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Table of Contents



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q


(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                      to                     

 

Commission File Number: 001-37471

 


PIERIS PHARMACEUTICALS, INC.

 

(Exact name of registrant as specified in its charter)


 

Nevada

30-0784346

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

  

225 Franklin Street, 26th Floor

 

Boston, MA

 

United States

02110

(Address of principal executive offices)

(Zip Code)

 

857-246-8998

 

(Registrants telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

 

Trading Symbol

 

Name of Each Exchange on which Registered

Common Stock, $0.001 par value per share

 

PIRS

 

The Nasdaq Capital Market

 

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.

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

 

Smaller reporting company

 

  

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes    No ☒

 

As of May 9, 2024, the registrant had 1,320,240 shares of common stock outstanding.



 

 

 

TABLE OF CONTENTS

 

 

Page

PART I: FINANCIAL INFORMATION

 

Item 1. Financial Statements (unaudited)

1

Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023

1

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months ended March 31, 2024 and 2023

2

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months ended March 31, 2024 and 2023

3

Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 2024 and 2023

4

Notes to the Condensed Consolidated Financial Statements

5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

Item 3. Quantitative and Qualitative Disclosures about Market Risk

21

Item 4. Controls and Procedures

22

PART II: OTHER INFORMATION

 

Item 1. Legal Proceedings

23

Item 1A. Risk Factors

23

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities

25

Item 3. Defaults Upon Senior Securities

25

Item 4. Mine Safety Disclosures

25

Item 5. Other Information

25

Item 6. Exhibits

25

SIGNATURES

27

 

 

 

 

 

Special Note Regarding Forward-Looking Statements

 

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that involve risks and uncertainties, principally in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding future events, potential strategic transactions or alternatives, our ability to maximize capture of future milestones payments, our workforce reduction and related restructuring activities, our future financial and operating performance, anticipated timing and amounts of milestone and other payments under collaboration agreements, business strategy and plans, objectives of management for future operations, timing and outcome of legal and other proceedings and our ability to finance our operations are forward-looking statements. We have attempted to identify forward-looking statements by using terms such as including “anticipates,” “approach,” “believes,” “can,” “contemplate,” “continue,” “look forward,” “ongoing,” “could,” “estimates,” “expects,” “intends,” “may,” “appears,” “suggests,” “future,” “likely,” “goal,” “plans,” “potential,” “possibly,” “projects,” “predicts,” “seek,” “should,” “target,” “would” or “will” and other similar words or expressions or the negative of these terms or other comparable terminology. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy.

 

These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks outlined under “Risk Factors” or elsewhere in our most recent Annual Report on Form 10-K or Quarterly Reports on Form 10-Q, which may cause our or our industry’s actual results, levels of activity, performance or achievements expressed or implied by these forward-looking statements to differ materially.
 

Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for us to predict all risk factors, nor can we address the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual results to differ materially from those contained in any forward-looking statements. Actual results could differ materially from our forward-looking statements due to a number of factors, including, without limitation, risks related to: our ability to realize the anticipated benefits of our strategy; our ability to achieve anticipated cost savings and capital preservation as a result of our workforce reduction and related restructuring, including implementation of any potential changes to our leadership structure; if we identify and decide to pursue a strategic opportunity, our ability to successfully consummate any strategic opportunity in the future, on attractive terms or at all; our ability to realize the anticipated benefits of any strategic opportunity that we may decide to pursue; the early stage of our partnered drug candidates presently under development; our partners' continued progress, if any, in the areas of co-stimulatory bispecifics and the results of their research and development activities including uncertainties relating to the ongoing or planned clinical testing of our partnered product candidates; our potential need for substantial additional funds in order to continue our operations and the uncertainty of whether we will be able to obtain the funding we need; our ability to maintain our compliance with the continued listing requirements of The Nasdaq Capital Market LLC, or Nasdaq; the possibility that Nasdaq treats us as a public shell, which may lead to delisting of our common stock on Nasdaq; our future financial performance; our ability to protect our intellectual property rights that are valuable to our business, including patent and other intellectual property rights; the success of our collaborations with third parties; our partners’ ability to meet milestones; the receipt of royalty and milestone payments provided for in our collaboration agreements; our partners' ability to successfully market and sell our drug candidates in the future as needed; the size and growth of the potential markets for any of our product candidates for which we or our partners may obtain regulatory approval, and the rate and degree of market acceptance of such product candidates; competition in our industry; regulatory developments in the United States and foreign countries, including with respect to the U.S. Food and Drug Administration, or FDA; Les Laboratoires Servier and Institut de Recherches Internationales Servier's, or Servier's, ability to advance the Phase 1 study for S095012 (also known as PRS-344); Pfizer Inc.'s, or Pfizer’s, ability to continue to advance SGN-BB228 (also known as PRS-346) and the other drug candidates licensed to them; BP Asset XII, Inc.'s, or Boston Pharmaceuticals', ability to continue to advance BOS-342 (also known as PRS-342); the expected impact of new accounting standards; and the delays or disruptions due to geopolitical issues, including the conflicts in Ukraine and the Middle East on our company.

 

You should not place undue reliance on any forward-looking statement(s), each of which applies only as of the date of this Quarterly Report on Form 10-Q. Before you invest in our securities, you should be aware that the occurrence of the events described in Part II, Item 1A (Risk Factors) of this Quarterly Report on Form 10-Q or Part I, Item 1A (Risk Factors) of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the Securities and Exchange Commission, or SEC, on March 29, 2024, could negatively affect our business, operating results, financial condition and stock price. All forward-looking statements included in this Quarterly Report on Form 10-Q are based on information available to us on the date hereof, and except as required by law, we undertake no obligation to update or revise publicly any of the forward-looking statements after the date of this Quarterly Report on Form 10-Q to conform our statements to actual results or changed expectations.

 

We have registered trademarks for Pieris®, Anticalin® and Duocalin®. All other trademarks, trade names and service marks included in this Quarterly Report on Form 10-Q are the property of their respective owners. Use or display by us of other parties’ trademarks, trade dress or products is not intended to and does not imply a relationship with, or endorsements or sponsorship of, us by the trademark, trade dress or product owner.

 

As used in this Quarterly Report on Form 10-Q, unless the context indicates or otherwise requires, “our Company”, “the Company”, “Pieris”, “we”, “us” and “our” refer to Pieris Pharmaceuticals, Inc., a Nevada corporation, and its consolidated subsidiary, Pieris Pharmaceuticals GmbH (formerly known as Pieris AG), a company organized under the laws of Germany, Pieris Australia Pty Ltd., a company organized under the laws of Australia that is a consolidated subsidiary of Pieris Pharmaceuticals GmbH and Pieris Pharmaceuticals Securities Corporation, a Massachusetts securities corporation, a consolidated subsidiary of Pieris Pharmaceuticals, Inc. Effective as of August 26, 2015 and with notification from the Amtsgericht München as of September 29, 2015, Pieris AG was transformed to Pieris Pharmaceuticals GmbH as a result of a change in the legal entity.

 

EXPLANATORY NOTE

 

On April 18, 2024, we filed a Certificate of Change with the Nevada Secretary of State effecting a reverse stock split of our authorized, issued and outstanding shares common stock at a ratio of 1-for-80, or the Reverse Stock Split, which became effective on April 22, 2024. Our common stock began trading on The Nasdaq Capital Market on a reverse-split adjusted basis at the market open on April 23, 2024. As a result of the Reverse Stock Split, the number of authorized, issued and outstanding shares of our common stock immediately prior to the Reverse Stock Split was reduced into a smaller number of shares, such that every 80 shares of our common stock held by a stockholder immediately prior to the Reverse Stock Split were combined and reclassified into one share of common stock after the Reverse Stock Split.

 

Currency Presentation and Currency Translation

 

Unless otherwise indicated, all references to “dollars,” “$,” “U.S. $” or “U.S. dollars” are to the lawful currency of the United States. All references in this Quarterly Report on Form 10-Q to “euro” or “€” are to the currency introduced at the start of the third stage of the European Economic and Monetary Union pursuant to the Treaty establishing the European Community, as amended. We prepare our financial statements in U.S. dollars.

 

The functional currency for our operations is primarily the euro. With respect to our financial statements, the translation from the euro to U.S. dollars is performed for balance sheet accounts using exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during the period. The resulting translation adjustments are recorded as a component of accumulated other comprehensive income/loss.

 

Where in this Quarterly Report on Form 10-Q we refer to amounts in euros, we have for your convenience also, in certain cases, provided a conversion of those amounts to U.S. dollars in parentheses. Where the numbers refer to a specific balance sheet account date or financial statement account period, we have used the exchange rate that was used to perform the conversions in connection with the applicable financial statement. In all other instances, unless otherwise indicated, the conversions have been made using the noon buying rate of €1.00 to U.S. $1.07931 based on information provided by Xignite as of March 31, 2024.

 

 

PART I - FINANCIAL INFORMATION

 

Item 1.        Financial Statements.

PIERIS PHARMACEUTICALS, INC.

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

(unaudited, in thousands)

 

  

March 31,

  

December 31,

 
  

2024

  

2023

 

Assets

        

Current assets:

        

Cash and cash equivalents

 $19,084  $17,396 

Short term investments

     8,970 

Accounts receivable

  1,842   572 

Receivable from public grants

  3,071   3,141 

Other receivables

  2,332   2,326 

Assets held for sale, property and equipment

  196   2,188 

Prepaid expenses and other current assets

  2,972   4,087 

Total current assets

 $29,497  $38,680 

Liabilities and stockholders’ equity

        

Current liabilities:

        

Accounts payable

 $1,518  $3,372 

Accrued expenses and other current liabilities

  6,015   8,550 

Total current liabilities

  7,533   11,922 

Stockholders’ equity:

        

Preferred stock

      

Common stock

  1   1 

Additional paid-in capital

  342,165   341,693 

Accumulated other comprehensive loss

  (346)  28 

Accumulated deficit

  (319,856)  (314,964)

Total stockholders’ equity

  21,964   26,758 

Total liabilities and stockholders’ equity

 $29,497  $38,680 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

 

PIERIS PHARMACEUTICALS, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

 

(unaudited)

 

(in thousands, except per share data)

 

  

Three Months Ended March 31,

 
  

2024

  

2023

 

Revenue

        

Customer revenue

 $6  $2,010 

Collaboration revenue

  47   (74)

Total revenue

  53   1,936 

Operating expenses

        

Research and development

  1,218   13,424 

General and administrative

  4,138   4,023 

Total operating expenses

  5,356   17,447 

Loss from operations

  (5,303)  (15,511)

Other income (expense)

        

Interest income

  240   357 

Grant income

     2,028 

Other income (loss)

  171   (57)

Net loss

 $(4,892) $(13,183)
         

Other comprehensive income loss:

        

Foreign currency translation

  (373)  (242)

Unrealized gain (loss) on available-for-sale securities

  (1)  70 

Comprehensive loss

 $(5,266) $(13,355)

Net loss per share

        

Basic and diluted

 $(3.95) $(14.15)

Weighted average number of common shares outstanding

        

Basic and diluted

  1,237   931 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

PIERIS PHARMACEUTICALS, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY

 

(unaudited, in thousands)

 

For the Three Months Ended March 31, 2023 and 2024

 

                          

Accumulated

         
  Preferred shares  Common shares  ATM  Additional  other      Total 
  

No. of

  

Share

  

No. of

  

Share

  

proceeds

  

paid-in

  

comprehensive

  

Accumulated

  

Stockholders’

 
  

shares

  

capital

  

shares

  

capital

  

receivable

  

capital

  

income (loss)

  

deficit

  

equity

 

Balance as of December 31, 2022

  16  $   931  $1  $  $318,603  $(254) $(290,421) $27,929 

Net loss

                       (13,183)  (13,183)

Stock based compensation expense

                 884         884 

Foreign currency translation adjustment

                    (242)     (242)

Unrealized gain on investments

                    70      70 

Balance at March 31, 2023

  16  $   931  $1  $  $319,487  $(426) $(303,604) $15,458 
                                     

Balance as of December 31, 2023

  16  $   1,237  $1  $  $341,693  $28  $(314,964) $26,758 

Net loss

                       (4,892)  (4,892)

Stock based compensation expense

                 472         472 

Foreign currency translation adjustment

                    (373)     (373)

Unrealized loss on investments

                    (1)     (1)

Balance at March 31, 2024

  16  $   1,237  $1  $  $342,165  $(346) $(319,856) $21,964 

 

 

 

PIERIS PHARMACEUTICALS, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(unaudited, in thousands)

 

  

Three Months Ended March 31,

 
  

2024

  

2023

 

Operating activities:

        

Net loss

 $(4,892) $(13,183)

Adjustments to reconcile net loss to net cash used in operating activities:

        

Depreciation and amortization (accretion)

  (30)  605 

Right-of-use asset (accretion) amortization

     (34)

Stock-based compensation

  472   884 

Proceeds on sale of fixed assets

  866    

Prepaid rent

  556    

Realized investment gains

     53 

Other non-cash transactions

  (5)  72 

Changes in operating assets and liabilities

  (3,963)  607 

Net cash used in operating activities

  (6,996)  (10,996)

Investing activities:

        

Purchases of property and equipment

     (48)

Proceeds from maturity of investments

  9,000   13,495 

Purchases of investments

     (1,544)

Net cash provided by investing activities

  9,000   11,903 

Effect of exchange rate change on cash and cash equivalents

  (316)  200 

Net increase in cash and cash equivalents

  1,688   1,107 

Cash and cash equivalents at beginning of period

  17,396   38,635 

Cash and cash equivalents at end of period

 $19,084  $39,742 

Supplemental cash flow disclosures:

        

Net unrealized gain (loss) on investments

 $(1) $70 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

PIERIS PHARMACEUTICALS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

1.     Corporate Information

 

Pieris Pharmaceuticals, Inc., or the Company or Pieris, was founded in May 2013, and acquired 100% interest in Pieris Pharmaceuticals GmbH (formerly Pieris AG, a German company which was founded in 2001) in December 2014. Pieris Pharmaceuticals, Inc. and its wholly-owned subsidiaries, hereinafter collectively Pieris, or the Company, is a biopharmaceutical company that, prior to July of 2023, discovered and developed Anticalin-based drugs to target validated disease pathways in unique and transformative ways. Pieris’ clinical pipeline consists of immuno-oncology, or IO, programs partnered with several major multi-national pharmaceutical companies. Pieris' corporate headquarters is located in Boston, Massachusetts. Pieris also maintains office space in Hallbergmoos, Germany.

 

The Company’s core Anticalin technology and platform was developed in Germany.

 

On July 18, 2023, the Company announced its intention to explore engaging in one or more strategic transactions, including mergers, reverse mergers, acquisitions, other business combinations or sales of assets, or other strategic transactions. This decision was related to events that impacted the Company’s inhaled respiratory franchise in connection with AstraZeneca's discontinuation of enrollment of the Phase 2a study for elarekibep, an inhaled IL-4Rα antagonist Anticalin protein to treat uncontrolled asthma. As part of this initiative, the Company engaged Stifel, Nicolaus & Company, Incorporated to serve as its advisor in its review of strategic transactions.

 

Also on July 18, 2023, the Company’s Board of Directors approved a reduction in the Company’s workforce by approximately 70%. Since July of 2023, and through March 31, 2024, the Company took additional steps to reduce its operating footprint including terminating its remaining lease obligations in Germany and winding down its proprietary inhaled respiratory programs. The Company also has opted out and terminated programs where possible to reduce operating costs. Further reductions in the workforce have occurred based upon these actions. As a result, the Company has incurred approximately $7.5 million of severance costs and other related termination benefits in 2023 as the service period to earn such benefits is considered complete. The Company expects termination benefits to be paid through the end of 2024.

 

On March 27, 2024, the Company announced the implementation of a new strategy along with relevant cost-saving measures that are expected to extend its cash runway into at least 2027, while maximizing its ability to capture the potential milestones from its partnered 4-1BB bispecific Mabcalin™ protein IO assets. The Company may be entitled to aggregate milestones of up to approximately $20.0 million upon first patient dosed in the Phase 2 trials for SGN-BB228, S095012 (formerly PRS-344) and BOS-342, which are all currently in Phase 1 clinical development, and up to approximately $55.0 million upon first patient dosed in pivotal clinical trials for SGN-BB228, S095012 and BOS-342. To support this new strategy, the Company plans to discontinue all of its research and development efforts which it expects to complete by the middle of 2024, implement a workforce reduction that will impact additional employees and the executive leadership team which is expected to be implemented in the second quarter of 2024, and reduce the size of its Board of Directors, which is also expected to be implemented in the second quarter of 2024.  In addition to the alliance management activities for its partnered programs, the Company remains committed to obtaining value for its products in prior development, including cinrebafusp alfa, as well as its proprietary platform capabilities by pursuing potential out-licensing or sales transactions. In addition to these potential transactions, the Company  may also, from time-to-time, consider strategic opportunities that it believes  may increase stockholder value.

 

As of March 31, 2024, cash and cash equivalents were $19.1 million. For the three months ended March 31, 2024 and 2023, the Company had net losses of $4.9 million and $13.2 million, respectively. The Company has incurred net losses since inception and had an accumulated deficit of $319.9  million as of   March 31, 2024. Net losses and negative cash flows from operations have had, and will continue to have, an adverse effect on the Company’s stockholders’ equity and working capital. The Company expects to continue to incur operating losses for the foreseeable future.

 

The Company has historically devoted substantially all of its financial resources and efforts to research and development and general and administrative expenses to support the discovery and development of Anticalin-based drugs. Going forward, as part of the Company's decision to implement measures to maximize its ability to capture potential milestones from its partnered programs with Pfizer, Boston Pharmaceuticals, and Servier (all as defined in Note 3 below), the Company plans to discontinue all research and development efforts and reduce discretionary expenditures and other fixed or variable personnel costs. The Company believes that its currently available funds will be sufficient to fund its operations through at least the next twelve months from the issuance of this Quarterly Report on Form 10-Q. The Company's belief with respect to its ability to fund operations is based on estimates that are subject to risks and uncertainties. If actual results are different from management’s estimates, the Company may need to seek additional funding.

 

2.    Summary of Significant Accounting Policies

 

The Company’s significant accounting policies are described in Note 2—Summary of Significant Accounting Policies, in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. There have been no material additions to the significant accounting policies for the three months ended March 31, 2024.

 

Unaudited Interim Financial Information

 

The accompanying unaudited condensed consolidated financial statements included herein have been prepared by the Company in accordance with accounting principles generally accepted in the United States, or U.S. GAAP, for interim financial information and pursuant to the rules and regulations of the SEC. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments, consisting of normal recurring adjustments, and disclosures considered necessary for a fair presentation of interim period results have been included. Interim results for the three months ended March 31, 2024 are not necessarily indicative of results that may be expected for the year ending December 31, 2024. For further information, refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the SEC on March 29, 2024.

 

Basis of Presentation and Use of Estimates

 

The accompanying unaudited condensed consolidated financial statements of Pieris Pharmaceuticals, Inc. and its wholly-owned subsidiaries were prepared in accordance with U.S. GAAP. The unaudited condensed consolidated financial statements include the accounts of all subsidiaries. All intercompany balances and transactions have been eliminated.

 

Effective at 5:00 p.m. Eastern Time on April 22, 2024, the Company effected a 1-for-80 reverse stock split of its common stock, or the Reverse Split, with any fractional shares resulting from the Reverse Split rounded up to the next whole share of common stock. All references to shares of common stock outstanding, average number of shares outstanding and per share amounts in this Quarterly Report on Form 10-Q have been restated to reflect the Reverse Split on a retroactive basis.

 

5

 

The preparation of the financial statements in accordance with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and the related disclosures at the date of the financial statements and during the reporting period. Significant estimates are used for, but are not limited to, revenue recognition; deferred tax assets, deferred tax liabilities and valuation allowances; beneficial conversion features; fair value of stock options, preferred stock, and warrants; fair value of assets held for sale; and prepaid and accrued clinical trial expenses. Management evaluates its estimates on an ongoing basis. Actual results and outcomes could differ materially from management’s estimates, judgments and assumptions.

 

Cash, Cash Equivalents and Investments

 

The Company determines the appropriate classification of its investments at the time of purchase. All liquid investments with original maturities of 90 days or less from the purchase date and for which there is an active market are considered to be cash equivalents. The Company’s investments are comprised of money market, asset backed securities, government treasuries and corporate bonds that are classified as available-for-sale in accordance with Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 320, InvestmentsDebt and Equity Securities. The Company classifies investments available to fund current operations as current assets on its balance sheets.

 

Available-for-sale investments are recorded at fair value, with unrealized gains or losses included in accumulated other comprehensive loss on the Company’s balance sheets. Realized gains and losses are determined using the specific identification method and are included as a component of other income.

 

The Company reviews investments for other-than-temporary impairment whenever the fair value of an investment is less than the amortized cost and evidence indicates that an investment’s carrying amount is not recoverable within a reasonable period of time. To determine whether an impairment is other-than temporary, the Company considers its intent to sell or whether it is more likely than not that the Company will be required to sell the investment before recovery of the investment’s amortized cost basis. Evidence considered in this assessment includes reasons for the impairment, the severity and the duration of the impairment and changes in value subsequent to period end.

 

Concentration of Credit Risk and Off-Balance Sheet Risk

 

The Company has no financial instruments with off-balance sheet risk such as foreign exchange contracts, option contracts or other foreign hedging arrangements. Financial instruments that subject Pieris to concentrations of credit risk include cash and cash equivalents, investments, and accounts receivable. The Company’s cash, cash equivalents, and investments are held in accounts with financial institutions that management believes are creditworthy. The Company’s investment policy includes guidelines on the quality of the institutions and financial instruments and defines allowable investments that the Company believes minimize the exposure to concentration of credit risk. The Company has not experienced any credit losses in such accounts and does not believe it is exposed to any significant credit risk on these funds. Accounts receivable primarily consist of amounts due under strategic partnership and other license agreements with major multi-national pharmaceutical companies for which the Company does not obtain collateral.

 

Fair Value Measurement

 

The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. FASB ASC Topic 820, Fair Value Measurement and Disclosures, established a hierarchy of inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the financial instrument based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the financial instrument and are developed based on the best information available in the circumstances. The fair value hierarchy applies only to the valuation inputs used in determining the reported or disclosed fair value of the financial instruments and is not a measure of the investment credit quality. Fair value measurements are classified and disclosed in one of the following three categories:

 

 

Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

 

Level 2 utilizes quoted market prices in markets that are not active, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency.

 

Level 3 inputs are unobservable inputs for the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date.

 

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

 

Financial instruments measured at fair value on a recurring basis include cash equivalents and investments (see Note 5).

 

An entity may elect to measure many financial instruments and certain other items at fair value at specified election dates. Subsequent unrealized gains and losses on items for which the fair value option has been elected will be reported in net loss. The Company did not elect to measure any additional financial instruments or other items at fair value.

 

6

 

Property and Equipment

 

Property and equipment are recorded at acquisition cost, less accumulated depreciation and impairment. Depreciation on property and equipment is calculated using the straight-line method over the remaining estimated useful lives of the assets. Maintenance and repairs to these assets are charged to expenses as occurred. The estimated useful life of the different groups of property and equipment is as follows:

 

Asset Classification

 

Estimated useful life (in years)

 

Leasehold improvements

 

shorter of useful life or remaining life of the lease

 

Laboratory furniture and equipment

 8 - 14 

Office furniture and equipment

 5 - 13 

Computer and equipment

 3 - 7 

 

If the criteria in ASC Topic 360 Property, Plant and Equipment are met, a long-lived asset is classified as held for sale. The long-lived asset is reported at the lower of its carrying value or fair value less cost to sell beginning in the period the held for sale criteria are met. The carrying amount of the asset will be adjusted each reporting period for subsequent changes in fair value less costs to sell. A loss is recognized for any subsequent write-down to fair value less cost to sell. A gain is recognized for any subsequent increase in fair value less cost to sell, but not in excess of the cumulative loss previously recognized. Once classified as held for sale, depreciation and amortization are no longer recorded for any long-lived assets included in the disposal group.

 

Impairment of Long-lived Assets

 

The Company reviews its long-lived assets to be held and used for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company evaluates the realizability of its long-lived assets based on profitability and cash flow expectations for the related asset. Any write-downs are treated as permanent reductions in the carrying amount of the assets.

 

Revenue Recognition

 

Pieris has entered into several licensing agreements with collaboration partners for the development of Anticalin therapeutics against a variety of targets. The terms of these agreements provide for the transfer of multiple goods or services which may include: (i) licenses, or options to obtain licenses, to Pieris’ Anticalin technology and/or specific programs and (ii) research and development activities to be performed on behalf of or with a collaborative partner. Payments to Pieris under these agreements may include upfront fees (which include license and option fees), payments for research and development activities, payments based upon the achievement of certain milestones, and royalties on product sales. There are no performance, cancellation, termination or refund provisions in any of the arrangements that could result in material financial consequences to Pieris. As the Company's intellectual property assets are considered to be located in Germany, the Company records all consolidated revenue in its subsidiary, Pieris Pharmaceuticals GmbH.

 

Collaborative Arrangements

 

The Company considers the nature and contractual terms of an arrangement and assesses whether the arrangement involves a joint operating activity pursuant to which it is an active participant and exposed to significant risks and rewards with respect to the arrangement. If the Company is an active participant and exposed to the significant risks and rewards with respect to the arrangement, it accounts for these arrangements pursuant to ASC Topic 808, Collaborative Arrangements, or ASC 808, and applies a systematic and rational approach to recognize revenue. The Company classifies payments received as revenue and payments made as a reduction of revenue in the period in which they are earned. Revenue recognized under a collaborative arrangement involving a participant that is not a customer is presented as Collaboration Revenue in the condensed consolidated statement of operations.

 

Revenue from Contracts with Customers

 

In accordance with ASC Topic 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled in exchange for these goods and services. To achieve this core principle, the Company applies the following five steps: 1) identify the customer contract; 2) identify the contract’s performance obligations; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations; and 5) recognize revenue when or as a performance obligation is satisfied.

 

The Company evaluates all promised goods and services within a customer contract and determines which of such goods and services are separate performance obligations. This evaluation includes an assessment of whether the good or service is capable of being distinct and whether the good or service is separable from other promises in the contract. In assessing whether promised goods or services are distinct, the Company considers factors such as the stage of development of the underlying intellectual property and the capabilities of the customer to develop the intellectual property on their own or whether the required expertise is readily available.

 

7

 

Licensing arrangements are analyzed to determine whether the promised goods or services, which often include licenses, research and development services and governance committee services, are distinct or whether they must be accounted for as part of a combined performance obligation. If the license is considered not to be distinct, the license would then be combined with other promised goods or services as a combined performance obligation. If the Company is involved in a governance committee, it assesses whether its involvement constitutes a separate performance obligation. When governance committee services are determined to be separate performance obligations, the Company determines the fair value to be allocated to this promised service.

 

Certain contracts contain optional and additional items, which are considered marketing offers and are accounted for as separate contracts with the customer if such option is elected by the customer, unless the option provides a material right which would not be provided without entering into the contract. An option that is considered a material right is accounted for as a separate performance obligation.

 

The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods and services to the customer. A contract may contain variable consideration, including potential payments for both milestone and research and development services. For certain potential milestone payments, the Company estimates the amount of variable consideration by using the most likely amount method. In making this assessment, the Company evaluates factors such as the clinical, regulatory, commercial and other risks that must be overcome to achieve the milestone. Each reporting period the Company re-evaluates the probability of achievement of such variable consideration and any related constraints. The Company will include variable consideration, without constraint, in the transaction price to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. For potential research and development service payments, the Company estimates the amount of variable consideration by using the expected value method, including any approved budget updates arising from additional research or development services.

 

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price among the performance obligations on a relative standalone selling price basis unless a portion of the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct good or service that forms part of a single performance obligation.

 

The Company allocates the transaction price based on the estimated standalone selling price of the underlying performance obligations or, in the case of certain variable consideration, to one or more performance obligations. The Company must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. The Company utilizes key assumptions to determine the stand-alone selling price, which may include other comparable transactions, pricing considered in negotiating the transaction and the estimated costs to complete the respective performance obligation. Certain variable consideration is allocated specifically to one or more performance obligations in a contract when the terms of the variable consideration relate to the satisfaction of the performance obligation and the resulting amounts allocated to each performance obligation are consistent with the amount the Company would expect to receive for each performance obligation.

 

When a performance obligation is satisfied, revenue is recognized for the amount of the transaction price, excluding estimates of variable consideration that are constrained, that is allocated to that performance obligation on a relative standalone selling price basis. Significant management judgment is required in determining the level of effort required under an arrangement and the period over which the Company is expected to complete its performance obligations under an arrangement.

 

For performance obligations consisting of licenses and other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company will recognize revenue from non-refundable, up-front fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license.

 

Revenue recognized under an arrangement involving a participant that is a customer is presented as Customer Revenue.

 

Milestones and Royalties

 

The Company aggregates milestones into four categories: (i) research milestones, (ii) development milestones, (iii) commercial milestones, and (iv) sales milestones. Research milestones are typically achieved upon reaching certain success criteria as defined in each agreement related to developing an Anticalin protein against the specified target. Development milestones are typically reached when a compound reaches a defined phase of clinical research or passes such phase, or upon gaining regulatory approvals. Commercial milestones are typically achieved when an approved pharmaceutical product reaches the status for commercial sale, including regulatory approval. Sales milestones are certain defined levels of net sales by the licensee, such as when a product first achieves global sales or annual sales of a specified amount.

 

There is uncertainty that the events to obtain the research and development milestones will be achieved given the nature of clinical development and the stage of the Company’s technology. The Company has thus determined that all research and development milestones will be constrained until it is deemed probable that a significant revenue reversal will not occur. For revenues from research and development milestones, payments will be recognized consistent with the recognition pattern of the performance obligation to which they relate.

 

8

 

For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and for which the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). Commercial milestones and sales royalties are determined by sales or usage-based thresholds and will be accounted for under the royalty recognition constraint as constrained variable consideration.

 

The Company calculates the maximum amount of potential milestones achievable under each collaboration agreement and discloses such potential future milestones for all current collaborations using such a maximum calculation.

 

Contract Balances

 

The Company recognizes a contract asset when the Company transfers goods or services to a customer before the customer pays consideration or before payment is due, excluding any amounts presented as a receivable (i.e., accounts receivable). A contract asset is an entity’s right to consideration in exchange for goods or services that the entity has transferred to a customer. The contract liabilities (i.e., deferred revenue) primarily relate to contracts where the Company has received payment but has not yet satisfied the related performance obligations.

 

In the event of an early termination of a collaboration agreement, any contract liabilities would be recognized in the period in which all Company obligations under the agreement have been fulfilled.

 

Costs to Obtain and Fulfill a Contract with a Customer

 

Certain costs to obtain customer contracts, including success-based fees paid to third-party service providers, and costs to fulfill customer contracts are capitalized in accordance with FASB ASC Topic 340, Other Assets and Deferred Costs, or ASC 340. These costs are amortized to expense on a systemic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates. The Company will expense the amortization of costs to obtain customer contracts to general and administrative expense and costs to fulfill customer contracts to research and development expense.

 

Government Grants

 

The Company recognizes grants from governmental agencies when there is reasonable assurance that the Company will comply with the conditions attached to the grant arrangement and the grant will be received. The Company evaluates the conditions of each grant as of each reporting period to evaluate whether the Company has reached reasonable assurance of meeting the conditions of each grant arrangement and that it is expected that the grant will be received as a result of meeting the necessary conditions. Grants are recognized in the condensed consolidated statements of operations on a systematic basis over the periods in which the Company recognizes the related costs for which the government grant is intended to compensate. Specifically, grant income related to research and development costs is recognized as such expenses are incurred. Grant income is included as a separate caption within Other income (expense) in the condensed consolidated statements of operations.

 

Leases

 

In accordance with accounting standards update, or ASU, No. 2016-2, Leases (Topic 842), or ASC 842, and for each of the Company’s leases, the following is recognized: (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term for all leases (with the exception of short-term leases) at the commencement date.

 

The Company determines if an arrangement is a lease at inception. The Company’s contracts are determined to contain a lease within the scope of ASC 842 when all of the following criteria based on the specific circumstances of the arrangement are met: (1) there is an identified asset for which there are no substantive substitution rights; (2) the Company has the right to obtain substantially all of the economic benefits from the identified asset; and (3) the Company has the right to direct the use of the identified asset.

 

At the commencement date, operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of future lease payments over the expected lease term. The Company’s lease agreements do not provide an implicit rate. As a result, the Company utilizes an estimated incremental borrowing rate to discount lease payments, which is based on the rate of interest the Company would have to pay to borrow a similar amount on a collateralized basis over a similar term and based on observable market data points. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or lease incentives received. Operating lease cost is recognized over the expected term on a straight-line basis.

 

The Company typically only includes an initial lease term in its assessment of a lease agreement. Options to renew a lease are not included in the Company’s assessment unless there is reasonable certainty that the Company will renew. The expected lease term includes noncancellable lease periods and, when applicable, periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option, as well as periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option.

 

Assumptions made by the Company at the commencement date are re-evaluated upon occurrence of certain events, including a lease modification. A lease modification results in a separate contract when the modification grants the lessee an additional right of use not included in the original lease and when lease payments increase commensurate with the standalone price for the additional right of use. When a lease modification results in a separate contract, it is accounted for in the same manner as a new lease.

 

When a lease is terminated in its entirety, the corresponding lease liability and right-of-use asset are adjusted to zero. Any difference between the carrying amounts of the right-of-use asset and lease liability as compared to the termination payment is recorded in the statement of operations as a gain or loss.

 

9

 

Recent Accounting Pronouncements Not Yet Adopted

 

On December 14, 2023, the FASB issued ASU 2023-09, or ASU 2023-09, Improvements to Income Tax Disclosures. The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. ASU 2023-09 applies to all entities subject to income taxes. For public business entities, the new requirements will be effective for annual periods beginning after December 15, 2024. For entities other than public business entities, the requirement will be effective for annual periods beginning after December 15, 2025. The Company is currently evaluating the effect on the unaudited condensed consolidated financial statements.

 

3.    Revenue

 

General

 

The Company has not generated revenue from product sales. The Company has generated revenue from contracts with customers (option, license and collaboration agreements), which include upfront payments for licenses or options to obtain licenses, payments for research and development services and milestone payments.

 

The Company recognized revenue from the following strategic partnerships and other license agreements (in thousands):

 

  

Three Months Ended March 31,

 
  

2024

  

2023

 

Pfizer

 $6  $1,423 

AstraZeneca

     434 

Servier

  47   (74)

Genentech

     153 

Total Revenue

 $53  $1,936 

 

As of March 31, 2024, under the Company’s existing strategic partnerships and other license agreements, the Company could receive the following potential milestone payments (in millions):

 

  

Research, Development, Regulatory & Commercial Milestones

  

Sales Milestones

 

Pfizer

 $759  $450 

Servier

  105   97 

Boston Pharmaceuticals

  85   265 

Total potential milestone payments

 $949  $812 

 

Strategic Partnerships

 

Genentech

 

On May 19, 2021, the Company and Genentech, Inc., or Genentech, entered into a Research Collaboration and License Agreement, or the Genentech Agreement, to discover, develop and commercialize locally delivered respiratory and ophthalmology therapies that leverage the Company’s proprietary Anticalin technology. Upon signing the Genentech Agreement, Genentech paid the Company a $20 million upfront fee.

 

Under the terms of the Genentech Agreement, the Company was responsible for discovery and preclinical development of two initial programs. In April and May 2023, Genentech and the Company decided to discontinue the discovery-stage programs in ophthalmology and respiratory, respectively, for scientific reasons. Pursuant to this decision, the material right performance obligations related to the target swaps for these programs also expired. Based on these decisions, there are no more active performance obligations remaining under the collaboration and the Company recognized all remaining revenue, or $12.5 million, under the collaboration in the three months ended June 30, 2023.

 

10

 

Genentech still has an option to select additional programs with the payment of a fee and that option expires in May 2024. If Genentech exercises its option to start additional programs, the Company would be eligible to receive additional milestone payments, as well as tiered royalty payments on net sales, subject to certain standard reductions and offsets. Genentech’s options to nominate two additional collaboration targets of their choosing is subject to the legal availability of the target to be researched. As of  March 31, 2024, any variable consideration related to the exercise of such options is considered fully constrained.

 

Boston Pharmaceuticals

 

On April 24, 2021, the Company and BP Asset XII, Inc., or Boston Pharmaceuticals, a subsidiary of Boston Pharma Holdings, LLC, entered into an Exclusive Product License Agreement, or the BP Agreement, to develop BOS-342, also referred to as PRS-342, a 4-1BB/GPC3 preclinical immuno-oncology MabcalinTM (antibody-Anticalin fusion) protein.

 

Under the terms of the BP Agreement, Boston Pharmaceuticals exclusively licensed worldwide rights to BOS-342. The Company received an upfront payment and is further entitled to receive development, regulatory and sales-based milestone payments, tiered royalties up to low double-digits on sales of BOS-342 and a percentage of consideration received by Boston Pharmaceuticals in the event of a sublicense of a program licensed under the BP Agreement or a change of control of Boston Pharmaceuticals.

 

The Company recognized the full transaction price as revenue in 2021 and has no remaining obligations. In August 2023, the first patient was dosed in the Boston Pharmaceuticals sponsored Phase 1/2 study of PRS-342/BOS-342 in hepatocellular carcinoma (HCC), for which the Company received a milestone payment of $2.5 million.

 

Pfizer (formerly Seagen)

 

On February 8, 2018, the Company entered into a license and collaboration agreement, or the Pfizer Collaboration Agreement, and a non-exclusive Anticalin platform technology license agreement, or the Pfizer Platform License, and together with the Pfizer Collaboration Agreement, the Pfizer Agreements, with Pfizer Inc., or Pfizer, pursuant to which the parties agreed to develop multiple targeted bispecific IO treatments for solid tumors and blood cancers.

 

Under the terms of the Pfizer Agreements, the companies agreed to pursue multiple antibody-Anticalin fusion proteins during the research phase. The Pfizer Agreements provide Pfizer an option to select up to three programs for further development, which Pfizer did, and Pfizer is responsible for developing, funding and commercializing each of these programs.

 

On March 24, 2021, the Company entered into a Second Pfizer Amendment (formerly the Second Seagen Amendment), to amend the existing immuno-oncology collaboration agreement relating to joint development and commercial rights for one program in the alliance. Under the Second Pfizer Amendment, the Company retains a co-promotion option in the United States for one program, while Pfizer remains solely responsible for the development and overall commercialization of that program. The Company will also be entitled to increased royalties from that program if it chooses to exercise the co-promotion option.

 

Under the Pfizer Agreements, the Company is eligible to receive other various research, development, commercial and sales milestones. There is uncertainty that the events to obtain the research and development milestones will be achieved given the nature of clinical development and the stage of the Company’s technology. The Company has thus determined that all research and development milestones will be constrained until it is deemed probable that a significant revenue reversal will not occur, with the exception of the $5.0 million milestone as described in the following paragraph.

 

In January 2023, the Company achieved a milestone for the first program in the Pfizer collaboration for $5.0 million. The Company evaluated the recognition of the milestone under ASC 606 and concluded that the constraints on the milestone no longer existed as of December 31, 2022 and therefore recorded the full $5.0 million as revenue for the year ended December 31, 2022.

 

In September 2023, Pfizer and the Company entered into an amendment of the Second Pfizer Amendment that provides Pfizer with collaboration product licenses and no changes to the amounts achievable under the collaboration agreement. The effect of the September 2023 amendment was to transfer responsibility for substantially all activities previously performed by the Company to Pfizer. Subsequently, in December 2023, the transfer of the programs was fully approved by the combined joint steering committee. Accordingly, the Company recognized revenue of approximately $10.1 million for the delivery on its performance obligations related to the two programs for the year ended December 31, 2023. With this amendment, the Company has satisfied all remaining obligations under the collaboration.

 

AstraZeneca

 

On May 2, 2017, the Company entered into a license and collaboration agreement, or the AstraZeneca Collaboration Agreement, and a non-exclusive Anticalin platform technology license agreement, or AstraZeneca Platform License, and together with the AstraZeneca Collaboration Agreement, the AstraZeneca Agreements, with AstraZeneca AB, or AstraZeneca, which became effective on June 10, 2017, following expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

 

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In addition to elarekibep (formerly known as PRS-060/AZD1402), or the AstraZeneca Lead Product, the Company and AstraZeneca agreed to collaborate, under the original terms of the AstraZeneca Collaboration Agreement, to progress four additional novel Anticalin proteins against undisclosed targets for respiratory diseases, or the AstraZeneca Collaboration Products, and together with the AstraZeneca Lead Product, the AstraZeneca Products. The first two discovery-stage programs were discontinued in 2022. The third discovery-stage program was discontinued in the second quarter of 2023, which led to recognition of $4.0 million of revenue in that same quarter.

 

In June 2023, based on non-clinical safety findings in a 13-week toxicology study of elarekibep in non-human primates previously disclosed by the Company, AstraZeneca notified us of its decision to discontinue and cease dosing in the ongoing clinical studies of elarekibep. There was no effect to revenue as a result of the discontinuation of this program.

 

On July 17, 2023, as a result of the non-clinical safety finding in the 13-week toxicology study of elarekibep in non-human primates, AstraZeneca notified the Company of its intention to terminate the AstraZeneca Collaboration Agreement and the AstraZeneca Platform License, effective October 15, 2023. As a result of this, the remaining amount of current deferred revenue, or $3.5 million, related to the fourth discovery-stage program was recognized in revenue in the third quarter of 2023. With the termination of the AstraZeneca Agreements, there are no more active programs or performance obligations related to the collaboration. Following the termination date, the Company determined that it would not continue development of the programs under the AstraZeneca Agreements.

 

Servier

 

In 2017, the Company entered into a license and collaboration agreement, or Servier Collaboration Agreement, and a non-exclusive Anticalin platform license agreement, or Servier Platform License, and together with the Servier Collaboration Agreement, the Servier Agreements, with Les Laboratoires Servier and Institut de Recherches Internationales Servier, or Servier, pursuant to which the Company and Servier agreed to initially pursue five bispecific therapeutic programs. The intention of the collaboration and defined programs was to combine antibodies from the Servier portfolio with one or more Anticalin proteins based on the Company’s proprietary platform to generate innovative IO bispecific drug candidates.

 

Since inception, four of the five initially committed programs have been discontinued by Servier. The Company does not presently intend to continue development of the four discontinued programs but retains full rights to advance the development and commercialization of those products on a world-wide basis in the future.

 

In July 2023, the Company notified Servier of its decision to opt out of co-development and commercialization of S095012, also referred to asPRS- 344, a 4- 1BB/PD- L1 bispecific Mabcalin protein, in the United States. Servier retains exclusive, even as to the Company, worldwide rights to the program, including the right to continue to advance development and potential commercialization of S095012 in the United States. As a result of the Company's decision to opt out of co-development, the Company will be entitled to increased royalty rates and potential royalties and milestones, if any, for S095012 under the terms of the Servier Agreement. With the decision to opt out of co-development of S095012 , the Company recognized the remaining revenue under the collaboration, or $4.7 million, in 2023 and there are no more active co-development programs under the collaboration.
 
Contract Balances

 

The Company receives payments from its collaboration partners based on payments established in each contract. Upfront payments and fees are recorded as deferred revenue upon receipt or when due until such time as the Company satisfies its performance obligations under each arrangement. A contract asset is a conditional right to consideration in exchange for goods or services that the Company has transferred to a customer. Amounts are recorded as accounts receivable when the Company’s right is unconditional.

 

There were no additions to deferred revenue during the three months ended March 31, 2024. There were no reductions to deferred revenue for the three months ended March 31, 2024 and reductions to deferred revenue were $1.7 million for the three months ended March 31, 2023.

 

4.    Grant Income

 

One of the Company's proprietary respiratory assets, PRS-220, an oral inhaled Anticalin protein targeting connective tissue growth factor, or CTGF, was being developed as a local treatment for idiopathic pulmonary fibrosis, and other forms for fibrotic lung disorders. In June 2021, the Company received a €14.2 million (approximately $17.0 million) grant from the Bavarian Ministry of Economic Affairs, Regional Development and Energy (the Bavarian Grant) supporting research and development for post-acute sequelae of SARS-CoV-2 infection (PASC) pulmonary fibrosis, or PASC-PF, also known as post-COVID-19 syndrome pulmonary fibrosis, or “long COVID”.

 

The Bavarian Grant provides partial reimbursement for qualifying research and development activities on PRS-220, including drug manufacturing costs, activities and costs to support an IND filing, and Phase 1 clinical trials costs. The Bavarian Grant provides reimbursement of qualifying costs incurred through December 2023, with submission for reimbursements allowed through February 2024, which was successfully completed by the Company. The timing of reimbursements follows the expected development timeline of this program. Qualifying costs incurred may exceed the annual grant funding thresholds.

 

In addition, the Company is required to communicate if there is a change in control or other event that would impact the continuation of PRS-220 to the Bavarian project agency, in which case the Company may be required to refund some or all amounts received under the grant.

 

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5.    Cash, cash equivalents and investments

 

As of  March 31, 2024 and December 31, 2023, cash, cash equivalents and investments comprised funds in depository, money market accounts and U.S. treasury securities. The following tables present the cash equivalents and investments carried at fair value in accordance with the hierarchy defined in Note 2 at March 31, 2024 and December 31, 2023.

 

  

Total

  

Quoted prices in active markets (Level 1)

  

Significant other observable inputs (Level 2)

  

Significant unobservable inputs (Level 3)

 

March 31, 2024

                

Money market funds, included in cash equivalents

 $8,143  $8,143  $  $ 

US treasuries, included in cash equivalents

  7,921   7,921       

Total

 $16,064  $16,064  $  $ 

 

  

Total

  

Quoted prices in active markets (Level 1)

  

Significant other observable inputs (Level 2)

  

Significant unobservable inputs (Level 3)

 

December 31, 2023

                

Money market funds, included in cash equivalents

 $13,224  $13,224  $  $ 

Investments - US treasuries

  8,970   8,970       

Total

 $22,194  $22,194  $  $ 

 

Cash equivalents and marketable securities have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, utilizing third party pricing services or other market observable data. The pricing services utilize industry standard valuation models, including both income and market-based approaches and observable market inputs to determine value. The Company validates the prices provided by its third-party pricing services by reviewing their pricing methods and obtaining market values from other pricing sources, as needed. After completing its validation procedures, the Company did not adjust any fair value measurements provided by the pricing services as of March 31, 2024.

 

The Company recorded no realized gains or losses from the maturity of available-for-sale securities during the three months ended March 31, 2024 and recorded $0.1 million in realized losses from the maturity of available-for-sale securities during the three months ended March 31, 2023.

 

6.    Assets Held for Sale

 

As of March 31, 2024 and December 31, 2023, assets held for sale are summarized as follows (in thousands):

 

  

March 31,

  

December 31,

 
  

2024

  

2023

 

Laboratory furniture and equipment

 $180  $1,967 

Office furniture and equipment

  16   221 

Assets held for sale

 $196  $2,188 

 

At the end of the third quarter of 2023, as part of the Company's strategic process for maximizing the value of assets, the Company committed to a plan to prepare and sell all property and equipment held at the Hallbergmoos, Germany location. The sale of the assets was deemed probable as a result of management's decision, including the estimated timing of sale which was determined to be within a year of the decision. As a result of this decision, the property and equipment met the criteria for held-for-sale accounting.

 

The net book value of its long-lived assets represents the Company's best estimate of the fair value less costs to sell that could be recovered related to lab and office equipment and furniture as part of the Company's initiative to monetize all remaining assets. As the estimated selling price less costs to sell are based primarily on unobservable inputs as they relate to the location and condition of the specific lab equipment and furniture, they are classified in Level 3 in the fair value hierarchy. In the first quarter of 2024, the Company conducted an auction, with the assistance of a third party, of its assets held for sale. After the conclusion of the auction, the Company has recovered substantially all of the total net book value of the assets held for sale and did not record a gain or loss for assets sold in the first quarter of 2024. The Company has further plans to sell all remaining assets in the second quarter of 2024.

 

7.    Accrued Expenses

 

Accrued expenses and other current liabilities consisted of the following (in thousands):

 

  

March 31,

  

December 31,

 
  

2024

  

2023

 

Compensation expense

 $4,190  $6,448 

Research and development fees

  719   968 

Accrued accounts payable

  549   558 

Other current liabilities

  335   363 

Accrued license obligations

  222   213 

Total

 $6,015  $8,550 

 

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The compensation expense line item in the above table includes both severance and benefit costs associated with the Company's corporate restructuring actions announced in 2023, inclusive of those employees retained as the service period to earn such benefits is considered complete. The Company recognized restructuring expenses consisting of one-time cash severance payments and other employee-related costs. Severance pay and related costs for certain retained employees are estimated to be paid through the end of 2024. The Company recorded these restructuring charges based on each employee’s role to the respective research and development and general and administrative operating expense categories on its condensed consolidated statements of operations and comprehensive loss.

 

The following table includes a roll forward of the restructuring activity and payments recorded for the three months ended March 31, 2024 (in thousands):

 

  

Severance and Benefits Costs

 

Balance at December 31, 2023

 $5,105 

Adjustments to restructuring charges

 $(286)

Cash payments

  (1,185)

Balance at March 31, 2024

 $3,634 

 

 

8.    Net Income (Loss) per Share

 

Basic net loss per share is calculated by dividing net income (loss) by the weighted average shares outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by adjusting weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury-stock and if-converted methods. For purposes of the diluted net loss per share calculation, preferred stock, stock options and warrants are considered to be common stock equivalents but have been excluded from the calculation of diluted net loss per share, as their effect would be anti-dilutive for all periods presented. Therefore, basic and diluted net loss per share were the same for all periods presented.

 

As of March 31, 2024 and 2023, and as calculated using the treasury stock method, approximately 0.5 million and 0.6 million of weighted average shares, respectively, were excluded from the calculation of diluted weighted average shares outstanding as their effect was antidilutive.

 

9.    Stockholders Equity

 

Effective at 5:00 p.m. Eastern Time on April 22, 2024, the Company effected a 1-for-80 Reverse Split of its common stock. All references to shares of common stock outstanding, average number of shares outstanding and per share amounts in this Quarterly Report on Form 10-Q have been restated to reflect the Reverse Split on a retroactive basis.

 

The Company had 3,750,000 shares authorized and 1,236,688 shares of common stock issued and outstanding as of March 31, 2024 and December 31, 2023, respectively, with a par value of $0.001 per share.

 

The Company had 10,000,000 shares authorized and 15,617 shares of preferred stock issued and outstanding as of March 31, 2024 and December 31, 2023. Preferred stock has a par value of $0.001 per share, converts on a factor of 13.34 common shares for each preferred share, and consists of the following:

 

 

Series A Convertible, 85 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively.

 

Series B Convertible, 4,026 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively.

 

Series C Convertible, 3,506 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively.

 

Series D Convertible, 3,000 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively.

 

Series E Convertible, 5,000 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively.

 

2020 Employee, Director and Consultant Equity Incentive Plan

 

At the 2020 Annual Meeting of Stockholders, the Company's stockholders approved the 2020 Employee, Director and Consultant Equity Incentive Plan, or the 2020 Plan. The 2020 Plan permits the Company to issue up to 43,750 shares of common stock pursuant to awards granted under the 2020 Plan. Upon approval of the 2020 Plan, the 2019 Employee, Director and Consultant Equity Incentive Plan, or the 2019 Plan, was terminated; all unissued options were canceled and no additional awards will be made thereunder. All outstanding awards under the 2019 Plan will remain in effect and any awards forfeited from the outstanding awards will be allocated back into the 2020 Plan. There were approximately 19,746 shares remaining and available for grant under the 2019 Plan that terminated upon original approval of the 2020 Plan.

 

At the 2021 Annual Meeting of Stockholders, held on June 25, 2021, the Company’s stockholders approved the first amendment to the 2020 Plan to add 28,125 shares for issuance under the 2020 Plan. At the 2022 Annual Meeting of Stockholders held on June 22, 2022, the Company’s stockholders approved a second amendment to the 2020 Plan to add 37,500 shares of common stock for issuance under the 2020 Plan. At the 2023 Annual Meeting of Stockholders held on June 21, 2023, the Company’s stockholders approved a third amendment to the 2020 Plan to add 75,000 shares of common stock for issuance under the 2020 Plan.

 

2023 Employee Stock Purchase Plan

 

At the 2023 Annual Meeting of Stockholders, the Company’s stockholders approved the 2023 Employee Stock Purchase Plan, or the 2023 ESPP. The 2023 ESPP provides eligible employees with the opportunity to purchase shares of the Company's common stock at a discount, on a tax-favored basis, through regular payroll deductions in compliance with federal tax regulations. The Company has reserved 9,375 shares of common stock for issuance under the 2023 ESPP.

 

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Open Market Sales Agreements

 

In August 2021, the Company established an at-the-market program, or ATM Program, under a sales agreement with Jefferies LLC, pursuant to which the Company may offer and sell shares of its common stock from time to time, up to an aggregate amount of gross sales proceeds of $50.0 million. The ATM Program is offered under a shelf registration statement on Form S-3 that was filed with and declared effective by the SEC in August 2021. In November 2022, the sales agreement was amended to provide for an increase in the aggregate offering amount, such that under the ATM Program, as amended, the Company may offer and sell shares of its common stock, from time to time, up to an aggregate amount of gross sales proceeds of $75.0 million.

 

For the three months ended March 31, 2024 and 2023, the Company did not sell any shares under the ATM program.

 

The Company is currently subject to the SEC general instructions of Form S-3 known as the “baby shelf rules.” Under these instructions, the amount of funds the Company can raise through primary public offerings of securities in any 12-month period using its registration statement on Form S-3 is limited to one-third of the aggregate market value of the shares of the Company’s common stock held by non-affiliates. Therefore, the Company will be limited in the amount of proceeds it is able to raise by selling shares of its common stock using its Form S-3, including under the ATM Program, until such time as its public float exceeds $75 million.

 

10.    Leases

 

The Company generally conducts its operational functions in the United States remotely.

 

In October 2018, Pieris Pharmaceuticals GmbH entered into a lease for office and laboratory space located in Hallbergmoos, Germany, or the Hallbergmoos Lease. The Hallbergmoos Lease was subsequently amended in May 2019 and February 2020. The Hallbergmoos Lease, as amended, provided an initial rental term of 12.5 years, and a rental area of approximately 105,000 square feet.

 

In December 2023, Pieris Pharmaceuticals GmbH entered into an agreement to terminate the Hallbermoos Lease, or the Lease Termination Agreement. Under the terms of the Lease Termination Agreement, Pieris Pharmaceuticals GmbH terminated the Hallbergmoos Lease in exchange for a termination fee of approximately €9.7 million, and vacated the majority of the premises by December 31, 2023, while continuing to occupy, through June 2024, a limited portion of the office space and using another portion of the former lab space to house its assets being held for sale.

 

There was no cash paid for amounts included in the measurement of the lease liabilities for the three months ended March 31, 2024. Cash paid for amounts included in the measurement of the lease liabilities were $0.5 million for the three months ended March 31, 2023.

 

The following table summarizes operating lease costs included in operating expenses (in thousands):

 

  

Three Months Ended March 31,

 
  

2024

  

2023

 

Operating lease costs

 $  $288 

Variable lease costs (1)

     186 

Total lease cost

 $  $474 

 

(1) Variable lease costs include certain additional charges for operating costs, including insurance, maintenance, taxes, utilities, and other costs incurred, which are billed based on both usage and as a percentage of the Company’s share of total square footage. The variable costs for the three months ended March 31, 2024 were immaterial, as the Company continues to occupy a limited portion of the space.

 

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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.

 

The interim financial statements and this Managements Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2023, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 29, 2024. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those set forth under the caption “Risk Factors” in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023 as well as those included in this Quarterly Report on Form 10-Q.

 

Overview

 

We are a biotechnology company that historically discovered and developed Anticalin® protein-based drugs to target validated disease pathways in unique and transformative ways. Proprietary to us, Anticalin proteins are a novel class of therapeutics validated in the clinic and through partnerships with leading pharmaceutical companies, including Servier, Pfizer (formerly Seagen), and Boston Pharmaceuticals in immuno-oncology, or IO. Our clinical pipeline consists of IO bispecifics in partnership with collaborators, including S095012 (also referred to as PRS-344) targeting PD-L1 and 4-1BB, SGN-BB228 (also referred to as PRS-346) targeting CD228 and 4-1BB, and BOS-342 (also referred to as PRS-342) targeting GPC3 and 4-1BB.

 

On March 27, 2024, we announced an update on our review of strategic alternatives, and our decision to implement measures that are expected to extend our cash runway into at least 2027, while maximizing our ability to collect potential milestones from our clinical pipeline of partnered drug candidates, potentially obtain value for cinrebafusp alfa and other proprietary platform capabilities, and consider other strategic opportunities. As part of this strategy, we intend to discontinue all of our research and development efforts, which we expect will be completed by the middle of 2024, reduce our workforce, which is expected to affect additional employees, including the executive leadership, and be substantially implemented in the second quarter of 2024. We also intend to reduce the size of our Board of Directors, which is also expected to be implemented in the second quarter of 2024. We remain eligible to receive potential contingent milestone and royalty payments from our partnered 4-1BB bispecific Mabcalin protein franchise from Pfizer, Boston Pharmaceuticals, and Servier. These include aggregated milestones of approximately $20.0 million in connection with dosing a first patient in the Phase 2 trials for SGN-BB228, S095102, and BOS-342, and aggregated milestones of approximately $55.0 million in connection with dosing a first patient in the pivotal clinical trials for SGN-BB228, S095102, and BOS-342. This follows from our July 2023 announcement where we stated our intention to explore one or more strategic transactions with the assistance of our advisors, Stifel, Nicolaus & Company Inc., and announced a reduction in our workforce by approximately 70% due to our decision to opt out of and terminate programs, thus reducing our operating footprint and expenses.

 

Discovery and Development Programs

 

We currently have several IO drug candidates, including those partnered with major biopharmaceutical companies, which are at varying stages of development:

 

 

Our IO partnered portfolio includes the following drug candidates that are multi-specific Anticalin-based fusion protein drug candidates designed to engage immunomodulatory targets, in partnership with Pfizer (formerly Seagen), Boston Pharmaceutics, and Servier.

 

 

In the Pfizer collaboration, SGN-BB228 (also referenced as PRS-346), a CD228 x 4-1BB bispecific antibody-Anticalin compound, was previously handed over to Pfizer, which is responsible for further advancement and funding of the asset. In January 2023, the first patient was dosed in a Pfizer-sponsored Phase 1 study of SGN-BB228, upon which we achieved a $5.0 million milestone. Pfizer presented preclinical data for this program at the Society for Immunotherapy of Cancer 37th Annual Meeting in November 2022 and at the American Association for Cancer Research (AACR) Annual Meeting in April 2023. Pfizer presented the study design of the Phase 1 study of SGN-BB228 at the American Society of Clinical Oncology (ASCO) Annual Meeting in June 2023. The program is one of three programs in the Pfizer alliance, and we believe the previous achievement of a key development milestone for SGN-BB228 validates our approach in IO bispecifics, complementing the encouraging clinical data seen with cinrebafusp alfa. We transferred the second and third programs to Pfizer at the end of 2023, and retain a co-promotion option for one program in the Pfizer collaboration in the United States.

 

 

BOS-342 (also referenced as PRS-342) is a GPC3 x 4-1BB bispecific Mabcalin compound that we have exclusively licensed to Boston Pharmaceuticals. In August 2023, the first patient was dosed in a Boston Pharmaceuticals sponsored Phase 1/2 study of BOS-342 in hepatocellular carcinoma (HCC), for which we received a $2.5 million milestone payment and are entitled to receive up to approximately $350 million in potential development, regulatory and sales-based milestone payments, and tiered royalties on potential sales of BOS-342.

   

 

 

S095012 (also referenced as PRS-344) is a bispecific Mabcalin compound comprising a PD-L1-targeting antibody genetically linked to 4-1BB-targeting Anticalin proteins being developed by Servier on a worldwide basis. The first-in-human Phase 1/2 multicenter open-label dose escalation study is designed to determine the safety and preliminary activity of S095012 in patients with advanced and/or metastatic solid tumors. In July 2023, we notified Servier that we were opting out of co-development and commercialization of S095012 in the United States Servier retains exclusive, even as to us, worldwide rights to the program including the right to advance development and potential commercialization in the United States. As a result of our election to opt out, we are entitled to increased royalty rates and potential royalties and milestones, if any, for S095012.

 

 

In May 2021, we also entered into a multi-program research collaboration and license agreement with Genentech, a member of the Roche Group, to discover, develop and commercialize locally delivered respiratory and ophthalmology therapies. In April and May 2023, the ophthalmology and respiratory programs were jointly discontinued, respectively.

 

Cinrebafusp alfa is designed to drive tumor localized T cell activation through tumor-targeted drug clustering mediated by HER2 expressed on tumor cells. This program was the first 4-1BB bispecific T cell co-stimulatory agonist to enter clinical development.

 

 

In July 2022, we received fast track designation from FDA for cinrebafusp alfa. In August 2022, we announced the decision to cease further enrollment in the two-arm, multicenter, open-label Phase 2 study of cinrebafusp alfa as part of a strategic pipeline prioritization to focus our resources. Cinrebafusp alfa has demonstrated clinical benefit in Phase 1 studies, including single agent activity in a monotherapy setting, and in the Phase 2 study in HER2-expressing gastric cancer, giving the Company confidence in its broader 4-1BB franchise. In April 2023, clinical data showing an unconfirmed 100% objective response rate and promising emerging durability profile were presented at the American Association of Cancer Research annual meeting. This data provided encouraging evidence of clinical activity for this program. The Company continues to remain committed to obtaining value for cinrebafusp alfa.

 

Our former drug candidates include:

  

 

Elarekibep, a former respiratory program that was partnered with AstraZeneca for the treatment of asthma, was a drug candidate that antagonizes IL-4Rα, thereby inhibiting the downstream action of IL-4 and IL-13, two cytokines known to be key mediators in the inflammatory cascade that drive the pathogenesis of asthma and other inflammatory diseases.

 

 

In June 2023, AstraZeneca communicated to us its decision to discontinue and cease dosing in the Phase 2 clinical studies of elarekibep. This decision was based on lung findings from a non-clinical 13-week GLP toxicology study with dry powder inhaler-formulated elarekibep, which did not support long-term use and progression to later-stage development. The 13-week non-human primate study included three active dose cohorts. AstraZeneca concluded that there were no clinical observations across any of the doses but that there were respiratory tract pathology findings. These findings included inflammation-mediated lung tissue damage, which did not appear to be dose related. AstraZeneca’s decision was made independent of any data from the Phase 2a study.

 

 

In July 2023, AstraZeneca notified us of its intention to terminate the AstraZeneca Collaboration Agreement and the AstraZeneca Platform License, which terminations became effective October 15, 2023. AstraZeneca’s decision to terminate these agreements was based on the non-clinical safety findings in a 13-week toxicology study of elarekibep in non-human primates previously disclosed by us. Based upon our review, we have determined to discontinue the program for scientific reasons.

 

 

PRS-220, an orally inhaled Anticalin protein targeting connective tissue growth factor, or CTGF, was being developed as a local treatment for idiopathic pulmonary fibrosis, or IPF, and other forms of fibrotic lung diseases. CTGF, a matricellular protein, has been demonstrated to be a driver of fibrotic tissue remodeling and the protein has been found over-expressed in lung tissue from patients suffering from IPF.

 

 

In 2021, we received a €14.2 million grant from the Bavarian Ministry of Economic Affairs, Regional Development and Energy supporting research and development of the PRS-220 program. We conducted a Phase 1 study of PRS-220 in healthy volunteers in Australia, which we completed in August 2023. The study was a randomized, two-part, blinded, placebo-controlled study, designed to assess the safety, tolerability, pharmacokinetics, and immunogenicity of single and multiple ascending doses of PRS-220 when administered by oral inhalation to healthy subjects. The clinical study report was finalized at the end of December 2023. Data from the single and multiple ascending doses of PRS-220, when administered by oral inhalation to healthy subjects, demonstrated that PRS-220 was safe and generally well tolerated by subjects in this study at all administered doses. With the completion of the Phase 1 clinical studies, we have decided to discontinue further development of the program for strategic and scientific reasons.

 

Since inception, we have devoted nearly all of our efforts and resources to our research and development activities and have incurred significant net losses. For the three months ended March 31, 2024 and 2023, we reported net loss of $4.9 million and  $13.2 million, respectively. As of March 31, 2024, we had an accumulated deficit of $319.9 million. We expect to continue incurring substantial losses as we devote time and resources into exploring strategic transactions. Our operating expenses have historically been comprised of research and development expenses and general and administrative expenses.

 

 

We have not generated any revenues from product sales to date and we do not expect to generate revenues from product sales for the foreseeable future. Our revenues for the three months ended March 31, 2023 were from license and collaboration agreements with our partners.

 

A significant portion of our operations are conducted in countries other than the United States. Since we conduct our business in U.S. dollars, our main exposure, if any, results from changes in the exchange rates between the euro and the U.S. dollar. At each period end, we remeasure assets and liabilities to the functional currency of that entity (for example, U.S. dollar payables recorded by our subsidiary, Pieris Pharmaceuticals GmbH). Remeasurement gains and losses are recorded in the statement of operations line item “Other income (expense), net”. All assets and liabilities denominated in euros are translated into U.S. dollars at the exchange rate on the balance sheet date. Revenues and expenses are translated at the weighted average rate during the period. Equity transactions are translated using historical exchange rates. All adjustments resulting from translating foreign currency financial statements into U.S. dollars are included in accumulated other comprehensive loss.

 

Key Financial Terms and Metrics

 

The following discussion summarizes the key factors our management believes are necessary for an understanding of our consolidated financial statements.

 

Revenues

 

We have not generated any revenues from product sales to date and we do not expect to generate revenues from product sales for the foreseeable future. Our revenues for the last two years have been from the license and collaboration agreements with AstraZeneca, Servier, Pfizer, Genentech and Boston Pharmaceuticals.

 

The revenues from AstraZeneca, Servier, Pfizer, Genentech and Boston Pharmaceuticals have been comprised primarily of upfront payments, research and development services and milestone payments. For additional information about our revenue recognition policy, see “Note 2— Summary of Significant Accounting Policies.”

 

Research and Development Expenses

 

The process of researching and developing drugs for human use is lengthy, unpredictable and subject to many risks. Historically, we have incurred substantial expenses as we continued to develop our clinical and preclinical drug candidates and programs. Also included in research and development costs in 2023 were severance costs associated with the workforce reduction announced in July 2023. In the third quarter of 2023, we had stopped or taken actions to wind down research and development costs related to all proprietary programs.

 

On March 27, 2024, we announced that we would be discontinuing all of our research and development activities. We have no further spending obligations related to our partnered IO programs. We expect research and development costs to be significantly lower than historical amounts.

 

General and Administrative Expenses

 

General and administrative expenses consist primarily of salaries, employee benefits, equity compensation and other personnel-related costs associated with executive, administrative and other support staff. Other significant general and administrative expenses include the costs associated with professional fees for accounting, auditing, insurance costs, consulting and legal services along with facility and maintenance costs attributable to general and administrative functions. Included in general and administrative costs in 2023 were severance costs associated with the workforce reduction announced in July 2023. On March 27, 2024, we announced a reduction in workforce that would impact additional employees and the executive leadership team and is expected to be implemented in the second quarter of 2024. We expect general and administrative costs to be significantly lower than historical amounts given the leaner organization and elimination of research and development spending going forward.

 

Results of Operations

 

Comparison of the three months ended March 31, 2024 and 2023

 

The following table sets forth our revenues and operating expenses (in thousands):

 

   

Three Months Ended March 31,

 
   

2024

   

2023

 

Revenues

  $ 53     $ 1,936  
                 

Research and development expenses

    1,218       13,424  

General and administrative expenses

    4,138       4,023  

Total operating expenses

    5,356       17,447  

Other (expense) income

               

Interest income

    240       357  

Grant income

          2,028  

Other (expense) income

    171       (57 )

Net income (loss)

  $ (4,892 )   $ (13,183 )

  

 

Revenues

 

The following table provides a comparison of revenue for the three months ended March 31, 2024 and 2023 (in thousands):

 

   

Three Months Ended March 31,

         
   

2024

   

2023

   

Increase/(Decrease)

 

Customer revenue

  $ 6     $ 2,010     $ (2,004 )

Collaboration revenue

    47       (74 )     121  

Total Revenue

  $ 53     $ 1,936       (1,883 )

 

 

The $2.0 million decrease in customer revenue in the three months ended March 31, 2024 compared to the three months ended March 31, 2023 reflects only minimal amounts of reimbursement revenue being recognized in the current period as all obligations related to customer revenue have previously been satisfied. 

 

 

The $0.1 million increase in collaboration revenues in the three months ended March 31, 2024 compared to the three months ended March 31, 2023 reflects final reimbursement revenue recorded in the current period as compared to changes in the estimated progress for S095012 under the Servier collaboration that led to higher revenue offsets in the prior period.

 

Research and Development Expenses

 

The following table provides a comparison of the research and development expenses for the three months ended March 31, 2024 and 2023 (in thousands):

 

   

Three Months Ended March 31,

         
   

2024

   

2023

   

Increase/(Decrease)

 

Respiratory

  $ 33     $ 4,146     $ (4,113 )

Immuno-oncology

    487       2,508       (2,021 )

Other R&D activities

    698       6,770       (6,072 )

Total

  $ 1,218     $ 13,424       (12,206 )

 

 

The $4.1 million decrease in our respiratory programs for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 is due primarily to lower overall costs for PRS-220 and lower pre-clinical costs PRS-400, as these programs were stopped or wound down in connection with the Company's strategic update announced in July 2023. 

 

 

The $2.0 million decrease in our immuno-oncology programs for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 is due primarily to decreases in manufacturing and clinical costs for both cinrebafusp alfa and S095012, as such programs have been discontinued or handed over to partners.

 

 

The $6.1 million decrease in other research and development activities expenses for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 is driven by lower overall personnel costs due to lower headcount as a result of restructuring actions announced in July 2023, no depreciation in 2024 as a result of the Company's asset sale, and lower overall lab supply costs due to the lab facility wind down.

 

General and Administrative Expenses

 

General and administrative expenses were $4.1 million for the three months ended March 31, 2024 and $4.0 million for the three months ended March 31, 2023. The period-over-period increase was driven primarily by higher legal costs ($1.0 million) due to exploration of strategic transactions, offset partially by lower personnel costs due to lower headcount, no depreciation in 2024 as a result of the asset sale and lower audit and professional service expenses.

 

Other Income (Expense)

 

Our other income was $0.4 million for the three months ended March 31, 2024 and $2.3 million for the three months ended March 31, 2023. The period-over-period decrease was primarily due to lower grant income offset slightly by unrealized gains in the current period due to an overall strengthening U.S. dollar.

 

 

Liquidity and Capital Resources

 

On March 27, 2024, we announced an update on our review of strategic alternatives, and our decision to implement measures that are expected to extend our cash runway into at least 2027, while maximizing our ability to collect potential milestones and royalties from our clinical pipeline of partnered drug candidates, potentially obtain value for cinrebafusp alfa and other proprietary platform capabilities, and consider other strategic opportunities. As part of this strategy, we intend to discontinue all of our research and development efforts, reduce our workforce, which is expected to affect additional employees, including the executive leadership, and be substantially implemented in the second quarter of 2024. We also intend to reduce the size of our Board of Directors, which is also expected to be implemented in the second quarter of 2024. This follows our July 2023 announcement in which we stated our intention to explore one or more strategic transaction, and in which we further announced a reduction in our workforce by approximately 70%.

 

Through March 31, 2024, we have funded our operations primarily through private and public sales of equity, payments received under our license and collaboration agreements (including research and development services costs, and upfront and milestone payments), government grants and loans.

 

As of March 31, 2024, we had a total of $19.1 million in cash, cash equivalents and investments. We have incurred losses in every period since inception, with the exception of the three months ended June 30, 2023, and have a total accumulated deficit of $319.9 million as of March 31, 2024. Net losses and negative cash flows have had, and will continue to have, an adverse effect on our stockholders’ equity and working capital. We expect to continue to incur operating losses for at least the next several years.

 

We have historically devoted substantially all of our financial resources and efforts to research and development and general and administrative expenses to support such research and development.

 

We expect cash necessary to fund operations will continue to decrease significantly in the near term as we have taken measures to preserve cash, including conducting a further workforce reduction which is expected to impact additional employees and the executive leadership team, discontinuing our research and development projects and opting out of co-development of S095012 (PRS-344) in the United States.

 

The following table provides a summary of operating, investing and financing cash flows (in thousands):

 

   

Three Months Ended March 31,

 
   

2024

   

2023

 

Net cash used in operating activities

  $ (6,996 )   $ (10,996 )

Net cash provided by investing activities

    9,000       11,903  

Net cash provided by financing activities

           

 

Net cash used in operating activities for the three months ended March 31, 2024 was $7.0 million compared to net cash used in operating activities of $11.0 million for the three months ended March 31, 2023. Net cash used in operations in the current period is impacted by lower accrued expenses, lower accounts payable, and higher prepaid expenses, offset partially by higher accounts receivable. This compares to the impact of lower deferred revenue, lower accrued expenses and higher prepaid expenses, offset partially by higher accounts payable. 

 

Net cash provided by investing activities for the three months ended March 31, 2024 was $9.0 million, as compared to net cash provided by investing activities of $11.9 million for the same period in 2023. The change in net cash used is solely attributable to the impact of net investments changes and the timing of maturities in the current period, as compared to the prior period.

 

There was no net cash provided by or used in financing activities for the three months ended March 31, 2024 and 2023.

 

Effective at 5:00 p.m. Eastern Time on April 22, 2024, we effected a 1-for-80 reverse stock split of our common stock. All references to shares of common stock outstanding, average number of shares outstanding and per share amounts in this Quarterly Report on Form 10-Q have been restated to reflect the reverse stock split on a retroactive basis.

 

In August 2021, we established the ATM Program under a sales agreement with Jefferies LLC, pursuant to which we may offer and sell shares of our common stock, from time to time, up to an aggregate amount of gross sales proceeds of $50.0 million. In November 2022, the sales agreement was amended to provide for an increase in the aggregate offering amount, such that under the ATM Program, as amended, we may offer and sell shares of our common stock, from time to time, up to an aggregate amount of gross sales proceeds of $75.0 million. The ATM Program, as amended, is offered under a shelf registration statement on Form S-3 that was filed with and declared effective by the SEC in August 2021. For the three months ended March 31, 2024, we did not sell any shares under the ATM Program.

 

We are currently subject to the SEC general instructions of Form S-3 known as the “baby shelf rules.” Under these instructions, the amount of funds we can raise through primary public offerings of securities in any 12-month period using our registration statement on Form S-3 is limited to one-third of the aggregate market value of the shares of our common stock held by non-affiliates. Therefore, we will be limited in the amount of proceeds we are able to raise by selling shares of our common stock using our Form S-3, including under the ATM Program, until such time as our public float exceeds $75 million.

 

We have historically devoted substantially all of our financial resources and efforts to research and development and general and administrative expenses to support such research and development. We expect cash necessary to fund operations will continue to decrease significantly as we have decided to discontinue all research and development activities and implement a further workforce reduction that will affect additional employees and the executive leadership team and is expected to be implemented in the second quarter of 2024.

 

 

We believe that our currently available funds will be sufficient to fund our remaining limited operations through at least the next 12 months from the issuance of this Quarterly Report on Form 10-Q. As part of our March 27, 2024 strategic update, as discussed above, we decided to implement measures to reduce discretionary expenditures and other fixed or variable personnel costs as we discontinue all remaining research and development obligations and conduct a further workforce reduction.

 

Future investments could be reevaluated if we identify and explore any strategic opportunity that our Board of Directors believes will increase stockholder value. Our belief with respect to our ability to fund operations is based on estimates that are subject to these and other risks and uncertainties.

 

If we seek to raise additional capital to fulfill our operating and capital requirements through public or private equity financings, utilization of our current ATM Program, strategic collaborations, licensing arrangements, government grants and/or the achievement of milestones under our collaborative agreements, there is no assurance that we will be successful in obtaining sufficient funding on terms acceptable to us to fund continuing operations, if at all, and the terms of any future financing may adversely affect the holdings or the rights of our stockholders.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements, as defined under applicable SEC rules.

 

Critical Accounting Policies and Estimates

 

Refer to Part II, Item 7, “Critical Accounting Policies and Estimates” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 for a discussion of our critical accounting policies and estimates.

 

This discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with U.S. GAAP. We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies as critical because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different estimates—which also would have been reasonable—could have been used. On an ongoing basis, we evaluate our estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

We believe that our most critical accounting policies are those relating to revenue recognition, contingencies, research and development expense and income taxes, and there have not been significant changes to our accounting policies discussed in the Annual Report on Form 10-K for the fiscal year ended on December 31, 2023. 

 

Recently Issued Accounting Pronouncements

 

We review new accounting standards to determine the expected financial impact, if any, that the adoption of each standard will have. For the recently issued accounting standards that we believe may have an impact on our consolidated financial statements, see “Note 2—Summary of Significant Accounting Policies” in our condensed consolidated financial statements.

 

Smaller Reporting Company Status

 

Currently, we qualify as a smaller reporting company.

 

As a smaller reporting company, we are eligible for and have taken advantage of certain exemptions from various reporting requirements that are not available to public reporting companies that do not qualify for this classification, including, but not limited to:

 

 

An opportunity for reduced disclosure obligations regarding executive compensation in our periodic and annual reports, including exemption from the requirements to provide a compensation discussion and analysis describing compensation practices and procedures,

 

 

An opportunity for reduced financial statement disclosure in registration statements and in annual reports on Form 10-K, which only requires two years of audited financial statements rather than the three years of audited financial statements that are required for other public companies,

 

 

An opportunity for reduced audit and other compliance expenses as we are not subject to the requirement to obtain an auditor’s report on internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002, and

 

 

An opportunity to utilize the non-accelerated filer time-line requirements.

 

For as long as we continue to be a smaller reporting company, we expect that we will take advantage of both the reduced internal control audit requirements and the disclosure obligations available to us as a result of this classification.

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

 

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our principal executive officer and principal financial officer, have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q.  The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and such information is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our principal executive officer and principal financial officer have concluded that, based on such evaluation, our disclosure controls and procedures were effective as of March 31, 2024.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting identified in connection with the evaluation of such internal control required by Rules 13a-15(d) and 15d-15(d) under the Exchange Act that occurred during the quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II - OTHER INFORMATION

 

 

Item 1. Legal Proceedings.

 

As of the date of this Quarterly Report on Form 10-Q, we are not party to and our property is not subject to any material pending legal proceedings. However, from time to time, we may become involved in legal proceedings or subject to claims seeking monetary damages or other relief. Regardless of the outcome, such legal proceedings or claims could have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

 

Item 1A. Risk Factors.

 

Please refer to the complete Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 29, 2024 for risks and uncertainties facing the Company that may have a material adverse effect on the Company’s business prospects, financial condition and results of operations. In addition, we are supplementing the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 with these additional risk factors. 

 

We may not be successful in identifying and implementing any strategic opportunities and any strategic opportunities that we may consider and consummate in the future could have negative consequences.

 

On March 27, 2024, we announced the implementation of a new strategy along with relevant cost-saving measures that are expected to extend our cash runway into at least 2027, while maximizing our ability to capture the potential milestones from our partnered 4-1BB bispecific Mabcalin protein IO assets, and allowing us to consider, from time-to-time, other strategic opportunities that we believe may increase stockholder value. If we do consider or explore any strategic opportunities, there can be no assurances that any particular course of action, business arrangement or transaction, or series of transactions, will be pursued, successfully consummated or lead to increased stockholder value. Furthermore, if we consider any other strategic opportunities, the process of considering such strategic opportunities may be very costly, time-consuming and complex and we have incurred, and may in the future incur, significant costs related to this evaluation, such as legal and accounting fees and expenses and other related charges. We may also incur additional unanticipated expenses in connection with this process. A considerable portion of these costs will be incurred regardless of whether any such course of action is implemented or transaction is completed. Any such expenses will decrease the remaining cash available for use in our business. 

 

Further, despite remaining open to considering strategic options and transactions that might arise, there can be no assurance that we will be successful in pursuing any transaction or that any transaction, if pursued, will be completed on attractive terms or at all. Additionally, there can be no assurances that any particular course of action, strategy to capture potential milestones or other strategy, business arrangement or transaction, or series of transactions, will be successfully pursued, consummated or lead to increased stockholder value.
In addition, potential counterparties in a strategic opportunity involving our company may place minimal or no value on our assets and our public listing. We may also not be able to adequately limit or avoid future liabilities which may impair the value of any potential transaction or present additional challenges on consummating a potential strategic opportunity. In addition, any strategic opportunities, including business combination or other transactions, that we may consider and consummate in the future could have a variety of negative consequences and we may implement a course of action or consummate a transaction that yields unexpected results that adversely affects our business and decreases the remaining cash available for use in our business or the execution of our strategy. Any potential transaction resulting from a strategic opportunity would be dependent on a number of factors that may be beyond our control, including, among other things, market conditions, industry trends, the interest of third parties in a potential transaction with us, maintaining our Nasdaq listing, obtaining stockholder approval and the availability of financing to third parties in a potential transaction with us on reasonable terms. Any failure of such potential transaction to achieve the anticipated results could significantly impair our ability to continue executing our current strategy or consider future strategic opportunities. In addition, speculation regarding any developments related to the consideration of strategic opportunities and perceived uncertainties related to the future of the Company could cause our stock price to fluctuate significantly.
 

Even if we identify and successfully consummate any strategic opportunity, including, but not limited to, any partnership, acquisition, merger, business combination and/or divestiture, we may fail to realize all of the anticipated benefits of such opportunity, those benefits may take longer to realize than expected, or we may encounter integration difficulties.

 

Our ability to realize the anticipated benefits of any potential business combination or any other result from any potential strategic opportunity we consider and decide to pursue, are highly uncertain. Any anticipated benefits will depend on a number of factors, including our ability to integrate with any future business partner, our ability to obtain value for our existing programs, if divested, and our ability to generate future shareholder value from existing programs we may continue to pursue. The process may be disruptive to our business and the expected benefits may not be achieved within the anticipated time frame, or at all. The failure to meet the challenges involved and to realize the anticipated benefits of any potential transaction could adversely affect our business and financial condition.

 

 

If we identify and are successful in consummating a strategic opportunity, we may be exposed to other operational and financial risks.

 

If we identify and decide to pursue a strategic opportunity, the negotiation and consummation of any such opportunity will require significant time on the part of our management, and the diversion of management’s attention may disrupt our business.

 

Additionally, our ability to consummate a strategic opportunity depends in part on our ability to retain certain of our remaining personnel. If we are unable to successfully retain certain of our remaining personnel, we are at risk of a disruption to our exploration and consummation of a strategic alternative as well as business operations.

 

The negotiation and consummation of any such opportunity may also require more time or greater cash resources than we anticipate and expose us to other operational and financial risks, including:

 

increased near-term and long-term expenditures;
exposure to unknown liabilities;
higher than expected acquisition or integration costs;
incurrence of substantial debt or dilutive issuances of equity securities to fund future operations;
write-downs of assets or goodwill or incurrence of non-recurring, impairment or other charges;
increased amortization expenses;
difficulty and cost in combining the operations and personnel of any acquired business with our operations and personnel;
impairment of relationships with key suppliers or customers of any acquired business due to changes in management and ownership;
inability to retain key employees of our company or any acquired business; and
possibility of future litigation.

 

Any of the foregoing risks could have a material adverse effect on our business, financial condition and prospects.

 

We may become involved in litigation, including securities class action litigation, that could divert managements attention and harm the companys business, and insurance coverage may not be sufficient to cover all costs and damages.

 

In the past, litigation, including securities class action litigation, has often followed certain significant business transactions, such as the sale of a company or announcement of any other strategic transaction, or the announcement of negative events, such as negative results from clinical trials. These events may also result in investigations by the SEC. If we pursue any strategic opportunities, we may be exposed to such litigation even if no wrongdoing occurred. Litigation is usually expensive and diverts management’s attention and resources, which could adversely affect our business and cash resources and our ability to consummate a potential strategic opportunity or the ultimate value our stockholders receive in any such transaction.

 

 

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits.

 

Exhibit

Number

 

Exhibit Description

   

Incorporated by
Reference herein
from Form or
Schedule

 

Filing Date

 

SEC File /
Registration
Number

                   
10.1   Certificate of Change to Articles of Incorporation of Pieris Pharmaceuticals, Inc.     Exhibit 3.1 to Form 8-K   April 18, 2024   001-37471
                   
10.2   License and Collaboration Agreement by and among the Registrant, Pieris GmbH and Seagen, Inc., dated February 8, 2018 *+            
                   
10.3   Non-Exclusive Anticalin Platform Technology License Agreement by and among the Registrant, Pieris Pharmaceuticals GmbH and Seagen, Inc., dated February 8, 2018 *+            
                   

31.1

 

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*

           
                   
31.2   Certification of Principal Financial Officer and Principal Accounting Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *            

 

 

Exhibit

Number

 

Exhibit Description

   

Incorporated by
Reference herein
from Form or
Schedule

 

Filing Date

 

SEC File /
Registration
Number

                   

32.1

 

Certification of Principal Executive Officer Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

**

           
           

32.2

 

Certification of Principal Financial Officer and Principal Accounting Officer Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

**

           
           

101.INS

 

Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

             
           

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document

*

           
           

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document

*

           
           

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase Document

*

           
           

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document

*

           
           

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document

*

           
                   

104

 

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

*

           
                   

*

 

Filed herewith.

             
                   

**

 

The certifications furnished in Exhibit 32.1 and Exhibit 32.2 hereto are deemed to accompany this Quarterly Report and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.

             
                   
+   Certain confidential portions of this Exhibit were omitted by means of marking such portions with brackets (“[***]”) because the identified confidential portions (i) are not material and (ii) would be competitively harmful if publicly disclosed.              

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

PIERIS PHARMACEUTICALS, INC.

     

May 15, 2024

By:

/s/ Stephen S. Yoder

   

Stephen S. Yoder

   

Chief Executive Officer and President

   

(Principal Executive Officer)

     

May 15, 2024

By:

/s/ Thomas Bures

   

Thomas Bures

   

Chief Financial Officer

   

(Principal Financial Officer and Principal Accounting Officer)

 

27

Exhibit 10.2

 

 

LICENSE AND COLLABORATION AGREEMENT BY AND AMONG

 

PIERIS PHARMACEUTICALS, INC. AND PIERIS PHARMACEUTICALS GMBH

 

AND

 

SEATTLE GENETICS, INC.

 

 

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.

 

 

 

TABLE OF CONTENTS

 

Page

 

1. Definitions 1
2. License Grants 27
3. Governance & Committees 31
4. Research & Development 39
5. Manufacturing 53
6. Commercialization 55
7. Payments & Royalties 57
8. Royalty Adjustments, Payment Terms & Reconciliation 59
9. Sublicensing and SGEN Rights for CoDev Product 63
10. Diligence & Exclusivity 66
11. Intellectual Property 71
12. Confidentiality 81
13. Publications 84
14. Representations, Warranties & Covenants 89
15. Indemnification & Insurance 94
16. Term & Termination 97
17. Miscellaneous 109

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL

 

i

 

This License and Collaboration Agreement is entered into as of February 8, 2018 (the “Effective Date”) by and among Seattle Genetics, Inc., a Delaware corporation located at 21823 30th Drive SE, Bothell, WA 98021 (together with its Affiliates, “SGEN”), and Pieris Pharmaceuticals, Inc., a Nevada corporation located at 255 State Street, 9th floor, Boston, MA 02109 and Pieris Pharmaceuticals GmbH, a company organized and existing under the laws of Germany located at Lise-Meitner-str. 30, 85354 Freising, Germany (collectively and together with their Affiliates, “PIRS”). SGEN and PIRS are individually referred to herein as a “Party” and collectively, as the “Parties”.

 

RECITALS

 

WHEREAS, PIRS owns or controls certain proprietary, lipocalin-derived Anticalin® protein technology and has developed other products and technologies that can be used to Research, Develop, Manufacture, and Commercialize (each as defined below) bispecific products, and owns or controls certain patents, proprietary technology, know-how, and information relating to such products or technologies;

 

WHEREAS, SGEN also owns or controls certain proprietary antibody-derived protein technology and has developed other products or technologies that can be used to Research, Develop, Manufacture and Commercialize (each as defined below) pharmaceutical products and owns or controls certain patents, proprietary technology, know-how and information relating to such products or technologies; and

 

WHEREAS, each Party desires to each grant to the other, and the other Party wishes to obtain, licenses to certain of such granting Party’s patents and know-how in order to Research, Develop, Manufacture, and Commercialize certain novel products in accordance with this Agreement (each as defined below).

 

NOW, THEREFORE, in consideration of the promises and mutual covenants herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

1.

Definitions

 

The following capitalized terms or derivatives thereof (verbs, nouns, singular, plural), when used in this Agreement, shall have the following meanings:

 

1.1      “Accelerated Arbitration” has the meaning set forth in Section 17.2.2.1.

 

1.2      “Accelerated Arbitration Request” has the meaning set forth in Section 17.2.2.1.

 

1.3      “Accounting Standards” means, as applicable, the International Financial Reporting Standards (“IFRS”), the U.S. Generally Accepted Accounting Principles (“U.S. GAAP”), and any other internationally recognized accounting standards that may be adopted by a Party.

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
 
1

 

1.4      “Acquired Competing Product” has the meaning set forth in Section 10.3.

 

1.5      “Acquisition Transaction” has the meaning set forth in Section 10.3.

 

1.6      “Acquiree” has the meaning set forth in Section 10.3.

 

1.7      “Acquiror” has the meaning set forth in Section 10.3.

 

1.8      “Additional Collaboration Product” has the meaning set forth in Section 4.3.2.

 

1.9      “Additional Collaboration Product Effective Date” has the meaning set forth in Section 4.3.4.3.

 

1.10    “Additional Collaboration Product Option” has the meaning set forth in Section 4.3.2.

 

1.11    “Additional Collaboration Product Option Exercise Fee” has the meaning set forth in Section 7.2.

 

1.12    “Additional Collaboration Product Option Exercise Notice” has the meaning set forth in Section 4.3.4.1.

 

1.13    “Additional Study Data” has the meaning set forth in Section 4.4.3.6(b).

 

1.14    “ADPIC Treaty” has the meaning set forth in Section 12.1.

 

1.15    “Affiliate” means with respect to a Party, any person or entity, which directly or indirectly controls, is controlled by, or is under common control with such Party. Solely as used in this definition, the term “control” means (a) the ownership, directly or indirectly, beneficially or legally, of at least fifty percent (50%) of the outstanding voting securities or capital stock (or such lesser percentage which is the maximum allowed to be owned by a person or entity in a particular jurisdiction) of such Party or other person or entity, as applicable, or such other comparable ownership interest with respect to any person or entity that is not a corporation; or (b) the power, direct or indirect, whether through ownership of voting securities or partnership or other ownership interests, by contract or otherwise of more than fifty percent (50%), to direct the management and policies of a Party or such other person or entity, as applicable.

 

1.16    “Agreement” means this License and Collaboration Agreement together with the recitals and all Exhibits, and attachments hereto, which shall form an integral part of this Agreement.

 

1.17    “Alliance Manager” has the meaning set forth in Section 3.10.

 

1.18    “Allowed Target Swap” has the meaning set forth in Section 4.1.1.4.

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
 
2

 

1.19    “Antibody” means any monoclonal or polyclonal antibody, whether multiple or single chain, recombinant or naturally occurring, whole or fragment, and any variants, derivatives or constructs thereof, including but not limited to, antigen binding portions including Fab, Fab’, F(ab’)2, Fv, dAb and CDR fragments, single chain antibodies (scFv), chimeric antibodies, diabodies and polypeptides (including any humanized versions thereof) that contain at least a portion of an immunoglobulin that is sufficient to selectively bind to a specific Target. For avoidance of doubt, an Antibody Building Block is an Antibody.

 

1.20    “Antibody Building Block” means an Antibody used in a Compound.

 

1.21    “Anticalin” or “Anticalin Protein” means, whether in nucleic acid or protein form, (a) any lipocalin mutein isolated from the Anticalin Libraries, or (b) any lipocalin mutein that, in each case, has been derived (either physically, intellectually or by reverse engineering, in one (1) or more steps) from any lipocalin referred to in subsection (a) of this definition, in each case, which selectively binds a specific Target. For the sake of this Section 1.21, “mutein” shall mean a protein arising as a result of a mutation or a recombinant DNA procedure.

 

1.22    “Anticalin Affinity Maturation” means the process of engineering for an Anticalin Protein to enhance its developability profile, such as altering binding affinity, cross-reactivity, or half-life, and specificity by introducing, e.g., one or more amino acid mutations.

 

1.23    “Anticalin Protein Building Block” means an Anticalin Protein used in a Compound.

 

1.24    “Anticalin Characterization” means the assessment of binding and functional potency and/or the evaluation of the developability profile of Anticalin Proteins and/or fusion proteins that include one or more Anticalin Proteins.

 

1.25    “Anticalin Expression” means the heterologous expression of an Anticalin Protein in a host cell.

 

1.26    “Anticalin Fusion Technology” means the process of fusing or genetically linking (including through the use of different linkers) one or more Anticalin Proteins to an immunoglobulin or fragment thereof to create bispecific fusion proteins.

 

1.27    “Anticalin Libraries” means any phage display library based on (a) the [***] lipocalin ([***]) or (b) the [***] lipocalin ([***]).

 

1.28    “Anticalin Selection” means the process of screening an Anticalin Library with a defined Target through the process of phage display, within a solution, and physically separating the Target bound to Anticalin Proteins from the solution containing non-binding Anticalin Proteins.

 

1.29    “Arbitration” has the meaning set forth in Section 17.2.1.

 

1.30    “Arbitration Request” has the meaning set forth in Section 17.2.1.

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
 
3

 

1.31    “Audited Party” has the meaning set forth in Section 8.5.1.

 

1.32    “Auditing Party” has the meaning set forth in Section 8.5.1.

 

1.33    “Authorized Recipients” has the meaning set forth in Section 12.2.

 

1.34    “Bankruptcy Code” has the meaning set forth in Section 16.3.4.

 

1.35    “Biological License Application” or “BLA” means a Biological License Application in the United States as described in Section 351(a) of the United States Public Health Service Act (“PHS Act”).

 

1.36    “Biosimilar” means, with respect to a given Collaboration Product in a given country, any biological product on the market in such country that is approved (a) by the applicable Competent Authority in such country under the biosimilarity standard set forth in the United States under 42 U.S.C. §§ 262(i)(2) and (k), or any similar standard under its foreign equivalent applicable Law, on a country-by-country basis where such Collaboration Product is marketed, provided that such applicable Law exists and (b) in reliance in whole or in part, on a prior Marketing Approval (or on any safety or efficacy data submitted in support of such prior Marketing Approval) of such Collaboration Product. For countries or jurisdictions where no explicit biosimilar regulations exist, “Biosimilar” includes products which have been deemed to be a Biosimilar or otherwise deemed interchangeable by a Competent Authority in the United Sates or European Union. Any product or component thereof (including any Collaboration Product or component thereof) licensed, marketed, sold, manufactured, or produced by or on behalf of a Party, its Affiliates or Sublicensees (to the extent such Sublicensee commercializes a Biosimilar in reliance on or access to the Data, Patents, and Know-How licensed under this Agreement) will not constitute a Biosimilar for the purpose of royalty reduction pursuant to Section 8.1.1.

 

1.37    “Building Block” means, individually, each Antibody and each Anticalin Protein used in a Compound. A Building Block can be either an Antibody Building Block or an Anticalin Protein Building Block.

 

1.38    “Building Block IP” means the PIRS Building Block IP and/or the SGEN Building Block IP, as applicable.

 

1.39    “Business Day” means a day that is not a Saturday, Sunday, or a day on which banking institutions in the United States or Munich, Germany, are authorized by applicable Law to remain closed.

 

1.40    “Calendar Quarter” means each three (3) consecutive calendar months ending on each March 31, June 30, September 30, and December 31.

 

1.41    “Calendar Year” means the period of time commencing on January 1 and ending on the next December 31.

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
 
4

 

1.42    “CDR” means complementarity determining region based on the IMGT (ImMunoGeneTics) method.

 

1.43   “Change of Control” means with respect to a Party, (a) completion of a merger, reorganization, amalgamation, arrangement, share exchange, consolidation, tender or exchange offer, private purchase, business combination, recapitalization, or other transaction involving such Party as a result of which either (1) the stockholders of such Party immediately preceding such transaction hold less than fifty percent (50%) of the outstanding shares, or less than fifty percent (50%) of the outstanding voting power, respectively, of the ultimate company or entity resulting from such transaction immediately after consummation thereof (including a company or entity which as a result of such transaction owns the then-outstanding securities of such Party or all or substantially all of such Party’s assets, including such Party’s assets related to the Compounds, either directly or through one or more subsidiaries), or (2) any single Third Party person or group (within the meaning of the U.S. Securities Exchange Act of 1934 and the rules of the SEC thereunder as in effect, referred to as a “Group”) holds fifty percent (50%) or more of the outstanding shares or voting power of the ultimate company or entity resulting from such transaction immediately after the consummation thereof (including a company or entity which as a result of such transaction owns the then-outstanding securities of such Party or all or substantially all of such Party’s assets either directly or through one or more subsidiaries); or (b) the direct or indirect acquisition (including by means of a tender offer or an exchange offer) by any Third Party person or Group of beneficial ownership (within the meaning of the U.S. Securities Exchange Act of 1934 and the rules of the SEC thereunder as in effect), or the right to acquire beneficial ownership, or formation of any Third Party Group which beneficially owns or has the right to acquire beneficial ownership, of fifty percent (50%) or more of either the outstanding voting power or the then outstanding shares of such Party, in each case on a fully-diluted basis. For the avoidance of doubt, a transaction solely to change the domicile of a Party shall not constitute a Change of Control as long as there is no change of direct or indirect shareholding.

 

1.44    “Claim” means any charge, complaint, action, suit, proceeding, hearing, investigation, claim, or demand, including without limitation any investigation by a Government Authority.

 

1.45    “Claim Notice” has the meaning set forth in Section 15.3.1.

 

1.46    “Clinical Studies” means research studies in humans that are (a) designed in accordance with international ethical and scientific quality standards for designing, conducting, recording, and reporting research studies involving investigational medicinal products for human use and that involve the participation of human subjects, which standards are established through applicable Laws, and (b) designed to generate clinical data and results regarding a biological molecule in support of Marketing Approval, including any translational research studies. Clinical Studies include, but are not limited to, any Phase 1 Clinical Study, Phase 2 Clinical Study, or Pivotal Clinical Study.

 

1.47    “CMC” means chemistry, manufacturing, and control.

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
 
5

 

1.48    “CMOs” means Third Party contract manufacturers that manufacture a Compound under GMP conditions.

 

1.49    “CMO Supply Agreement” has the meaning set forth in Section 5.3.2.1(b).

 

1.50    “Co-Chair” has the meaning set forth in Section 3.6.1.2.

 

1.51    “CoDev Decision Point” has the meaning set forth in Section 4.4.2.2.

 

1.52    “CoDev Product means a Collaboration Product for which PIRS has exercised a PIRS CoDev Option in accordance with Section 4.4.2. For avoidance of doubt, in the event that PIRS exercises a PIRS CoDev Option, the applicable Collaboration Product shall become a CoDev Product as of the applicable PIRS CoDev Option Exercise Effective Date, and shall no longer be considered an Exclusive Product as of such date.

 

1.53    “CoDev Product Amendment” has the meaning set forth in Section 9.2.3.

 

1.54    “CoDev Product Compound Specific Patent” means any Joint Patent (other than an Initial Compound Specific Patent) that Covers the Research, Development, Manufacture, or Commercialization of a CoDev Product. In addition, any SGEN Compound Specific Patent that Covers the Research, Development, Manufacture, or Commercialization of a CoDev Product shall be considered a CoDev Product Compound Specific Patent as of the PIRS CoDev Option Exercise Effective Date.

 

1.55    “CoDev Product Opt-Out” has the meaning set forth in Section 16.2.4.

 

1.56    “CoDev Product Plan” has the meaning set forth in Section 4.4.2.2.

 

1.57    “CoDev-Related Dispute” has the meaning set forth in Section 17.2.2.1.

 

1.58    “Collaboration Product(s)” means a Research Candidate that as of the [***] (a) is identified by the Parties under a Research Candidate Plan and (b) SGEN elects for further preclinical and clinical development, and for which SGEN pays the [***]. A bispecific Antibody-Anticalin Protein fusion molecule that comprises a portion, fragment, variant, modification or derivative of the Antibody or Anticalin Protein of a Research Candidate that otherwise meets the requirements of the foregoing sentence shall be deemed a Collaboration Product, so long as such portion, fragment, variant, modification or derivative continues to confer binding specificity for the relevant target within the applicable SGEN Antibody Target and PIRS Anticalin Target combination. A Collaboration Product will either be an Exclusive Product or a CoDev Product.

 

1.59    “Combination Product” has the meaning set forth in Section 1.149.

 

1.60    “Commercialization” means any and all activities related to obtaining pricing and reimbursement approval, marketing, promoting, distributing, importing, exporting, offering for sale, having sold, selling, or conducting any other commercial exploitation activities relating to a Collaboration Product. For clarity, “Commercialize” has a correlative meaning.

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
 
6

 

1.61    “Commercialization Expenses” shall have the meaning set forth in Exhibit 1.189 (Profits and Losses).

 

1.62    “Commercially Reasonable Efforts” means, with respect to an obligation of a Party, such level of effort and expenditure of resources required to carry out such obligation in a sustained manner consistent with the efforts and resources of a typical pharmaceutical or biotechnology company of a similar size and with similar resources as SGEN or PIRS together with their respective Affiliates, as applicable, typically devotes at the same stage of development or commercialization, as applicable, for its own internally developed pharmaceutical products in a similar area with similar market potential, at a similar stage of their product life, taking into account all relevant factors including, as applicable, stage of development, mechanism of action, efficacy and safety relative to competitive products in the marketplace, actual or anticipated labeling, the nature and extent of market exclusivity (including patent coverage and regulatory exclusivity), cost and likelihood of obtaining Marketing Approval, and actual or projected profitability. Where applicable, Commercially Reasonable Efforts will be determined on a market‑by‑market and Indication‑by‑Indication basis, and it is anticipated that the level of effort will be different for different markets and will change over time reflecting changes in the status of the applicable Compound and the markets involved.

 

1.63    “Commercial Manufacturing Costs” means with respect to a CoDev Product Manufactured by or on behalf of a Party in accordance with the applicable CoDev Product Plan or the Global Commercialization Strategy and related budgets at any time following the first Regulatory Approval of the applicable CoDev Product, such Party’s actual costs (including labor and out-of-pocket costs) of Manufacturing such CoDev Product (for both clinical as well as commercial supply) without any mark-up, from the date of the first Regulatory Approval of the applicable CoDev Product until such CoDev Product is no longer Manufactured. Commercial Manufacturing Costs shall be calculated as further defined in Exhibit 1.189 (Profits and Losses).

 

1.64    “Committee” has the meaning set forth in Section 3.6.1.1.

 

1.65    “Compassionate Use means the use of a Collaboration Product as an investigational drug (prior to Marketing Approval) in accordance with applicable Law outside of a Clinical Study to treat a patient with a serious or life-threatening disease or condition who has no comparable or satisfactory alternative treatment options.

 

1.66    “Compound” means any Research Candidate or Collaboration Product.

 

1.67    “Competent Authority” means any regulatory agency, department, bureau, commission, council, or other governmental entity of (a) any country, territory, national, federal, state, provincial, county, city, or other political subdivision government, including the FDA, or (b) any supranational body (including the EMA), in any applicable jurisdiction in the world, involved in the granting of Regulatory Approval.

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
 
7

 

1.68    “Competing Collaboration Product means any [***] that [***] and [***] the [***] ([***] in terms of [***] and [***] the [***]) as a Collaboration Product. For the avoidance of doubt, no Collaboration Product shall be a “Competing Collaboration Product” with respect to any other Research Candidate or Collaboration Product. For the purposes of this definition “Biologic” shall mean a peptide of at least forty (40) amino acids or at least one hundred (100) amino acids if made by entirely synthetic means.

 

1.69    “Competing Research Product means any bispecific Biologic that specifically binds to and modulates the same Therapeutically [***] ([***] in terms of [***]) as a Research Candidate. For the avoidance of doubt, no Research Candidate shall be a “Competing Research Product” with respect to any other Research Candidate or Collaboration Product. For the purposes of this definition “Biologic” shall mean a [***] of [***] or [***] if made by [***].

 

1.70    “Concerned Party” has the meaning set forth in Section 10.3.

 

1.71    “Confidential Information” means any and all Know-How and information of a confidential nature, whether financial, business, legal, technical, or non-technical, whether in oral, written, electronic or other form, including information and data related to a Compound, a Party, or any concepts, discoveries, inventions, data, designs or formulae in relation to this Agreement, that is disclosed, supplied or otherwise made available by or on behalf of one Party or any of its Affiliates or Sublicensees (“Disclosing Party”) to the other Party or any of its Affiliates or Sublicensees (“Receiving Party”) in connection with this Agreement, provided that Joint Know-How shall be deemed the Confidential Information of both Parties. All Confidential Information disclosed by a Party pursuant to the Mutual Confidential Disclosure Agreement between the Parties [***], including all amendments thereto (the “Prior CDA”) shall be deemed to be Confidential Information of such Party pursuant to this Agreement (with the mutual understanding and agreement that any use and disclosure thereof that is authorized under, and consistent with, Section 12 and this Agreement shall not be restricted by, or be deemed a violation of, such Prior CDA).

 

1.72    “Control”, “Controlled”, or “Controlling” means, with respect to a subject item (including any Intellectual Property Right, Know-How, Regulatory Approvals, or Regulatory Materials) (“Subject Item”), the possession (whether arising by ownership, pursuant to a license or sublicense or otherwise, other than pursuant to this Agreement) by a Party of the ability of such Party or its Affiliate to grant a license, sublicense or access to the other Party with respect to such Subject Item, as provided in this Agreement, without violating the terms of any agreement with any Third Party (and subject to Section 8.1.2), in existence as of the time such Party or its Affiliates would first be required hereunder to grant the other Party such license, sublicense, or access. Notwithstanding anything to the contrary hereunder, the PIRS Platform IP and PIRS Platform Improvement IP will not be deemed to be “Controlled” by PIRS or its Affiliates for purposes of this Agreement.

 

1.73    “Copyrights” means all copyrights, and all right, title, and interests in all copyrights, copyright registrations, and applications for copyright registration, certificates of copyright and copyrighted rights and interests throughout the world, and all right, title, and interest in related applications and registrations throughout the world.

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
 
8

 

1.74    “Cover”, “Covered” or “Covering” with reference to (a) a Patent Right, means that, in the absence of a (sub)license under, or ownership of, such Patent Right, the Research, Development, Manufacture, or Commercialization of a Compound (including the making, using, offering for sale, selling or importing thereof), with respect to a given country, would infringe a Valid Claim of such Patent Right (or, in the case of a Valid Claim that has not yet issued, would infringe such Valid Claim if it were to issue), or (b) Know-How, means that the Research, Manufacture, Development or Commercialization of a Compound incorporates, embodies or otherwise make use of such Know-How.

 

1.75    “CREATE Act” has the meaning set forth in Section 11.5.

 

1.76    “Damages” has the meaning set forth in Section 15.1.

 

1.77    “Data” means any and all non-aggregated and aggregated research, pharmacology, pre-clinical, clinical, commercial, marketing, process development, manufacturing, and other data or information, including investigator brochures and reports (both preliminary and final), statistical analyses, expert opinions and reports, and safety data, in each case generated from, or related to, Clinical Studies or non-clinical studies, research or testing specifically related or directed to a Compound.

 

1.78    “Developed in Competing Indications” or “Development in Competing Indications” has the meaning set forth in Section 4.3.6.2.

 

1.79    “Development” or “Develop” means, with respect to a Collaboration Product (and any companion diagnostic therefor), any and all pre-clinical, non-clinical and clinical research and development activities after [***] and before or after obtaining Marketing Approval for such Collaboration Product, and that are reasonably related to or leading to the development, preparation, and submission of data and information to a Regulatory Authority for the purpose of obtaining, supporting or expanding Marketing Approval or to the appropriate body for obtaining, supporting or expanding pricing approval, including all activities related to pharmacokinetic profiling, design and conduct of Clinical Studies, those Manufacturing related activities that support the Development of the applicable Collaboration Product (such as process development, scale up, test method development, formulation development, delivery system development, quality control development, and validation) and CMC activities, medical affairs, regulatory affairs, statistical analysis, report writing, and regulatory filing creation and submission (including the services of outside advisors and consultants in connection therewith).

 

1.80    “Development Costs” means, on a Collaboration Product-by-Collaboration Product basis, in the in the Field in the Territory, all (i) FTE Costs incurred for the Development and Manufacture of such Collaboration Product and (ii) Out-of-Pocket Costs incurred for the Development and Manufacture of such Collaboration Product, but excluding Commercial Manufacturing Costs. For avoidance of doubt, Development Costs shall not include Commercialization Expenses.

 

1.81    “Disclosing Party” has the meaning set forth in Section 1.71.

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
 
9

 

1.82    “Development Plan Overviews” has the meaning set forth in Section 3.3.1.

 

1.83    “Dispute” has the meaning set forth in Section 17.2.1.

 

1.84    “Divest” or “Divestiture” has the meaning set forth in Section 10.3.6.1.

 

1.85    “DMF” means a drug master file and all equivalents, and related proprietary dossiers, in any country or jurisdiction for a Collaboration Product submitted or to be submitted by a Party to Competent Authorities.

 

1.86    “Dollars” or “$” means the lawful currency of the United States.

 

1.87    “Dormant Candidate” means (i) the remaining [***] Research Candidates that have the same SGEN Building Block as a Research Candidate selected by SGEN for further Development at the [***] or (ii) a Collaboration Product deemed to be a Dormant Candidate pursuant to Section 4.3.7.

 

1.88    “Effective Date” has the meaning set forth in the preamble.

 

1.89    “EMA” means the European Medicines Agency or any successor agency thereto.

 

1.90    “EU[***] Market” means any one of [***].

 

1.91    “European Union” or “EU” means the member states of the European Union as of the Effective Date (including for the avoidance of doubt, the United Kingdom), and such other countries as may become part of the European Union after the Effective Date. For clarity, to the extent the United Kingdom and/or any other member state of the European Union would not anymore be a member of the European Union after the Effective Date, it shall still be included in this definition of EU for the purposes of this Agreement.

 

1.92    “Exclusive Product” means a Collaboration Product for which PIRS has not exercised a PIRS CoDev Option in accordance with Section 4.4.2. For avoidance of doubt, unless and until PIRS exercises a PIRS CoDev Option, a Collaboration Product shall be an Exclusive Product.

 

1.93    “Exclusive Product Royalties” has the meaning set forth in Section 7.9.

 

1.94    “Existing PIRS Patent Rights” has the meaning set forth in Section 14.2.1.3.

 

1.95    “Existing SGEN Know-How” has the meaning set forth in Section 14.3.1.2.

 

1.96    “Expedited Rules” has the meaning set forth in Section 17.2.2.1.

 

1.97    “FDA” means the United States Food and Drug Administration or any successor entity thereto.

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
 
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1.98    “Field” means, with respect to any Compound, any therapeutic, palliative, prophylactic and diagnostic use for any disease or condition.

 

1.99    “Filing Party” has the meaning set forth in Section 2.6.1.

 

1.100  Final Offer” has the meaning set forth in Section 9.2.3.

 

1.101  First Approved SGEN Antibody Target” has the meaning set forth in Section 4.1.1.2.

 

1.102  First Commercial Sale” means the first sale to a Third Party of a Collaboration Product by or on behalf of either Party or its Affiliates or Sublicensees, in a country after receipt of the applicable Marketing Approval from the Competent Authorities in that country. For the avoidance of doubt, any Compassionate Use shall not be considered a First Commercial Sale.

 

1.103  FTC” has the meaning set forth in Section 14.4.5.

 

1.104  FTE” shall mean, with respect to an applicable Compound, a full-time equivalent person-year of work engaged in the direct performance of the applicable Research, Development, Manufacturing, or Commercialization activities for such Compound, determined using an 1,800-hour annual base. In no circumstance can the work of any given person in a given year exceed one (1) FTE. For clarity, indirect personnel (including supervisors and support functions such as legal, finance or business development) shall not constitute FTEs.

 

1.105  FTE Costs” for a given period and with respect to an applicable Compound, means the product of (a) the total FTEs (proportionately, on a per-FTE basis) dedicated by a Party or its Affiliates in the particular period to the direct performance of the applicable Research, Development, Manufacturing, or Commercialization activities allocated to such Party hereunder and that are Reasonably Allocable to such Compound and (b) the FTE Rate. Notwithstanding the foregoing, FTE Costs shall not include (x) Commercial Manufacturing Costs and (y) Commercialization Expenses.

 

1.106  FTE Rate” means, unless otherwise agreed between the Parties, a rate per FTE equal to [***] Dollars ($[***]) per annum (which may be prorated on a daily or hourly basis (based on a 40-hour workweek) as necessary). The FTE Rate is “fully burdened” and will cover employee salaries, benefits, travel, and such facilities and equipment and other materials and services including ordinary laboratory and Manufacturing consumables (like, for example, growth media, but not larger out-of-pocket expenses that are used in GMP Manufacturing of a Compound, such as chromatography resins) procured from distributors of relevant products as they may use. Commencing upon the first (1st) anniversary of the Effective Date and upon every anniversary thereafter, the FTE Rate will be adjusted in accordance with the percentage change over the applicable annual period in the Consumer Price Index (U.S. Bureau of Labor Statistics for all urban consumers, U.S. city average, all items).

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
 
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1.107  Full Sublicense Agreement” means, with respect to a CoDev Product, a Partnering Agreement between a Party and a Third Party to license or sublicense, transfer, assign or sell all of its rights and obligations to Research, Develop and Commercialize such CoDev Product under this Agreement.

 

1.108  Gatekeeper” means the Third-Party gatekeeper who will check nominated SGEN Antibody Targets against the Restricted Research Candidate Target List, in accordance with Section 4.1.1.5.

 

1.109  Global Branding Strategy” has the meaning set forth in Section 6.6.

 

1.110  Global Commercialization Agreement” has the meaning set forth in Section 6.1.

 

1.111  Global Commercialization Strategy” has the meaning set forth in Section 6.1.

 

1.112  GLP Tox Study” means, with respect to a Compound, a study conducted in a species using applicable regulatory good laboratory practices for the purposes of assessing the onset, severity, and duration of toxic effects and their dose dependency with the goal of establishing a safety profile required for a regulatory submission supporting the dosing of human subjects as outlined in appropriate ICH guidance. For the avoidance of doubt, preliminary toxicology studies are not regarded as a GLP Tox Study.

 

1.113  Go/No-Go Decision Fee” means the payment amount for the Go/No-Go DP specified in Section 7.4 (i.e., [***] Dollars ($[***])).

 

1.114  Go/No-Go Decision Point” or “Go/No-Go DP” means, with respect to a Research Candidate, (i) SGEN’s written notice to PIRS within [***] days of the end of the Research Term with respect to such Research Candidate that it has selected that Research Candidate to become a Collaboration Product and (ii) SGEN’s payment of the Go/No Go Decision Fee within [***] days of providing such notice.

 

1.115  Government Authority” means any applicable government authority, court, tribunal, arbitrator, agency, department, legislative body, commission, or other government instrumentality of (a) any country, territory, nation, state, province, county, city, or other political subdivision thereof or (b) any supranational body, including any Competent Authority.

 

1.116  Health Authority Communication” means any communication from any Competent Authority that concerns significant issues, including any of the following: key product quality attributes (e.g., purity), safety findings affecting the platform (e.g., serious adverse events, emerging safety signals), clinical or non-clinical findings affecting patient safety, or lack of efficacy.

 

1.117  HSR” has the meaning set forth in Section 14.4.5.

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
 
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1.118  IND or IND/IMPD” means (a) an Investigational New Drug Application as defined in the FD&C Act and applicable regulations promulgated thereunder by the FDA, (b) the Investigational Medicinal Product Dossier in the European Union, or (c) the equivalent application to the applicable Competent Authority in any other regulatory jurisdiction, and any amendments to the foregoing (a), (b) or (c), in each case, the filing of which is necessary to initiate or conduct clinical testing of an investigational drug or biological product in humans in such jurisdiction.

 

1.119  IND/IMPD Submission” means the filing of an IND/IMPD.

 

1.120  IND Filing Party” has the meaning set forth in Section 2.7.

 

1.121  Indemnified Party” has the meaning set forth in Section 15.3.1.

 

1.122  Indemnifying Party” has the meaning set forth in Section 15.3.1.

 

1.123  Indication means a distinct type of disease or medical condition in humans to which a Collaboration Product is directed and eventually approved. To distinguish one Indication from another Indication, the two Indications [***] of the [***] is in a [***], whereas [***] to the [***] or [***] a [***] used to [***] for [***] of the [***] would [***] a [***]. Notwithstanding the foregoing, [***] shall be [***] and [***] of the [***] of the [***] of the [***].

 

1.124  Initial Compound Specific Know-How” means, on a Compound-by-Compound basis, all Know-How developed or generated by or on behalf of PIRS under the Research Candidate Plan that (a) Covers the Research, Development, Manufacture, or Commercialization of such Compound or (b) is reasonably necessary or useful for the Research, Development, Manufacture, or Commercialization of a Compound. Initial Compound Specific Know-How excludes Know-How within the SGEN Building Block IP, PIRS Building Block IP, PIRS Platform IP, or PIRS Platform Improvement IP.

 

1.125  Initial Compound Specific Patents” means, on a Compound-by-Compound basis, any Patent that includes or otherwise incorporates any Initial Compound Specific Know-How. For avoidance of doubt, Initial Compound Specific Patents excludes Patents within the SGEN Building Block IP, PIRS Building Block IP, PIRS Platform IP, or PIRS Platform Improvement IP.

 

1.126  Initial Quantities” means, for each of the [***] Research Candidates that include the same SGEN Building Block, at least [***] mg of the respective protein.

 

1.127  Initiation” or “Initiated” means, (i) with respect to a Clinical Study of a Collaboration Product, the first dosing of the first human subject pursuant to the protocol for such Clinical Study or (ii) with respect to a GLP Tox Study, the start date of the in-life phase of such GLP Tox Study.

 

1.128  Insolvent Party has the meaning set forth in Section 16.3.4.

 

1.129  Intellectual Property Rights” means, collectively, Patent Rights, Copyrights, Trademarks, designs, domain names, moral rights and all other intellectual property and proprietary rights.

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
 
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1.130  Joint Development Budget” has the meaning set forth in Section 4.4.2.2.

 

1.131  Joint Development Committee” or “JDC” has the meaning set forth in Section 3.3.

 

1.132  Joint IP” means collectively, Joint Know-How and Joint Patents, including all Intellectual Property Rights therein.

 

1.133  Joint Intellectual Property Committee” or “JIPC” has the meaning set forth in Section 3.4.

 

1.134  Joint Know-How” means the (x) Initial Compound Specific Know-How and (y) to the extent not included in (x), Know How created, invented or generated by employees, agents, or independent contractors of (i) both Parties or their Affiliates (or a Third Party acting on any of their behalf) jointly in the course of performing activities under this Agreement, (ii) PIRS or its Affiliates (or a Third Party acting on any of their behalf) in the course of performing activities under this Agreement during the Research Term, including the activities set forth in the applicable Research Candidate Plan, or (iii) either Party or its Affiliates (or a Third Party acting on any of their behalf) in the course of performing activities under this Agreement with respect to a CoDev Product, including the activities set forth in the applicable CoDev Product Plan. Joint Know-How excludes in each case Know-How within the PIRS Platform IP, PIRS Platform Improvement IP, SGEN Building Block IP or PIRS Building Block IP regardless of whether such Know-How would otherwise meet the definition of Joint Know-How hereunder.

 

1.135  Joint Patents” means the (x) Initial Compound Specific Patents and (y) to the extent not included in (x), Patents that claim an invention created, invented or generated by employees, agents, or independent contractors of (i) both Parties together or their Affiliates (or a Third Party acting on any of their behalf) in the course of performing activities under this Agreement, (ii) PIRS or its Affiliates (or a Third Party acting on any of their behalf) in the course of performing activities under this Agreement during the Research Term, including the activities set forth in the applicable Research Candidate Plan, or (iii) either Party or its Affiliates (or a Third Party acting on any of their behalf) in the course of performing activities under this Agreement with respect to a CoDev Product, including the activities set forth in the applicable CoDev Product Plan. Joint Patents excludes in each case any Patents within the PIRS Platform IP, PIRS Platform Improvement IP, SGEN Building Block IP or PIRS Building Block IP regardless of whether such Patent would otherwise meet the definition of a Joint Patent hereunder.

 

1.136  Joint Research Committee” or “JRC” has the meaning set forth in Section 3.2.

 

1.137  Joint Steering Committee” or “JSC” has the meaning set forth in Section 3.1.

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
 
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1.138  Key Data” shall consist of the following Data and information: (a) size and geography of the applicable Clinical Study, including number of sites and identification of main sites, (b) Indications and clinical settings included in such Clinical Study, including lines of therapy and key patient inclusion criteria, (c) summary of safety data from such Clinical Study, including adverse events by severity, dose level and Indication or clinical setting, (d) summary of efficacy data, including Key Endpoints by dose level and Indication or clinical setting, and (e) summary of biomarker analysis by dose level and Indication or clinical setting, including correlation of such biomarker analysis with Key Endpoints (as available at time of publication). For the purposes of this definition, “Key Endpoints” shall consist of the following endpoints: overall response rate, complete responses, partial responses if applicable, stable disease, disease control rate, minimal residual disease if applicable, progression free survival, overall survival (as available at the time of publication of Key Data), and any other efficacy endpoint that was not contemplated at the time of this Agreement but was subsequently included as a primary or secondary endpoint in such Clinical Study.

 

1.139  Know-How” means any and all ideas, concepts, designs, technical information, techniques, Data, database rights, discoveries, inventions, practices, methods, procedures, processes, methods, algorithm, knowledge, skill, experience, test data and any other information or technology, whether in written, electronic, graphic or any other form, including pharmaceutical, chemical, biological and biochemical compositions, formulations, assays, active pharmaceutical ingredients (“APIs”), molecules, samples, cell lines, journals, and laboratory notebooks.

 

1.140  Law” means any applicable national, supranational, federal, state, local or foreign law, statute, ordinance, principle of common law, or any rule, regulation, standard, judgment, order, writ, injunction, decree, arbitration award, agency requirement, license or permit of any applicable Government Authority, including any rules, regulations, guidelines, directives or other requirements of applicable Government Authorities, including good clinical practices, good laboratory practices and good manufacturing practices, as well as all anti-bribery or anti-corruption laws, as applicable.

 

1.141  Licensor” has the meaning set forth in Section 9.1.1.

 

1.142  MAA” means a Marketing Authorization Application, in relation to any Product, filed or to be filed with the EMA (or equivalent national agency), for authorization to place a medicinal product on the market in the European Union (or any other territory).

 

1.143  Manufacture” means, with respect to a Compound, all activities related to the manufacture of the Compound, including, but not limited to, manufacturing supplies for Development or Commercialization, packaging, in-process and finished product testing, release of product or any component or ingredient thereof, quality assurance and quality control activities related to manufacturing and release of product, ongoing stability tests, storage, shipment, import and export as needed, improvement of production, improvement of manufacturing processes, and regulatory activities related to any of the foregoing. For clarity, “Manufacturing” has a correlative meaning.

 

1.144  Manufacturing Party” has the meaning set forth in Section 5.3.2.1.

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
 
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1.145  Marketing Approval” means all approvals, licenses, registrations or authorizations of the Competent Authorities in a country, necessary for the commercial marketing and sale of a Collaboration Product in such country, including (a) the approval of a MAA or a BLA, and (b) a determination or decision establishing prices for a Collaboration Product that can be charged or reimbursed in regulatory jurisdictions where the applicable Competent Authorities approve or determine the price or reimbursement of pharmaceutical products.

 

1.146  Material Adverse Effect” has the meaning set forth in Section 4.4.3.6.

 

1.147  Medical Journals” has the meaning set forth in Section 13.2.1.

 

1.148  Net Income” has the meaning set forth in Exhibit 1.189, attached hereto and incorporated herein by reference.

 

1.149  Net Sales” means, in the case of sales by or for the benefit of SGEN, its Affiliates, and its Sublicensees (in each case, “Seller”) in the Territory to a Third Party, the gross amount invoiced by Seller with respect to Exclusive Products, less the following deductions solely to the extent such deduction: (i) is reasonable and customary, (ii) is included in the gross invoiced sales price for the Exclusive Product or otherwise directly paid, allowed, accrued, or incurred by the Seller with respect to the sale of such Exclusive Product (iii) is applicable and in accordance with standard allocation procedures, (iv) has not already been deducted or excluded, (v) is incurred in the ordinary course of business in type and amount consistent with good industry practice, and (vi) is determined in accordance with, and as recorded in revenues under, applicable Accounting Standards (“Permitted Deductions”):

 

1.149.1        trade, cash, [***] and [***] and allowances for Exclusive Products; price reductions (retroactive or otherwise) including [***] or otherwise [***];

 

1.149.2        any tax, tariff, duty (including custom duty) or other governmental charge (such as excise, sales or use taxes or value added tax), levied on the sale, transportation or delivery of such Exclusive Products [***] and [***] or other [***] or [***] or any [***];

 

1.149.3        customary freight, insurance, packing costs and other transportation charges added to the sales price that are incurred in delivering the Exclusive Product;

 

1.149.4        amounts repaid or credits taken by reason of rejections, defects, or returns of the Exclusive Products or because of retroactive price reductions, or due to recalls or rebates required by applicable Laws;

 

1.149.5        any fees for services provided by wholesalers and warehousing chains related to the distribution of such Exclusive Products and the portion of administrative fees paid during the relevant time period to group purchasing organizations, pharmaceutical benefit managers and/or Medicare Prescription Drug Plans relating specifically to such Exclusive Products [***] to the [***] that such [***] in [***] the [***]; and

 

1.149.6        the [***] that [***] to the [***] for the [***] which as of the [***] is [***] the [***] by the [***] and the [***] is the [***];

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
 
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1.149.7        .[***] of a [***] with the [***] to the [***].

 

For the avoidance of doubt, if a single item falls into more than one of the categories set forth in Section 1.149.1 through Section 1.149.6 above, such item may not be deducted more than once.

 

“Net Sales” shall not include any consideration received with respect to a sale, use or other disposition of any Exclusive Product in a country for purposes of conducting Clinical Studies in the course of Development of the Exclusive Product in accordance with this Agreement or as samples (reasonable in number), for Compassionate Use, or for other charitable, promotional, pre‑clinical, clinical, regulatory or governmental purposes, in each case to the extent such Exclusive Product is sold at or below cost. Notwithstanding the foregoing, the amounts invoiced by SGEN, its Affiliates, or their Sublicensees for the sale of Exclusive Products among SGEN, its Affiliates or their respective Sublicensees for resale shall not be included in the computation of Net Sales hereunder (except where such Affiliates or Sublicensees are the end users) and Net Sales shall be the gross invoice or contract price charged to the Third Party customer for that Exclusive Product in an arms’ length transaction, less the Permitted Deductions. Net Sales calculations shall be determined in accordance with Accounting Standards consistently applied throughout the organization and across all products of the entity whose sales of Exclusive Products are giving rise to Net Sales. In the case of any sale or other transfer for value, such as barter or counter-trade, of an Exclusive Product, or part thereof, other than in an arm’s length transaction exclusively for cash, Net Sales shall be calculated as above on the value of the non-cash consideration received or the fair market price (if higher) of such Exclusive Product in the country of sale or transfer, as determined in accordance with Accounting Standards consistently applied (as contemplated above).

 

In the case where an Exclusive Product is sold as part of a Combination Product in a country in the Territory, Net Sales for the Exclusive Product included in such Combination Product in such country shall be calculated as follows:

 

(i)        if the Exclusive Product is sold separately in such country and the other active ingredient or ingredients in the Combination Product are sold separately in such country, Net Sales for the Collaboration Product shall be calculated by multiplying actual Net Sales of such Combination Product in such country by the fraction A/(A+B), where A is the invoice price of the Exclusive Product when sold separately in such country and B is the total invoice price of the other active ingredient or ingredients in the Combination Product when sold separately in such country;

 

(ii)       if the Exclusive Product is sold separately in such country but the other active ingredient or ingredients in the Combination Product are not sold separately in such country, Net Sales for the Exclusive Product shall be calculated by multiplying actual Net Sales of such Combination Product in such country by the fraction A/D, where A is the invoice price of the Exclusive Product when sold separately in such country and D is the invoice price of the Combination Product in such country;

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
 
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(iii)      if the Exclusive Product is not sold separately in such country but the other active ingredient or ingredients in the Combination Product are sold separately in such country, Net Sales for the Exclusive Product shall be calculated by multiplying actual Net Sales of such Combination Product by the fraction 1 – (B/D), where B is the invoice price of the other active ingredient or ingredients in the Combination Product when sold separately in such country and D is the invoice price of the Combination Product in such country; notwithstanding the foregoing, if the other active ingredient or ingredients in the Combination Product are being sold by (a) Seller, then Net Sales for the Collaboration Product shall be calculated by multiplying actual Net Sales of such Combination Product by the fraction 1 – (E/E+1), where E is the number of other active ingredients in the Combination Product, and (b) a Third Party, where such Third Party and Seller have a written agreement on how actual Net Sales of such Combination Product shall be split between Seller and such Third Party, then Net Sales for the Collaboration Product shall be the proportion of Net Sales of the Combination Product Seller actually receives under such written agreement with such Third Party; or and each other active ingredient to the Combination Product, and shall take into account in good faith any applicable allocations and calculations that may have been made for the same period in other countries.

 

(iii)      if neither the Exclusive Product nor the other active ingredient or ingredients in the Combination Product are sold separately in such country, the Parties shall determine Net Sales for the Exclusive Product in such Combination Product by mutual agreement based on the relative contribution of the Exclusive Product and each other active ingredient to the Combination Product, and shall take into account in good faith any applicable allocations and calculations that may have been made for the same period in other countries.

 

For purposes of this definition, “Combination Product” means a product that includes at least one active ingredient other than a Collaboration Product, when a single sale or reimbursement price is set for such Combination Product.

 

1.150  Non-Competing Indication CoDev Product” has the meaning set forth in Section 4.3.6.2.

 

1.151  Non-Proposing Party” has the meaning set forth in Section 4.4.3.6.

 

1.152  Objection Period” has the meaning set forth in Section 4.4.3.6(a).

 

1.153  Ongoing Internal PIRS Program” means therapeutic programs for which PIRS has initiated lab work, including all of the following: (i) generation of the genetic constructs, (ii) production of the corresponding protein, and (iii) testing of such protein in at least one (1) in vitro or in vivo assay.

 

1.154  Option Notice” has the meaning set forth in Section 4.4.2.2.

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
 
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1.155  Out-of-Pocket Costs” means all direct project costs and expenses paid to Third Parties (or payable to Third Parties) after the Effective Date, which are specifically identifiable for or Reasonably Allocable to services or materials provided by such Third Parties directly in their performance of the Research, Development, Manufacture, or Commercialization of a Compound; such expenses to have been recorded and accrued in accordance with Accounting Standards by the applicable Party and/or its Affiliates, in each case without mark-up. For clarity, Out-of-Pocket Costs do not include capital expenditures (unless mutually agreed by the Parties), travel expenses, idle Manufacturing capacity costs, or items intended to be covered under the definition of FTE Costs. For further clarity, Out-of-Pocket Costs do include otherwise eligible costs for: contract research organizations (CROs); clinical supplies; Manufacturing process development and scale-up; test method development, qualification, and validation; formulation development; and stability testing. Notwithstanding the foregoing, Out-of-Pocket Costs shall not include (x) Commercial Manufacturing Costs and (y) Commercialization Expenses.

 

1.156  Partnering Agreement” means with respect to any Collaboration Product, an agreement with a Third Party to license or sublicense, transfer, assign or sell (in each case, including an option to do so, but excluding any assignment or sale in connection with a Change of Control of the assigning or selling Party) all or part of its rights and obligations to Research, Develop and Commercialize such Collaboration Product.

 

1.157  Party” or “Parties” has the meaning set forth in the preamble.

 

1.158  Party Supply Agreement” has the meaning set forth in Section 5.3.2.1(a).

 

1.159  Patent Right” or “Patent” means any and all patent rights and all right, title and interest in all patent applications and patents that issue from them, all letters patent or equivalent rights and applications in each case to the extent the same has not been held, by a court of competent jurisdiction, to be invalid or unenforceable in a decision from which no appeal can be taken or from which no appeal was taken within the time permitted for appeal. Patent Rights include any extension, registration, confirmation, reissue, continuation, supplementary protection certificate, divisional, continuation-in-part, re-examination, or renewal thereof or foreign counterparts of any of the foregoing.

 

1.160  Paying Party” has the meaning set forth in Section 8.4.1.

 

1.161  Permitted Deductions” has the meaning set forth in Section 1.148.

 

1.162  Pharmacovigilance Agreement” has the meaning set forth in Section 4.6.1.

 

1.163  Phase 1 Clinical Study” means a clinical study of a product in human subjects which provides for the first introduction into humans of a product, conducted in healthy volunteers or patients to obtain information on product safety, tolerability, pharmacological activity, or pharmacokinetics, as described in 21 C.F.R. § 312.21(a) (or the non-United States equivalent thereof).

 

1.164  Phase 1 Clinical Study Expansion Cohort” means the expansion of a Phase 1 Clinical Study to include additional patient(s) following the selection of a dose during the dose escalation part of the Phase 1 Clinical Study (such as a maximum tolerated dose).

 

1.165  Phase 2 Clinical Study”, “Phase 2a Clinical Study” or “Phase 2b Clinical Study” means a clinical study of a product that is prospectively designed to establish the safety, dose ranging and efficacy of a product as further defined in 21 C.F.R. § 312.21(b) (or the non-United States equivalent thereof).

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
 
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1.166  PIRS” has the meaning set forth in the preamble.

 

1.167  PIRS Anticalin Target” means [***].

 

1.168  PIRS Background Agreement” means (i) the Research and License Agreement with [***] and (ii) any agreement entered by PIRS to in-license any Intellectual Property Rights necessary or useful for the Research, Development, Manufacturing, or Commercialization of the PIRS Building Block of any Compound.

 

1.169  PIRS Building Block” means any Anticalin Protein Building Block Controlled by PIRS. For avoidance of doubt, any PIRS Building Block with the same PIRS Anticalin Target shall be deemed to be the same PIRS Building Block under this Agreement.

 

1.170  PIRS Building Block IP” means all Patent Rights and Know-How Controlled by PIRS as of the Effective Date and thereafter during the Term that Cover an Anticalin Protein Building Block individually, including all Intellectual Property Rights therein, but excluding any PIRS Platform IP and PIRS Platform Improvement IP.

 

1.171  PIRS CoDev Option” has the meaning set forth in Section 4.1.2.1.

 

1.172  PIRS CoDev Option Exercise Effective Date” has the meaning set forth in Section 4.4.2.2.

 

1.173  PIRS Collaboration Product” has the meaning set forth in Section 16.3.2.4(b).

 

1.174  PIRS Indemnitees” has the meaning set forth in Section 15.2.

 

1.175  PIRS IP” means any and all PIRS Patent Rights and the PIRS Know-How, including any Intellectual Property Rights therein. For avoidance of doubt, PIRS IP shall exclude PIRS Platform IP and PIRS Platform Improvement IP but shall include PIRS Building Block IP.

 

1.176  PIRS Know-How” means all Know-How that is Controlled by PIRS as of the Effective Date and thereafter during the Term other than pursuant to the licenses granted by SGEN under this Agreement and that (a) Covers the Research, Development, Manufacture, or Commercialization of the Compounds or (b) is reasonably necessary for the Research, Development, Manufacture, or Commercialization of the Compounds, but excludes Know-How within the PIRS Platform IP and PIRS Platform Improvement IP. PIRS Know-How shall include PIRS’ interest in Joint Know-How.

 

1.177  PIRS Partner” has the meaning set forth in Section 9.2.1.

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
 
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1.178  PIRS Patent Rights” means any Patent Rights that are Controlled by PIRS as of the Effective Date and thereafter during the Term, and that (a) Cover the Research, Development, Manufacture, or Commercialization of the Compounds (including their composition, formulation, combination, product by process, or method of use, manufacture, preparation, or administration), or (b) are reasonably necessary for the Research, Development, Manufacture, or Commercialization of the Compounds pursuant to the terms of this Agreement. PIRS Patent Rights shall include PIRS’ interest in Joint Patents that meet the above requirements. PIRS Patent Rights shall exclude Patent Rights within the PIRS Platform IP and PIRS Platform Improvement IP. The PIRS Patent Rights existing as of the Effective Date are set forth in Exhibit 1.178 and shall be updated from time to time.

 

1.179  PIRS Platform Improvement IP” means any and all Patent Rights or Know-How created, invented, or generated by or on behalf of employees, agents, or independent contractors of either Party or their Affiliates (whether alone or jointly) in the course of performing activities pursuant to this Agreement that constitutes an improvement, modification, or enhancement to, or derivative of, the PIRS Platform IP, including all Intellectual Property Rights therein. The Patent Rights within the PIRS Platform IP shall be added to Exhibit 1.179 from time to time.

 

1.180  PIRS Platform IP” means (a) the Know-How Controlled by PIRS that is necessary or useful for the practice of the PIRS Platform Technology, and (b) those Patent Rights Controlled by PIRS directed to the PIRS Platform Technology as set forth in Exhibit 1.180.

 

1.181  PIRS Platform Technology” means Anticalin Libraries, Anticalin Selection, Anticalin Expression, Anticalin Characterization, Anticalin Fusion Technology, and Anticalin Affinity Maturation methods, all to the extent Controlled by PIRS.

 

1.182  PIRS Sublicense Notice” has the meaning set forth in Section 9.2.3.

 

1.183  PIRS Territory” means (a) with respect to a CoDev Product, the United States of America, and (b) with respect to a Research Candidate, the entire world.

 

1.184  PIRS Territory Commercialization Plan” has the meaning set forth in Section 6.5.

 

1.185  Pivotal Clinical Study” means a clinical study of a product that is designed to generate statistically significant evidence of the efficacy of a product for a particular Indication or use (as well as additional safety information) and that is intended to form the primary scientific support for filing a BLA to obtain Marketing Approval to market the product (or any MAA for the non-United States equivalent thereof).

 

1.186  Platform Agreement” means that certain non-exclusive license agreement to the PIRS Platform Technology entered into between SGEN and PIRS on the date hereof.

 

1.187  Potential CoDev Product” means each Collaboration Product unless and until it would be impossible for such Collaboration Product to become a CoDev Product.

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
 
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1.188  Prior CDA” has the meaning set forth in Section 1.71.

 

1.189  Profits and Losses” means all profits and losses associated with the Commercialization of a CoDev Product. Profits and Losses will be calculated as outlined in Exhibit 1.189.

 

1.190  Promotional Materials” has the meaning set forth in Exhibit 6.2.

 

1.191  Proposed Study(ies)” has the meaning set forth in Section 4.4.3.6.

 

1.192  Proposed Terms” has the meaning set forth in Section 17.2.2.2.

 

1.193  Proposing Party” has the meaning set forth in Section 4.4.3.6.

 

1.194  Qualified Sublicensee” means any Third Party that, at the time of the PIRS Sublicense Notice [***].

 

1.195  Raw Data” has the meaning set forth in Section 2.6.4.

 

1.196  Receiving Party” has the meaning set forth in Section 1.71.

 

1.197  Reasonably Allocable” means, with respect to FTE Costs or Out-of-Pocket Costs that are associated with an applicable Compound and something else (such as another product or Compound) and where such costs are not separately accounted for or invoiced for such Compound, only the pro-rated portion of such costs that are attributable to such Compound (based on head-count, time-spent or other activity-based method) and calculated and documented in good faith using Accounting Standards.

 

1.198  Reconciliation Report” has the meaning set forth in Section 8.3.2.

 

1.199  Regulatory Approval” means any and all approvals, licenses, registrations, or authorizations by a Competent Authority necessary for the Development activities (including any IND/IMPD approval), Manufacturing activities or Commercialization activities (including, where applicable, Marketing Approval, pricing, labeling and reimbursement determinations or approvals).

 

1.200  Regulatory Exclusivity” means any exclusive marketing rights or data exclusivity rights conferred by any applicable Competent Authority, other than an issued and unexpired Patent, including any regulatory data protection exclusivity and/or any other exclusivity afforded by restrictions which prevent the granting by a Competent Authority of Regulatory Approval to market for any indication a Biosimilar.

 

1.201  Regulatory Materials” means regulatory applications, submissions, dossiers, notifications, registrations, case report forms, trial master file, DMF, common technical documents, question and answers with Competent Authorities, Marketing Approvals or other filings or communications made to or with, or other approvals granted by, a Competent Authority that are necessary or reasonably desirable in order to Develop, Manufacture or Commercialize a Collaboration Product in a particular country or regulatory jurisdiction.

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
 
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1.202  Reimbursable [***]” means [***] between [***] and the [***].

 

1.203  Research” or “Researching” means activities related to the design, discovery, generation, identification, profiling, characterization, production, process development, cell line development, pre-clinical development or non-clinical or pre-clinical studies of Research Candidates prior to [***].

 

1.204  Research Candidate” means a bispecific Antibody-Anticalin Protein fusion molecule Researched by the Parties under this Agreement. Each Research Candidate shall include [***] PIRS Building Block and [***] SGEN Building Block.

 

1.205  Research Candidate Target Combination” means the [***] Targets against which a single Research Candidate is directed.

 

1.206  Research Collaboration” has the meaning set forth in Section 4.1.

 

1.207  Research Candidate Plan” has the meaning set forth in Section 4.1.2.1.

 

1.208  Research Term” means, with respect to the [***] Research Candidates for an Approved SGEN Antibody Target, the period of time commencing on (I) the Effective Date for the First Approved SGEN Antibody Target, and (II) the date a nominated SGEN Antibody Target becomes approved (as notified by the Gatekeeper in accordance with Section 4.1.1.5(c)) for the Second and Third Approved SGEN Antibody Targets, and, continuing until the earliest of (i) with respect to (x) the First Approved SGEN Antibody Target, [***] years after SGEN’s receipt of [***] of the Research Candidate directed to the [***] PIRS Anticalin Target, or (y) the Second and Third Approved SGEN Antibody Targets, [***] years after SGEN’s receipt of [***] of such Research Candidates, respectively and (ii) with respect to all Approved SGEN Antibody Targets, the [***].

 

1.209  Restricted Research Candidate Target List” means the list of Targets that PIRS will submit to the Gatekeeper within [***] days of the Effective Date (and keep updated on an ongoing basis) that shall include (i) the Targets that PIRS would be contractually restricted from Researching, Developing, Manufacturing, or Commercializing under this Agreement, and (ii) Targets for which PIRS has a bona fide Ongoing Internal PIRS Programs, which PIRS shall provide to the Gatekeeper from time to time.

 

1.210  Royalty Bearing Net Sales” means on a country-by-country and Exclusive Product-by- Exclusive Product basis, the Net Sales generated during the Royalty Term for such Collaboration Product in such country.

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
 
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1.211  Royalty Term” means, on a country-by-country basis and Exclusive Product-by-Exclusive Product basis, the period commencing on the First Commercial Sale of such Exclusive Product in a country and ending with respect to such Exclusive Product in such country on the later of (a) [***] years thereafter in such country of sale; (b) [***] in such country of sale; or (c) expiration of the [***], in each case, Covering the import, use, sale or offer for sale (but, for clarity, not the Manufacturing) of such Exclusive Product in such country of sale, including by 35 U.S.C. § 271(g) or any foreign equivalent.

 

1.212  Rules” has the meaning set forth in Section 17.2.1.

 

1.213  Scientific Meeting” has the meaning set forth in Section 13.2.2.

 

1.214  Scientific Paper” has the meaning set forth in Section 13.2.1.

 

1.215  SEC” has the meaning set forth in Section 12.6.2.

 

1.216  Second Approved SGEN Antibody Target” has the meaning set forth in Section 4.1.1.3.

 

1.217  Seller” has the meaning set forth in Section 1.148.

 

1.218  Senior Executives” means the Chief Executive Officer of PIRS and the Chief Executive Officer of SGEN, or their duly authorized respective designees with equivalent decision-making authority with respect to matters under this Agreement.

 

1.219  Sensitive Information” has the meaning set forth in Section 10.3.6.2.

 

1.220  SGEN” has the meaning set forth in the preamble.

 

1.221  SGEN Antibody Target” means an antibody Target that SGEN has nominated and the Gatekeeper has approved for use in the collaboration in accordance with Section 4.1.1.

 

1.222  SGEN Antibody Target-Dependent T Cell Activation” is deemed to be achieved if the criteria described in Exhibit 1.222 have been met by the applicable Research Candidate.

 

1.223  SGEN Background Agreement” means any agreement entered by SGEN, whether before or after the Effective Date, to in-license any Intellectual Property Rights necessary or useful for the Research, Development, Manufacturing, or Commercialization of the SGEN Building Block of any Compound.

 

1.224  SGEN Building Block” means any Antibody Building Block Controlled by SGEN. For avoidance of doubt, any Antibody Building Block with the same SGEN Antibody Target shall be deemed to be the same SGEN Building Block under this Agreement.

 

1.225  SGEN Building Block IP” means all Patent Rights and Know-How Controlled by SGEN as of the Effective Date and thereafter during the Term that Cover an Antibody Building Block individually, including all Intellectual Property Rights therein.

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
 
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1.226  SGEN Compound Specific Patents” has the meaning set forth in Section 11.1.3.1.

 

1.227  SGEN Indemnitees” has the meaning set forth in 15.1.

 

1.228  SGEN IP” means any and all SGEN Patent Rights and SGEN Know-How, including any Intellectual Property Rights therein. For the avoidance of doubt, SGEN IP shall include SGEN Building Block IP.

 

1.229  SGEN Know-How” means all Know-How that is Controlled by SGEN as of the Effective Date and thereafter during the Term other than pursuant to the licenses granted by PIRS under this Agreement and that (a) Covers the Research, Development, Manufacture, or Commercialization of the Compounds or (b) is reasonably necessary for the Research, Development, Manufacture, or Commercialization of the Compounds. SGEN Know-How shall include SGEN’s interest in Joint Know-How.

 

1.230  SGEN Partner” has the meaning set forth in Section 9.3.1.

 

1.231  SGEN Patent Rights” means any Patent Rights that are Controlled by SGEN as of the Effective Date and thereafter during the Term, and that that (a) Cover the Research, Development, Manufacture, or Commercialization of the Compounds (including their composition, formulation, combination, product by process, or method of use, manufacture, preparation, or administration), or (b) are reasonably necessary for the Research, Development, Manufacture, or Commercialization of the Compounds pursuant to the terms of this Agreement. SGEN Patent Rights shall include SGEN’s interest in Joint Patents that meet the above requirements. The SGEN Patent Rights existing as of the Effective Date (if any) are set forth in Exhibit 1.231 and shall be updated from time to time.

 

1.232  SGEN Territory” means (a) with respect to a CoDev Product, the entire world except for the United States of America, (b) with respect to an Exclusive Product, the entire world, and (c) with respect to a Research Candidate, the entire world.

 

1.233  SGEN Territory Commercialization Plan” has the meaning set forth in Section 6.4.

 

1.234  Shared Costs” means (a) Development Costs, (b) Commercial Manufacturing Costs, (c) Commercialization Expenses, and (d) any Third Party license payments in accordance with Section 8.1.2.2(b); in each case for (a) through (d) as such costs are incurred by either Party or their Affiliates in connection with a Collaboration Product on or following the date that PIRS receives the Option Notice for such Collaboration Product in accordance with the applicable CoDev Product Plan and Joint Development Budget for such Collaboration Product, subject to [***] as set forth in Section 9.1.2. For clarity, Shared Costs shall not include costs incurred by a Party in the performance of any Unsponsored Work.

 

1.235  Shared Cost Report” has the meaning set forth in Section 8.3.1.

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
 
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1.236  Significant Study” has the meaning set forth in Section 4.3.7.

 

1.237  Subject Item” has the meaning set forth in Section 1.72.

 

1.238  Sublicensee” means a Third Party which is a licensee or sublicensee of the rights granted to SGEN or PIRS, as applicable, under this Agreement, in accordance with the terms and conditions of this Agreement. For sake of clarity, Sublicensees do not include (a) wholesalers, Distributors or similar entities performing similar functions, even if such Third Party is granted a limited right to promote and resell a Collaboration Product sold to it and (b) Affiliates of the Party that has been granted the license (i.e., SGEN or PIRS, as applicable). For avoidance of doubt, neither Party shall be permitted to sublicense their rights under this Agreement with respect to a Compound until after achievement of the [***] with respect to such Compound.

 

1.239  Sublicensing Income” means all consideration and payments, including without limitation, [***]. Notwithstanding the foregoing, Sublicensing Income shall not include amounts such Party receives from a Third Party for the purchase of an equity interest in such Party generally (for clarity, an equity investment that is not solely related to a Compound(s)), [***]. For avoidance of doubt, Sublicensing Income shall also include the [***]. For the purposes of this Section 1.239, “[***]” means the [***].

 

1.240  Supplied Party” has the meaning set forth in Section 5.3.2.1.

 

1.241  Supply Agreement” means a Party Supply Agreement or a CMO Supply Agreement.

 

1.242  Support Memorandum” has the meaning set forth in Section 17.2.2.2.

 

1.243  Target” means the biological target of a pharmacologically active drug compound.

 

1.244  Term” has the meaning set forth in Section 16.1.

 

1.245  Territory” means either the SGEN Territory or the PIRS Territory, as applicable given the context of the use of the term.

 

1.246  Therapeutically Relevant” means that the modulation of a given Target is reasonably believed to be responsible, in whole or in part, for a specific aspect of the safety or efficacy of such product and would not, for example, include modulation of a given Target solely to achieve or improve a pharmacokinetic attribute, such as [***].

 

1.247  Third Approved SGEN Antibody Target” has the meaning set forth in Section 4.1.1.3.

 

1.248  Third Party” means any person or entity other than PIRS, SGEN, and their respective Affiliates.

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
 
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1.249  Third Party Claim” has the meaning set forth in Section 15.1.

 

1.250  Third Party License” has the meaning set forth in Section 8.1.2.

 

1.251  Trademarks” means all trademarks, service marks, trade names, rights in trade dress, logos, symbols, brand names and all trademark rights and interests throughout the world, and all right, title and interest in related applications and registrations throughout the world under common law, state law, federal law, or laws of foreign countries.

 

1.252  Transferring Party” has the meaning set forth in Section 2.5.2.

 

1.253  Unsponsored Work” has the meaning set forth in Section 4.4.3.6(a).

 

1.254  Valid Claim” means (a) a claim of an issued and unexpired Patent Right, which claim has not been revoked or held invalid or unenforceable by a final court without the possibility of appeal or other government agency of competent jurisdiction by a final determination without the possibility of appeal or has not been held (through a final determination without the possibility of appeal) or admitted to be invalid or unenforceable through re-examination or disclaimer, reissue, opposition procedure, nullity suit or otherwise by a final determination without the possibility of appeal or (b) a claim of a pending Patent Right application that has not been abandoned, finally rejected or expired without the possibility of appeal or refiling; provided, however, that Valid Claim will exclude any such pending claim in an application that has not been granted within [***] years following the earliest priority filing date for such application, excluding, however, any pending Patent Right that does not have a reasonable bona fide basis for patentability (such reasonable bona fide basis to be determined by an outside counsel selected in good faith by the Parties, in the event that the Parties disagree as to whether there is a reasonable bona fide basis for patentability for such a claim). For purposes of the definition of Valid Claim, “determination” means a determination with respect to a Patent Right that would prevent a Party from enforcing or continuing to enforce such Patent Right. To the extent that any Patent Right is issued, restored, or otherwise deemed valid and enforceable, then it once again shall be considered a Valid Claim as from the date of such issuance, restoration, or determination.

 

1.255  Withholding Taxes” has the meaning set forth in Section 8.4.3.

 

1.256  Working Group” has the meaning set forth in Section 3.9.

 

2.

License Grants

 

2.1      Collaboration Product Licenses. Subject to the terms and conditions set forth in this Agreement, on a Collaboration Product-by-Collaboration Product basis (unless and until PIRS exercises a PIRS CoDev Option for such Collaboration Product pursuant to Section 4.4.2, in which case such Collaboration Product would become a CoDev Product), PIRS hereby grants to SGEN an exclusive (even as to PIRS) sublicensable (subject to Section 2.4), non-transferable (except as set forth in Section 17.4), right and license under the PIRS IP to Develop, Manufacture, have Manufactured, and Commercialize such Collaboration Product in the Territory and in the Field. For clarity, the license grant to SGEN under this Section 2.1 with respect to any PIRS Building Block IP within the PIRS IP is exclusive solely with respect to the applicable Collaboration Product, and no other right or license is granted to SGEN under such PIRS Building Block IP (e.g., to develop and commercialize the applicable PIRS Building Block as a standalone product or as a component of an unrelated product).

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
 
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2.2      Research Candidate Research Licenses.

 

2.2.1    License Grant to SGEN. Subject to the terms and conditions set forth in this Agreement, on an Research Candidate-by-Research Candidate basis, during the Research Term for such Research Candidate, PIRS hereby grants to SGEN a co-exclusive (with PIRS), non-sublicensable, non-transferable (except as set forth in Section 17.4), right and license under the PIRS IP for the Research and Manufacturing activities in relation to such Research Candidate to be performed by SGEN (alone or jointly with PIRS) under the applicable Research Candidate Plan in the Field and anywhere in the Territory. For clarity, the license grant to SGEN under this Section 2.2.1 with respect to any PIRS Building Block IP within the PIRS IP is co-exclusive (with PIRS) solely with respect to the applicable Research Candidate, and no other right or license is granted to SGEN under such PIRS Building Block IP (e.g., to develop and commercialize the applicable PIRS Building Block as a standalone product or as a component of an unrelated product).

 

2.2.2    License Grant to PIRS. Subject to the terms and conditions set forth in this Agreement, on an Research Candidate-by-Research Candidate basis, during the Research Term for such Research Candidate, SGEN hereby grants to PIRS a co-exclusive (with SGEN), non-sublicensable, non-transferable (except as set forth in Section 17.4), right and license under the SGEN IP for the Research and Manufacturing activities in relation to such Research Candidate to be performed by PIRS (alone or jointly with SGEN) under the applicable Research Candidate Plan in the Field and anywhere in the Territory. For clarity, the license grant to PIRS under this Section 2.2.2 with respect to any SGEN Building Block IP within the SGEN IP is co-exclusive (with SGEN) solely with respect to the applicable Research Candidate, and no other right or license is granted to PIRS under such SGEN Building Block IP (e.g., to develop and commercialize the applicable SGEN Building Block as a standalone product or as a component of an unrelated product).

 

2.3      CoDev Product Licenses.

 

2.3.1    License Grant to SGEN. Subject to the terms and conditions of this Agreement, PIRS hereby grants to SGEN, commencing on the PIRS CoDev Option Exercise Effective Date, a co-exclusive (with PIRS), sublicensable (subject to Section 2.4 below), non-transferable (except as set forth in Section 17.4), right and license under the PIRS IP to Develop (subject to Section 4), Manufacture and have Manufactured (subject to Section 5) and Commercialize (subject to Section 6) a CoDev Product in the Field and anywhere in the world. For clarity, the license grant to SGEN under this Section 2.3.1 with respect to any PIRS Building Block IP within the PIRS IP is co-exclusive (with PIRS) solely with respect to the applicable CoDev Product, and no other right or license is granted to SGEN under such PIRS Building Block IP (e.g., to develop and commercialize the applicable PIRS Building Block as a standalone product or as a component of an unrelated product). For avoidance of doubt, upon PIRS CoDev Option Exercise Effective Date the applicable Collaboration Product shall be considered a CoDev Product and the exclusive license under Section 2.1 with respect to such CoDev Product shall terminate.

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
 
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2.3.2    License Grant to PIRS. Subject to the terms and conditions of this Agreement, SGEN hereby grants to PIRS, commencing on PIRS CoDev Option Exercise Effective Date, a co-exclusive (with SGEN), sublicensable (subject to Section 2.4 below), non-transferable (except as set forth in Section 17.4), right and license under the SGEN IP to Develop (subject to Section 4), Manufacture and have Manufactured (subject to Section 5) and Commercialize (subject to Section 6) a CoDev Product in the Field and anywhere in the world. For clarity, the license grant to PIRS under this Section 2.3.2 with respect to any SGEN Building Block IP within the SGEN IP is co-exclusive (with SGEN) solely with respect to the applicable CoDev Product, and no other right or license is granted to PIRS under such SGEN Building Block IP (e.g., to develop and commercialize the applicable SGEN Building Block as a standalone product or as a component of an unrelated product). For avoidance of doubt, upon PIRS CoDev Option Exercise Effective Date the applicable Collaboration Product shall be considered a CoDev Product and the exclusive license under Section 2.1 with respect to such CoDev Product shall terminate.

 

2.4      Sublicense Rights. SGEN or PIRS may sublicense (through multiple tiers) all or part of the rights and licenses granted to them under this Section 2 to a Third Party solely in accordance with the terms set forth in Section 9.

 

2.5      Know-How Transfer & Information Sharing.

 

2.5.1   Electronic Data Exchange. Promptly following the Effective Date, the Parties will establish a secure electronic data exchange system through which the Parties may share Know-How to be exchanged by the Parties under this Agreement, including the Know-How transfer obligations of this Section 2.5.

 

2.5.2   Research Term. Within [***] days following the Effective Date (and for SGEN, within [***] days of approval of an SGEN Antibody Target under Section 4.1.1) or any other schedule unanimously agreed upon by the Parties in a Research Candidate Plan, [***] that [***] or [***] a [***] been [***]. For avoidance of doubt and subject to Section 2.6 below [***] Section 2.5.2, [***].

 

2.5.3   Ongoing Transfer & Information Sharing.

 

2.5.3.1    Research Candidates. With respect to each Research Candidate, during the Research Term with respect to such Research Candidate, the Transferring Party shall promptly [***] to the [***] that is [***].

 

2.5.3.2    Potential CoDev Products. With respect to each Potential CoDev Product, SGEN will provide PIRS with Development Plan Overviews as set forth in Section 3.3.1, and [***], CMC [***]. In addition, at least [***] months in advance (as determined by SGEN in good faith) of [***] for a [***], SGEN shall provide a [***] of all Reimbursable [***] to date and an [***] of future Reimbursable [***] through the estimated PIRS CoDev Option Exercise Effective Date for such Potential CoDev Product.

 

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II) IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
 
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2.5.3.3    CoDev Products. With respect to each CoDev Product, to the extent not already provided, a Party shall make available to the other Party as soon as practicable all material Know-How (or, at the request of the other Party, any other Know-How) Controlled by such Party at the time of the PIRS CoDev Option Exercise Effective Date and that comes into existence from time to time thereafter that is relevant to the continued Development, Manufacturing or Commercialization of the CoDev Product, including Know-How generated pursuant to the applicable CoDev Product Plan or under any Unsponsored Work in accordance with Section 4.4.3.

 

2.6      CoDev Product Rights of Reference; Use of Data.

 

2.6.1   Where applicable, each Party (the “Beneficiary”) shall have the right to cross-reference, file or incorporate by reference in its respective Territory any Regulatory Materials (and any Data contained therein) filed or owned by the other Party or its Sublicensees (the “Filing Party”) for a CoDev Product, for use by the Beneficiary (and its Affiliates and Sublicensees) solely in connection therewith. The Filing Party shall, on written request by the Beneficiary, provide to the Beneficiary, and to any specified Competent Authority, a letter, in the form reasonably required by the Beneficiary, acknowledging that the Beneficiary (and its Affiliates and Sublicensees) has the above rights with respect to any such Regulatory Materials.

 

2.6.2    The Filing Party will provide, and cause its Affiliates and Sublicensees to provide, reasonable cooperation to the Beneficiary to affect the foregoing rights (including permitting the Beneficiary (and its Affiliates’ and Sublicensees’) and/or any relevant Competent Authority to inspect any such Regulatory Materials upon rea