public or the medical community. The patient
populations targeted by our product candidates are also typically
not at risk of near-term death, even if they may suffer
life-threatening symptoms, so patients will need to deem the
benefits of cell therapy to be worth the risk of unknown potential
adverse side effects. Our success will depend upon physicians who
specialize in the treatment of autoimmune diseases targeted by our
product candidates prescribing treatments that involve the use of
our product candidates in lieu of, or in addition to, existing
treatments with which they are more familiar and for which greater
clinical data may be available. Adverse events in clinical trials
of our product candidates or in clinical trials of others
developing similar products and the resulting publicity, as well as
any other adverse events in the field of cellular therapies, could
result in a decrease in demand for any product that we may
develop.
We are developing a pipeline of CAR T and CAAR T product candidates
that are intended for use in treating individuals with autoimmune
diseases. Advancing these novel product candidates creates
significant challenges for us, including:
•
manufacturing our product candidates to our specifications and in a
timely manner to support our clinical trials, and, if licensed,
commercialization;
•
sourcing clinical and, if licensed, commercial supplies for the
materials used to manufacture our product candidates;
•
understanding and addressing variability in the quality and
quantity of a subject’s T cells, which could ultimately affect our
ability to manufacture clinical supply and, if licensed, commercial
supply of our product candidates in a reliable and consistent
manner;
•
educating medical personnel regarding the potential side effect
profile of our product candidates, if licensed, such as the
potential adverse side effects related to pemphigus flare, MuSK MG
flare or myasthenic crisis from infusion of activated T cells or
medication taper, cytokine release syndrome, or CRS, or other
unexpected adverse effects of therapy with our product
candidates;
•
facilitating patient access to the limited number of facilities
able to administer our product candidates, if
licensed;
•
using medicines to manage adverse side effects of our product
candidates that may not adequately control the side effects and/or
may have a detrimental impact on the efficacy of the
treatment;
•
utilizing preconditioning agents in patients to enhance engraftment
in advance of administering our product candidates, which may
increase the risk of adverse side effects and potentially reduce
the population eligible for therapy;
•
obtaining and maintaining regulatory approval for our product
candidates, as the FDA and other regulatory authorities have
limited or no experience with development of engineered T cell
therapies for the treatment of B cell-mediated autoimmune
diseases;
•
establishing sales and marketing capabilities upon obtaining any
regulatory approval to gain market acceptance of a novel therapy;
and
•
managing costs of inputs and other supplies while scaling
production.
41
In addition, preclinical murine and other animal models may not
exist or be adequate for some or all of the B cell-mediated
autoimmune diseases we choose to pursue in our programs, and
because we are early in the clinical development process, we are
unable to predict whether there may be short-term or long-term
effects from treatment with any product candidates that we develop.
In developing our product candidates, we have not exhaustively
explored different options in the method for manufacturing CAR T or
CAAR T cells. We may find our existing manufacturing process may be
substantially improved with future design or process changes,
necessitating further clinical testing, delaying commercial launch
of our first products, and causing us to incur additional expenses.
For example, while we have used a lentiviral vector in our
manufacturing process, we may in the future find that another viral
vector or non-viral vector-based process offers advantages.
Switching from one lentiviral vector to another or switching from
lentiviral to another delivery system would necessitate additional
process development and clinical testing, and this may delay the
development of existing product candidates.
In addition, we do not know the doses to be evaluated in pivotal
trials or, if licensed, commercially. Finding a suitable dose may
delay our anticipated clinical development timelines. Our
expectations with regard to our scalability and costs of
manufacturing may vary significantly as we develop our product
candidates and understand these critical factors. We may experience
delays in developing a sustainable, reproducible and scalable
manufacturing process or transferring that process to commercial
partners, which may prevent us from completing our clinical studies
or commercializing our product candidates on a timely or profitable
basis, if at all.
Moreover, our product candidates may not perform successfully in
clinical trials or may be associated with adverse events that
distinguish them from the chimeric antigen receptor T, or CAR T,
therapies that have previously been licensed. For instance,
subjects in our CAAR T clinical trials will be infused with our
proposed therapies, and may possess strongly activating soluble
antibodies, which, are not present in oncology patients and when
they interact with our infused product candidates, could result in
potential adverse side effects, such as CRS. Additionally, adverse
side effects caused by even one of our CAAR T product candidates
could negatively affect our ability to develop future product
candidates based on our CABATM
platform. Unexpected side effects or clinical outcomes from any of
our products candidates would significantly impact our
business.
In addition, one of our current product candidates, DSG3/1-CAART,
and certain of our future product candidates may require
introducing large transgenes into T cells, and lentiviral vectors
may have too limited a genome capacity to accomplish this process.
We currently use lentiviral vector transduction for transgene
delivery. However, lentiviral vectors have a limited genome
capacity that restricts the size of the transgene that can be
delivered using this vector system. For example, designing a
lentiviral vector that will have sufficient capacity to introduce
DSG3 CAAR and DSG1 CAAR together into T cells may not be possible.
In addition to reducing lentiviral vector titers that may
substantially increase the cost of gene transfer, it may be
entirely unsuccessful, thus necessitating use of alternative
strategies for transfer of these larger transgenes into T
cells.
Further, the clinical study requirements of the FDA and other
regulatory agencies and the criteria they use to determine the
safety, potency and purity of a product candidate are determined
according to the type, complexity, novelty and intended use and
market of the potential products. The regulatory approval process
for novel product candidates such as ours is less clear, and can be
more complex and consequently have higher development risk, be more
expensive and take longer than for other, better known or
extensively studied pharmaceutical or other product candidates.
Approvals by the FDA for existing cell therapies treating B
cell-mediated diseases, such as Kymriah (Novartis Pharmaceuticals
Corporation) and Yescarta®
(Gilead Sciences, Inc.) in oncology indications, may not be
indicative of what the FDA may require for approval of our
therapies in autoimmune indications. Approvals by any regulatory
agency may not be indicative of what any other regulatory agency
may require for approval or what such regulatory agencies may
require for approval in connection with new product candidates. As
we advance our product candidates, we will be required to consult
with these regulatory agencies and comply with applicable
requirements and guidelines. If we fail to do so, we may be
required to delay or discontinue development of such product
candidates. These additional processes may result in a review and
approval process that is longer than we otherwise would have
expected. More restrictive statutory regimes, government
regulations or negative public opinion would have an adverse effect
on our business, financial condition, results of operations and
prospects and may delay or impair the development and
commercialization of our product candidates or demand for any
products we may develop.
42
In addition, responses by agencies at the federal and state level
to negative public perception or ethical concerns may result in new
legislation or regulations that could limit our ability to develop
or commercialize any product candidates, obtain or maintain
regulatory approval or otherwise achieve profitability. The FDA has
expressed interest in further regulating biotechnology products,
such as cellular therapies. Agencies at both the federal and state
level in the United States, as well as the U.S. Congressional
committees and other government entities or governing agencies have
also expressed interest in further regulating the biotechnology
industry. Such action may delay or prevent commercialization of
some or all of our product candidates. Adverse developments in
clinical trials of cellular therapy products conducted by others
may cause the FDA or other oversight bodies to change the
requirements for approval of any of our product candidates. These
regulatory review agencies and committees and the new requirements
or guidelines they promulgate may lengthen the regulatory review
process, require us to perform additional studies or trials,
increase our development costs, lead to changes in regulatory
positions and interpretations, delay or prevent approval and
commercialization of our product candidates or lead to significant
post-approval limitations or restrictions.
Patients receiving T cell-based immunotherapies, such as our
product candidates, may experience serious adverse events,
including neurotoxicity, CRS and killing of cells other than the
intended B cells that express the autoantibodies. If our product
candidates are revealed to have high and unacceptable severity
and/or prevalence of side effects or unexpected characteristics,
their clinical development, regulatory approval, and commercial
potential will be negatively impacted, which will significantly
harm our business, financial condition and prospects.
Our product candidates are CAR T or CAAR T cell-based
immunotherapies. In other similarly designed cellular
immunotherapies to treat cancer, there have been life threatening
events related to severe neurotoxicity and CRS requiring intense
medical intervention, such as intubation or medications to support
blood pressure, and in several cases, resulted in death. Severe
neurotoxicity is a condition that is currently defined clinically
by cerebral edema, confusion, drowsiness, speech impairment,
tremors, seizures or other central nervous system side effects,
when such side effects are serious enough to lead to intensive
care. CRS is a condition that is currently defined clinically by
certain symptoms related to the release of cytokines, which can
include fever, chills and low blood pressure, when such side
effects are serious enough to lead to intensive care with
mechanical ventilation or significant medications to support blood
pressure. There is a possibility that our product candidates could
have similarly life threatening serious adverse side effects, such
as neurotoxicity and CRS.
Our product candidates may have serious and potentially fatal
consequences due to the targeting of cells within the body due to
unexpected protein interactions with the CAR or CAAR. Although we
have completed multiple preclinical studies designed to screen for
toxicity caused by unintended off-target recognition by the cell
binding domain of the DSG3 CAAR and MuSK CAAR and intend to screen
future CAAR candidates not yet tested in patients through
preclinical studies, our product candidates may still recognize and
react with one or more proteins unrelated to the intended surface
immunoglobin target protein to which it is designed to link. If
unexpected binding occurs in normal tissue, our product candidates
may target and kill the normal tissue in a patient, leading to
serious and potentially fatal adverse events, undesirable side
effects, toxicities or unexpected characteristics. Detection of any
unexpected targeting may halt or delay any ongoing clinical trials
for our product candidates and prevent or delay regulatory
approval. While we have developed a preclinical screening process
to identify cross-reactivity of our product candidates, we cannot
be certain that this process will identify all potential tissue
that our product candidates may target. For example, a membrane
protein array with DSG3-CAART yielded one weak signal against a
protein that is designed to bind to glycoproteins and which was
detected in both the test and control conditions. Further analysis
of this protein in confirmatory cell-based assays repeatedly
demonstrated that DSG3-CAART does not recognize nor activate
against this protein. We performed similar preclinical studies for
the MuSK CAAR and did not observe any confirmed off target activity
for MuSK-CAART. However, this further analysis may prove to be
inaccurate. Any unexpected targeting that impacts patient safety
could materially impact our ability to advance our product
candidates into clinical trials or to proceed to marketing approval
and commercialization. Furthermore, in the event subjects are
retreated, they may respond differently than other subjects given
the same dose, and may not tolerate the dose or develop safety
concerns.
Results of our studies could reveal a high and unacceptable
severity and prevalence of side effects or unexpected
characteristics. Undesirable side effects caused by our product
candidates could cause us or regulatory authorities to interrupt,
delay or halt clinical trials and could result in a more
restrictive label or the delay or denial of regulatory approval by
the FDA. The FDA has requested and we have agreed to provide data
on the subjects dosed in Part A of our
DesCAARTesTM
trial prior to dosing subjects in Part B. The FDA has communicated
that the dosing of patients in Part B1 is not dependent on the
review of Part A data and that they will provide feedback, if any,
in a timely manner. In some cases, side effects such as
neurotoxicity or CRS have resulted in clinical holds of ongoing
clinical trials and/or discontinuation of the development of the
product candidate. Given that the autoimmune and alloimmune
diseases we are seeking to treat are, in some cases, less serious
than the later stage cancers being treated with other immunotherapy
products, we believe the FDA and other regulatory authorities
likely will apply a different benefit-risk assessment thresholds
such that even if our product candidate demonstrated a similar
safety profile as current CAR T therapies, the FDA may ultimately
determine that the harmful side effects outweigh the benefits and
require us to cease clinical trials or deny approval of our product
candidates. We believe tolerance for adverse events in the patient
population being pursued with CAAR T cell therapies will be lower
than it is in oncology, and the risks of negative impact from these
toxicities may therefore be higher for us than for CAR T programs
in oncology.
43
Furthermore, treatment-related side effects could also affect
patient recruitment or the ability of enrolled patients to complete
the studies or result in potential product liability claims. In
addition, these side effects may not be appropriately recognized or
managed by the treating medical staff, as toxicities resulting from
T cell-based immunotherapies are not normally encountered in
routine medical care. Medical personnel may need additional
training regarding T cell-based immunotherapy product candidates to
understand their side effects. Inadequate training in recognizing
or failure to effectively manage the potential side effects of T
cell-based immunotherapy product candidates could result in patient
deaths. Any of these occurrences may harm our business, financial
condition and prospects significantly.
In addition to side effects caused by our product candidates, any
preconditioning, administration process or related procedures,
which we evaluate from time to time as part of our process
improvement and optimization efforts, may also cause adverse side
effects. For example, prolonged or persistent cytopenias and severe
neurotoxicity has been noted to be associated with the use of
certain lymphodepleting regimens and CAR T therapies. While we
initiated the DesCAARTesTM
trial without a preconditioning regimen, we have implemented a
cohort where a preconditioning regimen with a lymphodepleting agent
and an immunomodulatory agent will be administered.
We have implemented a preconditioning regimen in the
DesCAARTesTM
trial where subjects are pre-treated with IVIg and cyclophosphamide
prior to DSG3-CAART infusion, and included a planned dosing cohort
in the MusCAARTesTM
trial where subjects are pre-treated with cyclophosphamide prior to
MuSK-CAART infusion, and we may in the future use a preconditioning
regimen
for our other CAR T or CAAR T cell product candidates, which may
increase the risk of adverse side effects and impact our ability to
accurately assess the efficacy of our product
candidates.
In oncology patients receiving CAR T cell therapy, a
lymphodepleting preconditioning regimen is typically used to
condition the patient prior to CAR T cell infusion in order to
improve tumor immunogenicity and to promote the expansion of the
infused CAR T cells. Together, these effects have been shown to
enhance the clinical activity of CAR T cells in oncology patients.
These regimens often include cyclophosphamide and fludarabine and
are usually administered within the week prior to infusion of CAR T
cells. Serious adverse events have been observed in some patients
following CAR T cell infusion, and these include infection,
cytokine release syndrome and neurotoxicity. The lymphodepleting
and immunomodulatory preconditioning regimen may contribute to the
occurrence and severity of these adverse events due to its role in
inducing lymphopenia, or low levels of lymphocytes in the blood,
and regulating the activation and effector functions of other
immune cells and antibodies, and enhanced CAR T cell
activity.
Lymphodepleting preconditioning may not be required in all oncology
settings for CAR T cell activity. A clinical trial in multiple
myeloma patients published in 2019 in
The Journal of Clinical Investigation
showed similar clinical activity of CAR T cell infusions in
patients with or without a lymphodepleting preconditioning regimen.
Furthermore, the requirement for lymphodepleting preconditioning
for potentiating engineered T cell therapy outside of oncology has
not been well established. Specifically, the effect on tumor
immunogenicity is not relevant in settings outside oncology, and
therefore the contribution of this aspect to the potential
enhancing effect of preconditioning would not apply.
In addition, a lymphodepleting regimen may eliminate pathogenic B
cells targeted by our CAAR T cell product candidates. As a result,
any lymphodepleting regimen for preconditioning that we use may
delay or otherwise adversely affect our ability to use DSG3 or MuSK
autoantibody titers, a standard clinical assay, to assess the
activity of DSG3-CAART and MuSK-CAART, respectively. An inability
to use DSG3 or MuSK autoantibody levels to demonstrate the specific
activity of our CAAR T cell product candidates may require us to
rely on the subjective measurement of blister formation in patients
in the DesCAARTesTM
trial or muscle weakness in the MusCAARTesTM
trial, which can be a less sensitive and accurate measurement of
CAAR T cell activity. This therefore could delay a signal of
potential biologic activity attributable to CAAR and therefore may
slow clinical development. Based on emerging clinical and
translational data, in the setting of autoimmune patients, we
believe the inclusion of such a regimen in the
DesCAARTesTM
trial and MusCAARTesTM
trial is justified to further evaluate the DSG3-CAART and
MuSK-CAART platforms. We will continue to evaluate emerging data
from the DesCAARTesTM
trial on an ongoing basis, as well as other relevant clinical
trials in autoimmune disease, and may make additional modifications
to the DesCAARTesTM
trial or MusCAARTesTM
trial, as appropriate.
In addition to lymphodepleting preconditioning, other
preconditioning regimens with immunomodulatory effects may be
considered to prepare the body for CAR T or CAAR T infusion. For
example, if autoantibody is found to reduce or inhibit function of
CAAR T in the body, then pretreatment of patients with antibody
reducing therapies, such as FcRN inhibitors, IVIg, plasmapheresis,
or treatment of post rituximab patients may be considered. Some of
these types of preconditioning are standard of care for this
autoimmune population and therefore are already considered to have
a beneficial risk profile in this patient population. These other
preconditioning regimens may cause serious adverse events,
including hypotension, thromboembolism, and opportunistic
infections.
While we initiated the DesCAARTesTM
trial without a preconditioning regimen, we have now implemented a
cohort where a preconditioning regimen with a lymphodepleting agent
and an immunomodulatory agent will be administered. Our clinical
patients may experience increased or more severe adverse effects
specifically related to the preconditioning regimen, such as severe
allergic reactions, difficulty breathing, severe headaches, serious
infections, low blood counts, inflammation of the colon with
bleeding, bladder irritation, blood clots, development of certain
cancers, damage to the heart, lung or kidneys, and even death.
These undesirable side effects, whether associated with the
preconditioning regimen alone or in combination with our CAAR T
cell product candidates, could cause
44
delays in patient enrollment in our clinical trials, could cause us
or regulatory authorities to interrupt, delay or halt clinical
trials and could result in a change to our clinical trial design, a
more restrictive label or the delay or denial of regulatory
approval by the FDA. Any of the foregoing may increase the duration
and expense of the clinical development of our product candidates
or limit market acceptance of such product candidates, if approved,
any of which could have a material adverse effect on our business
and financial condition.
Our business is highly dependent on the success of our initial
product candidates targeting B cell-mediated autoimmune diseases,
particularly CABA-201, DSG3-CAART and MuSK-CAART. All of our
product candidates will require significant additional preclinical
and/or clinical development before we can seek regulatory approval
for and launch a product commercially.
Our business and future success depend on our ability to obtain
regulatory approval of, and then successfully launch and
commercialize our initial product candidates targeting B
cell-mediated autoimmune diseases, including CABA-201, DSG3-CAART,
MuSK-CAART, DSG3/1-CAART, PLA2R-CAART and others that may be
selected from preclinical and discovery programs. Our product
candidates are in the early stages of development and will require
additional preclinical studies, clinical trials, regulatory review
and licensure, substantial investment, access to sufficient
commercial manufacturing capacity and significant marketing efforts
before we can generate any revenue from product sales. There is no
guarantee that we will be able to advance our product candidates
through clinical development or obtain marketing approval for any
of our product candidates. The process for obtaining marketing
approval for any product candidate is very long and risky and there
will be significant challenges for us to address in order to obtain
marketing approval as planned, if at all.
However, the initial clinical results we have observed may not be
predictive of results of subsequent cohorts in this clinical trial,
or of any future clinical trials. Because DSG3-CAART and MuSK-CAART
are the first and second product candidates that we are testing in
the clinic, we may experience preliminary complications surrounding
trial design, protocol establishment and execution, establishing
trial protocols, patient recruitment and enrollment, quality and
supply of clinical doses, or safety issues. For example, we did not
use pre-infusion lymphodepletion or other preconditioning regimens
in the initial dose escalation cohorts of our Phase 1 trial.
However, based on emerging clinical and translational data, we have
now implemented a cohort where a preconditioning regimen with a
lymphodepleting agent and an immunomodulatory agent is administered
in the DesCAARTesTM
trial, and we continue to evaluate whether the use of a
lymphodepleting or other preconditioning regimen is necessary for
our other product candidates to be successful, and if we determine
that it is, it could result in delays in clinical development and
will expose patients to the associated risks.
Additionally, a failure of our clinical trials of DSG3-CAART or
MuSK-CAART could influence physicians’ and regulators’ opinions
with regard to the viability of our CABATM
platform more broadly, particularly if treatment-related side
effects are observed. The occurrence of any of these risks could
significantly harm our development plans and business prospects. If
treatment-related side effects are observed with the administration
of DSG3-CAART or MuSK-CAART, or if they are viewed as less safe,
potent or pure than other therapies, our ability to develop other
CAAR T cell therapies may be significantly harmed.
We have never successfully completed any clinical trials, and we
may be unable to do so for any product candidates we
develop.
We have not yet demonstrated our ability to successfully complete
any clinical trials, including large-scale, pivotal clinical
trials, obtain regulatory approvals, manufacture a commercial scale
product, or arrange for a third party to do so on our behalf, or
conduct sales and marketing activities necessary for successful
commercialization. Although our key employees have significant
experience in leading clinical development programs, our experience
conducting clinical trials with our product candidates is limited.
We may not be able to file INDs for any of our other product
candidates on the timelines we expect, if at all. For example, we
cannot be certain that the IND-enabling studies for our future
product candidates will be completed in a timely manner or be
successful or that the manufacturing process will be validated in a
timely manner. Even if we submit an IND for a future product
candidate, the FDA may not clear the IND and allow us to begin
clinical trials in a timely manner or at all. For example, we may
not be able to obtain FDA clearance of our IND for CABA-201 during
the first half of 2023. The timing of submissions on future product
candidates will be dependent on further preclinical and
manufacturing success. Moreover, we cannot be sure that submission
of an IND will result in the FDA allowing further clinical trials
to begin, or that, once begun, issues will not arise that require
us to suspend or terminate clinical trials. Commencing each of
these clinical trials is subject to finalizing the trial design
based on discussions with the FDA and other regulatory authorities.
Any guidance we receive from the FDA or other regulatory
authorities is subject to change. These regulatory authorities
could change their position, including, on the acceptability of our
trial designs or the clinical endpoints selected, which may require
us to complete additional clinical trials or impose stricter
approval conditions than we currently expect.
If we are required to conduct additional clinical trials or other
testing of our product candidates beyond those that we currently
contemplate, if we are unable to successfully complete clinical
trials of our product candidates or other testing, if the results
of these trials or tests are not positive or are only modestly
positive or if there are safety concerns, we may:
•
be delayed in obtaining marketing approval for our product
candidates;
•
not obtain marketing approval at all;
45
•
obtain approval for indications or patient populations that are not
as broad as intended or desired;
•
be subject to post-marketing testing requirements; or
•
have the product removed from the market after obtaining marketing
approval.
If product liability lawsuits are brought against us, we may incur
substantial liabilities and may be required to limit
commercialization of our product candidates.
We face an inherent risk of product liability as a result of the
clinical testing of our product candidates and will face an even
greater risk if we commercialize any products. For example, we may
be sued if our product candidates cause or are perceived to cause
injury or are found to be otherwise unsuitable during clinical
testing, manufacturing, marketing or sale. Any such product
liability claims may include allegations of defects in
manufacturing, defects in design, a failure to warn of dangers
inherent in the product, negligence, strict liability or a breach
of warranties. Claims could also be asserted under state consumer
protection acts. If we cannot successfully defend ourselves against
product liability claims, we may incur substantial liabilities or
be required to limit commercialization of our product candidates.
Even successful defense would require significant financial and
management resources. Regardless of the merits or eventual outcome,
liability claims may result in:
•
inability to bring our product candidates to the
market;
•
decreased demand for our product candidates;
•
injury to our reputation;
•
withdrawal of clinical trial participants;
•
initiation of investigations by regulators;
•
costs to defend the related litigation;
•
a diversion of management’s time and our resources;
•
substantial monetary awards to trial participants or
patients;
•
product recalls, withdrawals or labeling, marketing or promotional
restrictions;
•
exhaustion of any available insurance and our capital
resources;
•
the inability to commercialize any product candidate;
and
•
a decline in our share price.
Since we have not yet commenced marketing of any products, we do
not yet hold product liability insurance for commercialization of
our product candidates. Our inability to obtain sufficient product
liability insurance at an acceptable cost to protect against
potential product liability claims could prevent or inhibit the
commercialization of products we develop, alone or with corporate
collaborators. Our insurance policies may also have various
exclusions, and we may be subject to a product liability claim for
which we have no coverage. Assuming we obtained clinical trial
insurance for our clinical trials, we may have to pay amounts
awarded by a court or negotiated in a settlement that exceed our
coverage limitations or that are not covered by our insurance, and
we may not have, or be able to obtain, sufficient capital to pay
such amounts. Even if our agreements with any future corporate
collaborators entitle us to indemnification against losses, such
indemnification may not be available or adequate should any claim
arise.
Risks Related to the Industry
Our product candidates may cause undesirable side effects or have
other properties that could halt their clinical development,
prevent their regulatory approval, limit their commercial potential
or result in significant negative consequences.
Undesirable or unacceptable side effects caused by our product
candidates could cause us or regulatory authorities to interrupt,
delay or halt clinical trials and could result in a more
restrictive label or the delay or denial of regulatory approval by
the FDA. Further, 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 may only be uncovered with a
significantly larger number of patients exposed to the drug.
Undesirable side effects could also result in an expansion in the
size of our clinical trials, increasing the expected costs and
timeline of our clinical trials. Additionally, results of our
clinical trials could reveal a high and unacceptable severity and
prevalence of side effects or unexpected
characteristics.
46
Licensed CAR T cell therapies and those under development have
shown frequent rates of CRS and neurotoxicity, and adverse events
have resulted in the death of patients. Similar adverse events
could occur during treatment with our current or future CAR T or
CAAR T cell product candidates. For example, activation of CAAR T
cells by patient autoantibodies or alloantibodies could stimulate
CRS. When CAAR T cells are infused and the CAAR binds to soluble
antibodies in the blood or tissues of treated patients, these
soluble antibodies may cause the CAAR T cells to proliferate,
resulting in an activation of the immune system that is too high,
leading to CRS. Further, it is possible that patients will exhibit
acute rejection of the CAAR T cells because of preexisting immunity
to the antigen within the CAAR. This could render our product
candidates ineffective.
If unacceptable toxicities or health risks, including risks
inferred from other unrelated immunotherapy trials, arise in the
development of our product candidates, we could suspend or
terminate our trials or the FDA, the Data Safety Monitoring Board,
or DSMB, or local regulatory authorities such as institutional
review boards, or IRBs, could recommend or order us to cease
clinical trials. Regulatory authorities, such as the FDA, could
also deny approval of our product candidates for any or all
targeted indications. Treatment-related side effects could also
affect patient recruitment or the ability of enrolled subjects to
complete the trial or result in potential product liability claims.
In addition, these side effects may not be appropriately recognized
or managed by the treating medical staff, as toxicities resulting
from T cell therapy are not normally encountered in the general
patient population and by medical personnel. We expect to have to
train medical personnel using CAR T or CAAR T cell product
candidates to understand the side effect profile of our product
candidates for both our preclinical studies and clinical trials and
upon any commercialization of any of our product candidates, if
licensed. Inadequate training in recognizing or managing the
potential side effects of our product candidates could result in
patient deaths. Any of these occurrences may harm our business,
financial condition and prospects significantly.
Our preclinical studies and clinical trials may fail to demonstrate
the safety, potency and purity of any of our product candidates,
which would prevent or delay regulatory approval and
commercialization.
Before obtaining regulatory approvals for the commercial sale of
any of our product candidates, we must demonstrate through lengthy,
complex and expensive preclinical testing and clinical trials that
our product candidates are safe, potent and pure for use in each
target indication. Clinical trials are expensive and can take many
years to complete, and their outcomes are inherently uncertain.
Failure can occur at any time during the clinical trial process.
The results of preclinical studies and early clinical trials of our
product candidates may not be predictive of the results of
later-stage clinical trials, including in any post-approval studies
of our product candidates. In addition, initial success in any
clinical trials may not be indicative of results obtained when such
trials are completed. There is typically an extremely high rate of
attrition from the failure of product candidates proceeding through
clinical trials. Product candidates in later stages of clinical
trials may fail to show the desired safety, potency and purity
profile despite having progressed through preclinical studies and
initial clinical trials.
A number of companies in the biopharmaceutical industry have
suffered significant setbacks in advanced clinical trials due to
lack of potency or efficacy, insufficient durability of potency or
efficacy or unacceptable safety issues, notwithstanding promising
results in earlier trials, and we cannot be certain that we will
not face similar setbacks. These setbacks have been caused by,
among other things, preclinical and other nonclinical findings made
while clinical trials were underway, or safety or efficacy
observations made in preclinical studies and clinical trials,
including previously unreported adverse events. Moreover,
preclinical and clinical data are often susceptible to varying
interpretations and analyses and many companies that believed their
product candidates performed satisfactorily in preclinical studies
and clinical trials nonetheless failed to obtain FDA or EMA
approval. Most product candidates that commence clinical trials are
never approved as products.
Any preclinical studies or clinical trials that we may conduct may
not demonstrate the safety, potency and purity necessary to obtain
regulatory approval to market our product candidates. If the
results of our ongoing or future preclinical studies and clinical
trials are inconclusive with respect to evaluations of efficacy,
the safety, potency and purity of our product candidates, if we do
not meet the clinical endpoints with statistical and clinically
meaningful significance, or if there are safety concerns associated
with our product candidates, we may be prevented or delayed in
obtaining marketing approval for such product candidates. In some
instances, there can be significant variability in evaluations of
efficacy, safety, potency or purity results between different
preclinical studies and clinical trials of the same product
candidate due to numerous factors, including changes in trial
procedures set forth in protocols, differences in the size and type
of the patient populations, changes in and adherence to the
clinical trial protocols and the rate of dropout among clinical
trial participants. For example, because our CAAR T cell product
candidates only target approximately 0.01% to 1% of the B cells in
a patient, they may not engage enough of the target to achieve
adequate engraftment necessary for elimination of all pathogenic B
cells. Insufficient safety or potency in clinical trials may delay
product development to enable time to modify the product candidate
for next generation approaches or make manufacturing changes or may
lead us to discontinue development of the product
candidate.
Additionally, our ongoing clinical trials utilize, and our planned
trials may utilize, an “open-label” trial design. An “open-label”
clinical trial is one where both the patient and investigator know
whether the patient is receiving the investigational product
candidate or either an active drug or placebo. Most typically,
open-label clinical trials 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. The
results from an open-label trial may not be predictive of future
clinical trial results with any
47
of our product candidates for which we include an open-label
clinical trial when studied in a controlled environment with a
placebo or active control.
In addition, we cannot guarantee that the FDA will interpret the
results of any of our ongoing or planned clinical trials as we do,
and more trials could be required before we submit our product
candidates for approval. To the extent that the results of the
trials are not satisfactory to the FDA to support a marketing
application, approval of our product candidates may be
significantly delayed, or we may be required to expend significant
additional resources, which may not be available to us, to conduct
additional trials in support of potential approval of our product
candidates.
Interim, topline or preliminary data from any preclinical studies
or clinical trials that we conduct may change as more data become
available and are subject to audit and verification procedures that
could result in material changes in the final data.
Our DesCAARTesTM
trial and our MusCAARTesTM
trial are both designed as open-label trials. From time to time, we
may publicly disclose interim, preliminary or topline data from our
preclinical studies and clinical trials, including safety data and
evaluations of efficacy, which will be based on a preliminary
analysis of then-available data, and the results and related
findings and conclusions are subject to change following our
receipt of additional data or a more comprehensive review of the
data related to the particular study or trial. We also make
assumptions, estimations, calculations and conclusions as part of
our analyses of data, and we may not have received or had the
opportunity to fully and carefully evaluate all data. For example,
we have disclosed clinical and translational data from the first
four cohorts in the DesCAARTesTM
trial where we reported no DLTs, serious adverse events or
clinically relevant adverse events, within six months of DSG3-CAART
infusion. Additionally, we have disclosed that no DLTs were
observed through cohort A5, and that no clear trends in antibody
levels or disease activity reduction were observed through cohort
A4, though one subject in cohort A4 had no disease activity by
three months post-infusion while reducing steroid usage during that
period, an antibody titer that dropped more than 20% by three
months post-infusion, and was the only patient in the first four
cohorts that had detectable DSG3-CAART persistence at the three
month time point following initial DSG3-CAART infusion. DSG3-CAART
persistence through day 29 in cohort A5 was similar to that
observed in cohort A4 and through up to six months post CAART
infusion, no clear pattern in antibody levels and disease activity
was observed in the first three subjects at the cohort A5 dose.
However, the trial is in its early stages and additional data from
these initial cohorts, data from subsequent patients and data from
patients at higher dosing levels or different dosing regimens, such
as our combination sub-study, may not be positive with respect to
safety, target engagement or evidence of early signs of biologic
activity.
As a result, the topline results that we report may differ from
future results of the same studies, or different conclusions or
considerations may qualify such results, once additional data have
been received and fully evaluated. Topline data also remain subject
to audit and verification procedures that may result in the final
data being materially different from the preliminary data we
previously published. As a result, topline data should be viewed
with caution until the final data are available. From time to time,
we may also disclose interim data from planned interim analyses in
our clinical trials. Interim data from clinical trials that we may
complete are subject to the risk that one or more of the clinical
outcomes may materially change as patient enrollment continues and
more patient data become available. Adverse differences between
preliminary or interim data and final data could significantly harm
our business prospects. Further, disclosure of interim data by us
or our competitors, or by patients or caregivers who are aware that
a patient is receiving investigational product, due to the
open-label design of the trial, could result in volatility in the
price of our common stock.
Regulatory agencies, including the FDA, 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.
If the interim, topline or preliminary data that we report differ
from actual results, or if others, including regulatory
authorities, disagree with the conclusions reached, our ability to
obtain approval for, and commercialize, our product candidates may
be harmed, which could harm our business, operating results,
prospects or financial condition.
The increasing use of social media platforms presents new risks and
challenges.
Social media is increasingly being used to communicate about our
clinical development programs and the diseases our product
candidates are being developed to treat. We intend to utilize
appropriate social media in connection with communicating about our
development programs. Social media practices in the
biopharmaceutical industry continue to evolve and regulations
relating to such use are not always clear. This evolution creates
uncertainty and risk of noncompliance with regulations applicable
to our business. For example, patients may use social media
channels to report an alleged adverse event during a clinical
trial. When such disclosures occur, there is a risk that we fail to
monitor and comply with applicable adverse event reporting
obligations, or we may not be able to defend our business or the
public’s legitimate interests in the face of the political and
market pressures generated by social media due to restrictions on
what we may say about our investigational products. There is also a
risk of inappropriate disclosure of sensitive information or
negative or inaccurate posts or comments about us on any social
networking website, or a risk that a post on a social
48
networking website by any of our employees may be construed as
inappropriate promotion. If any of these events were to occur or we
otherwise fail to comply with applicable regulations, we could
incur liability, face regulatory actions, or incur other harm to
our business.
We may encounter substantial delays in our clinical trials or may
not be able to conduct our trials on the timelines we expect or at
all.
Clinical testing is expensive, time consuming and subject to
uncertainty. We cannot guarantee that any clinical trials will be
conducted as planned or completed on schedule, if at all. Even if
these trials begin as planned, issues may arise that could suspend
or terminate such clinical trials. A failure of one or more
clinical trials can occur at any stage of testing, and our ongoing
and future clinical trials may not be successful. Events that may
prevent successful or timely completion of clinical development
include:
•
inability to generate sufficient preclinical, toxicology or
other
in vivo
or
in vitro
data to support the initiation of clinical trials;
•
delays in sufficiently developing, characterizing or controlling a
manufacturing process suitable for clinical trials;
•
delays in developing suitable assays for screening patients for
eligibility for clinical trials with respect to certain product
candidates;
•
delays in reaching a consensus with the FDA and other regulatory
agencies on trial design;
•
delays in reaching agreement on acceptable terms with prospective
CMOs, CROs and clinical study sites, the terms of which can be
subject to extensive negotiation and may vary significantly among
different CMOs, CROs and clinical trial sites;
•
delays in obtaining required institutional review board, or IRB,
approval at each clinical trial site;
•
imposition of a temporary or permanent clinical hold by regulatory
agencies for a number of reasons, including after review of an IND
submission or amendment, or equivalent application or amendment; as
a result of a new safety finding that presents unreasonable risk to
clinical trial participants; a negative finding from an inspection
of our clinical study operations or study sites; developments on
trials conducted by competitors for related technology that raises
FDA concerns about risk to patients of the technology broadly; or
if FDA finds that the investigational protocol or plan is clearly
deficient to meet its stated objectives;
•
delays in recruiting eligible patients to participate in our
clinical trials;
•
delays in treating one or more patients, once enrolled, due to a
patient’s inability to accommodate parts of the complex study
procedures schedule;
•
difficulty collaborating with patient groups and
investigators;
•
failure by our CROs, other third parties or us to adhere to
clinical trial requirements and the potential termination of
ongoing agreements with our CROs;
•
limitations on our recourse in our CRO relationship with Penn as
compared to a CRO that is not an academic institution;
•
failure to perform in accordance with the FDA’s Good Clinical
Practice, or GCP, requirements or applicable regulatory guidelines
in other countries;
•
transfer of manufacturing processes to any new CMO or our own
manufacturing facilities or any other development or
commercialization partner for the manufacture of product
candidates;
•
delays in having patients complete participation in a trial or
return for post-treatment follow-up;
•
patients dropping out of a trial;
•
occurrence of adverse events associated with the product candidate
that are viewed to outweigh its potential benefits;
•
changes in regulatory requirements and guidance that require
amending or submitting new clinical protocols;
•
changes in the standard of care on which a clinical development
plan was based, which may require new or additional
trials;
•
the cost of clinical trials of our product candidates being greater
than we anticipate;
•
clinical trials of our product candidates producing negative or
inconclusive results, which may result in our deciding, or
regulators requiring us, to conduct additional clinical trials or
abandon product development programs;
49
•
delays or failure to secure supply agreements with suitable raw
material suppliers, or any failures by suppliers to meet our
quantity or quality requirements for necessary raw materials;
and
•
delays in manufacturing or inability to manufacture sufficient
clinical supply (for example, due to capacity constraints, supply
interruption, or the need to engineer the process to meet higher
dose requirements), testing, releasing, validating or
importing/exporting sufficient stable quantities of our product
candidates for use in clinical trials or the inability to do any of
the foregoing.
Any inability to successfully complete preclinical and clinical
development could result in additional costs to us or impair our
ability to generate revenue. If we make manufacturing or
formulation changes to our product candidates, we may be required
to, or we may elect to, conduct additional trials to bridge our
modified product candidates to earlier versions. Clinical trial
delays could also shorten any periods during which our product
candidates and products, if licensed, have patent protection and
may allow our competitors to bring products to market before we do,
which could impair our ability to successfully commercialize our
product candidates and may harm our business and results of
operations.
We could also encounter delays if a clinical trial is suspended or
terminated by us, the FDA or other regulatory authority, or if the
IRBs of the institutions in which such trials are being conducted
suspend or terminate the participation of their clinical
investigators and sites subject to their review. Such authorities
may suspend or terminate a clinical trial due to a number of
factors, including failure to conduct the clinical trial in
accordance with regulatory requirements or our clinical protocols,
inspection of the clinical trial operations or trial site by the
FDA or other regulatory authorities resulting in the imposition of
a clinical hold, unforeseen safety issues or adverse side effects,
failure to demonstrate a benefit from using a product candidate,
changes in governmental regulations or administrative actions or
lack of adequate funding to continue the clinical trial.
Delays in the initiation, conduct or completion of any clinical
trial of our product candidates will increase our costs, slow down
our product candidate development and approval process and delay or
potentially jeopardize our ability to commence product sales and
generate revenue. In addition, many of the factors that cause, or
lead to, a delay in the commencement or completion of clinical
trials may also ultimately lead to the denial of regulatory
approval of our product candidates. In the event we identify any
additional product candidates to pursue, we cannot be sure that
submission of an IND will result in the FDA allowing clinical
trials to begin in a timely manner, if at all.
In addition, from time to time, we may publicly announce the
expected timing of various scientific, clinical, regulatory,
manufacturing and other product development milestones. These
milestones may include the commencement, completion or development
of data from our preclinical studies and clinical trials or the
submission of regulatory filings, such as an IND. All of these
milestones are, and will be, based on a variety of assumptions. If
any of the foregoing events impact our ability to meet the publicly
announced timing of our milestones, we may experience adverse
effects on our business, financial condition and prospects and the
price of our common stock could decline.
Monitoring safety of patients receiving our product candidates will
be challenging, which could adversely affect our ability to obtain
regulatory approval and commercialize our product
candidates.
For our clinical trials of CABA-201, DSG3-CAART, MuSK-CAART and our
other product candidates, we expect to continue to contract with
Penn and/or other academic medical centers and hospitals
experienced in the assessment and management of toxicities arising
during clinical trials. In the future, we may also contract with
non-academic medical centers and hospitals with similar
capabilities. Nonetheless, these centers and hospitals may have
difficulty observing patients, including due to failure by patients
to comply with post-clinical trial follow-up programs, and treating
toxicities, which may be more challenging due to personnel changes,
inexperience, shift changes, house staff coverage or related
issues. This could lead to more severe or prolonged toxicities or
even patient deaths, which could result in us or the FDA delaying,
suspending or terminating one or more of our clinical trials, and
which could jeopardize regulatory approval. We also expect the
centers using CABA-201, DSG3-CAART, MuSK-CAART and our other
product candidates, if licensed, on a commercial basis could have
similar difficulty in managing adverse events. Medicines used at
centers to help manage adverse side effects of CABA-201,
DSG3-CAART, MuSK-CAART and our other product candidates may not
adequately control the side effects and/or may have a detrimental
impact on the efficacy of the treatment.
50
If we encounter difficulties enrolling patients in our clinical
trials, our clinical development activities could be delayed or
otherwise adversely affected.
We may experience difficulties in patient enrollment in our
clinical trials for a variety of reasons. The timely completion of
clinical trials in accordance with their protocols depends, among
other things, on our ability to enroll a sufficient number of
patients who remain in the trial until its conclusion. The
enrollment of patients depends on many factors,
including:
•
the size and nature of the patient population;
•
the patient eligibility criteria defined in the
protocol;
•
the size of the patient population required for analysis of the
trial’s primary endpoints;
•
recruiting an adequate number of suitable patients to participate
in a clinical trial;
•
reaching agreement on acceptable terms with prospective CROs and
clinical trial sites, the terms of which can be subject to
extensive negotiation and may vary significantly among different
CROs and clinical trial sites;
•
obtaining IRB and other required reviewing body approval at each
clinical trial site;
•
the proximity of patients to trial sites;
•
the design of the trial and whether the FDA agrees to the design
and implementation of the trial;
•
our ability to identify clinical trial sites and recruit clinical
trial investigators with the appropriate capabilities, competencies
and experience;
•
clinicians’ and patients’ perceptions as to the potential
advantages and risks of the product candidate being studied in
relation to other available therapies, including any new drugs that
may be approved for the indications we are
investigating;
•
the occurrence of dose-limiting toxicity in the clinical
trial;
•
the efforts to facilitate timely enrollment in clinical
trials;
•
the patient referral practices of physicians;
•
the ability to monitor patients adequately during and after
treatment;
•
our ability to obtain and maintain patient consents;
•
the risk that patients enrolled in clinical trials will drop out of
the trials before the infusion of our product candidates or trial
completion; and
•
the ability of patients to meet the complex follow-up requirements
of the clinical trial.
In addition, our clinical trials will compete with other clinical
trials for product candidates that are in the same therapeutic
areas as our product candidates, and this competition will reduce
the number and types of patients available to us because some
patients who might have opted to enroll in our trials may instead
opt to enroll in a trial being conducted by one of our competitors.
Since the number of qualified clinical investigators is limited,
some of our clinical trial sites may also be used by some of our
competitors, which may reduce the number of patients who are
available for our clinical trials in that clinical trial
site.
Moreover, because our product candidates represent a departure from
more commonly used methods for B cell-mediated autoimmune disease
treatment, potential patients and their doctors may be inclined to
use conventional therapies, such as corticosteroids or systemic
immunosuppressive medications, rather than enroll patients in our
clinical trial.
Delays in patient enrollment may result in increased costs or may
affect the timing or outcome of our ongoing and planned clinical
trials, which could prevent completion of these trials and
adversely affect our ability to advance the development of our
product candidates.
Our DesCAARTesTM
trial, our MusCAARTesTM
trial and any additional expected Phase 1 clinical trials for each
of our product candidates will be pilot dose escalation studies
with a limited number of patients. The activity and toxicity data
from these clinical trials of our product candidates may differ
from future results of Phase 2 and/or Phase 3 clinical trials that
enroll a larger number of patients.
Since the number of patients that we plan to dose in our
DesCAARTesTM
trial and our MusCAARTesTM
trial is small, and the number of patients in clinical trials for
any future product candidates may be small, the results from such
clinical trials, once completed, may be less reliable than results
achieved in larger clinical trials, which may hinder our efforts to
obtain regulatory approval for our product candidates.
In both our DesCAARTesTM
trial and our MusCAARTesTM
trial, we plan to evaluate the toxicity profile of our
51
product candidates and establish the recommended dose for the next
clinical trial. The preliminary results of clinical trials with
smaller sample sizes, such as our DesCAARTesTM
trial and our MusCAARTesTM
trial, as well as any clinical trials for future product
candidates, can be disproportionately influenced by various biases
associated with the conduct of small clinical trials, such as the
potential failure of the smaller sample size to accurately depict
the features of the broader patient population, which limits the
ability to generalize the results across a broader community, thus
making the clinical trial results less reliable than clinical
trials with a larger number of patients. As a result, there may be
less certainty that such product candidates would achieve a
statistically significant effect in any future clinical trials. If
we conduct any future clinical trials of DSG3-CAART or MuSK-CAART,
we may not achieve a statistically significant result or the same
level of statistical significance, if any, that we might have
anticipated based on the results observed in our
DesCAARTesTM
trial and our MusCAARTesTM
trial, respectively.
Risks Related to Sales, Marketing and Competition
The market opportunities for our product candidates may be limited
to those patients who are ineligible for or have failed prior
treatments and may be small.
Our projections of both the number of people who have the B
cell-mediated autoimmune diseases we are targeting, as well as the
subset of people with these diseases in a position to receive
second or later lines of therapy and who have the potential to
benefit from treatment with our product candidates, are based on
our beliefs and estimates. These estimates have been derived from a
variety of sources, including scientific literature, surveys of
clinics, patient foundations, or market research and may prove to
be incorrect. Further, new studies may change the estimated
incidence or prevalence of these B cell-mediated autoimmune
diseases. The number of patients may turn out to be lower than
expected. Additionally, the potentially addressable patient
population for our product candidates may be limited or may not be
amenable to treatment with our product candidates. For instance, we
expect DSG3-CAART to initially target a small patient population
that suffers from mPV. Furthermore, patients for whom a
preconditioning regimen is contraindicated, or is not acceptable to
the patient, may not be eligible for treatment with the product
candidate, further reducing the potential target population. Even
if we obtain significant market share for our product candidates,
because the potential target populations are small, we may never
achieve profitability without obtaining regulatory approval for
additional indications.
We face significant competition from other biotechnology and
pharmaceutical companies, and our operating results will suffer if
we fail to compete effectively.
The biopharmaceutical and pharmaceutical industries are
characterized by rapidly advancing technologies, intense
competition and a strong focus on intellectual property. We face
competition from many different players, including large and
specialty pharmaceutical and biotechnology companies, academic
research organizations and governmental agencies. Any therapeutic
candidates we successfully develop and commercialize will compete
with the existing standard of care as well as novel therapies that
may gain regulatory approval in the future. Many of our competitors
have substantially greater financial, technical and other
resources, such as larger research and development staff and
experienced marketing and manufacturing organizations and
well-established sales forces. Smaller or early-stage companies may
also prove to be significant competitors, particularly through
collaborative arrangements with large, established companies.
Mergers and acquisitions in the biotechnology and pharmaceutical
industries may result in even more resources being concentrated in
our competitors. We believe we are the first and only company
developing CAAR T drug candidates, and one of only a few developing
CAR T drug candidates, for the treatment of B cell-mediated
autoimmune diseases. However, despite the significant differences
in discovery, development and target populations between oncology
and autoimmune targets, we recognize that companies with an
investment and expertise in CAR T cell development for oncology
indications could attempt to leverage their expertise into B
cell-mediated autoimmune disease affected populations. Competition
may increase further as a result of advances in the commercial
applicability of technologies and greater availability of capital
for investment in these industries. Our competitors, either alone
or with collaborative partners, may succeed in developing,
acquiring or licensing on an exclusive basis drug or biologic
products that are more effective, safer, more easily commercialized
or less costly than our product candidates or may develop
proprietary technologies or secure patent protection that we may
need for the development of our technologies and
products.
Specifically, while rituximab is the first drug for the treatment
of PV, the target indication for DSG3-CAART to have received
regulatory approval in the United States in over 60 years, we are
aware that multiple biopharmaceutical companies have therapies in
clinical development. We are also aware of other biopharmaceutical
companies developing therapies for muscle-specific kinase
myasthenia gravis, or MuSK MG, and PLA2R-associated membranous
nephropathy, or PLA2R MN. While we do not expect these product
candidates to be directly competitive to our product candidates,
even if we obtain regulatory approval of our product candidates,
the availability and price of these other products could limit the
demand and the price we are able to charge for our product
candidates. We may not be able to implement our business plan if
the acceptance of our product candidates is inhibited by price
competition or the reluctance of physicians to switch from existing
methods of treatment to our product candidates, or if physicians
switch to other new drug or biologic products or choose to reserve
our product candidates for use in limited circumstances.
52
Even if we obtain regulatory approval of our product candidates,
the products may not gain the market acceptance among physicians,
patients, hospitals, treatment centers and others in the medical
community necessary for commercial success.
The use of engineered T cells as a potential treatment for B
cell-mediated autoimmune diseases is a recent development and may
not become broadly accepted by physicians, patients, hospitals,
treatment centers and others in the medical community. We expect
physicians to be particularly influential and we may not be able to
convince them to use our product candidates for many reasons.
Additional factors will influence whether our product candidates
are accepted in the market, including:
•
the clinical indications for which our product candidates are
licensed;
•
physicians, hospitals, treatment centers and patients considering
our product candidates as a safe and effective
treatment;
•
the potential and perceived advantages of our product candidates
over alternative treatments;
•
the prevalence and severity of any side effects;
•
product labeling or product insert requirements of the FDA or other
regulatory authorities;
•
limitations or warnings contained in the labeling approved by the
FDA;
•
the timing of market introduction of our product candidates as well
as competitive products;
•
the cost of treatment in relation to alternative
treatments;
•
the availability of coverage and adequate reimbursement and pricing
by third-party payors and government authorities;
•
the willingness of patients to pay out-of-pocket in the absence of
coverage and adequate reimbursement by third-party payors and
government authorities;
•
relative convenience and ease of administration, including as
compared to alternative treatments and competitive therapies;
and
•
the effectiveness of our sales and marketing efforts.
The product candidates we plan to develop and commercialize are
premised on offering a potential cure for B cell-mediated
autoimmune diseases, which may result in a high degree of
uncertainty related to pricing and long-term demand for our
product. Our target patient populations are relatively small.
Because of this pricing and demand for our product candidates, if
licensed, may not be adequate to support an extended period of
commercial viability, which could adversely affect our continued
ability to successfully produce and market our product or any
follow-on products.
In addition, if our product candidates are licensed but fail to
achieve market acceptance among physicians, patients, hospitals,
treatment centers or others in the medical community, we will not
be able to generate significant revenue. Even if our products
achieve market acceptance, we may not be able to maintain that
market acceptance over time if new products or technologies are
introduced that are more favorably received than our products, are
more cost effective or render our products obsolete.
Risks Related to Business Development
We may not be successful in our efforts to identify additional
product candidates. Due to our limited resources and access to
capital, we must prioritize development of certain product
candidates, which may prove to be wrong and may adversely affect
our business.
Although we intend to explore other therapeutic opportunities, in
addition to the product candidates that we are currently
developing, we may fail to identify viable new product candidates
for clinical development for a number of reasons. If we fail to
identify additional potential product candidates, our business
could be materially harmed.
53
Research programs to pursue the development of our existing and
planned product candidates for additional indications and to
identify new product candidates and disease targets require
substantial technical, financial and human resources whether or not
they are ultimately successful. Our research programs may initially
show promise in identifying potential indications and/or product
candidates, yet fail to yield results for clinical development for
a number of reasons, including:
•
the research methodology used may not be successful in identifying
potential indications and/or product candidates;
•
potential product candidates may be identified but may not be able
to be expressed on T cells in a manner that enables product
activity;
•
potential product candidates may, after further study, be shown to
have harmful adverse effects or other characteristics that indicate
they are unlikely to be effective drugs; or
•
it may take greater human and financial resources than we will
possess to identify additional therapeutic opportunities for our
product candidates or to develop suitable potential product
candidates through internal research programs, thereby limiting our
ability to develop, diversify and expand our product
portfolio.
Because we have limited financial and human resources, we intend to
initially focus on research programs and product candidates for a
limited set of indications. As a result, we may forego or delay
pursuit of opportunities with other product candidates or for other
indications that later prove to have greater commercial potential
or a greater likelihood of success. Our resource allocation
decisions may cause us to fail to capitalize on viable commercial
products or profitable market opportunities.
Accordingly, there can be no assurance that we will ever be able to
identify additional therapeutic opportunities for our product
candidates or to develop suitable potential product candidates
through internal research programs, which could materially
adversely affect our future growth and prospects. We may focus our
efforts and resources on potential product candidates or other
potential programs that ultimately prove to be
unsuccessful.
If we fail to develop additional product candidates, our commercial
opportunity will be limited.
One of our core strategies is to pursue clinical development of
additional product candidates beyond CABA-201, DSG3-CAART,
MuSK-CAART, DSG3/1-CAART, and PLA2R-CAART. Developing, obtaining
regulatory approval and commercializing additional product
candidates will require substantial additional funding and is prone
to the risks of failure inherent in medical product development. We
cannot provide you any assurance that we will be able to
successfully advance any of these additional product candidates
through the development process.
Even if we receive FDA approval to market additional product
candidates for the treatment of B cell-mediated autoimmune
diseases, we cannot assure you that any such product candidates
will be successfully commercialized, widely accepted in the
marketplace or more effective than other commercially available
alternatives. If we are unable to successfully develop and
commercialize additional product candidates, our commercial
opportunity will be limited. Moreover, a failure in obtaining
regulatory approval of additional product candidates may have a
negative effect on the approval process of any other, or result in
losing approval of any approved, product candidate.
We are highly dependent on our key personnel, and if we are not
successful in attracting and retaining highly qualified personnel,
we may not be able to successfully implement our business
strategy.
Our ability to compete in the highly competitive biotechnology and
pharmaceutical industries depends upon our ability to attract and
retain highly qualified managerial, scientific and medical
personnel. We are highly dependent on our management, scientific,
and medical personnel, including our Chief Executive Officer and
President, our Scientific Advisory Board members, our President,
Science and Technology, our Chief Medical Officer, and our Chief
Financial Officer. The loss of the services of any of our executive
officers, other key employees, and other scientific and medical
advisors, and our inability to find suitable replacements could
result in delays in product development and harm our
business.
Competition for skilled personnel in our market is intense and may
limit our ability to hire and retain highly qualified personnel on
acceptable terms or at all. To induce valuable employees to remain
at our company, in addition to salary and cash incentives, we have
provided stock options that vest over time. The value to employees
of stock options that vest over time may be significantly affected
by movements in our stock price that are beyond our control and may
at any time be insufficient to counteract more lucrative offers
from other companies. Despite our efforts to retain valuable
employees, members of our management, scientific and development
teams may terminate their employment with us on short notice.
Although we have employment agreements with our key employees,
these employment agreements provide for at-will employment, which
means that any of our employees could leave our employment at any
time, with or without notice. We do not maintain “key person”
insurance policies on the lives of these individuals or the lives
of any of
54
our other employees. Our success also depends on our ability to
continue to attract, retain and motivate highly skilled junior,
mid-level and senior managers as well as junior, mid-level and
senior scientific and medical personnel.
We expect to grow the size of our organization, and we may
experience difficulties in managing this growth.
As of December 31, 2022, we had 58 full-time employees and two
part-time employees. As our development and commercialization plans
and strategies develop, and as we continue to broaden our
operational capabilities, we expect to expand our employee base and
continue to add managerial, operational, sales, research and
development, marketing, financial and other personnel. For example,
we are still dependent on Penn and certain Penn-affiliated entities
to continue providing certain research and development as well as
manufacturing services under that certain research services
agreement. Current and future growth imposes significant added
responsibilities on members of management, including:
•
identifying, recruiting, integrating, retaining and motivating
additional employees in an increasingly competitive, inflationary
market;
•
managing our internal development efforts effectively, including
the clinical and FDA review process for our product candidates,
while complying with our contractual obligations to contractors and
other third parties; and
•
improving our operational, financial and management controls,
reporting systems and procedures.
Our future financial performance and our ability to commercialize
our product candidates will depend, in part, on our ability to
effectively manage our growth, and our management may also have to
divert a disproportionate amount of its attention away from
day-to-day activities in order to devote a substantial amount of
time to managing these growth activities.
We currently rely, and for the foreseeable future will continue to
rely, in substantial part on certain independent organizations,
advisors and consultants to provide certain services, including
certain research and development as well as general and
administrative support, pursuant to agreements which expire after a
certain period of time. There can be no assurance that the services
of independent organizations, advisors and consultants will
continue to be available to us on a timely basis when needed, or
that we can find qualified replacements. In addition, if we are
unable to effectively manage our outsourced activities or if the
quality or accuracy of the services provided by consultants is
compromised for any reason, our clinical trials may be extended,
delayed or terminated, and we may not be able to obtain regulatory
approval of our product candidates or otherwise advance our
business. There can be no assurance that we will be able to manage
our existing consultants or find other competent outside
contractors and consultants on economically reasonable terms, or at
all.
If we are not able to effectively expand our organization by hiring
new employees and expanding our groups of consultants and
contractors, or if we are not able to raise sufficient funds in the
future to support our hiring efforts beyond our research and
development personnel, we may not be able to successfully implement
the tasks necessary to further develop and commercialize our
product candidates and, accordingly, may not achieve our research,
development and commercialization goals.
Business disruptions could seriously harm our future revenue and
financial condition and increase our costs and expenses.
Our operations, Penn’s operations and those of any CMOs, CROs and
other contractors and consultants that we may engage could be
subject to earthquakes, power shortages, telecommunications
failures, water shortages, floods, hurricanes, typhoons, fires,
extreme weather conditions, medical epidemics and other natural or
man-made disasters or business interruptions, for which we are
predominantly self-insured. The occurrence of any of these business
disruptions could seriously harm our operations and financial
condition and increase our costs and expenses. We currently rely on
Penn to produce and process DSG3-CAART and anticipate that in the
future we will rely on a third-party CMO for the same. Our ability
to obtain clinical supplies of our product candidates could be
disrupted if the operations of these suppliers are affected by a
man-made or natural disaster or other business
interruption.
In addition, due to our adoption of a more flexible work model
following the COVID-19 pandemic, our increased prevalence of
personnel working from home may negatively impact productivity, or
disrupt, delay, or otherwise adversely impact our business
operations. Further, this could increase our cyber security risk,
create data accessibility concerns, and make us more susceptible to
communication disruptions, any of which could adversely impact our
business operations or delay necessary interactions with local and
federal regulators, ethics committees, manufacturing sites,
research or clinical trial sites and other important agencies and
contractors.
55
Risks Related to Our Financial Condition and Capital
Requirements
Risks Related to Past Financial Condition
We have incurred net losses in every period since our inception and
anticipate that we will incur substantial net losses over the next
several years, and may never achieve or maintain
profitability.
Investment in biopharmaceutical product development is highly
speculative because it entails substantial upfront capital
expenditures and significant risk that any potential product
candidate will fail to demonstrate adequate effect or an acceptable
safety profile, gain regulatory approval and become commercially
viable. We initially licensed rights to the patents underlying our
product candidates in August 2018 and initiated our
DesCAARTesTM
trial in June 2020. We have no products licensed for commercial
sale, and we will continue to incur significant research and
development and other expenses related to our ongoing operations.
Our net losses may fluctuate significantly from quarter to quarter
and year to year. We have to date financed our operations primarily
through private placements of our preferred stock, the sale of
common stock in our initial public offering and sales of our common
stock from time to time in “at-the-market” offerings.
As a result, we are not profitable and have incurred net losses in
each period since our inception. For the years ended December 31,
2022 and 2021, we recorded net losses of $53.0 million and $46.3
million, respectively. As of December 31, 2022, we had an
accumulated deficit of $165.6 million. We expect to incur
significant losses for the foreseeable future, and we expect these
losses to increase substantially if, and as, we:
•
continue our research and development efforts and submit additional
INDs for our product candidates;
•
conduct preclinical studies and clinical trials for our current and
future product candidates;
•
further develop our product candidate platform;
•
continue to discover and develop additional product
candidates;
•
maintain, expand and protect our intellectual property
portfolio;
•
hire additional clinical, scientific manufacturing and commercial
personnel;
•
establish a commercial manufacturing source and secure supply chain
capacity sufficient to provide commercial quantities of any product
candidates for which we may obtain regulatory approval, whether
through a CMO or through a manufacturing facility that we
establish;
•
acquire or in-license other product candidates and technologies,
including advanced manufacturing and translational capabilities
that we will need for the further development and possible
commercialization of our product candidates;
•
seek marketing approvals for any product candidates that
successfully complete clinical trials;
•
establish a sales, marketing and distribution infrastructure to
support the sales and marketing of any product candidates for which
we may obtain marketing approvals; and
•
add operational, financial and management information systems and
personnel, including personnel to support our product development
and planned future commercialization efforts, as well as to support
our operations as a public company.
To become and remain profitable, we must succeed in developing, and
eventually commercializing, a product or products that generate
significant revenue. The ability to achieve this success will
require us to be effective in a range of challenging activities,
including completing preclinical testing and clinical trials of our
product candidates, discovering additional product candidates,
obtaining regulatory approval for these product candidates and
manufacturing, marketing and selling any products for which we may
obtain regulatory approval. We are only in the preliminary stages
of most of these activities and have not yet demonstrated our
ability to successfully develop any product candidate, obtain
regulatory approvals, manufacture a commercial scale product or
arrange for a third party to do so on our behalf, or conduct sales
and marketing activities necessary for successful product
commercialization. We may never be able to develop, manufacture or
commercialize a marketable product.
56
Even if we are able to succeed in these activities, we may never
generate revenues that are significant enough to achieve
profitability. Because of the numerous risks and uncertainties
associated with pharmaceutical product development, we are unable
to accurately predict the timing or amount of increased expenses or
when, or if, we will be able to achieve profitability. Our expenses
will increase if, among other things:
•
there are any delays in completing our clinical trials or the
development of any of our product candidates;
•
we are required by the FDA or other regulatory authorities to
perform trials or studies in addition to, or different than, those
expected; or
•
there are any third-party challenges to our intellectual property
or we need to defend against any intellectual property-related
claim.
Because of the numerous risks and uncertainties associated with
pharmaceutical product development, we are unable to accurately
predict the timing or amount of increased expenses we will incur or
when, if ever, we will be able to achieve profitability. Even if we
succeed in commercializing one or more of our product candidates,
we will continue to incur substantial research and development and
other expenditures to develop, seek regulatory approval for and
market additional product candidates. We may encounter unforeseen
expenses, difficulties, complications, delays and other unknown
factors that may adversely affect our business. The size of our
future net losses will depend, in part, on the rate of future
growth of our expenses and our ability to generate revenue. Our
prior losses and expected future losses have had and will continue
to have an adverse effect on our stockholders’ equity and working
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, and we may face significant challenges and
expense as we test our product candidates and build our
capabilities.
We were incorporated in 2017 and initially acquired rights to
license certain patent rights from Penn in August 2018, and
acquired rights to license certain patent rights from Nanjing IASO
Biotherapeutics Co., Ltd., or IASO, in October 2022. We are early
in our development efforts, have a limited operating history and
are subject to the risks inherent to any newly-formed organization,
including, among others, risks that we may not be able to hire
sufficient qualified personnel and establish operating controls and
procedures.
Our limited operating history, particularly in light of the rapidly
evolving cell therapy field, may make it difficult to evaluate our
technology and industry and predict our future performance. Our
short history as an operating company makes any assessment of our
future success or viability subject to significant uncertainty. We
will encounter risks and difficulties frequently experienced by
early-stage companies in rapidly evolving fields. If we do not
address these risks successfully, our business will suffer.
Similarly, we expect that our financial condition and operating
results will fluctuate significantly from quarter to quarter and
year to year due to a variety of factors, many of which are beyond
our control. As a result, our shareholders should not rely upon the
results of any quarterly or annual period as an indicator of future
operating performance.
We currently do not have in-house resources sufficient to enable
the development of our product candidates, including our CAR T and
CAAR T cell platforms. We are reliant on several manufacturing and
support services from Penn through a Master Translational Research
Services Agreement, or the Services Agreement, as well as certain
research and development and general and administrative services
through three sponsored research agreements. We also rely on Penn
for access to key technologies for current manufacturing of
DSG3-CAART. Our ability to rely on services from Penn is limited to
a specified period of time, to specific capabilities, and is
subject to Penn’s right to terminate these services with or without
cause. We are reliant on manufacturing services from WuXi through a
Development, Manufacturing and Testing Services Agreement, or the
WuXi Agreement. Our ability to rely on services from WuXi is
limited to a specified period of time, to specific capabilities,
and is subject to WuXi’s right to terminate these services with or
without cause. If we are unable to establish necessary
relationships with third party partners and build our own
capabilities, our operating and financial results could differ
materially from our expectations, and our business could suffer. As
we build our own capabilities, and enter into agreements with third
parties, we expect to encounter risks and uncertainties frequently
experienced by growing companies in new and rapidly evolving
fields, including the risks and uncertainties described
herein.
All of our programs require additional preclinical research and
development, clinical development, regulatory approval in multiple
jurisdictions, obtaining manufacturing supply, capacity and
expertise, building of a commercial organization, substantial
investment and significant marketing efforts before we generate any
revenue from product sales. Other programs of ours require
additional discovery research and then preclinical and clinical
development. In addition, our product candidates must be licensed
for marketing by the FDA before we may commercialize any
product.
57
In addition, as an early-stage company, we have encountered and may
continue to encounter unforeseen expenses, difficulties,
complications, delays and other known and unknown circumstances. As
we advance our product candidates, we will need to transition from
a company with a research focus to a company capable of supporting
clinical development and if successful, commercial activities. We
may not be successful in such a transition.
We have not generated any revenue from our product candidates and
our ability to generate revenue from product sales and become
profitable depends significantly on our success in a number of
areas.
To become and remain profitable, we or any potential future
collaborator must develop and eventually commercialize products
with significant market potential at an adequate profit margin
after cost of goods sold and other expenses. All of our product
candidates are in the early stages of development and we will
require additional preclinical studies, clinical development,
regulatory review and approval, substantial investment, access to
sufficient commercial manufacturing capacity and significant
marketing efforts before we can generate any revenue from product
sales. We initiated our DesCAARTesTM
trial of DSG3-CAART, our most advanced product candidate, targeting
pathogenic B
cells in patients with mucosal pemphigus vulgaris, or mPV, in June
2020. Our IND for MuSK-CAART, targeting pathogenic B cells in a
subset of patients with myasthenia gravis, or MG, became effective
in January 2022. Our other product candidates, which include
CABA-201, targeting undisclosed autoimmune disease(s),
DSG3/1-CAART, targeting pathogenic B cells in patients with
mucocutaneous pemphigus vulgaris, or mcPV, and PLA2R-CAART,
targeting pathogenic B cells in patients with PLA2R-associated
membranous nephropathy, or PLA2R-associated MN, have yet to
complete IND-enabling studies. We have not yet administered any of
our product candidates other than DSG3-CAART in humans and, as
such, we face significant translational risk as our product
candidates advance to the clinical stage. Our ability to generate
revenue depends on a number of factors, including, but not limited
to:
•
timely completion of our preclinical studies and clinical trials,
which may be significantly slower or cost more than we currently
anticipate and will depend substantially upon the performance of
third-party academic and commercial contractors;
•
our ability to complete IND-enabling studies and successfully
submit INDs or comparable applications;
•
whether we are required by the FDA to conduct additional clinical
trials or other studies beyond those planned to support the
licensure and commercialization of our product candidates or any
future product candidates;
•
our ability to demonstrate to the satisfaction of the FDA the
safety, potency, purity and acceptable risk to benefit profile of
our product candidates or any future product
candidates;
•
the prevalence, duration and severity of potential side effects or
other safety issues experienced with our product candidates or
future product candidates, if any;
•
the cost of manufacturing and processing our product candidates
being greater than we anticipate;
•
the timely receipt of necessary marketing approvals from the
FDA;
•
the willingness of physicians, operators of clinics and patients to
utilize or adopt any of our product candidates or future product
candidates to treat B cell-mediated autoimmune
diseases;
•
our ability and the ability of third parties with whom we contract
to manufacture adequate clinical and commercial supplies of our
product candidates or any future product candidates, remain in good
standing with regulatory authorities and develop, validate and
maintain commercially viable manufacturing processes that are
compliant with FDA’s current Good Manufacturing Practices, or
cGMP;
•
our ability to successfully develop a commercial and competitive
strategy and thereafter commercialize our product candidates or any
future product candidates in the United States, if licensed for
marketing, reimbursement, sale and distribution, whether alone or
in collaboration with others;
•
patient demand for our product candidates and any future product
candidates, if licensed; and
•
our ability to establish and enforce intellectual property rights
in and to our product candidates or any future product
candidates.
58
Many of the factors listed above are beyond our control and could
cause us to experience significant delays or prevent us from
obtaining regulatory approvals or commercialize our product
candidates. Even if we are able to commercialize our product
candidates, we may not achieve profitability soon after generating
product sales, if ever. If we are unable to generate sufficient
revenue through the sale of our product candidates or any future
product candidates, we may be unable to continue operations without
continued funding.
If we do achieve profitability, we may not be able to sustain or
increase profitability on a quarterly or annual basis.
Additionally, even if we succeed in commercializing one or more of
our product candidates, we will continue to incur substantial
research and development and other expenditures to research,
develop and market additional product candidates. Our failure to
become and remain profitable would decrease the value of our
company and could impair our ability to raise capital, maintain our
research and development efforts, expand our business or continue
our operations. A decline in the value of our company also could
cause you to lose all or part of your investment.
We may encounter unforeseen expenses, difficulties, complications,
delays and other unknown factors that may adversely affect our
business. The size of our future net losses will depend, in part,
on the rate of future growth of our expenses and our ability to
generate revenue. Our prior losses and expected future losses have
had and will continue to have an adverse effect on our
stockholders’ equity and working capital.
Risks Related to Future Financial Condition
We will require substantial additional financing to develop and
commercialize our product candidates and implement our operating
plans. If we fail to obtain additional financing or cannot obtain
financing at the levels we require due to we may be delayed in our
plans or unable to complete the development and commercialization
of our product candidates.
Our operations have consumed substantial amounts of cash since
inception. We expect to continue to spend substantial amounts to
continue the preclinical and clinical development of our product
candidates, including our DesCAARTesTM
trial, our MusCAARTesTM
trial, and our research and development, preclinical studies and
clinical trials for CABA-201, PLA2R-CAART and DSG3/1-CAART and any
future product candidates, to seek regulatory approvals for our
product candidates, to enable commercial production of our
products, if licensed, and to initiate and complete registration
trials for multiple products. While we currently expect our
existing cash and cash equivalents and investments to be sufficient
to fund our operations through the announcement of six month
combination cohort data from the DesCAARTesTM
and MusCAARTesTM
clinical trials, as well as initial clinical data from the CABA-201
clinical trial, assuming the clearance of our CABA-201 IND by the
FDA, we expect to require significant additional financing to
complete these Phase 1 trials, and any future clinical trials of
these and our other product candidates.
Further, if licensed, we will require significant additional
amounts of cash to launch and commercialize our product
candidates.
As of December 31, 2022, we had $106.5 million of cash and cash
equivalents and investments. On October 29, 2019, we completed an
initial public offering of our common stock by issuing 7,275,501
shares of our common stock (including 475,501 shares of our common
stock pursuant to the underwriters’ option to purchase additional
shares that we issued in November 2019), at $11.00 per share, for
gross proceeds of $80.0 million, or net proceeds of $71.0 million.
In 2021, we raised $49.7 million, or net proceeds of $48.3 million,
in “at-the-market” offerings, pursuant to a Sales Agreement with
Cowen and Company, LLC which provides for the offering, issuance
and sale of up to an aggregate amount of $75.0 million of our
common stock. In December 2022, we issued 126,815 shares of our
common stock at a price of $5.52 per share and to certain investors
in lieu of common stock, pre-funded warrants to purchase 6,213,776
shares of common stock at a price of $5.51999 per pre-funded
warrant. The purchase price per share of each pre-funded warrant
represents the per share offering price for the common stock, minus
the $0.00001 per share exercise price of such pre-funded warrant.
Aggregate net proceeds were $32.6 million after deducting
underwriting discounts and commissions and offering expenses. Based
on our current operating plan, we believe that our existing cash
and cash equivalents and investments will be sufficient to fund our
operations into the first quarter of 2025. However, we have based
this estimate on assumptions that may prove to be wrong.
Additionally, changing circumstances may cause us to consume
capital significantly faster than we currently anticipate, and we
may need to spend more money than currently expected because of
circumstances beyond our control. We may require substantial
additional capital for the further development and
commercialization of our product candidates, including funding our
internal manufacturing capabilities, and may need to raise
additional funds sooner if we choose to expand more rapidly than we
presently anticipate. Because the length of time and activities
associated with development of our product candidates is highly
uncertain, we are unable to estimate the actual funds we will
require for development and any approved marketing and
commercialization activities. Our future funding requirements, both
near- and long-term, will depend on many factors, including, but
not limited to:
•
the initiation, progress, timing, costs and results of preclinical
studies and clinical trials for our product
candidates;
•
the clinical development plans we establish for these product
candidates;
•
the number and characteristics of product candidates that we may
develop or in-license;
59
•
the terms of any collaboration agreements we may choose to
conclude;
•
the outcome, timing and cost of meeting regulatory requirements
established by the FDA;
•
the cost of filing, prosecuting, defending and enforcing our patent
claims and other intellectual property rights;
•
the cost of defending intellectual property disputes, including
patent infringement actions brought by third parties against us or
our product candidates;
•
the effect of competing technological and market
developments;
•
the costs of establishing and maintaining a supply chain for the
development and manufacture of our product candidates;
•
the cost and timing of establishing, expanding and scaling
manufacturing capabilities;
•
the cost of maintaining the amount patient data for which we would
be responsible following commercialization of one or more of our
product candidates; and
•
the cost of establishing sales, marketing and distribution
capabilities for any product candidates for which we may receive
regulatory approval in regions where we choose to commercialize our
products on our own.
We cannot be certain that additional funding will be available on
acceptable terms, or at all. As widely reported, global credit and
financial markets have experienced extreme volatility and
disruptions, including severely diminished liquidity and credit
availability, declines in consumer confidence, declines in economic
growth, inflation, increases in unemployment rates and uncertainty
about economic stability. There can be no assurance that further
deterioration in credit and financial markets and confidence in
economic conditions will not occur. Until we are able to generate
sufficient revenue to finance our cash requirements, we will need
to finance our future cash needs through a combination of public or
private equity offerings, debt financings, collaborations,
strategic alliances, licensing arrangements and other marketing or
distribution arrangements. If we are unable to raise additional
capital in sufficient amounts or on terms acceptable to us, we may
have to significantly delay, scale back or discontinue our research
and development initiatives and clinical development plans. We
could be required to seek collaborators for our product candidates
at an earlier stage than otherwise would be desirable or on terms
that are less favorable than might otherwise be available or
relinquish or license on unfavorable terms our rights to our
product candidates in markets where we otherwise would seek to
pursue development or commercialization ourselves.
Future sales and issuances of our common stock or rights to
purchase common stock, including pursuant to our equity incentive
plans, could result in additional dilution of the percentage
ownership of our stockholders and could cause our stock price to
fall.
We expect that significant additional capital may be needed in the
future to continue our planned operations, including conducting
clinical trials, commercialization efforts, expanded research and
development activities and costs associated with operating a public
company. 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. If we
sell common stock, convertible securities or other equity
securities, investors may be materially diluted by subsequent
sales. Such sales may also result in material dilution to our
existing stockholders, and new investors could gain rights,
preferences and privileges senior to the holders of our common
stock.
Pursuant to our equity incentive plans, our management is
authorized to grant stock options to our employees, directors and
consultants. Additionally, the number of shares of our common stock
reserved for issuance under the 2019 Stock Option and Incentive
Plan automatically increased on January 1, 2023 and will
automatically increase each January 1 thereafter through and
including January 1, 2029, by 4% of the total number of shares of
our capital stock outstanding on December 31 of the preceding
calendar year, or a lesser number of shares determined by our board
of directors. Unless our board of directors elects not to increase
the number of shares available for future grant each year, our
stockholders may experience additional dilution, which could cause
our stock price to fall.
Any of the above events could significantly harm our business,
prospects, financial condition and results of operations and cause
the price of our common stock to decline.
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Risks Related to Our Intellectual Property
We rely heavily on certain in-licensed patent and other
intellectual property rights in connection with our development of
our product candidates and, if we fail to comply with our
obligations under our existing and any future intellectual property
licenses with third parties, we could lose license rights that are
important to our business.
Our ability to develop and commercialize our product candidates is
heavily dependent on in-licenses to patent rights and other
intellectual property granted to us by third parties. For example,
we depend heavily on our License Agreement with Penn and CHOP,
which was entered into in 2018, amended and restated in July 2019,
and further amended in May 2020 and October 2021, pursuant to which
we obtained (a) a non-exclusive, non-sublicensable, worldwide
research license to intellectual property controlled by Penn and
CHOP to make, have made and use products in two subfields of use,
(b) effective as of October 2018, an exclusive, worldwide,
royalty-bearing license, with the right to sublicense, under
certain of such intellectual property to make, use, sell, offer for
sale and import products in the same two subfields of use, and (c)
effective as of October 2018, a non-exclusive, worldwide,
royalty-bearing license, with limited rights to sublicense, under
certain of Penn’s know-how, which know-how satisfies certain
criteria and is listed on a mutually agreed to schedule, to make,
have made, use, sell, offer for sale, import and have imported
products in the same two subfields of use. We also depend on our
Exclusive License Agreement with IASO, which was entered into in
October 2022, pursuant to which we obtained a worldwide, exclusive
license under certain intellectual property to develop,
manufacture, commercialize and otherwise exploit T cell products
directed to CD19 for the purpose of diagnosis, prevention or
treatment of an autoimmune or alloimmune indication in humans, or
the IASO Agreement. We may enter into additional license agreements
in the future. Our license agreements with Penn, CHOP and IASO
impose, and we expect that future license agreements will impose,
various diligence, milestone payment, royalty, insurance and other
obligations on us. If we fail to comply with our obligations under
these licenses, our licensors, including Penn, CHOP and IASO may
have the right to terminate these license agreements, in which
event we might not be able to market our product candidates.
Termination of any of our license agreements or reduction or
elimination of our licensed rights may also result in our having to
negotiate new or reinstated licenses with less favorable
terms.
We may need to obtain additional licenses from third parties to
advance our research or allow commercialization of our product
candidates, and we have done so from time to time. We may fail to
obtain any of these licenses at a reasonable cost or on reasonable
terms, if at all. In that event, we may be required to expend
significant time and resources to develop or license replacement
technology. If we are unable to do so, we may be unable to develop
or commercialize the affected product candidates, which could harm
our business significantly. We cannot provide any assurances that
third-party patents do not exist which might be enforced against
our current product candidates or future products, resulting in
either an injunction prohibiting our sales, or, with respect to our
sales, an obligation on our part to pay royalties and/or other
forms of compensation to third parties.
Furthermore, in many cases, we may not have the right to control
the preparation, filing and prosecution of patent applications, or
to maintain the patents, covering technology that we in-license
from third parties. For example, pursuant to our IASO Agreement,
IASO controls such activities for the patent rights licensed to us
under such agreement. Pursuant to our License Agreement with Penn
and CHOP, Penn controls such activities for the patent rights
licensed to us under such agreement. Therefore, although we provide
input to IASO, Penn and CHOP on these activities, we cannot be
certain that these patents will be prosecuted, maintained and
enforced in a manner consistent with the best interests of our
business. If our current or future licensors or collaboration
partners fail to obtain, maintain or protect any patents or patent
applications licensed to us, our rights to such patents and patent
applications may be reduced or eliminated and our right to develop
and commercialize any of our product candidates that are the
subject of such licensed rights could be adversely
affected.
Disputes may arise between us and our current and future licensors
regarding intellectual property subject to a license agreement,
including those related to:
•
the scope of rights granted under the License Agreement or IASO
Agreement and other interpretation-related issues;
•
whether we have breached the License Agreement or IASO Agreement
and whether any such breach is subject to a cure
period;
•
whether and the extent to which our technology and processes
infringe on intellectual property of the licensor that is not
subject to the licensing agreement;
•
our right to sublicense patent and other rights to third parties
under collaborative development relationships;
•
our diligence obligations with respect to the use of the licensed
technology in relation to our development and commercialization of
our product candidates, and what activities satisfy those diligence
obligations; and
•
the ownership of inventions and know-how resulting from the joint
creation or use of intellectual property by our licensors and us
and our partners.
Furthermore, disputes may arise between us and our current or
future licensors regarding the ownership of intellectual property
developed by us, such that we may be required to assign or
otherwise transfer such intellectual property to such licensor. In
the event that the assigned or transferred intellectual property is
covered by an existing license agreement with such licensor we may
be required
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to make additional royalty or milestone payments, or both, to such
licensor. If the assigned or transferred intellectual property is
not covered by an existing license agreement, then we may be
required to enter into an additional license agreement to advance
our research or allow commercialization of our product candidates,
which may not be available on commercially reasonable terms or at
all.
If disputes over intellectual property that we have licensed, or
license in the future, prevent or impair our ability to maintain
our current licensing arrangements on acceptable terms, we may be
unable to successfully develop and commercialize the affected
product candidates.
If our efforts to protect the proprietary nature of the
intellectual property related to our current and any future product
candidates are not adequate, we may not be able to compete
effectively in our market.
Our success depends in large part on our ability to obtain and
maintain intellectual property protection in the United States and
other countries with respect to our product candidates. If we do
not adequately protect or enforce our intellectual property rights,
competitors may be able to erode or negate any competitive
advantage we may have, which could harm our business and ability to
achieve profitability. To protect our proprietary position, we have
in-licensed patent rights in the United States and abroad relating
to the product candidates that are important to our business. The
patent application and approval process is expensive, complex and
time-consuming. Our licensors may not be able to file and prosecute
all necessary or desirable patent applications at a reasonable cost
or in a timely manner.
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. In addition, the determination of patent rights with
respect to biological and pharmaceutical products commonly involves
complex legal and factual questions, which has 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. Pending patent applications cannot be
enforced against third parties practicing the technology claimed in
such applications unless and until a 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 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.
Therefore, we cannot be certain that our licensors were the first
to make the inventions claimed in the patents or pending patent
applications we in-license, or that our licensors were the first to
file for patent protection of such inventions.
Moreover, because the issuance of a patent is not conclusive as to
its inventorship, scope, validity or enforceability, the patents or
pending patent applications we in-license 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 preissuance submission
of prior art to the U.S. Patent and Trademark Office, or USPTO, or
become involved in post-grant review procedures, derivation
proceedings, reexaminations, or
inter partes
review in the United States, or oppositions and other comparable
proceedings in foreign jurisdictions, challenging our patent rights
or the patent rights of others. An adverse determination in any
such challenges may result in loss of exclusivity or in 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
product candidates. In addition, given the amount of time required
for the development, testing and regulatory review of new product
candidates, patents protecting such candidates might expire before
or shortly after such candidates are commercialized.
Changes in either the patent laws or interpretation of the patent
laws in the United States and other countries may diminish the
value of the patents we in-license or narrow the scope of our
patent protection. In addition, the laws of foreign 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 is
more restrictive than U.S. patent law in connection with the
patentability of methods of treatment of the human body and Chinese
bankruptcy law may not provide a licensee the same protections as
U.S. bankruptcy law. This could impact our in-license under the
IASO Agreement with IASO, a China-based company, if IASO declared
bankruptcy, and could have a material adverse effect on the
development of CABA-201.
62
A European Unified Patent Court (UPC) is scheduled to come into
force during 2023. The UPC will be a common patent court to hear
patent infringement and revocation proceedings effective for member
states of the European Union. This could enable third parties to
seek revocation of any of our European patents in a single
proceeding at the UPC rather than through multiple proceedings in
each of the jurisdictions in which the European patent is
validated. Any such revocation and loss of patent protection could
have a material adverse impact on our business and our ability to
commercialize or license our technology and products. Moreover, the
controlling laws and regulations of the UPC will develop over time,
and may adversely affect our ability to enforce or defend the
validity of our European patents. We may decide to opt out our
European patents and patent applications from the UPC. If certain
formalities and requirements are not met, however, our European
patents and patent applications could be challenged for
non-compliance and brought under the jurisdiction of the UPC. We
cannot be certain that our European patents and patent applications
will avoid falling under the jurisdiction of the UPC, if we decide
to opt out of the UPC.
We cannot predict whether the patent applications we in-license
currently being pursued will issue as patents, whether the claims
of any patent that has or may issue will provide us with a
competitive advantage or prevent competitors from designing around
the claims to develop competing technologies in a non-infringing
manner, or whether we or our licensors will be able to successfully
pursue patent applications in the future relating to our current
product candidates or future products and product candidates.
Moreover, the patent application and approval process is expensive
and time-consuming. We or our licensors may not be able to file and
prosecute all necessary or desirable patent applications at a
reasonable cost or in a timely manner. Furthermore, we, or any
future partners, collaborators, or licensees, may fail to identify
patentable aspects of inventions made in the course of development
and commercialization activities before it is too late to obtain
patent protection on them. Therefore, we may miss potential
opportunities to seek additional patent protection.
It is possible that defects of form in the preparation or filing of
patent applications may exist, or may arise in the future, for
example with respect to proper priority claims, inventorship, claim
scope, or requests for patent term adjustments. If we fail to
establish, maintain or protect such patents and other intellectual
property rights, such rights may be reduced or eliminated. If there
are material defects in the form, preparation, prosecution or
enforcement of the patents or patent applications we in-license,
such patents may be invalid and/or unenforceable, and such
applications may never result in valid, enforceable patents. Any of
these outcomes could impair our ability to prevent competition from
third parties, which may have an adverse impact on our
business.
Even if the patent applications we in-license issue as patents,
they may not issue in a form that will provide us with any
meaningful protection, prevent competitors from competing with us
or otherwise provide us with any competitive advantage. Our
competitors may be able to circumvent our patent rights by
developing similar or alternative technologies or products in a
non-infringing manner. Our competitors may also seek approval to
market their own products similar to or otherwise competitive with
our product candidates. Alternatively, our competitors may seek to
market generic versions of any approved products by submitting
abbreviated BLAs to the FDA during which process they may claim
that patents licensed by us are invalid, unenforceable or not
infringed. In these circumstances, we may need to defend or assert
our intellectual property rights, 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 the
patents we in-license invalid or unenforceable, or that our
competitors are competing in a non-infringing manner. Thus, even if
we have in-licensed 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.
In the future, we likely will need to expand our patent portfolio
to pursue patent coverage for new product candidates that we wish
to develop. The patent prosecution process is competitive, and
other companies, some which may have greater resources than we do
in this area, may also be pursuing intellectual property rights
that we may consider necessary or attractive in order to develop
and commercialize future product candidates.
We may not be able to protect our intellectual property rights
throughout the world.
Filing, prosecuting, maintaining, defending and enforcing patents
on our product candidates in all countries throughout the world
would be prohibitively expensive, and our intellectual property
rights in some countries outside the United States could be less
extensive than those in the United States. The deadline to pursue
protection in foreign jurisdictions for some of the patent families
licensed under the License Agreement with Penn has not yet expired.
Prior to applicable deadlines, we and Penn will need to decide
where to pursue protection, and we will not have the opportunity to
pursue protection unless we do so in applicable jurisdictions prior
to the deadlines. Although our License Agreement and IASO Agreement
grant us worldwide rights, there can be no assurance that we will
obtain or maintain patent rights in or outside the United States
under any future license agreements. In addition, the laws of some
foreign countries do not protect intellectual property rights to
the same extent as federal and state laws in the United States even
in jurisdictions where we and our licensors pursue patent
protection. Consequently, we and our licensors may not be able to
prevent third parties from practicing our inventions in all
countries outside the United States, even in jurisdictions where we
and our licensors pursue patent protection, or from selling or
importing products made using our inventions in and into the United
States or other jurisdictions. Competitors may use our technologies
in jurisdictions where we and our licensors have not pursued and
obtained patent protection to develop their own products and,
further, may export otherwise infringing products to territories
where we and our licensors have patent protection, but
63
enforcement is not as strong as that in the United States. These
products may compete with our product candidates and the patents we
in-license or other intellectual property rights may not be
effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting
and defending intellectual property rights in foreign
jurisdictions. The legal systems of certain countries, particularly
certain developing countries, do not favor the enforcement of
patents, trade secrets and other intellectual property protection,
particularly those relating to biotechnology products, which could
make it difficult for us to stop the infringement of the patents we
in-license or marketing of competing products in violation of our
proprietary rights generally. Proceedings to enforce our patent
rights, even if obtained, in foreign jurisdictions could result in
substantial costs and divert our efforts and attention from other
aspects of our business, could put the patents we in-license at
risk of being invalidated or interpreted narrowly and the patent
applications we in-license at risk of not issuing and could provoke
third parties to assert claims against us. We may not prevail in
any lawsuits that we initiate, and the damages or other remedies
awarded, if any, may not be commercially meaningful. Accordingly,
our efforts to enforce our intellectual property rights around the
world may be inadequate to obtain a significant commercial
advantage from the intellectual property that we develop or
license.
We or our licensors may be subject to claims challenging the
inventorship or ownership of the patents and other intellectual
property that we own or license.
We or our licensors may be subject to claims that former employees,
collaborators or other third parties have an ownership interest in
the patents and intellectual property that we in-license or that we
may own or in-license in the future. While it is our policy to
require our employees and contractors who may be involved in the
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 develops
intellectual property that we regard as our own or such assignments
may not be self-executing or may be breached. Our licensors may
face similar obstacles. We or our licensors could be subject to
ownership disputes arising, for example, from conflicting
obligations of employees, consultants or others who are involved in
developing our product candidates. For example, our scientific
co-founders, Drs. Payne and Milone, are members of our scientific
advisory board and are also employed by and subject to Penn’s
intellectual property policy. Litigation may be necessary to defend
against any claims challenging inventorship or ownership. If we or
our licensors fail in defending any such claims, we may have to pay
monetary damages and may lose valuable intellectual property
rights, such as exclusive ownership of, or right to use,
intellectual property, which could adversely impact our business,
results of operations and financial condition.
Some intellectual property which we have in-licensed was discovered
through government funded programs and thus is subject to federal
regulations such as “march-in” rights, certain reporting
requirements, and a preference for U.S. industry. Compliance with
such regulations may limit our exclusive rights and limit our
ability to contract with non-U.S. manufacturers.
Certain of the intellectual property rights we have licensed,
including rights licensed to us by Penn relating to our DSG3-CAART
and DSG3/1-CAART product candidates, was generated through the use
of U.S. government funding and may therefore be subject to certain
federal laws and regulations. As a result, the U.S. government has
certain rights to intellectual property embodied in our DSG3-CAART
and DSG3/1-CAART product candidates and may have rights in future
product candidates pursuant to the Bayh-Dole Act of 1980. These
U.S. government rights in certain inventions developed under a
government-funded program include a non-exclusive,
non-transferable, irrevocable worldwide license to use inventions
for any governmental purpose. In addition, the U.S. government has
the right to require us to grant exclusive, partially exclusive, or
non-exclusive licenses to any of these inventions to a third party
if it determines that: (i) adequate steps have not been taken to
commercialize the invention; (ii) government action is necessary to
meet public health or safety needs; or (iii) government action is
necessary to meet requirements for public use under federal
regulations, also referred to as “march-in rights”. The U.S.
government also has the right to take title to these inventions if
we, or the applicable licensor, such as Penn, fail to disclose the
invention to the government and fail to file an application to
register the intellectual property within specified time limits.
Intellectual property generated under a government funded program
is also subject to certain reporting requirements, compliance with
which may require us or the applicable licensor to expend
substantial resources. In addition, the U.S. government requires
that products embodying the subject invention or produced through
the use of the subject invention be manufactured substantially in
the United States. The manufacturing preference requirement can be
waived if the owner of the intellectual property can show that
reasonable but unsuccessful efforts have been made to grant
licenses on similar terms to potential licensees that would be
likely to manufacture substantially in the United States or that
under the circumstances domestic manufacture is not commercially
feasible. This preference for U.S. manufacturers may limit our
ability to contract with non-U.S. product manufacturers for product
candidates covered by such intellectual property.
We may become involved in lawsuits to protect or enforce our patent
rights or other intellectual property rights, which could be
expensive, time consuming and unsuccessful.
Competitors may infringe, misappropriate or otherwise violate
patents, trademarks, copyrights or other intellectual property that
we own or in-license. To counter infringement, misappropriation or
other unauthorized use, we may be required to file claims, which
can be expensive and time consuming and divert the time and
attention of our management and scientific personnel. Any claims we
assert against perceived violators could provoke these parties to
assert counterclaims against us alleging that we infringe,
misappropriate
64
or otherwise violate their intellectual property, in addition to
counterclaims asserting that the patents we in-license are invalid
or unenforceable, or both. In any patent infringement proceeding,
there is a risk that a court will decide that a patent we
in-license 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. In the U.S., grounds for a validity
challenge in a court proceeding could be an alleged failure to meet
one or more statutory requirements for patentability, including,
for example, lack of novelty, obviousness, lack of written
description or non-enablement. Grounds for an unenforceability
assertion could be an allegation that someone connected with
prosecution of the patent withheld relevant information from the
USPTO, or made a misleading statement, during prosecution.
Additionally, third parties are able to challenge the validity of
issued patents through administrative proceedings in the patent
offices of certain countries, including the USPTO and the European
Patent Office.
Even if the validity of a patent is upheld during a court
proceeding, there is a risk that 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 the patent claims do not cover the invention. An
adverse outcome in a litigation or proceeding involving the patents
we in-license could limit our ability to assert the patent we
in-license 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. Any of these
occurrences could adversely affect our competitive business
position, business prospects and financial condition.
Even if we establish infringement, misappropriation or another
violation of our intellectual property rights, the court may decide
not to grant an injunction against the offender and instead award
only monetary damages, which may or may not be an adequate remedy.
Furthermore, because of the substantial amount of discovery
required in connection with intellectual property litigation, there
is a risk that some of our confidential information could be
compromised by disclosure during 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 our shares. Moreover, there
can be no assurance that we will have sufficient financial or other
resources to file and pursue such 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. Any
of the foregoing may have a material adverse effect on our
business, financial condition, results of operations and
prospects.
Changes in patent law in the United States and other jurisdictions
could diminish the value of patents in general, thereby impairing
our ability to protect our product candidates.
Changes in either the patent laws or the interpretation of the
patent laws in the United States or other jurisdictions could
increase the uncertainties and costs surrounding the prosecution of
patent applications and the enforcement or defense of issued
patents. On September 16, 2011, the Leahy-Smith America Invents
Act, or the Leahy-Smith Act, was signed into law. When implemented,
the Leahy-Smith Act included several significant changes to U.S.
patent law that impacted how patent rights could be prosecuted,
enforced and defended. In particular, the Leahy-Smith Act also
included provisions that switched the United States from a
“first-to-invent” system to a “first-to-file” system, allowed
third-party submission of prior art to the USPTO during patent
prosecution and set forth additional procedures to attack the
validity of a patent by the USPTO administered post grant
proceedings. Under a first-to-file system, assuming the other
requirements for patentability are met, the first inventor to file
a patent application generally will be entitled to the patent on an
invention regardless of whether another inventor had made the
invention earlier. The USPTO developed new regulations and
procedures governing the administration of the Leahy-Smith Act, and
many of the substantive changes to patent law associated with the
Leahy-Smith Act, and in particular, the first to file provisions,
became effective on March 16, 2013. It remains unclear what impact,
if any, the Leahy-Smith Act will have on the operation of our
business. However, the Leahy-Smith Act and its implementation could
increase the uncertainties and costs surrounding the prosecution of
the patent applications we in-license and the enforcement or
defense of the issued patents we in-license, all of which could
have a material adverse effect on our business.
65
The patent positions of companies engaged in the development and
commercialization of biologics are particularly uncertain. For
example, the Supreme Court of the United States issued its decision
in Association for Molecular Pathology v. Myriad Genetics, Inc., or
Myriad, a case involving patent claims held by Myriad Genetics,
Inc. relating to the breast cancer susceptibility genes BRCA1 and
BRCA2. Myriad held that an isolated segment of naturally occurring
DNA, such as the DNA constituting the BRCA1 and BRCA2 genes, is not
patent-eligible subject matter, but that complementary DNA, which
is an artificial construct that may be created from RNA transcripts
of genes, may be patent-eligible. Thereafter, the USPTO issued a
guidance memorandum instructing USPTO examiners on the
ramifications of the Prometheus and Myriad rulings and apply the
Myriad ruling to natural products and principles including all
naturally occurring nucleic acids. Certain claims of our
in-licensed patent applications contain, and any future patents we
may obtain may contain, claims that relate to specific recombinant
DNA sequences that are naturally occurring at least in part and,
therefore, could be the subject of future challenges made by third
parties.
We cannot assure you that our efforts to seek patent protection for
one or more of our product candidates will not be negatively
impacted by this Supreme Court decision, rulings in other cases or
changes in guidance or procedures issued by the USPTO. We cannot
fully predict what impact the Supreme Court’s decisions in Myriad
may have on the ability of life science companies to obtain or
enforce patents relating to their products in the future. These
decisions, the guidance issued by the USPTO and rulings in other
cases or changes in USPTO guidance or procedures could have a
material adverse effect on our existing patent rights and our
ability to protect and enforce our intellectual property in the
future.
If we are unable to protect the confidentiality of trade secrets,
our business and competitive position would be harmed.
In addition to the protection afforded by patents, we rely on trade
secret protection and confidentiality agreements to protect certain
proprietary know-how that is not patentable or that we elect not to
patent, processes for which patents are difficult to enforce, and
any other elements of our product candidate discovery and
development processes that involve proprietary know-how,
information or technology that is not covered by patents. However,
trade secrets can be difficult to protect and some courts inside
and outside the United States are less willing or unwilling to
protect trade secrets. We seek to protect our proprietary
technology and processes, in part, by entering into confidentiality
agreements with our employees, consultants, scientific advisors,
and contractors. We cannot guarantee that we have entered into such
agreements with each party that may have or has had access to our
trade secrets or proprietary technology and processes. We also seek
to preserve the integrity and confidentiality of our data and trade
secrets by maintaining physical security of our premises and
physical and electronic security of our information technology
systems. While we have confidence in these individuals,
organizations and systems, agreements or security measures may be
breached, and we may not have adequate remedies for any
breach.
In addition, our trade secrets may otherwise become known or be
independently discovered by competitors. Competitors and other
third parties could infringe, misappropriate or otherwise violate
our intellectual property rights, design around our protected
technology or develop their own competitive technologies that fall
outside of our intellectual property rights. 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 them, or those to whom they communicate it, from using that
technology or information to compete with us. If our trade secrets
are not adequately protected or sufficient to provide an advantage
over our competitors, our competitive position could be adversely
affected, as could our business. Additionally, if the steps taken
to maintain our trade secrets are deemed inadequate, we may have
insufficient recourse against third parties for misappropriating
our trade secrets.
Patent term may be inadequate to protect our competitive position
on our product candidates for an adequate amount of
time.
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. In the United States, the Drug Price
Competition and Patent Term Restoration Act of 1984 permits a
patent term extension of up to five years beyond the normal
expiration of the patent, which is limited to the approved
indication (or any additional indications approved during the
period of extension). However, a patent term extension cannot
extend the remaining term of a patent beyond a total of 14 years
from the date of the product’s approval by the FDA, 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. In the future, if
and when our product candidates receive FDA approval, we plan to
apply for patent term extensions on patents covering those product
candidates in any jurisdiction where these are available. 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, and may refuse to grant extensions to the
patents we in-license, or may grant more limited extensions than we
request. Moreover, we may not receive an extension because of, for
example, failing to apply within applicable deadlines, failing to
apply prior to expiration of relevant patents or otherwise failing
to satisfy applicable requirements. If this occurs, our competitors
may be able to 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.
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We may be subject to claims asserting that our employees,
consultants or advisors have wrongfully used or disclosed alleged
trade secrets of their current or former employers or claims
asserting ownership of what we regard as our own intellectual
property.
Certain of our employees, consultants or advisors are currently, or
were previously, employed at universities or other biotechnology or
pharmaceutical companies, including our competitors or potential
competitors. Although we try to ensure that our employees,
consultants and advisors do not use the proprietary information or
know-how of others in their work for us, we may be subject to
claims that these individuals or we have used or disclosed
intellectual property, including trade secrets or other proprietary
information, of any such individual’s current or former employer.
Litigation may be necessary to defend against these claims. If we
fail in defending any such claims, in addition to paying monetary
damages, we may lose valuable intellectual property rights or
personnel. Even if we are successful in defending against such
claims, litigation could result in substantial costs and be a
distraction to management. Our licensors may face similar risks,
which could have an adverse impact on intellectual property that is
licensed to us.
We may become subject to claims that we are infringing certain
third-party patents or other third-party intellectual property
rights, any of which may prevent or delay our development and
commercialization efforts and have a material adverse effect on our
business.
Our commercial success depends in part on avoiding infringing,
misappropriating and otherwise violating the patents and other
intellectual property and proprietary rights of third parties.
There is a substantial amount of litigation, both within and
outside the United States, involving patent and other intellectual
property rights in the biotechnology and pharmaceutical industries,
including patent infringement lawsuits, and administrative
proceedings such as interferences,
inter partes
review and post grant review proceedings before the USPTO and
opposition proceedings before foreign patent offices. Numerous U.S.
and foreign issued patents and pending patent applications, which
are owned or controlled by third parties, including our
competitors, exist in the fields in which we are pursuing product
candidates. As the biotechnology and pharmaceutical industries
expand and more patents are issued, the risk increases that our
product candidates may be subject to claims of infringement of the
patent rights of third parties.
Third parties may assert that we or our licensors are employing
their proprietary technology without authorization. There may be
third-party patents or patent applications with claims to
materials, methods of manufacture or methods for treatment relating
to our product candidates and, because patent applications can take
many years to issue, there may be currently pending third party
patent applications which may later result in issued patents, in
each case that our product candidates, their manufacture or use may
infringe or be alleged to infringe. We may fail to identify
potentially relevant patents or patent applications, incorrectly
conclude that a patent is invalid or does not cover our activities,
or incorrectly conclude that a patent application is unlikely to
issue in a form of relevance to our activities.
Parties making patent infringement claims against us may obtain
injunctive or other equitable relief, which could effectively block
our ability to further develop and commercialize one or more of our
product candidates. Defense of these claims, including
demonstrating non-infringement, invalidity or unenforceability of
the respective patent rights in question, regardless of their
merit, is time-consuming, would involve substantial litigation
expense and would be a substantial diversion of employee resources
from our business. For example, in order to successfully challenge
the validity of any U.S. patent in federal court, we would need to
overcome a presumption of validity. This is a high burden requiring
us to present clear and convincing evidence as to the invalidity of
any such U.S. patent claim, and we can provide no assurance that a
court of competent jurisdiction would invalidate the claims of any
such U.S. patent. We may not have sufficient resources to bring
these actions to a successful conclusion. 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 our shares.
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In the event that a holder of any such patents seeks to enforce its
patent rights against us with respect to one or more of our product
candidates, and our defenses against the infringement of such
patent rights are unsuccessful, we may be precluded from
commercializing our product candidates, even if approved, without
first obtaining a license to some or all of these patents, which
may not be available on commercially reasonable terms or at all.
Moreover, we may be required to pay significant fees and royalties
to secure a license to the applicable patents. Such a license may
only be non-exclusive, in which case our ability to stop others
from using or commercializing technology and products similar or
identical to ours may be limited. Furthermore, we could be liable
for damages to the holder of these patents, which may be
significant and could include treble damages if we are found to
have willfully infringed such patents. In the event that a
challenge to these patents were to be unsuccessful or we were to
become subject to litigation or unable to obtain a license on
commercially reasonable terms with respect to these patents, it
could harm our business, financial condition, results of operations
and prospects.
We are aware of third-party issued U.S. patents relating to the
lentiviral vectors which may be used in the manufacture or use of
our product candidates. If these patent rights were enforced
against us, we believe that we have defenses against any such
action, including that these patents would not be infringed by our
product candidates and/or that these patents are not valid.
However, if these patents were enforced against us and defenses to
such enforcement were unsuccessful, unless we obtain a license to
these patents, which may not be available on commercially
reasonable terms, or at all, we could be liable for damages and
precluded from commercializing any product candidates that were
ultimately held to infringe these patents, which could have a
material adverse effect on our business, financial condition,
results of operations and prospects.
Even in the absence of a finding of infringement, we may need or
may choose to obtain licenses from third parties to advance our
research or allow commercialization of our product candidates. We
may fail to obtain any of these licenses at a reasonable cost or on
reasonable terms, or at all. In that event, we would be unable to
further develop and commercialize our product candidates. Claims
that we have misappropriated the confidential information or trade
secrets of third parties could have a similar negative impact on
our business. Any of the foregoing could materially adversely
affect our business, results of operations and financial
condition.
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 that are similar to our product
candidates or utilize similar cell therapy technology but that are
not covered by the claims of our current or future patent
portfolio;
•
we, or our current or future licensors or collaborators, might not
have been the first to make the inventions covered by the issued
patent or pending patent application that we license now or that we
may license or own in the future;
•
we, or our current or future licensors or 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 our licensed intellectual property rights;
•
it is possible that our current or future licensed patent
applications 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;
•
we may choose not to file a patent application in order to maintain
certain trade secrets or know-how, and a third party may
subsequently file a patent application covering such intellectual
property; and
•
third-party patents may issue with claims covering our activities;
we may have infringement liability exposure arising from such
patents.
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Should any of these events occur, they could have a material
adverse effect on our business, financial condition, results of
operations and prospects.
Risks Related to Our Reliance on Third Parties
We are reliant on a research services agreement with Penn for a
significant portion of our nonclinical research and development
activities and current manufacturing activities.
If Penn and its affiliated entities were to fail to perform their
obligations in accordance with the terms of the Services Agreement
or terminate the Services Agreement with little notice, we may have
difficulty continuing our normal business operations and our
business prospects, financial condition and results of operations
could be harmed. In addition, the termination of our relationship
with Penn and the Services Agreement and any delay in appointing or
finding a suitable replacement provider, if one exists, could make
it difficult for us to operate our business for that period.
Moreover, we will be reliant on Penn to assist us with any
necessary technology transfer. Any delays or inadequacies in such
technology transfer, or disputes regarding the scope of such
technology transfer, could delay our operations, including our
clinical trials, require us to expend additional resources and
otherwise have an adverse effect on our business.
Additionally, over time we will need to transition from receiving
the services that Penn currently provides to performing such
services internally. The Services Agreement is scheduled to expire
on the later of October 19, 2021 or completion of all research and
development projects, and unless the Services Agreement is amended,
Penn will not be obligated to provide any further services under
the Services Agreement after that time. We currently anticipate
that research and development projects under the Services Agreement
will continue through at least 2023. In addition, Penn has the
right to terminate the Services Agreement in whole at any time with
90 days’ notice and to terminate any research and development
project being performed under the Services Agreement if the Penn
service provider appointed to lead such project is unavailable and
Penn is unavailable to find a replacement within 60 days for such
service provider. Penn also has the right to terminate certain
manufacturing services being performed under the Services Agreement
with 180 days’ written notice. From time to time, we may enter into
further addenda to the Services Agreement that provide Penn with
the right to terminate such addenda with limited notice periods. If
we do not have adequate personnel and capabilities at the time that
we assume responsibilities for such services, we may not be
successful in effectively or efficiently transitioning these
services from Penn, which could disrupt our business and have a
material adverse effect on our financial condition and results of
operations. Further, we will incur costs relating to establishing
our own financial, administrative, information technology and other
support functions as well as running and maintaining such functions
on a going-forward basis. In addition, the process of establishing
such functions may distract our management from focusing on
business and strategic opportunities and could result in
disruptions to our business. Even if we are able to successfully
transition these services, they may be more expensive or less
efficient than the services we are receiving from Penn during the
transition period.
We currently, and will likely continue to, rely on third parties to
conduct our clinical trials. If these third parties do not
successfully carry out their contractual duties or meet expected
deadlines, we may not be able to obtain regulatory approval of or
commercialize our product candidates.
We depend and will continue to depend upon third parties, including
independent investigators and collaborators, such as universities,
medical institutions, CROs and strategic partners, to conduct our
preclinical studies and clinical trials under agreements with us.
Specifically, we depend on clinical trial sites to enroll patients
and conduct the DesCAARTesTM
trial and MusCAARTesTM
trial in a timely and appropriate manner. If our clinical trial
sites do not conduct the trials on the timeline we expect or
otherwise fail to support the trials, our clinical trial results
could be significantly delayed, thereby adversely impacting our
leadership position in the CAAR T industry and our ability to
progress additional product candidates. Further, although we intend
to transition our manufacturing needs to a CMO and eventually
secure our own clinical manufacturing facility, we must currently
rely on Penn to manufacture supplies and process our product
candidates. As we open additional clinical trial sites, we expect
to have to negotiate budgets and contracts with CROs and study
sites, which may result in delays to our development timelines and
increased costs.
We will rely heavily on these third parties, including Penn and
WuXi, to conduct our manufacturing, and as a result, will have
limited control over pace at which these activities are carried
out. Nevertheless, we are responsible for ensuring that each of our
trials is conducted in accordance with applicable protocol, legal,
regulatory and scientific standards, and our reliance on third
parties does not relieve us of our regulatory responsibilities. We
and these third parties are required to comply with FDA’s GCPs
which are regulations and guidelines enforced by the FDA for
product candidates in clinical development. Regulatory authorities
enforce these GCPs through periodic inspections of trial sponsors,
principal investigators and trial sites. If we or any of these
third parties fail to comply with applicable GCP requirements, the
clinical 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 provide assurance that, upon inspection, such regulatory
authorities will not determine that some or all of our clinical
trials do not fully comply with the GCP requirements. For any
violations of laws and regulations during the conduct of our
clinical trials, we could be subject to untitled and warning
letters or enforcement action that may include civil penalties up
to and including criminal prosecution. In addition, our clinical
trials must be conducted with biologic product produced under cGMPs
and will require a large number of test patients. We also are
required to register
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ongoing clinical trials and post the results of completed clinical
trials on a government-sponsored database within certain
timeframes. Failure to do so can result in fines, adverse publicity
and civil and criminal sanctions.
As widely reported, global credit and financial markets have
experienced extreme volatility and disruptions, including severely
diminished liquidity and credit availability, declines in consumer
confidence, declines in economic growth, increases in unemployment
rates and uncertainty about economic stability. In the event that
one or more of our current or future service providers,
manufacturers and other partners 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, due to the economic downturn or for any other
reasons, then we may not be able to obtain, or may be delayed in
obtaining, marketing approvals for any product candidates we may
develop and will not be able to, or may be delayed in our efforts
to, successfully commercialize our medicines. Our failure or the
failure of these third parties to comply with applicable regulatory
requirements or our stated protocols could also subject us to
enforcement action. Moreover, our business may be implicated if any
of these third parties violates federal or state fraud and abuse or
false claims laws and regulations or healthcare privacy and
security laws.
Any third parties conducting our clinical trials will not be our
employees and, except for remedies available to us under our
agreements with such third parties, we cannot control whether or
not they devote sufficient time and resources to our ongoing
preclinical and clinical programs. These third parties may also
have relationships with other commercial entities, including our
competitors, for whom they may also be conducting clinical studies
or other drug development activities, which could affect their
performance on our behalf. If these third parties do not
successfully carry out their contractual duties or obligations or
meet expected deadlines, if they need to be replaced or if the
quality or accuracy of the clinical data they obtain is compromised
due to the failure to adhere to our clinical protocols or
regulatory requirements or for other reasons, our clinical trials
may be extended, delayed or terminated and we may not be able to
complete development of, obtain regulatory approval of or
successfully commercialize our product candidates. As a result, our
financial results and the commercial prospects for our product
candidates would be harmed, our costs could increase and our
ability to generate revenue could be delayed.
If any of our relationships with trial sites, or any CRO that we
may use in the future, terminates, we may not be able to enter into
arrangements with alternative trial sites or CROs or do so on
commercially reasonable terms. Switching or adding third parties to
conduct our clinical trials involves substantial cost and requires
extensive management time and focus. In addition, there is often a
natural transition period when a new third party commences work. As
a result, delays may occur, which can materially impact our ability
to meet our desired clinical development timelines. For example, in
October 2021, one of our CROs that provides data management,
biostatistics and pharmacovigilance data services for the
DesCAARTesTM
trial, provided us a 60-day notice of termination for convenience,
and as a result in December 2021 we transitioned to a new provider
of data management, biostatistics and pharmacovigilance data
services. Though we carefully manage our relationships with our
CROs, there can be no assurance that we will not encounter similar
challenges or delays in the future or that these delays or
challenges will not have a material adverse impact on our business,
financial condition and prospects.
We also expect to rely on other third parties to store and
distribute drug supplies for our clinical trials. Any performance
failure on the part of our distributors could delay clinical
development or marketing approval of any product candidates we may
develop or commercialization of our medicines, producing additional
losses and depriving us of potential product revenue.
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We intend to rely on third parties to manufacture our clinical
product supplies, and we may have to rely on third parties to
produce and process our product candidates, if licensed.
Although we may eventually secure our own clinical manufacturing
facility for any late phase clinical development that we undertake,
we currently rely on third parties, including Penn, to supply raw
materials and other important components and WuXi for certain key
technologies that are used to manufacture our product candidates
and intend in the future to rely on CMOs. In the case of any
manufacturing performed for us by third parties, the services
performed for us risk being delayed because of the competing
priorities that such parties have for utilization of their
manufacturing resources and any capacity issues that thereby
arise.
We do not yet have sufficient information to reliably estimate the
cost of the manufacturing and processing of our product candidates
in clinical quantity or commercial quantity, and the actual cost to
manufacture and process our product candidates could ultimately
materially and adversely affect the commercial viability of our
product candidates. As a result, we may never be able to develop a
commercially viable product.
In addition, our anticipated reliance on a limited number of
third-party manufacturers exposes us to the following
risks:
•
We may be unable to identify manufacturers on acceptable terms or
at all because the number of potential manufacturers is limited and
the FDA may have questions regarding any replacement contractor.
This may require new testing and regulatory interactions. In
addition, a new manufacturer would have to be educated in, or
develop substantially equivalent processes for, production of our
products after receipt of FDA questions, if any.
•
Our third-party manufacturers might be unable to timely formulate
and manufacture our product or produce the quantity and quality
required to meet our clinical and commercial needs, if
any.
•
Contract manufacturers may not be able to execute our manufacturing
procedures appropriately.
•
Any contract manufacturers that we engage may not perform as agreed
or may not remain in the contract manufacturing business for the
time required to supply our clinical trials or to successfully
produce, store and distribute our product candidates.
•
Manufacturers are subject to ongoing periodic unannounced
inspection by the FDA and corresponding state agencies to ensure
strict compliance with cGMP and other government regulations. We do
not have control over third-party manufacturers’ compliance with
these regulations and standards.
•
We may not own, or may have to share, the intellectual property
rights to any improvements made by our third-party manufacturers in
the manufacturing process for our product candidates.
•
Our third-party manufacturers could breach or terminate their
agreement with us.
Furthermore, all of our contract manufacturers are engaged with
other companies to supply and/or manufacture materials or products
for such companies, which exposes our manufacturers to regulatory
risks related to the production of such materials and products. As
a result, failure to meet the regulatory requirements for the
production of those materials and products may affect the
regulatory clearance of our contract manufacturers’ facilities
generally. If the FDA does not approve these facilities for the
manufacture of our product candidates or if any agency withdraws
its approval in the future, we may need to find alternative
manufacturing facilities, which would negatively impact our ability
to develop, obtain regulatory approval for or market our product
candidates, if licensed.
Our contract manufacturers would also be subject to the same risks
we face in developing our own manufacturing capabilities, as
described above. Each of these risks could delay our clinical
trials, the approval, if any of our product candidates by the FDA
or the commercialization of our product candidates or result in
higher costs or deprive us of potential product revenue. In
addition, we will rely on third parties to perform release tests on
our product candidates prior to delivery to patients. If these
tests are not appropriately done and test data are not reliable,
patients could be put at risk of serious harm.
For more information, see “Risk Factors—Risks Related to
Manufacturing and Supply”.
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We may form or seek strategic alliances or enter into additional
licensing arrangements in the future, and we may not realize the
benefits of such alliances or licensing arrangements.
We may form or seek strategic alliances, create joint ventures or
collaborations or enter into additional licensing arrangements with
third parties that we believe will complement or augment our
development and commercialization efforts with respect to our
product candidates and any future product candidates that we may
develop. Any of these relationships may require us to incur
non-recurring and other charges, increase our near and long-term
expenditures, issue securities that dilute our existing
stockholders or disrupt our management and business. In addition,
we face significant competition in seeking appropriate strategic
partners and the negotiation process is time-consuming and complex.
Moreover, we may not be successful in our efforts to establish a
strategic partnership or other alternative arrangements for our
product candidates because they may be deemed to be at too early of
a stage of development for collaborative effort and third parties
may not view our product candidates as having the requisite
potential to demonstrate safety, potency and purity. Any delays in
entering into new strategic partnership agreements related to our
product candidates could delay the development and
commercialization of our product candidates in certain geographies
for certain indications, which would harm our business prospects,
financial condition and results of operations.
If we license products or businesses, we may not be able to realize
the benefit of such transactions if we are unable to successfully
integrate them with our existing operations and company culture.
For instance, our License Agreement with Penn and CHOP requires
significant research and development commitments that may not
result in the development and commercialization of our product
candidates, including DSG3-CAART and our other product candidates.
We cannot be certain that, following a strategic transaction or
license, we will achieve the results, revenue or specific net
income that justifies such transaction.
We may not realize the benefits of acquired assets or other
strategic transactions, including any transactions whereby we
acquire or license manufacturing and other advanced
technologies.
In August 2018, we entered into a License Agreement with Penn and
CHOP which was amended and restated in July 2019, and further
amended in May 2020 and October 2021, or the License Agreement,
pursuant to which we were granted licenses to certain patent rights
for the research and development of products, as well as an
exclusive license under those same patent rights to make, use, sell
and import such products, in the autoimmune disease and alloimmune
response subfields, in each case, for the treatment of humans. In
January 2021 and as amended in August 2022, we entered into an
agreement with WuXi to serve as our cell processing manufacturing
partner for our MusCAARTesTM
trial, and have since completed enabling engineering runs. In
October 2022, we entered into the IASO Agreement, pursuant to which
we were granted worldwide license under certain intellectual
property to develop, manufacture, commercialize and otherwise
exploit T cell products directed to CD19 for the purpose of
diagnosis, prevention or treatment of an autoimmune or alloimmune
indication in humans.
We actively evaluate various strategic transactions on an ongoing
basis. We may acquire other businesses, products or technologies as
well as pursue joint ventures or investments in complementary
businesses. The success of our strategic transactions, including
the License Agreement, and any future strategic transactions
depends on the risks and uncertainties involved
including:
•
unanticipated liabilities related to acquired companies or joint
ventures;
•
difficulties integrating acquired personnel, technologies and
operations into our existing business;
•
retention of key employees;
•
diversion of management time and focus from operating our business
to management of strategic alliances or joint ventures or
acquisition integration challenges;
•
increases in our expenses and reductions in our cash available for
operations and other uses;
•
disruption in our relationships with collaborators or suppliers as
a result of such a transaction; and
•
possible write-offs or impairment charges relating to acquired
businesses or joint ventures.
If any of these risks or uncertainties occur, we may not realize
the anticipated benefit of any acquisition or strategic
transaction. Additionally, foreign acquisitions and joint ventures
are subject to additional risks, including those related to
integration of operations across different cultures and languages,
currency risks, potentially adverse tax consequences of overseas
operations and the particular economic, political, legal and
regulatory risks associated with specific countries. For example,
IASO is based in China and we may not receive the same protections
under Chinese law, including with respect to applicable bankruptcy,
insolvency, liquidation, arrangement, moratorium or similar laws
relating to or affecting our rights.
Future acquisitions or dispositions could result in potentially
dilutive issuances of our equity securities, the incurrence of
debt, contingent liabilities or amortization expenses or write-offs
of goodwill, any of which could harm our financial
condition.
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Risks Related to Manufacturing and Supply
We currently rely upon Penn and commercial CMOs for our
manufacturing needs, and we intend to continue to rely on other
third parties for our future manufacturing needs prior to
establishing our own manufacturing facility.
We are currently reliant upon Penn for our cell product
manufacturing for DSG3-CAART and WuXi for MuSK-CAART. To support
the scale up of manufacture and to support commercially compliant
production, we will need to maintain (in the case of WuXi) or
develop new relationships with commercially compliant and scalable
suppliers, increase the scale of production, and demonstrate
comparability of the material produced at these facilities to the
material that was previously produced, if a facility change was
made. Transferring manufacturing processes and know-how is complex
and involves review and incorporation of both documented and
undocumented processes that may have evolved over time.
In addition, transferring production to different facilities may
require utilization of new or different processes to meet the
specific requirements of a given facility. We would expect
additional comparability work will also need to be conducted to
support the transfer of certain manufacturing processes and process
improvements. We cannot be certain that all relevant know-how and
data has been adequately incorporated into the manufacturing
process until the completion of studies (and the related
evaluations) intended to demonstrate the comparability of material
previously produced with that generated by any CMO that we engage
for our manufacturing needs. If we are not able to successfully
transfer and produce comparable product candidates, our ability to
further develop and manufacture our product candidates may be
negatively impacted.
We may plan to eventually establish our own manufacturing facility.
While the addition of our own manufacturing facility would provide
us with future flexibility within our manufacturing network, we
still may need to identify additional CMOs for continued production
of supply for some or all of our product candidates. Given the
nature of our manufacturing processes, the number of CMOs who
possess the requisite skill and capability to manufacture our CAR T
and CAAR T cell immunotherapy product candidates is
limited.
Further, we may not be able to achieve clinical manufacturing and
cell processing through our CMOs or on our own on a timely basis.
While our current manufacturing process is similar to the validated
process developed at Penn for CD19 CAR T, or CART19, which was
later commercialized, we have limited experience as an organization
in managing the CAR T or CAAR T engineering process at commercial
scale. Finally, because clinical manufacturing and cell processing
is highly complex and patient donor material is inherently
variable, we cannot be sure that the manufacturing processes
employed by Penn, any CMO that we engage in the future, or by us at
a manufacturing facility that we establish, will consistently
result in T cells that will be safe and effective. Success in
manufacturing in smaller early phase clinical trials may not
predict the frequency of success at larger late phase clinical
trials, or success at the commercial phase production.
Our product candidates are uniquely manufactured. If we, Penn or
any of our third-party manufacturers encounter difficulties in
manufacturing our product candidates, our ability to provide supply
of our product candidates for clinical trials or, if licensed, for
commercial sale, could be delayed or stopped, or we may be unable
to maintain a commercially viable cost structure.
The manufacturing process used to produce our product candidates is
complex and novel, and it has not yet been validated for commercial
production. Among the complex processes used in the manufacture of
our product candidates is the manufacture of the lentiviral
delivery vector used to deliver the applicable CAR or CAAR gene
into the T cells. For example, the manufacture of our product
candidates includes harvesting white blood cells from each patient,
stimulating certain T cells from the white blood cells and thereby
causing them to activate and proliferate, combining patient T cells
with our lentiviral delivery vector through a process known as
transduction, expanding the transduced T cells to obtain the
desired dose, and ultimately infusing the modified T cells back
into the patient’s body. Notably, the manufacture of both
DSG3/1-CAART may be more challenging or require new gene delivery
technology due to the need to deliver large transgenes for these
programs, and vector delivery systems have size limitations.
Because of these complexities, the cost to manufacture our product
candidates is higher than traditional small molecule chemical
compounds and monoclonal antibodies, and the manufacturing process
is less reliable and is more difficult to reproduce. Furthermore,
our manufacturing process development and scale-up is at an early
stage. The actual cost to manufacture and process our product
candidates could be greater than we expect and could materially and
adversely affect the commercial viability of our product
candidates.
Our manufacturing process may be susceptible to technical and
logistics delays or failures due to the fact that each patient is
an independent manufacturing lot, and also due to unique supply
chain requirements. These include the collection of white blood
cells from patients’ blood, variability in the quality of white
blood cells collected from patients’ blood, cryopreservation of the
white blood cells collected, packaging and shipment of frozen white
blood cells to the manufacturing site in order to enable multi-site
studies, procurement of lentiviral vectors that meet potency and
purity requirements and shipment to the product candidate
manufacturing site, shipment of the final product to clinical
centers, manufacturing issues associated with interruptions in the
manufacturing process, scheduling constraints for cell
manufacturing slots, process contamination, equipment or reagent
failure or supply shortage(s)/interruption(s),
73
improper installation or operation of equipment, vendor or operator
error, and inconsistency in cell growth. Even minor deviations from
normal manufacturing processes could result in reduced production
yields, lot failures, product defects, product recalls, product
liability claims and other supply disruptions. If microbial, viral,
or other contaminations are discovered in our product candidates or
in the manufacturing facilities in which our product candidates are
made, production at such manufacturing facilities may be
interrupted for an extended period of time to investigate and
remedy the contamination. Further, as product candidates are
developed through preclinical studies to late-stage clinical trials
toward approval and commercialization, it is common that various
aspects of the development program, such as manufacturing methods,
are altered along the way in an effort to optimize processes and
results. Such changes may result in the need to enroll additional
patients or to conduct additional clinical studies to evaluate the
impact of changes on product safety and efficacy. Penn has informed
us that it will be unable provide clinical supply for any
late-phase clinical trials of our product candidates that we may
conduct. Therefore, we will need to enter into new agreements with
CMOs to produce clinical supply of our product candidates for
late-phase clinical trials. We cannot guarantee that we will be
able to enter into such agreements on commercially acceptable
terms, if at all. We will need to transfer the technology to
manufacture our product candidates to these CMOs, and these CMOs
may decide or be required to adopt different manufacturing
protocols or processes, which may require us to amend any ongoing
or proposed clinical trial protocols or perform additional
preclinical studies to demonstrate the comparability of any such
new manufacturing protocols or processes. We cannot provide any
assurance that Penn will provide adequate support to efficiently
and effectively transfer the technology or that disputes will not
arise between us and Penn regarding the necessary scope of
technology transfer, that the technology transfer will be
successful, or that any CMO will be successful in producing our
product candidates in sufficient quantities or of acceptable
quality, if at all. Such changes carry the risk that they will not
achieve these intended objectives, and any of these changes could
cause our product candidates to perform differently and affect the
results of ongoing and planned clinical trials or other future
clinical trials.
Although we continue to optimize our manufacturing process for our
product candidates, doing so is a difficult and uncertain task, and
there are risks associated with scaling to the level required for
advanced clinical trials or commercialization, including, among
others, cost overruns, potential problems with process scale-up,
process reproducibility, stability issues, lot consistency and
timely availability of reagents and/or raw materials. We ultimately
may not be successful in transferring our production system from
our contract manufacturer to any manufacturing facilities we may
establish ourselves, or our contract manufacturer may not have the
necessary capabilities to complete the implementation and
development process. If we are unable to adequately validate or
scale-up the manufacturing process for our product candidates with
our current manufacturer, we will need to transfer to another
manufacturer and complete the manufacturing validation process,
which can be lengthy. If we are able to adequately validate and
scale-up the manufacturing process for our product candidates with
a contract manufacturer, we will still need to negotiate with such
contract manufacturer an agreement for commercial supply and it is
not certain we will be able to come to agreement on terms
acceptable to us. As a result, we may ultimately be unable to
reduce the cost of goods for our product candidates to levels that
will allow for an attractive return on investment if and when those
product candidates are commercialized.
In addition, many of the components which are required to support
our cell manufacturing process, such as equipment, media, growth
factors and disposables, are highly specialized and it is possible
that the supply chain for these materials may be interrupted. If we
are unable to promptly remedy such interruption, then there may be
delays to our clinical development efforts.
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The manufacturing process for any products that we may develop is
subject to the FDA approval process, and we will need to contract
with manufacturers who can meet all applicable FDA requirements on
an ongoing basis.
The manufacturing process for any products that we may develop is
subject to the FDA approval process, and we will need to contract
with manufacturers who can meet all applicable FDA requirements on
an ongoing basis. If we or our CMOs are unable to reliably produce
products to specifications acceptable to the FDA, we may not obtain
or maintain the approvals we need to commercialize such products.
Even if we obtain regulatory approval for any of our product
candidates, there is no assurance that either we or our CMOs will
be able to manufacture the approved product in accordance with
requirements from the FDA, to produce it in sufficient quantities
to meet the requirements for the potential launch of the product,
or to meet potential future demand. Any of these challenges could
delay completion of clinical trials, require bridging clinical
trials or the repetition of one or more clinical trials, increase
clinical trial costs, result in sanctions being imposed on us,
including clinical holds, fines, injunctions, civil penalties,
delays, suspension or withdrawal of approvals, license revocation,
suspension of production or recalls of the product candidates or
marketed biologics, operating restriction and criminal
prosecutions, delay approval of our product candidates, impair
commercialization efforts, increase our cost of goods, and have an
adverse effect on our business, financial condition, results of
operations and growth prospects. Our future success depends on our
ability to manufacture our products, if licensed, on a timely basis
with acceptable manufacturing costs, while at the same time
maintaining good quality control and complying with applicable
regulatory requirements, and an inability to do so could have a
material adverse effect on our business, financial condition, and
results of operations. In addition, we could incur higher
manufacturing costs if manufacturing processes or standards change,
and we could need to replace, modify, design, or build and install
equipment, all of which would require additional capital
expenditures. Specifically, because our product candidates may have
a higher cost of goods than conventional therapies, the risk that
coverage and reimbursement rates may be inadequate for us to
achieve profitability may be greater.
The manufacture of viral vectors is complex and variable, and there
are a limited number of manufacturers able to supply us with viral
vectors.
Our DSG3-CAART and MuSK-CAART product candidates utilize a
lentiviral delivery vector and some or all of our other product
candidates may require a lentiviral delivery vector, a key drug
substance that delivers the CAR or CAAR to the target T cells. We
do not have the capability to manufacture lentiviral vector and
plan to obtain the vector we require from third parties. The
manufacturing process for lentiviral vector is variable and still
evolving. It is not uncommon for manufacturing runs to fail,
whether due to contamination, supplier error, or equipment failure,
or to be delayed. To the extent our product candidates use a
lentiviral delivery vector, a lack of vector supply will cause us
to be unable to manufacture our CAR T or CAAR T cells as well as a
delay in patient enrollment, which may have a negative impact on
our ability to successfully develop our product
candidates.
Further, there are a limited number of manufacturers capable of
producing lentiviral vectors. It can be challenging to secure a
relationship with any of these manufacturers, and the manufacturing
and release process can take a significant amount of time. We have
secured a supply of lentiviral vector from CHOP sufficient for a
portion of the patients we plan to enroll in our
DesCAARTesTM
trial. We have also reserved additional vector manufacturing
capacity at Penn and CHOP and in December 2021, we secured a
license and supply agreement with Oxford Biomedica to establish a
process and supply lentiviral vector for the clinical and
commercial development of our DSG3-CAART candidate. There is no
assurance that we will be able to secure adequate and timely supply
of lentiviral vector. Moreover, we cannot be certain that our CAR T
or CAAR T cell product candidates produced with lentiviral vector
from different manufacturers will be comparable or that results of
clinical trials will be consistent if conducted with lentiviral
vector from different manufacturers.
Vector production also requires the production of high-quality DNA
plasmids, for which there is also a limited number of suppliers.
Although we have established relationships with multiple suppliers
for lentiviral vector and plasmids, we do not yet have our own
clinical-scale manufacturing facility established, and are
therefore highly dependent on the ability of these suppliers to
manufacture necessary materials and to deliver these materials to
us on a timely and reliable basis.
If we are to operate our own manufacturing facility, significant
resources will be required and we may fail to successfully operate
our facility, which could adversely affect our clinical trials and
the commercial viability of our product candidates.
If we establish our own manufacturing facility, our operations will
be subject to review and oversight by the FDA and the FDA could
object to our use of our manufacturing facility. We must first
receive approval from the FDA prior to licensure to manufacture our
product candidates, which we may never obtain. Even if licensed, we
would be subject to ongoing periodic unannounced inspection by the
FDA and corresponding state agencies to ensure strict compliance
with cGMPs and other government regulations. Our license to
manufacture product candidates will be subject to continued
regulatory review.
Our cost of goods development is at an early stage. The actual cost
to manufacture and process our product candidates could be greater
than we expect and could materially and adversely affect the
commercial viability of our product candidates.
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The manufacture of biopharmaceutical products is complex and
requires significant expertise, and can be impacted by resource
constraints, labor disputes and workforce limitations.
The manufacture of biopharmaceutical products is complex and
requires significant expertise, including the development of
advanced manufacturing techniques and process controls.
Manufacturers of cell therapy products often encounter difficulties
in production, particularly in scaling out and validating initial
production and ensuring the absence of contamination. These
problems include difficulties with production costs and yields,
quality control, including stability of the product, quality
assurance testing, operator error, shortages of qualified
personnel, as well as compliance with strictly enforced federal,
state and foreign regulations. Furthermore, if contaminants are
discovered in our supply of product candidates or in the
manufacturing facilities upon which we currently or will rely, such
manufacturing facilities may need to be closed for an extended
period of time to investigate and remedy the contamination. We
cannot assure you that any stability or other issues relating to
the manufacture of our product candidates, whether by Penn, by a
third-party CMO, or at any manufacturing facility that we may
establish, will not occur in the future.
Penn, third-party CMOs that we engage, or we may fail to manage the
logistics of storing and shipping our product candidates. Storage
failures and shipment delays and problems caused by us, our vendors
or other factors not in our control, such as weather, could result
in loss of usable product or prevent or delay the delivery of
product candidates to patients.
Penn, third-party CMOs that we engage, or we may also experience
manufacturing difficulties due to resource constraints, labor
disputes or workforce limitations arising from the expanding need
for manufacturing in the cell therapy field and the limited number
of training programs for technical staff. If we were to encounter
any of these difficulties, our ability to provide our product
candidates to patients would be jeopardized.
We are dependent upon the availability of specialty raw materials
and the production capabilities of small manufacturers to source
the components of our product candidates.
Our product candidates require many specialty raw materials, some
of which are manufactured by small companies with limited resources
and experience to support a commercial product, and the suppliers
may not be able to deliver raw materials to our specifications. In
addition, those suppliers generally do not have the capacity to
support commercial products manufactured under cGMP by
biopharmaceutical firms. The suppliers may be ill-equipped to
support our needs, especially in non-routine circumstances like an
FDA inspection or medical crisis, such as widespread contamination.
We also do not have contracts with many of these suppliers, and we
may not be able to contract with them on acceptable terms or at
all. Accordingly, we may experience delays in receiving key raw
materials to support clinical or commercial
manufacturing.
In addition, some raw materials are currently available from a
single supplier, or a small number of suppliers. We cannot be sure
that these suppliers will remain in business or that they will not
be purchased by one of our competitors or another company that is
not interested in continuing to produce these materials for our
intended purpose. In addition, the lead time needed to establish a
relationship with a new supplier can be lengthy, and we may
experience delays in meeting demand in the event we must switch to
a new supplier. The time and effort to qualify a new supplier could
result in additional costs, diversion of resources or reduced
manufacturing yields, any of which would negatively impact our
operating results. Further, we may be unable to enter into
agreements with a new supplier on commercially reasonable terms,
which could have a material adverse impact on our business. We are
also unable to predict how changing global economic conditions or
global health concerns such as the ongoing COVID-19 pandemic will
affect our third-party suppliers and manufacturers. Any negative
impact of such matters on our third-party suppliers and
manufacturers may also have an adverse impact on our results of
operations or financial condition.
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We may encounter difficulties in production, particularly with
respect to process development or scaling up of our manufacturing
capabilities. If we encounter such difficulties, our ability to
provide supply of our CAR T or CAAR T cells for clinical trials or
for commercial purposes could be delayed or stopped.
Establishing clinical and commercial manufacturing and supply is a
difficult and uncertain task, and there are risks associated with
scaling to the level required for advanced clinical trials or
commercialization, including, among others, increased costs,
potential problems with process scale-out, process reproducibility,
stability issues, lot consistency, and timely availability of
reagents or raw materials. For example, we may find it difficult to
establish a manufacturing process that is consistent. If this
occurs, we may need to complete more than one manufacturing run for
each treated patient, which would impact the availability of
adequate coverage and reimbursement from third-party payors.
Competitors that have developed CAR T cell therapies have had
difficulty reliably producing engineered T cell therapies in the
commercial setting. If we experience similar challenges
manufacturing product candidates to approved specifications, this
may limit our product candidates’ utilization and our ability to
receive payment for these product candidates once licensed.
Alternatively, these challenges may require changes to our
manufacturing processes, which could require us to perform
additional clinical studies, incurring significant expense. We may
ultimately be unable to reduce the expenses associated with our
product candidates to levels that will allow us to achieve a
profitable return on investment.
If we or our third-party suppliers use hazardous, non-hazardous,
biological or other materials in a manner that causes injury or
violates applicable law, we may be liable for damages.
Our research and development activities involve the controlled use
of potentially hazardous substances, including chemical and
biological materials. We and our suppliers are subject to federal,
state and local laws and regulations in the United States governing
the use, manufacture, storage, handling and disposal of medical and
hazardous materials. Although we believe that we and our suppliers’
procedures for using, handling, storing and disposing of these
materials comply with legally prescribed standards, we and our
suppliers cannot completely eliminate the risk of contamination or
injury resulting from medical or hazardous materials. As a result
of any such contamination or injury, we may incur liability or
local, city, state or federal authorities may curtail the use of
these materials and interrupt our business operations. In the event
of an accident, we could be held liable for damages or penalized
with fines, and the liability could exceed our resources. We do not
have any insurance for liabilities arising from medical or
hazardous materials. Compliance with applicable environmental laws
and regulations is expensive, and current or future environmental
regulations may impair our research, development and production
efforts, which could harm our business, prospects, financial
condition or results of operations.
Changes in product candidate manufacturing or formulation may
result in additional costs or delay, which could adversely affect
our business, results of operations and financial
condition.
As product candidates are developed through preclinical studies to
later-stage clinical trials towards approval and commercialization,
it is common that various aspects of the development program, such
as manufacturing methods or formulation, are altered along the way
in an effort to optimize processes and results. Any of these
changes could cause our product candidates to perform differently
and affect the results of ongoing and planned clinical trials or
other future clinical trials conducted with the altered materials
or with materials made with the altered methods. Such changes may
also require additional testing, or notification to, or approval by
the FDA or other regulatory authorities. This could delay
completion of clinical trials, require the conduct of bridging
clinical trials or studies, require the repetition of one or more
clinical trials, increase clinical trial costs, delay approval of
our product candidates and/or jeopardize our ability to commence
product sales and generate revenue.
Risks Related to Government Regulation
The FDA regulatory approval process is lengthy and time-consuming,
and we may experience significant delays in the clinical
development and regulatory approval of our product
candidates.
The research, testing, manufacturing, labeling, approval, selling,
import, export, marketing and distribution of drug products,
including biologics, are subject to extensive regulation by the FDA
and other regulatory authorities in the United States. We are not
permitted to market any biological drug product in the United
States until we receive approval of a Biologics License
Application, or BLA, from the FDA. We have not previously submitted
a BLA to the FDA, or similar licensure filings to comparable
foreign authorities. A BLA must include extensive preclinical and
clinical data and supporting information to establish the product
candidate’s safety, potency and purity for each desired indication.
The BLA must also include significant information regarding the
chemistry, manufacturing and controls for the product, including
with respect to chain of identity and chain of custody of the
product.
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We expect the novel nature of our product candidates to create
further challenges in obtaining regulatory approval. For example,
to our knowledge, the FDA has not previously reviewed regulatory
applications for the commercial development of CAR T cells for
treatment of autoimmune disease or CAAR T cells for treatment of
pemphigus, and there is no cell therapy currently approved by the
FDA for the treatment of mPV or MuSK myasthenia gravis. Because of
this, we have little guidance as to which endpoints will be
accepted, how many clinical trials we may expect to conduct, and
whether open-label clinical trials will be deemed acceptable, among
other things. We may also request regulatory approval of future CAR
T or CAAR T cell-based product candidates by target, regardless of
disease type or origin, which the FDA may have difficulty accepting
if our clinical trials only involved diseases of certain origins.
The FDA may also require a panel of experts, referred to as an
Advisory Committee, to deliberate on the adequacy of the safety,
potency and purity data to support licensure. The opinion of the
Advisory Committee, although not binding, may have a significant
impact on our ability to obtain licensure of the product candidates
based on the completed clinical trials, as the FDA often adheres to
the Advisory Committee’s recommendations. Further, given the
rapidly evolving landscape of cell therapy, we could encounter a
significant change in the regulatory environment for our product
candidates once we have already begun one or more lengthy and
expensive clinical trials for our product candidates. Accordingly,
the regulatory approval pathway for our product candidates may be
uncertain, complex, expensive and lengthy, and approval may not be
obtained.
We may also experience delays in completing ongoing and planned
clinical trials for a variety of reasons, including delays related
to:
•
obtaining regulatory authorization to begin a trial, if
applicable;
•
the availability of financial resources to commence and complete
the planned trials;
•
reaching agreement on acceptable terms with prospective CROs and
clinical trial sites, the terms of which can be subject to
extensive negotiation and may vary significantly among different
CROs and trial sites;
•
obtaining approval at each clinical trial site by an independent
IRB;
•
recruiting suitable patients to participate in a
trial;
•
having patients complete a trial, including having patients
enrolled in clinical trials dropping out of the trial before the
product candidate is manufactured and returned to the site, or
return for post-treatment follow-up;
•
clinical trial sites deviating from trial protocol or dropping out
of a trial;
•
addressing any patient safety concerns that arise during a
trial;
•
adding new clinical trial sites; or
•
manufacturing sufficient quantities of qualified materials under
cGMPs and applying them on a patient by patient basis for use in
clinical trials.
We could also encounter delays if physicians encounter unresolved
ethical issues associated with enrolling patients in clinical
trials of our product candidates in lieu of prescribing existing
treatments that have established safety and efficacy profiles. If
we experience delays in the completion of, any future clinical
trial of our product candidates, the commercial prospects for our
product candidates will be harmed, and our ability to generate
product revenue will be delayed. In addition, any delays in
completing our clinical trials will increase our costs, slow down
our product development and approval process and jeopardize our
ability to commence product sales and generate revenue. Many of the
factors that cause, or lead to, a delay in the commencement or
completion of clinical trials may ultimately lead to the denial of
regulatory approval of our product candidates.
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We expect the product candidates we develop will be regulated as
biological products, or biologics, and therefore they may be
subject to competition.
The Biologics Price Competition and Innovation Act of 2009, or
BPCIA, was enacted as part of the Patient Protection and Affordable
Care Act, as amended by the Health Care and Education
Reconciliation Act, or collectively the ACA, to establish an
abbreviated pathway for the approval of biosimilar and
interchangeable biological products. The regulatory pathway
establishes legal authority for the FDA to review and approve
biosimilar biologics, including the possible designation of a
biosimilar as “interchangeable” based on its similarity to a
licensed biologic. Under the BPCIA, an application for a biosimilar
product cannot be licensed by the FDA until 12 years after the
reference product was licensed under a BLA. The law is complex and
is still being interpreted and implemented by the FDA.
We believe that any of the product candidates we develop that is
licensed in the United States as a biological product under a BLA
should qualify for the 12-year period of exclusivity. However,
there is a risk that this exclusivity could be shortened due to
congressional action or otherwise, or that the FDA will not
consider the subject product candidates to be reference products
for competing products, potentially creating the opportunity for
generic competition sooner than anticipated. Moreover, the extent
to which a biosimilar, once licensed, will be substituted for any
one of the reference products in a way that is similar to
traditional generic substitution for non-biological products is not
yet clear, and will depend on a number of marketplace and
regulatory factors that are still developing.
The regulatory landscape that will govern our product candidates is
uncertain; regulations relating to more established cell therapies
and other therapies for B cell-mediated autoimmune diseases are
still developing, and changes in regulatory requ