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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-K
(Mark One)
☒
Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the fiscal year ended
December 31, 2021
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
 
001-41058
VAXXINITY, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
86-2083865
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)
1717 Main St
.,
Ste 3388
Dallas
,
TX
75201
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code:
(
254
)
244-5739
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of exchange on which registered
Class A Common Stock, par value $0.0001 per
share
VAXX
The
Nasdaq
 
Global Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
☐
No
☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
☐
No
☒
Indicate by
 
check mark
 
whether the
 
registrant (1) has
 
filed all
 
reports required
 
to be
 
filed by
 
Section 13 or
 
15(d) of the
 
Securities Exchange
 
Act of
1934 during the preceding 12 months (or for such shorter
 
period that the registrant was required to file such
 
reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes
☒
 
No
☐
Indicate by check mark
 
whether the registrant has
 
submitted electronically every Interactive
 
Data File required to
 
be submitted pursuant to
 
Rule 405
of Regulation S-T (§ 232.405 of
 
this chapter) during the preceding
 
12 months (or for such shorter period
 
that the registrant was required
 
to submit such
files).
Yes
☒
 
No
☐
Indicate by check mark whether
 
the registrant is a
 
large accelerated filer,
 
an accelerated filer,
 
a non-accelerated filer,
 
a smaller reporting company or
an emerging growth company. See the definitions of “large accelerated filer,”
 
“accelerated filer,” “smaller reporting company” and "emerging growth
company" in Rule 12b-2 of the Exchange Act.
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report.
☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
☐
 
No
☒
The registrant was not a public company as of June 30, 2021, the last business day of its most recently completed second fiscal quarter,
 
and therefore,
cannot calculate the aggregate market value
 
of its voting and non-voting common equity
 
held by non-affiliates as of such
 
date. The registrant’s Class
A common stock began trading on the Nasdaq Global Market on November 11, 2021. As of March 24, 2022, the registrant had
111,966,892
 
shares of
$0.0001 par value Class A common stock outstanding and
13,874,132
 
shares of $0.0001 par value Class B common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of
 
the following document
 
are incorporated
 
by reference in
 
Part III of this
 
Report: the
 
registrant’s definitive
 
proxy statement relating
 
to its
2022 Annual Meeting of
 
Shareholders. We
 
currently anticipate that our
 
definitive proxy statement will
 
be filed with the
 
SEC not later than
 
120 days
after December 31, 2021, pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended.
 
2
PART
 
I
Unless otherwise indicated
 
in this report,
 
“Vaxxinity
 
,” “we,” “us,”
 
“our,” and similar terms
 
refer to Vaxxinity,
 
Inc. and our
 
consolidated
subsidiaries.
SPECIAL NOTE REGARDING FORWARD
 
-LOOKING STATEMENTS
This Annual Report
 
on Form 10-K
 
for the
 
year ended December
 
31, 2021 (“Report”)
 
contains forward-looking statements.
 
Forward-
looking
 
statements
 
are
 
neither
 
historical
 
facts
 
nor
 
assurances of
 
future
 
performance.
 
Instead,
 
they
 
are
 
based
 
on
 
our
 
current
 
beliefs,
expectations and assumptions
 
regarding the future
 
of our business,
 
future plans and
 
strategies and other
 
future conditions. In
 
some cases,
you can identify forward-looking
 
statements because they contain
 
words such as “anticipate,”
 
“believe,” “estimate,” “expect,” “intend,”
“may,” “predict,” “project,” “target,” “potential,” “seek,” “will,” “would,” “could,” “should,” “continue,” “contemplate,” “plan,” other
words and terms of similar meaning and the negative of these words or similar terms.
Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control.
 
We
caution you
 
that forward-looking
 
statements are
 
not guarantees
 
of future
 
performance or
 
outcomes and
 
that actual
 
performance and
outcomes may differ
 
materially from those
 
made in or
 
suggested by the
 
forward-looking statements
 
contained in this
 
Report. In addition,
even
 
if
 
our results
 
of
 
operations, financial
 
condition
 
and cash
 
flows,
 
and
 
the development
 
of
 
the
 
markets in
 
which we
 
operate,
 
are
consistent with the forward-looking statements contained in this Report, those results or developments may not be indicative
 
of results
or developments in subsequent periods.
 
New factors emerge from time to
 
time that may cause our
 
business not to develop as
 
we expect,
and it is not possible for us to predict all
 
of them. Factors that could cause actual results and outcomes to differ
 
from those reflected in
forward-looking statements include, among others, the following:
•
 
the prospects of UB-612
 
and other product
 
candidates, including the timing
 
of data from our
 
clinical trials for UB-612
and other product candidates and our ability to obtain and maintain regulatory approval for our product candidates;
•
 
our ability to develop and commercialize new products and product candidates;
•
 
our ability to leverage our Vaxxine Platform;
•
 
the rate and degree of market acceptance of our products and product candidates;
•
 
our
 
status
 
as
 
a
 
clinical-stage
 
company
 
and
 
estimates
 
of
 
our
 
addressable
 
market,
 
market
 
growth,
 
future
 
revenue,
expenses, capital requirements and our needs for additional financing;
•
 
our ability
 
to comply
 
with multiple
 
legal and
 
regulatory systems
 
relating to
 
privacy,
 
tax, anti-corruption
 
and other
applicable laws;
•
 
our ability to hire and retain key personnel and to manage our future growth effectively;
•
 
competitive companies and technologies and our industry and our ability to compete;
•
 
our and our
 
collaborators’, including United
 
Biomedical’s (“UBI”), ability and
 
willingness to obtain,
 
maintain, defend
and enforce our
 
intellectual property
 
protection for our
 
proprietary and collaborative
 
product candidates,
 
and the scope
of such protection;
•
 
the
 
performance
 
of
 
third
 
party
 
suppliers
 
and
 
manufacturers
 
and
 
our
 
ability
 
to
 
find
 
additional
 
suppliers
 
and
manufacturers;
•
 
our ability and the potential to successfully manufacture our product candidates for pre-clinical use, for clinical trials
and on a larger scale for commercial use, if approved;
•
 
the
 
ability
 
and
 
willingness
 
of
 
our
 
third-party
 
collaborators,
 
including
 
UBI,
 
to
 
continue
 
research
 
and
 
development
activities relating to our product candidates;
•
 
general economic,
 
political, demographic
 
and business conditions
 
in the United
 
States, Taiwan and other
 
jurisdictions;
•
 
the
 
potential
 
effects
 
of
 
government
 
regulation,
 
including
 
regulatory
 
developments
 
in
 
the
 
United
 
States
 
and
 
other
jurisdictions;
•
 
ability to obtain additional financing in future offerings;
 
3
•
 
expectations about market trends; and
•
 
the
 
effects
 
of
 
the
 
Russia-Ukraine
 
conflict
 
and
 
the
 
COVID-19
 
pandemic
 
on
 
business
 
operations,
 
the
 
initiation,
development and operation of our clinical trials and patient enrollment of our clinical trials.
We discuss many of
 
these factors
 
in greater
 
detail under
 
Item 1A. “Risk
 
Factors.” These
 
risk factors are
 
not exhaustive
 
and other sections
of
 
this
 
report
 
may
 
include
 
additional
 
factors
 
which
 
could
 
adversely
 
impact
 
our
 
business
 
and
 
financial
 
performance.
 
Given
 
these
uncertainties, you should not place undue reliance on these forward-looking statements.
You
 
should read
 
this Report
 
and the
 
documents that
 
we reference
 
in this
 
Report and
 
have filed
 
as exhibits
 
completely and
 
with the
understanding that
 
our actual
 
future results
 
may be
 
materially different
 
from what
 
we expect.
 
We
 
qualify all
 
of the
 
forward- looking
statements in this Report by these cautionary statements. Except as required by law, we undertake no obligation to publicly update any
forward-looking statements, whether as a result of new information, future events or otherwise.
 
Item 1. Business.
Overview
We
 
are a purpose-driven biotechnology company
 
committed to democratizing healthcare across the
 
globe. Our vision is
 
to disrupt the
existing treatment
 
paradigm for chronic
 
diseases, increasingly
 
dominated by
 
drugs, particularly monoclonal
 
antibodies (“mAbs”), which
suffer
 
from
 
prohibitive
 
costs
 
and
 
cumbersome
 
administration.
 
We
 
believe
 
our
 
synthetic
 
peptide
 
vaccine
 
platform
 
(“Vaxxine
Platform”) has the potential
 
to enable
 
a new
 
class of
 
therapeutics that will
 
improve the quality
 
and convenience of
 
care, reduce
 
costs
and increase access to
 
treatments for a wide
 
range of indications. Our
 
Vaxxine
 
Platform is designed to
 
harness the immune system
 
to
convert the
 
body into
 
its own
 
“drug factory,”
 
stimulating the
 
production of
 
antibodies with
 
a therapeutic
 
or protective
 
effect. While
traditional vaccines have been
 
able to leverage this
 
approach against infectious diseases, they
 
have historically been unable
 
to resolve
key challenges in the fight
 
against chronic diseases. We
 
believe our Vaxxine
 
Platform has the potential to
 
overcome these challenges,
and has the potential
 
to bring the efficiency
 
of vaccines to a
 
whole new class of
 
medical conditions. Specifically,
 
our technology uses
synthetic peptides to
 
mimic and optimally
 
combine biological epitopes
 
in order to
 
selectively activate the
 
immune system, producing
antibodies against only the desired
 
targets, including self- antigens, making
 
possible the safe and effective treatment
 
of chronic diseases
by vaccines. The modular
 
and synthetic nature of
 
our Vaxxine Platform generally provides significant speed and
 
efficiency in candidate
development and has
 
generated multiple product
 
candidates that we
 
are designing to
 
have safety and
 
efficacy equal to
 
or greater than
the
 
standard-of-care treatments
 
for many
 
chronic diseases,
 
with
 
more convenient
 
administration and
 
meaningfully lower
 
costs. Our
current pipeline
 
consists of
 
five chronic
 
disease product
 
candidates from
 
early to
 
late-stage development
 
across multiple
 
therapeutic
areas, including
 
Alzheimer’s Disease
 
(“AD”), Parkinson’s Disease
 
(“PD”), migraine
 
and hypercholesterolemia.
 
Additionally, we believe
our Vaxxine
 
Platform may be used to disrupt the treatment paradigm for a
 
wide range of other chronic diseases, including any that are
or could
 
potentially be
 
successfully treated
 
by mAbs.
 
We
 
also will
 
opportunistically pursue
 
infectious disease
 
treatments. When
 
the
COVID-19
 
pandemic
 
struck
 
the
 
world
 
in
 
March
 
2020,
 
we
 
quickly
 
reallocated
 
our
 
resources
 
to
 
develop
 
vaccine
 
candidates
 
for
 
the
condition. We
 
have assembled an
 
industry-leading team with
 
extensive experience developing
 
and commercializing successful
 
drugs
that is
 
committed to
 
realizing our
 
mission of
 
democratizing healthcare.
 
Our website
 
address is
 
www.vaxxinity.com.
 
The information
contained on, or that can be accessed through, our website is not part of, and is not incorporated into, this Report.
Limitations of the Current Healthcare Paradigm
The current healthcare paradigm favors the development of drugs that are primarily intended for
 
the U.S. market, for niche indications
and
 
for
 
treatment
 
of
 
disease
 
rather
 
than
 
prevention.
 
Furthermore,
 
these
 
drugs
 
are
 
expected
 
to
 
be
 
sold
 
at
 
price
 
points
 
that
 
are
 
only
accessible to healthcare systems
 
in developed countries. One
 
class of drugs in
 
particular exemplifies the current
 
environment: biologics,
particularly mAbs. In 2019,
 
biologics represented eight
 
of the ten top
 
selling drugs in the
 
United States, of which
 
seven were mAbs. The
global
 
market
 
for
 
mAbs
 
totaled
 
approximately
 
$163 billion
 
in
 
2019,
 
representing
 
approximately
 
70%
 
of
 
the
 
total
 
sales
 
for
 
all
biopharmaceutical products.
While mAbs can provide life-altering care with generally favorable safety characteristics and significant health benefits
 
for the patients
who receive them, regular
 
in-office transfusions and annual
 
treatment costs, which can
 
exceed hundreds of thousands
 
of dollars, present
challenges to both patients and payors. These price
 
and administration hurdles cause mAb treatments to be available
 
to only a fraction
of the population who could benefit from them. Furthermore, mAbs are often restricted
 
to moderate to severe disease and to later lines
of treatment due to their high cost. Based on internal estimates, less
 
than 1% of the worldwide population is on mAbs. Meanwhile, the
alternative to
 
mAbs treatments
 
tends to
 
be small
 
molecules, which
 
are accessible
 
to most
 
patients, but
 
are often
 
comparatively less
effective with
 
more significant
 
side effects.
 
Collectively,
 
this perpetuates
 
a profound
 
inequity in
 
healthcare access,
 
domestically but
even more so globally, that we believe represents a tremendous social and market opportunity.
4
Our Solution
Monoclonal antibodies are developed, produced and purified outside the body and then transfused into
 
the patient on a regular basis, as
frequently as bi-weekly. Therefore,
 
mAbs are inherently
 
less efficient than
 
vaccines, which instead
 
stimulate antibody
 
production within
the patient’s immune system, requiring both less active material and less frequent treatments. However, while traditional vaccines have
historically been
 
successful addressing
 
infectious diseases,
 
previous attempts
 
to utilize
 
vaccines to
 
address chronic
 
disease have
 
not
achieved both acceptable
 
safety and efficacy. This limitation is
 
driven by a traditional
 
vaccine’s inability to either stimulate
 
the requisite
antibody response
 
against harmful
 
self-antigens, that
 
is, break
 
immune tolerance,
 
or produce
 
acceptable levels
 
of reactogenicity,
 
the
physical manifestation of
 
the immune response
 
to vaccination. Our
 
Vaxxin
 
e
 
Platform technology contains
 
modular components custom-
designed to
 
mimic select
 
biology and
 
activate the
 
immune system, enabling
 
our product
 
candidates to
 
break immune
 
tolerance when
targeting self- antigens, a property observed across multiple clinical and pre-clinical studies. Our Vaxxine Platform depends heavily on
intellectual property licensed
 
from UBI and
 
its affiliates, a
 
related party and
 
a commercial partner
 
for us, who
 
first developed the
 
peptide
vaccine technology utilized
 
by our Vaxxine Platform. The formulation
 
of peptide-based medicines
 
is also complex,
 
requiring significant
expertise from UBI, its affiliates and our other contract manufacturers to produce our product candidates.
We
 
believe
 
our
 
Vaxxine
 
Platform
 
has
 
the
 
potential
 
to
 
generate
 
product
 
candidates
 
with
 
attributes
 
that
 
collectively
 
offer
 
significant
advantages over both mAbs and small molecule therapeutics:
•
Cost
:
 
Monoclonal
 
antibodies
 
require
 
costly
 
and
 
complex
 
biological
 
manufacturing
 
processes.
 
Our
manufacturing process
 
is chemically
 
based and
 
highly scalable
 
and requires
 
lower capital expenditures.
 
In addition, we
 
designed our
product
 
candidates to
 
generate
 
antibody
 
production
 
in
 
the
 
body,
 
thus
 
requiring
 
meaningfully
 
less
 
drug
 
substance
 
relative
 
to
 
mAbs,
leading to commensurately lower costs.
•
Administration
:
 
Our
 
product
 
candidates
 
are
 
designed
 
to
 
be
 
injected
 
in
 
quarterly
 
or
 
longer
 
intervals
 
via
intramuscular injection similar to a flu shot. We believe this offers
 
considerable convenience compared to mAbs, which can require up
to bi-weekly dosing via intravenous infusion or subcutaneous injections, and small molecules, which often require daily dosing.
•
Efficacy
: In
 
our clinical
 
trials conducted
 
to date,
 
our product
 
candidates have
 
yielded high
 
response rates
(95% or above at target dose levels)
 
for UB-311, UB-312 and UB-612,
 
high target-specific antibodies against self-antigens (as seen in
UB-311 and UB-312
 
clinical trials) and long
 
durations of action for
 
UB-311 (based on
 
titer levels remaining elevated
 
between doses)
and UB-612 (based
 
on half-life). See
 
our descriptions of
 
these clinical trials
 
under “—Our Product
 
Candidates.” We
 
also believe that
the improved convenience of our product candidates as compared to mAbs has the potential to lead to increased adherence by patients.
Furthermore, our
 
Vaxxine
 
Platform enables
 
the combining
 
of target
 
antigens into
 
a single
 
formulation. For
 
indications that
 
could be
treated more effectively with a multivalent approach, we believe our Vaxxine Platform would have an advantage over other modalities.
Finally,
 
because our
 
Vaxxine
 
Platform is
 
designed to
 
elicit endogenous
 
antibodies, we
 
believe our
 
product candidates
 
may lessen
 
or
avoid altogether the phenomenon of anti-drug antibodies which has limited the efficacy of certain mAbs over time.
•
Safety
:
 
Based
 
on
 
our
 
clinical
 
trials
 
to
 
date,
 
our
 
product
 
candidates
 
have
 
been
 
well
 
tolerated,
 
with
 
safety
profiles comparable to placebo.
 
We
 
aim to offer
 
product candidates with
 
safety profiles at least
 
comparable to the
 
competing mAb or
small molecule alternative for the relevant disease.
vaxxq410kp6i0.jpg
5
Our Pipeline
The following chart reflects our current product candidate pipeline:
As used in the chart above, “IND” signifies a program has begun investigational new drug (“IND”)-enabling studies.
Our pipeline
 
consists of five
 
lead programs focused
 
on chronic
 
disease, particularly neurodegenerative
 
disorders, in
 
addition to other
neurology and cardiovascular indications.
Neurodegenerative Disease Programs:
•
UB-311
: Targets toxic forms of aggregated amyloid-b
 
(“Ab”) in the brain to
 
fight AD. Phase 1,
 
Phase 2a and
Phase 2a
 
Long Term
 
Extension (“LTE”)
 
trials have
 
shown UB-311
 
to be
 
well tolerated
 
in mild-to-moderate
 
AD subjects
 
over three
years of
 
repeat dosing,
 
with a
 
safety profile
 
comparable to
 
placebo, with
 
no cases
 
of amyloid-
 
related imaging
 
abnormalities-edema
(“ARIA-E”) observed in the Phase 2a trial, and immunogenic, with a high responder rate and antibodies that bind to the desired target.
We expect to initiate a Phase 2b early AD efficacy trial in the second half of 2022.
•
UB-312
: Targets toxic forms of aggregated α-synuclein in the brain to fight PD and
 
other synucleinopathies,
such as Lewy body dementia (“LBD”)
 
and multiple system atrophy (“MSA”). The first part of a Phase 1 trial in
 
healthy volunteers has
shown UB-312
 
to be
 
well tolerated,
 
with no
 
significant safety
 
findings, and
 
immunogenic, with
 
a high
 
responder rate
 
and antibodies
that cross the
 
blood-brain barrier (“BBB”). No
 
serious adverse events
 
were observed in
 
Part A of
 
the Phase 1
 
trial. We
 
have initiated
the second part of this Phase
 
1 trial in PD subjects,
 
and anticipate the completion of an end-of-treatment
 
analysis in the second half of
2022.
•
Anti-tau
:
 
We
 
are
 
developing
 
an
 
anti-tau
 
product
 
candidate
 
that
 
has
 
the
 
potential
 
to
 
address
 
multiple
neurodegenerative
 
conditions,
 
including
 
AD,
 
by
 
targeting
 
abnormal
 
tau
 
proteins
 
alone
 
and
 
in
 
potential
 
combination
 
with
 
other
pathological proteins such as Aβ
 
to combat multiple pathological processes
 
at once. We
 
expect to identify a
 
lead product candidate in
the next two years.
Next Wave Chronic
 
Disease Programs:
•
UB-313
:
 
Targets
 
Calcitonin
 
Gene-Related
 
Peptide
 
(“CGRP”) to
 
fight
 
migraines.
 
We
 
have
 
initiated
 
IND-
enabling studies and expect to begin a first-in-human Phase 1 clinical trial in 2022.
•
Anti-PCSK9
: Targets proprotein convertase subtilisin/kexin type 9 serine protease (“PCSK9”) to lower low-
density
 
lipoprotein
 
(“LDL”) cholesterol
 
and
 
reduce
 
the
 
risk
 
of
 
cardiac
 
events.
 
We
 
expect
 
to
 
initiate
 
IND-enabling
 
studies
 
for
 
this
program in 2022.
Given the global COVID-19 pandemic
 
and our Vaxxine
 
Platform’s applicability to
 
infectious disease, we also have
 
advanced product
candidates that address SARS-CoV-2.
6
COVID-19
•
UB-612
:
 
Employs
 
a
 
“multitope”
 
approach
 
to
 
neutralizing
 
the
 
SARS-CoV-2
 
virus,
 
meaning
 
the
 
product
candidate is designed to activate both antibody and cellular immunity against multiple viral epitopes.
 
Phase 1 and Phase 2 trials of UB-
612 have shown
 
UB-612 to be
 
well tolerated, with
 
no significant safety
 
findings to date
 
(over 7,500 doses
 
have been administered
 
to
over 3,750 subjects).
 
No serious adverse
 
events were observed in
 
the Phase 1
 
trial. In the
 
Phase 2 trial,
 
twenty serious adverse
 
events
were observed
 
through interim
 
analysis. Only
 
one led
 
to discontinuation
 
of the
 
study,
 
and none
 
were considered
 
UB-612-related. In
these trials we observed
 
that UB-612 generated antibodies
 
that can bind to
 
the S1-RBD protein and
 
neutralize SARS-CoV-2, in addition
to driving
 
T-lymphocytes
 
(“T-cell”)
 
response. An
 
emergency use
 
authorization (“EUA”)
 
application for
 
UB-612 was
 
denied by
 
the
Taiwan Food and Drug Administration (“TFDA”) in August 2021, but, in collaboration with our partner United Biomedical, Inc., Asia
(“UBIA”),
 
we
 
are
 
appealing
 
that
 
decision.
 
At
 
the
 
same
 
time,
 
we
 
are
 
still
 
pursuing
 
approval
 
of
 
UB-612
 
elsewhere,
 
including
 
as
 
a
heterologous boost (boosting the immunity of a subject who has already received a different vaccine). In collaboration with University
College London
 
and VisMederi
 
,
 
we analyzed
 
sera from
 
subjects immunized
 
with a
 
booster dose
 
of UB-612.
 
Data demonstrated
 
that
UB-612
 
elicited
 
a
 
broad
 
IgG
 
antibody
 
response
 
against
 
multiple
 
SARS-CoV-2
 
variants
 
of
 
concern,
 
including
 
Alpha,
 
Beta,
 
Delta,
Gamma,
 
and Omicron,
 
and higher
 
levels of
 
neutralizing antibodies
 
against Omicron
 
than
 
reported with
 
three doses
 
of
 
an approved
mRNA vaccine.
 
We
 
believe our Vaxxine
 
Platform has application across a
 
multitude of chronic and infectious
 
disease indications beyond our
 
existing
pipeline. We
 
also are
 
developing additional product
 
candidates that we
 
believe may
 
address significant unmet
 
needs both
 
within and
beyond our current pipeline’s therapeutic areas.
Our Team
We
 
have assembled an
 
experienced group of
 
executives with deep
 
scientific, business and
 
leadership expertise in
 
pharmaceutical and
vaccine
 
discovery
 
and
 
development,
 
manufacturing,
 
regulatory
 
and
 
commercialization.
 
Mei
 
Mei
 
Hu,
 
our
 
co-founder
 
and
 
Chief
Executive Officer, has
 
been a
 
member of the
 
executive committee
 
of UBI since
 
2010. Our
 
board of
 
directors is
 
chaired by
 
our co-founder
Louis
 
Reese,
 
who
 
has
 
been
 
a
 
member
 
of
 
the
 
executive
 
committee
 
of
 
UBI
 
since
 
2014.
 
Our
 
research
 
efforts
 
are
 
guided
 
by
 
highly
experienced
 
scientists
 
and
 
physicians
 
on
 
our
 
leadership
 
team
 
including
 
Dr.
 
Ulo
 
Palm,
 
our
 
Chief
 
Medical
 
Officer,
 
and
 
Dr.
 
Farshad
Guirakhoo,
 
our
 
Chief
 
Scientific
 
Officer.
 
Our
 
leadership
 
team
 
contributes
 
a
 
diverse
 
range
 
of
 
experiences
 
from
 
leading
 
companies
including
 
Acambis,
 
Allergan,
 
Amgen,
 
Dendreon,
 
Eli
 
Lilly,
 
Merck,
 
Novavax,
 
Novartis,
 
Sanofi,
 
and
 
Schering-Plough,
 
and
 
were
executives in multiple successful
 
mAb and vaccine launches,
 
including Dupixent, Kevzara, Provenge,
 
PreveNile, Ervebo, Imojev and
Dengvaxia. As of December 31, 2021, we have
 
assembled an exceptional team of approximately 86 employees, the majority of
 
whom
hold
 
Ph.D.,
 
M.D.,
 
J.D.
 
or
 
Master’s
 
degrees,
 
and
 
we
 
are
 
regularly
 
hiring
 
additional
 
personnel.
 
We
 
also
 
have
 
a
 
highly
 
experienced
scientific advisory board consisting of 13 doctors and scientists.
Our Strategy
Our mission is
 
to develop product
 
candidates that
 
improve the
 
quality of care
 
for chronic diseases
 
and are accessible
 
to all patients
 
across
the globe. In order to achieve this mission, we seek to:
•
Advance our chronic disease pipeline through
 
clinical stage development
: We
 
plan to advance UB-311 and
UB-312
 
through
 
clinical
 
stage
 
development
 
for
 
the
 
treatment
 
of
 
neurodegenerative
 
disorders.
 
In
 
addition,
 
we
 
are
 
conducting
 
IND-
enabling studies
 
on multiple
 
pre-clinical product
 
candidates that
 
are focused
 
on the
 
treatment of
 
chronic migraines,
 
hypercholesterolemia
and additional neurodegenerative disorders. We
 
believe that our differentiated Vaxxine
 
Platform will enable our product candidates, if
successful, to
 
potentially disrupt
 
the treatment
 
paradigm for
 
their respective
 
indications. However,
 
there can
 
be no
 
guarantee that
 
we
will achieve commercialization of any such product candidates.
•
Expand our pipeline of product candidates
: Chronic diseases are prevalent globally and expected to worsen
over the next several decades. In furtherance of our mission, we plan to expand our pipeline
 
by developing new product candidates that
address additional indications. In
 
expanding our pipeline,
 
we rely on
 
our proprietary filtering
 
methodology, which
 
evaluates potential
product
 
candidates
 
across
 
five
 
principal
 
criteria
 
–
 
(i)
 
probability
 
of
 
technical
 
and
 
regulatory
 
success,
 
(ii)
 
addressable
 
market,
 
(iii)
development cost, (iv) competitive dynamics and (v) disruptive potential.
•
Opportunistically develop
 
treatments for infectious
 
diseases
: While
 
our core
 
mission focuses
 
on the
 
treatment
of chronic diseases, we are committed to bringing accessible medicines to people around the world
 
and will address infectious diseases
opportunistically. For example, when the COVID-19 pandemic struck the world, we rapidly deployed resources in pursuit of a product
candidate currently embodied in UB-612.
•
Expand
 
and
 
scale
 
our
 
existing
 
capabilities
:
 
We
 
are
 
investing
 
in
 
our
 
operational
 
processes,
 
facilities
 
and
human capital to accelerate the speed with which we can bring product candidates
 
through the development pipeline, and to expand the
capacity for developing more product candidates simultaneously.
7
•
Continue to
 
improve our
 
Vaxxine
 
Platform
: In
 
addition to,
 
and in
 
conjunction with,
 
our product
 
candidate
development
 
efforts,
 
we
 
are
 
continuously
 
working
 
to
 
improve
 
and
 
enhance
 
the
 
richness,
 
breadth
 
and
 
effectiveness
 
of
 
our
 
Vaxxine
Platform. As
 
our Vaxxine Platform further
 
develops, we
 
believe that
 
we can
 
both increase
 
the number
 
of product
 
candidates in
 
concurrent
development and accelerate the process of advancing product candidates through pre-clinical and clinical development.
•
Maximize the value
 
of our product candidates
 
through potential partnerships
: We currently retain
 
worldwide
rights for the majority of our product
 
candidates and will consider entering into development and
 
commercialization partnerships with
third parties that align with our mission on an opportunistic basis.
Background
 
and Limitations of Traditional Vaccines
 
and Monoclonal Antibodies
The immune
 
system, the
 
body’s
 
mechanism for
 
fighting off
 
potential threats,
 
is comprised
 
of cells
 
that form
 
the innate
 
and adaptive
immune responses.
 
The main
 
purpose of
 
the innate
 
immune system
 
is to
 
immediately prevent
 
the spread
 
and movement
 
of
 
foreign
pathogens throughout the body. The adaptive immune response is specific
 
to the pathogen presented to T-cells and B lymphocytes (“B-
cells”) and leads to an enhanced
 
response upon future encounters with those
 
antigens. Antibodies represent an important
 
tool within the
adaptive immune system’s arsenal. Upon
 
detection of a potential
 
threat, B-cells produce antibodies
 
that recognize, bind
 
to and eliminate
the threatening pathogen. Over
 
time, the immune system
 
develops the ability to
 
produce countless types of
 
antibodies, each finely tuned
against a specific threat.
Generally, the immune system is able to function effectively by neutralizing
 
viruses, bacteria and even self-generated cells and
 
proteins
from within our own bodies that could
 
cause harm if unchecked. However,
 
as powerful as the immune system is,
 
there are threats that
it
 
cannot
 
overcome
 
on
 
its
 
own,
 
generating
 
the
 
need
 
for
 
medicine.
 
Conventional
 
forms
 
of
 
medicine
 
include
 
small
 
molecules
 
(e.g.,
antibiotics), which
 
can inhibit or
 
promote action within
 
the body by, for
 
instance, binding
 
to a receptor
 
on the surface
 
of a cell,
 
or directly
inducing toxic effects
 
upon bacteria. These
 
medicines do not
 
necessarily modulate the
 
immune system directly
 
in order to
 
work. Instead,
they work alongside it.
 
While small molecules have
 
provided substantial benefits to
 
human health, they are
 
not designed to interact
 
with
the immune system. They may also have limited
 
efficacy in cases where an immune response
 
to a target can be used
 
against a chronic
condition.
Vaccines
In the first
 
part of the
 
twentieth century,
 
vaccines revolutionized healthcare
 
by directly interacting
 
with, and modulating,
 
the immune
system — training
 
it to recognize
 
a dangerous pathogen
 
by introducing the
 
immune system
 
to a relatively
 
harmless form
 
of the pathogen,
its toxins
 
or one
 
of its
 
surface proteins,
 
thereby promoting
 
the body’s
 
own production
 
of binding
 
antibodies. Once
 
immunized
 
to a
specific pathogen, the immune system can recognize it and generate the antibodies to fight it more quickly and robustly.
Traditional vaccine technologies have generally
 
focused on the prevention of bacterial and
 
viral infections and not on chronic disease.
In
 
chronic
 
disease
 
settings,
 
the
 
disease-causing
 
agents
 
frequently
 
come
 
from
 
within
 
the
 
body.
 
These
 
self-antigens
 
are
 
proteins
 
that
become too abundant, misfolded or aggregated such
 
that they can no longer perform their
 
healthy function and even may induce
 
toxic
effects.
 
The body
 
can
 
sometimes produce
 
antibodies
 
against
 
such proteins,
 
but
 
this often
 
falls
 
short of
 
providing
 
the right
 
types of
antibodies in the
 
right concentrations to
 
ward off disease.
 
Historically, vaccine technologies developed
 
to target these
 
proteins have been
unable to
 
break immune
 
tolerance —
 
that is,
 
the immune
 
system’s
 
general avoidance
 
of reactivity
 
towards self-antigens
 
— with
 
an
acceptable level of reactogenicity.
 
The challenges faced by prior efforts to
 
advance vaccine technologies for chronic diseases included
low response rates, low titer levels, off-
 
target responses and other safety concerns such as T-cell mediated inflammation.
Monoclonal Antibodies
The first
 
mAbs were
 
developed in
 
the later
 
part of
 
the twentieth
 
century.
 
In contrast
 
to vaccines,
 
which prompt
 
the body
 
to produce
antibodies, mAbs are antibodies manufactured outside of the patient’s body and then injected or infused into the body to recognize and
eliminate
 
harmful
 
targets.
 
Monoclonal
 
antibodies
 
have
 
revolutionized
 
the
 
standard-of-care
 
treatment
 
for
 
many
 
chronic
 
diseases.
However, manufacturing mAbs
 
is often
 
an expensive
 
and complex
 
process and
 
administering mAbs
 
is cumbersome,
 
sometimes requiring
infusions as
 
frequently as
 
bi-weekly.
 
These factors
 
have generally
 
limited mAbs’
 
availability to
 
moderate-to-severe disease,
 
to later
lines of therapy and to wealthier geographies, thus denying access to a substantial portion of the patients who could benefit from them.
Finally,
 
patients
 
on
 
mAbs
 
often
 
experience
 
a
 
loss
 
of
 
effectiveness
 
over
 
time
 
due
 
to
 
a
 
phenomenon
 
known
 
as
 
anti-drug
 
antibodies,
whereby the
 
immune system
 
begins to
 
recognize therapeutic
 
mAbs as
 
foreign, and
 
mounts a
 
response against
 
them, eventually
 
mitigating
their efficacy.
Our Vaxxine Platform
Our Vaxxine
 
Platform is designed to stimulate the patient’s own immune system to generate antibodies and overcome the limitation of
traditional
 
vaccines
 
to
 
effectively
 
and
 
safely
 
target
 
self-antigens
 
in
 
chronic
 
diseases.
 
Our
 
product
 
candidates
 
have
 
broken
 
immune
tolerance against self-antigens consistently. As described in the
 
section titled “Our Product Candidates”
 
below, across six clinical trials,
we have consistently observed
 
that our product candidates
 
have stimulated the development
 
of antibodies against the
 
desired target at
vaxxq410kp9i0.jpg
8
relevant doses in clinical trial subjects, including the elderly. We have observed favorable tolerability and reactogenicity of our product
candidates
 
across
 
studies of
 
UB-311,
 
UB-312
 
and
 
UB-612,
 
with
 
no
 
significant
 
safety findings
 
to
 
date.
 
We
 
aim
 
to
 
develop
 
product
candidates
 
that
 
possess
 
clinical
 
advantages
 
against,
 
and
 
safety
 
profiles
 
at
 
least
 
comparable
 
to,
 
relevant
 
mAbs
 
and
 
small
 
molecule
treatments. We
 
believe our product candidates have the potential to
 
eventually capture meaningful market share from mAbs and small
molecules, and to provide therapeutic benefit
 
to large patient populations who
 
currently receive neither form of
 
treatment. This would
represent
 
an
 
unprecedented
 
shift
 
in
 
the
 
treatment
 
paradigm,
 
potentially
 
providing
 
better
 
global
 
access
 
to
 
treatments
 
that
 
have
 
been
previously limited
 
to
 
the wealthiest
 
nations.
 
In particular,
 
we believe
 
our
 
treatments for
 
chronic disease
 
could reflect
 
the
 
following
benefits as compared with the relevant mAbs and small molecule alternatives:
Characteristics of our Product Candidates versus Monoclonal Antibodies and Small Molecules
History and Design
Our Vaxxine Platform utilizes a peptide vaccine technology first developed by UBI and subsequently
 
refined over the last two decades,
with more than three billion doses of animal vaccines sold to date. UBI initiated the development of this technology for human
 
use; the
business
 
focused
 
on
 
human
 
use
 
was
 
then
 
separated
 
from
 
UBI
 
through
 
two
 
separate
 
transactions:
 
a
 
spin-out
 
from
 
UBI
 
in
 
2014
 
of
operations focused on developing chronic
 
disease product candidates that resulted
 
in United Neuroscience, a Cayman
 
Islands exempted
company (“UNS”),
 
and a
 
second spin-out
 
from UBI
 
in 2020
 
of operations
 
focused on
 
the development
 
of a
 
COVID-19 vaccine
 
that
resulted in C19 Corp., a
 
Delaware corporation (“COVAXX”)
 
.
 
Our current company,
 
Vaxxinity,
 
Inc., was incorporated under the laws
of the State of Delaware on February 2, 2021 for the purpose of acquiring UNS and COVAXX in March of 2021.
 
On March 2,
 
2021, in
 
accordance with
 
a contribution
 
and exchange
 
agreement among Vaxxinity,
 
UNS, COVAXX
 
and the
 
UNS and
COVAXX stockholders party thereto (the “Contribution and
 
Exchange Agreement”), the
 
existing equity holders
 
of UNS and COVAXX
contributed their equity interests
 
in each of
 
UNS and COVAXX
 
in exchange for equity
 
interests in Vaxxinity
 
(the “Reorganization”).
In
 
connection
 
with
 
the
 
Reorganization,
 
(i) all
 
outstanding
 
shares
 
of
 
UNS
 
and
 
COVAXX
 
preferred
 
stock
 
and
 
common
 
stock
 
were
contributed to
 
Vaxxinity
 
and exchanged
 
for like
 
shares of
 
stock in
 
Vaxxinity,
 
(ii) the outstanding options
 
to purchase
 
shares of
 
UNS
and COVAXX
 
common stock were terminated and substituted with options to purchase shares of Class A common stock in Vaxxinity,
(iii) the outstanding
 
warrant to
 
purchase shares
 
of
 
COVAXX
 
common stock
 
was cancelled
 
and
 
exchanged for
 
a warrant
 
to acquire
Class A common
 
stock in
 
Vaxxinity,
 
and (iv) the
 
outstanding convertible
 
notes
 
and a
 
related party
 
not payable
 
were contributed
 
to
Vaxxinity
 
and the former holders of such notes received Series A preferred stock in Vaxxinity.
 
UBI has used
 
its capabilities in peptide
 
technology for innovations across
 
an array of
 
business endeavors: antibody
 
testing for human
diagnostics, animal health vaccines and the manufacture of
 
medical products. Its innovative products include one of
 
the first approved
peptide-based blood antibody tests in
 
the world (for HIV), one
 
of the first approved peptide
 
vaccines against an infectious disease
 
in the
world in animal health (for a food-and-mouth disease virus) and one of the first approved peptide vaccines against a self-antigen in the
world in
 
animal health
 
(an anti-luteinizing
 
hormone-releasing hormone
 
(“LHRH”) vaccine
 
used for
 
the immunocastration
 
of swine).
Grant funding from the
 
National Institutes of Health
 
supported some of UBI’s
 
work in the fields
 
of vaccines and antibody
 
testing. To
commercialize its
 
animal health vaccine
 
business, UBI and
 
its affiliates scaled
 
up GMP vaccine
 
manufacturing to over
 
500 million doses
per
 
year
 
and
 
partnered
 
with
 
a
 
top-ten
 
animal
 
health
 
company
 
for
 
commercialization
 
of
 
its
 
anti-LHRH
 
vaccine;
 
all
 
together,
 
UBI’s
technology platform is utilized for the vaccination of approximately 25% of the global swine population annually.
We are
 
advancing our peptide-based Vaxxine
 
Platform to develop product candidates that target chronic diseases and COVID-19.
 
Our
Vaxxine
 
Platform
 
comprises
 
a
 
custom,
 
rationally
 
designed
 
antigen
 
capable
 
of
 
evoking
 
an
 
immune
 
response
 
(an
 
“immunogen”)
formulated with
 
a proprietary
 
CpG oligonucleotide.
 
The immunogen
 
contains several
 
advanced synthetic
 
peptides, including
 
B-cell
epitopes, T-helper
 
(“Th”) antigen carrier constructs and epitope linker configurations. This composition enables us
 
to achieve a highly
vaxxq410kp10i0.jpg
9
specific immune response
 
to the target
 
antigen, with limited
 
inflammation and off-target
 
effects that
 
could cause reactogenicity.
 
This
design process has evolved into a repeatable series of well-defined steps, which has enabled the development of our current pipeline of
product candidates.
Key Elements of our Vaxxine Platform Constructs and Formulations
When developing a
 
product candidate, we
 
use publicly available
 
information and sophisticated
 
bioinformatics tools to
 
investigate the
entire protein structure of a target in a comprehensive manner to identify functional B-cell epitopes that may provide
 
optimal antigens.
We then synthesize custom
 
peptides that mimic
 
these identified antigens
 
to elicit highly
 
specific antibodies
 
against these B-cell
 
epitopes.
To yield favorable tolerability profiles, we design our product
 
candidates such that they lack
 
T-cell epitopes and screen them for lack of
T-cell mediated inflammation and toxicity,
 
as well as reactogenicity. Such screening tests include the measuring of immunogenicity of
each B-cell
 
antigen with
 
and without
 
conjugation to
 
a Th
 
carrier peptide (a
 
response only
 
when conjugated to
 
a Th
 
carrier peptide is
desired), epitope mapping assays
 
and in vivo and
 
ex vivo tests of
 
lymphocyte proliferation, pro-inflammatory cytokine release
 
and T-
cell infiltration. To
 
enhance effectiveness, we seek to optimize the size
 
and sequence of our custom peptides to elicit a
 
robust, specific
antibody response when linked to a carrier molecule.
We
 
then
 
attach
 
a
 
proprietary
 
carrier
 
molecule,
 
an
 
artificial
 
Th
 
carrier
 
peptide
 
that
 
delivers
 
the
 
synthetic
 
peptide
 
into
 
cells.
 
Carrier
molecules used in traditional vaccines often elicit a strong T-cell mediated immune response, resulting in significant off-target activity.
In our
 
pre-clinical trials
 
and clinical
 
trials to
 
date, our
 
product candidates
 
have displayed
 
specific immunogenicity,
 
or the
 
ability to
stimulate
 
an
 
immune
 
response,
 
thereby
 
greatly
 
reducing
 
potential
 
off-target
 
effects
 
and
 
increasing
 
the
 
potential
 
for
 
our
 
product
candidates to
 
be well
 
tolerated and
 
efficacious. We
 
have observed
 
that our
 
carrier molecules
 
have produced
 
consistent results
 
across
multiple
 
species
 
and
 
against
 
multiple
 
targets
 
in
 
our
 
six
 
human
 
clinical
 
trials
 
to
 
date.
 
Traditional
 
vaccines
 
have
 
faced
 
challenges
 
in
achieving specific responses because
 
they rely on conjugating
 
the antigen to a
 
large toxoid molecule
 
carrier protein, to which
 
most of
the antibody response is directed, causing off-target effects such as inflammation.
vaxxq410kp11i0.jpg
10
Our Product Candidate Does not Induce an Antibody Response against its Carrier Molecule
The graph
 
above illustrates
 
that our
 
peptide carriers
 
induce a
 
strong immune response
 
against the
 
target antigen, and
 
a minimal
 
immune
response against themselves, as compared to traditional vaccines formulated with other types of carrier molecules.
Our peptide
 
carriers have
 
short sequence
 
lengths, which
 
contribute to
 
their immunosilence
 
and ability
 
to avoid
 
a direct
 
response by
cytotoxic T-cells. However,
 
the carriers’ sequences mirror those found in naturally ubiquitous pathogens, so they are easily recognized
by T-helper
 
cells. This encourages robust T-helper
 
cell exposure to the
 
carrier peptide and promotes activation
 
of other immune cells.
In turn,
 
B-cells are
 
exposed to
 
the B-cell
 
antigen and
 
begin antibody
 
production against
 
the antigen,
 
while avoiding
 
exposure to
 
the
carrier peptide, which avoids antibody response to the carrier. We believe that B-cell exposure to the carrier peptide is avoided because
of its relatively small size
 
and its high affinity
 
to T-helper
 
cells, such that T-helper
 
cells are exposed to the
 
carrier peptide rapidly and
robustly,
 
more so than
 
other cell types.
 
UBI first developed
 
a library of
 
such peptide carriers,
 
which contain various
 
Th cell
 
epitopes
and are of critical importance to our vaccine configuration. Our library of peptide carriers
 
enables the use of different carrier molecules
or different combinations
 
of carrier molecules,
 
which allows us
 
to potentially regulate the
 
speed of immune
 
response onset as
 
well as
the magnitude and
 
duration of
 
that response. For
 
example, a longer
 
duration of
 
response would allow
 
for less
 
frequent dosing.
 
Other
variables that can
 
be adjusted to
 
modulate the immune
 
response include dosing
 
and formulation optimization. In
 
the case of
 
vaccines
targeting
 
infectious diseases, T-cell mediated activity is desirable, while in the case of chronic diseases, it is not. Our Vaxxine Platform
affords
 
the
 
flexibility
 
to
 
design
 
immunogen
 
constructs
 
that
 
specifically
 
promote
 
cytotoxic
 
T-cell
 
activity
 
when
 
warranted
 
(e.g.,
 
for
infectious diseases).
We utilize our linker construct to
 
attach our peptide
 
carriers with our
 
custom antigens. In
 
addition to their binding
 
function, these linkers
also enhance the immune system response further by enabling conformational changes
 
to optimize presentation of the B-cell epitope to
antigen-presenting cells (“APCs”), such as B-cells and dendritic cells (“DC”).
Our Vaxxine Platform also enables the construction of
 
multitope configurations, whereby we
 
can attach multiple immunogens
 
targeting
multiple
 
B-cell
 
epitopes
 
simultaneously,
 
each
 
with
 
different
 
targets,
 
within
 
a
 
single
 
product
 
candidate.
 
Combinations
 
of
 
therapies
targeting
 
different
 
molecular
 
mechanisms
 
are
 
common
 
in
 
treating
 
neurologic,
 
cardiovascular,
 
psychiatric,
 
metabolic,
 
respiratory,
infectious and oncologic disease. Our Vaxxine
 
Platform’s favorable cost of goods
 
and efficient manufacturing process could allow for
viable combinations
 
of targeted
 
therapies in
 
a single
 
formulation. This
 
concept could
 
be applied
 
in an
 
array of
 
potential therapeutic
areas. Our current
 
pipeline has candidates
 
against amyloid-β, α-synuclein
 
and tau; combinations
 
of two or
 
more of these
 
might prove
more effective than
 
any single therapy
 
in some patients.
 
Pre-clinical data to
 
date suggests that
 
we can elicit
 
antibody titers against
 
all
three targets
 
in a
 
single formulation.
 
For mAb-based
 
treatments, such
 
combinations might
 
require the
 
individual dosing
 
of multiple
separate mAb therapies, thereby compounding cost and administration burdens.
vaxxq410kp12i0.jpg
11
Immunogenicity of Single- Versus Combination-Target
 
Formulations in Guinea Pigs
Guinea
 
pigs
 
(three
 
per
 
dose)
 
were
 
tested
 
with
 
either
 
single-target
 
or
 
combination-target
 
formulations,
 
then
 
serum
 
was
 
drawn
 
and
antibody titers compared via enzyme immunoassays
 
(“EIA”). Combination-target formulations elicited similar titer
 
levels against each
target as
 
corresponding single-target
 
formulations. This suggests
 
we can
 
create product
 
candidates with multiple
 
neurodegenerative
targets in a single formulation and achieve sustainable titer levels.
Product Candidate Formulations
In
 
addition
 
to
 
our
 
immunogen
 
construct,
 
each
 
product
 
candidate
 
formulation
 
includes
 
custom
 
CpG
 
oligonucleotides
 
and
 
adjuvant
selection. CpG
 
oligonucleotides are
 
negatively charged, and
 
we utilize
 
proprietary CpG
 
configurations to
 
stabilize the
 
positively charged
peptides.
 
This
 
stabilization
 
acts
 
to
 
optimize
 
display
 
of
 
the
 
B-cell
 
epitope
 
to
 
APCs.
 
In
 
this
 
way,
 
the
 
primary
 
function
 
of
 
CpG
oligonucleotides in our formulations is that of an excipient, even though it has the secondary function of an adjuvant.
A potential secondary
 
function of CpG
 
is that of
 
an adjuvant. Certain
 
CpG configurations are known
 
to act as
 
immunostimulants and
promote direct
 
cytotoxic T-cell activity, while others
 
do not.
 
Accordingly, our selection
 
of the
 
specific CpG
 
modality is
 
highly dependent
on the target indication. For
 
infectious disease indications, the T-cell
 
response generated by the CpG configuration
 
is independent and
in addition to that of the T-cell response generated by the peptide carrier.
The final formulation includes the addition
 
of an adjuvant, such as a well-recognized,
 
alum-derived Adju-Phos or Alhydrogel to further
enhance
 
the
 
immunogenicity
 
of
 
our
 
product
 
candidate.
 
Alum-derived
 
adjuvants
 
are
 
commonly
 
used
 
in
 
vaccines
 
to
 
enhance
 
the
stimulation of an
 
immune response. This
 
is not the
 
same adjuvant used
 
in other companies’
 
failed neurodegenerative
 
vaccine candidates.
How our Product Candidates Function
Our immunogens
 
stimulate the
 
body’s
 
adaptive immune
 
system to
 
produce antibodies
 
against a
 
variety of
 
antigen targets,
 
including
secreted
 
peptides
 
or
 
proteins,
 
degenerative
 
or
 
dysfunctional
 
proteins
 
and
 
membrane
 
proteins,
 
as
 
well
 
as
 
infectious
 
pathogens.
 
The
mechanism of action involves the following sequence of steps:
1.
 
The immunogen is taken up
 
by an APC, such as
 
a DC. Antigen uptake leads
 
to DC maturation and
 
migration
to the draining lymph nodes where the DCs interact with CD4+ T-helper cells.
2.
 
DCs engulf and process the
 
antigen internally and present the
 
T-helper
 
epitope on major histocompatibility
complex (“MHC”)
 
Class II
 
molecules. The
 
presentation activates
 
immunogen-specific CD4+
 
T-helper
 
cells causing
 
them to
 
mature,
proliferate and promote B-cell stimulatory activity.
3.
 
B-cells with receptors that recognize the target B-cell
 
epitope bind, internalize and process the immunogen.
The binding of the B-cell receptor to the immunogen provides the first activation signal to the B-cells.
4.
 
When B-cells
 
function as
 
APCs and
 
present the
 
T-helper
 
epitope on
 
MHC Class
 
II molecules,
 
interaction
with immunogen-specific CD4+
 
T-helper
 
cells provides a
 
second activation signal
 
to B-cells, which
 
causes them
 
to differentiate
 
into
plasma cells.
5.
 
B-cell
 
epitope-specific plasma
 
cells produce
 
high
 
affinity
 
antibodies
 
against the
 
target
 
B-cell
 
epitope. Of
particular importance for neurodegeneration targets, these antibodies are produced in sufficient concentrations to cross the BBB.
vaxxq410kp13i1.jpg vaxxq410kp13i0.jpg
12
Overview of How our Product Candidates Function
Importantly, from both
 
clinical trials and pre-clinical studies, we have
 
observed the rapid expansion of antibodies upon
 
administration
of a booster of our
 
product candidates. Based on
 
the available data to
 
date, we can infer that
 
while antibody titers decline with
 
time after
administration, a small number of memory B-cells
 
and antibody secreting cells are maintained
 
in the lymphoid organs, spleen or
 
bone
marrow. We believe this is important because if a
 
patient misses a dose
 
of our product candidate,
 
they may be able
 
to recall the antibody
response, and therefore the therapeutic effect of the antibodies, with a single booster, even after a long period of time has passed.
Vaxxine
 
Platform Immunogenicity upon Re-dosing
As shown
 
in the
 
above graph,
 
a repeatable
 
immune response
 
elicited from
 
our product
 
candidates has been
 
observed with
 
a booster
dose over one year after the priming regimen.
Furthermore, the antibodies elicited
 
by our product candidates
 
have different properties than those
 
of mAbs targeting similar pathology.
In general,
 
we aim
 
to achieve
 
binding affinity,
 
specificity and
 
functionality similar
 
or improved
 
compared to
 
mAbs targeting
 
similar
pathology.
 
We
 
use Bio-Layer
 
Interferometry (ForteBio®)
 
to compare
 
kon, koff
 
and kD
 
values of
 
antibodies elicited
 
by our
 
product
candidates versus mAbs. We
 
also use Western
 
blot or slot blot to
 
evaluate the binding specificity of antibodies
 
elicited by our product
13
candidates against the toxic, misfolded or aggregated forms of the target protein, and avoidance of monomers
 
or healthy forms. We use
immunohistochemical analyses to observe the binding of antibodies to pathological inclusions on brain sections of patients. Moreover,
we use cell-based models and animal models to measure the induced antibodies’ functionality. Additionally, a major challenge in mAb
drug
 
discovery
 
is
 
that
 
mAbs
 
are
 
prone
 
to
 
induce
 
an
 
immune
 
response
 
against
 
themselves,
 
resulting
 
in
 
a
 
potential
inactivation/neutralization of the mAb by
 
the host (i.e., the patient).
 
This is not a concern
 
with our vaccine approach as
 
each patient will
produce its own antibodies against the target. Finally,
 
mAbs have a potential for off-target binding, which
 
could result in non- specific
safety and toxicity issues. We believe that this is
 
unlikely to happen using our vaccine
 
approach since antibodies elicited by
 
our product
candidates come
 
from the
 
body’s
 
own B-cells
 
and are
 
therefore unlikely
 
to induce
 
antibodies against
 
other self-proteins
 
as a
 
foreign
antibody may.
Product Candidate Selection Process
Because our Vaxxine Platform may
 
have applicability across
 
a range of
 
chronic diseases, we
 
employ a proprietary
 
filtering methodology
to best identify new product candidates for development. We evaluate potential product candidates across five principal criteria:
•
Probability
 
of
 
technical
 
and
 
regulatory
 
success
:
 
We
 
examine
 
the
 
probability
 
of
 
success
 
for
 
a
 
product
candidate based on stage of
 
development and therapeutic area, and
 
then make target-
 
specific adjustments for design
 
difficulty, industry
knowledge and
 
clarity of biological
 
mechanism, general
 
safety risk and
 
estimated titer
 
level required
 
for therapeutic
 
effect. This criterion
accounts for the known validity of a given target in the relevant disease context.
•
Market
 
opportunity
:
 
We
 
account
 
for
 
the
 
prevalence,
 
unmet
 
need
 
and
 
drug
 
market
 
size
 
for
 
each
 
likely
indication associated with a given target, as well as the number of potential indications.
•
Development cost
: We
 
estimate the
 
cost of
 
development through
 
BLA submission,
 
the time
 
to submission
and the number of patient-years to proof-of-concept.
•
Competitive advantages
: We
 
evaluate the extent to which the advantages of
 
our Vaxxine
 
Platform compare
to the current and potential future standard of care, including convenience, dosing, safety, efficacy and cost.
•
Disruptive opportunities
: We evaluate the extent to which the potential disruptive properties of our Vaxxine
Platform may play
 
a role in
 
treatment paradigms, including
 
the ability to
 
“leap-frog” mAbs
 
and treat patients
 
in earlier lines
 
of treatment,
to be used as a prophylactic, to combine multiple targets into a single formulation and to be used as an adjuvant therapy.
After assigning values to
 
each criterion for a
 
given product candidate, we
 
weight each criterion according
 
to a confidential algorithm,
and thereby prioritize product candidates for development. We update these values on a regular basis based on new scientific
 
literature,
trial results and our Vaxxine Platform advancements.
As an example, in light of these criteria, AD and other neurodegenerative
 
diseases that involve misfolded proteins are an attractive area
for development. First, as the field has gained knowledge and clinical experience
 
around the biology of targeting aberrant proteins with
antibodies, the relative
 
technical, safety and
 
regulatory risk has
 
decreased. AD and
 
PD have high
 
prevalence worldwide, and
 
large unmet
need with
 
no disease-modifying
 
products readily
 
available to
 
patients. Moreover, the
 
underlying pathologies
 
often begin
 
years or
 
decades
before symptoms may appear
 
and as a
 
result, early intervention in
 
the disease state, as
 
well as prevention or
 
delay of onset strategies,
may be optimal
 
and more practically
 
achievable with a
 
vaccine approach. While
 
mAbs can target
 
the pathology, they face
 
the limitations
of high cost, cumbersome and inefficient administration and limited access, and are not suited for early treatment or
 
prevention, which
we believe provides a disruptive opportunity for our Vaxxine Platform.
We
 
do not
 
currently evaluate
 
oncology and
 
infectious diseases
 
through the
 
above framework.
 
We
 
generally do
 
not pursue
 
oncology
targets given
 
the hyper-segmentation
 
of subjects
 
common in
 
clinical development
 
efforts in
 
oncology that
 
leads to
 
relatively narrow
labels, and
 
due to
 
the strengths
 
of other
 
new modalities
 
such as
 
cell-based therapy
 
in this
 
area. We
 
only consider
 
infectious disease
opportunistically. However, our approach with respect to oncology and infection diseases could change in the future.
We believe that our Vaxxine
 
Platform, and our strategy more generally, will create a significant opportunity for drug development well
beyond our current
 
pipeline of clinical
 
and pre-clinical indications,
 
in therapeutic areas
 
including allergy
 
(e.g., chronic rhinosinusitis,
atopic
 
dermatitis,
 
food
 
allergy),
 
autoimmune
 
disease
 
(e.g.,
 
psoriasis,
 
psoriatic
 
arthritis,
 
Crohn’s
 
disease),
 
pain
 
(e.g.,
 
peripheral
neuropathy, diabetic neuropathy) and bone and muscle atrophy (e.g., sarcopenia of aging, osteopenia).
Underlying Drivers of Our Platform Advantages
Our Vaxxine Platform’s properties drive the unique
 
combination of attributes
 
that we believe
 
will be reflected
 
in our product
 
candidates:
14
•
Cost
: Our reliance on chemically
 
linked, custom peptide sequences fuels cost
 
efficiencies that we expect to
enable
 
broad
 
accessibility
 
to
 
our
 
product
 
candidates.
 
Foremost
 
among
 
these
 
relates
 
to
 
dosing.
 
Monoclonal
 
antibodies
 
require
 
more
physical material for annual dosing because the patient needs to
 
be delivered the externally manufactured therapeutic antibodies, which
have high molecular weight. In
 
contrast, our product candidates
 
are designed to stimulate the
 
body’s immune system to produce its own
antibodies and
 
have relatively
 
low molecular weight.
 
While an
 
annual supply
 
of mAbs
 
doses may
 
include grams
 
or tens
 
of grams
 
of
drug substance, our current product candidates only require 1 to 2 milligrams each, or even less, leading to a relatively low annual cost
of goods. In our
 
development programs to date,
 
we have achieved a
 
cost of goods amounting
 
to a small fraction
 
of the typical
 
cost of
mAbs (as low as <1%).
•
Administration
: Administration of our product
 
candidates generally requires three
 
priming doses, each in the
range of several
 
hundred micrograms, followed
 
by booster doses
 
of a similar
 
magnitude 2 to
 
4 times per
 
year. As described in
 
the section
titled “Our
 
Product Candidates”
 
below,
 
in clinical
 
trials we
 
have observed
 
that our
 
product candidates
 
elicited a
 
sustained antibody
response, with elevated antibody
 
levels lasting six
 
months or longer. We believe this presents a
 
meaningful advantage over
 
many mAbs,
which commonly require either bi-weekly
 
or monthly injections, or
 
monthly or quarterly infusions, and
 
many small molecules, which
commonly require a daily pill.
•
Safety
: The
 
antibodies generated by
 
our product
 
candidates are
 
designed to
 
be highly
 
specific to the
 
target
antigen and to
 
avoid an off-target
 
immune response to
 
the peptide carrier,
 
thereby limiting inflammation and
 
other off-target
 
activity.
We
 
believe these
 
characteristics have
 
yielded the
 
high tolerability
 
observed in
 
the clinical
 
studies of
 
our product
 
candidates to
 
date.
Furthermore, the
 
titer response
 
to our
 
product candidates
 
is naturally
 
titrated, which
 
may reduce
 
the likelihood
 
of an
 
antibody Cmax
safety side effect, and is naturally reversible, thus avoiding an uncontrolled or permanent immune response.
•
Efficacy
: In
 
our clinical
 
trials conducted
 
to date,
 
our product
 
candidates have
 
yielded comparatively
 
high
response
 
rates (95%
 
or
 
above at
 
target
 
dose levels)
 
for UB-311,
 
UB-312 and
 
UB-612, high
 
target-
 
specific antibodies
 
against
 
self-
antigens (as
 
seen in
 
UB-311 and UB-312
 
clinical trials)
 
and long
 
durations of
 
action for
 
UB-311 (based on
 
titer levels
 
remaining elevated
between doses)
 
and UB-612
 
(based on
 
half-life). Furthermore,
 
our Vaxxine
 
Platform enables
 
the combining
 
of target
 
antigens into
 
a
single formulation. For indications that
 
could be treated more effectively
 
with a multivalent approach, we
 
believe our Vaxxine Platform
would have an advantage over other modalities. Finally, because our Vaxxine
 
Platform is designed to elicit endogenous antibodies, we
believe our product candidates may
 
lessen or avoid altogether the
 
phenomenon of anti-drug antibodies which
 
has limited the efficacy of
certain mAbs over time.
Additionally,
 
our Vaxxine
 
Platform possesses
 
important benefits
 
reflected at
 
the platform
 
level, as
 
opposed to
 
the product
 
candidate
level:
•
Product Candidate Discovery
: Our Vaxxine
 
Platform enables the efficient iteration of product candidates in
the discovery phase
 
through rapid, rational
 
design and formulation.
 
We
 
are able to
 
screen in high
 
throughput rapidly and
 
at low cost.
Upon nominating
 
a target
 
for drug
 
discovery,
 
we can
 
formulate several
 
dozen product
 
candidate compounds
 
for preliminary
 
in vivo
immunogenicity and cross-reactivity
 
screening within 2 to
 
3 months. This process
 
allows nonviable product
 
candidates to “fail fast”
 
and
allows
 
us
 
to
 
carry
 
top
 
product
 
candidates
 
forward
 
through
 
subsequent
 
pre-clinical
 
development
 
to
 
lead
 
identification.
 
In
 
contrast,
biologics require the maintenance and
 
adjustment of living cultures to design,
 
formulate and iterate, and therefore discovery
 
and early
development is inherently less efficient.
•
Process Development
: Scaling the formulation of a drug product from research grade
 
to clinical grade, then
to commercial grade, typically
 
consumes a great deal
 
of resources. This, together
 
with the development of
 
assays for quality control
 
and
quality assurance,
 
comprise process
 
development. Through
 
our manufacturing
 
partnership with
 
UBI and
 
certain of
 
its affiliates,
 
we
leverage their
 
experience scaling
 
the manufacture
 
of both
 
clinical and
 
commercial compounds
 
that use
 
our Vaxxine Platform technology.
Unlike process development
 
for mAbs, which
 
has inherent challenges
 
such as risk
 
of contamination in
 
cell culture or
 
bioreactors and
time-consuming adjustments
 
to cell
 
lines for
 
any formulation
 
adjustment, our
 
peptide platform
 
relies on
 
chemical synthesis
 
which is
more reproducible and scalable, and relatively quick to manipulate for any modifications.
Our Product Candidates
Neurodegenerative Disease Programs
Neurodegenerative diseases are a collection of conditions defined by progressive nervous system dysfunction, degeneration or death of
neurons, which can cause cognitive decline,
 
functional impairment and eventually death. Neurodegeneration
 
represents one of the most
significant unmet medical needs of our time due to an aging population and lack of effective therapeutic options.
Two of the most common
 
neurodegenerative diseases are
 
AD and PD.
 
In the United
 
States, currently more
 
than six million people
 
suffer
from
 
AD,
 
and
 
approximately
 
one million
 
people
 
suffer
 
from
 
PD
 
according
 
to
 
estimates
 
from
 
the
 
Alzheimer’s
 
Association
 
and
 
the
Parkinson’s Disease
 
Foundation, respectively.
 
As a result,
 
AD and PD
 
bring a heavy
 
burden on our
 
society’s cost
 
of care. The
 
direct
costs of caring for individuals with AD and
 
other dementias in the United States were estimated at
 
$305 billion in 2020 according to a
15
study
 
published
 
by
 
the
 
American
 
Journal of
 
Managed
 
Care,
 
and
 
are
 
projected
 
to
 
increase to
 
$1.1
 
trillion by
 
2050
 
according
 
to
 
the
Alzheimer’s Association. The financial burden of PD exceeded $50 billion in the United States in 2019. Many more people around the
world suffer from these two diseases and their related social and economic implications.
UB-311
An Overview of Alzheimer’s Disease
Alzheimer’s disease
 
is a
 
progressive neurodegenerative disorder
 
that slowly destroys
 
memory and cognitive
 
skills and
 
eventually the
ability to
 
carry out
 
simple tasks.
 
Its symptoms
 
include cognitive
 
dysfunction, memory
 
abnormalities, progressive
 
impairment in
 
activities
of daily
 
living and
 
a host
 
of other
 
behavioral and
 
neuropsychiatric symptoms.
 
The exact
 
cause of
 
AD is
 
unknown, but
 
genetic and
environmental
 
factors
 
are
 
established
 
contributors.
 
AD
 
affects
 
more
 
than
 
six million
 
people
 
in
 
the
 
United
 
States
 
and
 
44 million
worldwide. The economic burden of AD is expected to surpass $2.8 trillion by 2030.
Many molecular and cellular changes take place in the brain of a person with AD. Aβ plaques and neurofibrillary tangles of tau
 
protein
in the brain are the pathological hallmarks of the disease.
 
These abnormal depositions lead to loss of neurons and
 
neuronal connectivity
and the signs and symptoms of AD.
The Aβ
 
protein involved
 
in AD
 
comes in
 
several different
 
molecular forms
 
that accumulate
 
between neurons.
 
One form,
 
Aβ 42,
 
is
thought to be especially
 
toxic. In the brains
 
of patients with AD,
 
abnormal levels of this naturally
 
occurring protein clump together
 
to
form plaques that collect between neurons and disrupt cell function.
 
Research is ongoing to better understand how, and at what stage of
the disease, the various forms of Aβ influence AD.
Neurofibrillary tangles are
 
abnormal accumulations of
 
a protein called
 
tau that collect
 
inside neurons. Healthy
 
neurons are
 
supported
internally,
 
in part,
 
by structures called
 
microtubules, which help
 
to guide nutrients
 
and molecules from
 
the cell
 
body to
 
the axon
 
and
dendrites. In healthy neurons, tau normally
 
binds to and stabilizes microtubules. In
 
AD, abnormal chemical changes cause tau
 
to detach
from microtubules and to
 
stick to other tau
 
molecules, forming threads that
 
eventually join to form
 
tangles inside neurons. These
 
tangles
block the neuron’s transport system, which harms the synaptic communication between neurons.
Converging
 
lines of
 
evidence suggest
 
that AD-related
 
brain changes
 
may result
 
from a
 
complex interplay
 
among abnormal
 
tau, Aβ
proteins and several other
 
factors. It appears that
 
abnormal tau accumulates in
 
specific brain regions involved
 
in memory. Concurrently,
Aβ clumps into
 
plaques between
 
neurons. As the
 
level of
 
Aβ reaches a
 
tipping point,
 
tau rapidly spreads
 
throughout the
 
brain. In addition
to the spread of Aβ and tau,
 
chronic inflammation and its effect on the
 
cellular functions of microglia and astrocytes,
 
as well as changes
to the vasculature, are thought to be involved in AD’s pathology and progression.
Limitations of Current Therapies
Two
 
classes
 
of
 
small
 
molecules
 
approved
 
for
 
the
 
treatment
 
of
 
AD’s
 
symptoms
 
are
 
acetylcholinesterase
 
inhibitors
 
(“AChEIs”)
 
and
glutamatergic
 
modulators.
 
AChEIs
 
are
 
designed
 
to
 
slow
 
the
 
degradation
 
of
 
the
 
neurotransmitter
 
acetylcholine,
 
helping
 
to
 
preserve
neuronal communication and function
 
temporarily. Glutamatergic
 
modulators are designed to
 
block sustained, low-level
 
activation of
the
 
N-methyl-D-aspartate
 
(“NMDA”)
 
receptor,
 
without
 
inhibiting
 
the
 
normal
 
function
 
of
 
the
 
receptor
 
in
 
memory
 
and
 
cognition.
However,
 
these therapeutic
 
products only
 
address the
 
symptoms of
 
AD and
 
do not
 
modify or
 
alter the
 
progression of
 
the underlying
disease.
Aducanumab, marketed under the trade name Aduhelm, is
 
a mAb developed by Biogen, Inc. (“Biogen”) that
 
targets aggregated forms
of Aß. The FDA approved
 
aducanumab in June 2021, making
 
it the first approved immunotherapy
 
for AD, the first new
 
FDA-approved
treatment since 2003 and, importantly, the first to receive accelerated
 
approval based on a biomarker. By approving aducanumab
 
on the
basis of
 
biomarker evidence,
 
we believe
 
the FDA
 
set a
 
precedent for
 
developers of
 
anti-Aβ immunotherapies.
 
Soon after
 
the FDA’s
decision, Eli
 
Lilly and
 
Company (“Lilly”)
 
announced that
 
it would
 
file for
 
approval of
 
its anti-Aβ
 
mAb, donanemab,
 
in 2022
 
on the
basis
 
of
 
Phase
 
2
 
data.
 
Despite
 
the
 
milestone
 
in
 
the
 
treatment
 
of
 
AD
 
that
 
aducanumab’s
 
approval
 
represents,
 
the
 
drug
 
has
 
several
limitations. Approximately one-third of
 
patients experience ARIA-E related adverse
 
events, which can manifest
 
as symptoms ranging
from headaches
 
to confusion
 
to coma.
 
In addition,
 
the drug
 
must be
 
administered monthly via
 
intravenous infusion
 
in locations
 
with
healthcare professionals trained
 
to administer infusion
 
therapies in facilities
 
specifically configured to
 
support an hours-long
 
infusion
process, creating a
 
burden for patients
 
and additional costs
 
resulting from the
 
complex administration process.
 
Because of the
 
risk of
developing
 
ARIA-E,
 
physicians
 
who
 
prescribe
 
aducanumab
 
must
 
titrate
 
dosing
 
and
 
carefully
 
monitor
 
each
 
patient
 
using
 
magnetic
resonance imaging (“MRI”). This process is costly and burdensome, and thus expected to limit the prescribing of and regular access to
aducanumab. In addition, aducanumab launched at a price
 
of $56,000 annually for the drug product
 
only, not including
 
administration
and ongoing monitoring costs such
 
as positron emission topography
 
(“PET”) and MRI scans.
 
Since that time, Biogen has
 
reduced the
price of Aduhelm.
 
The combination of price,
 
side effects, extra
 
costs and extra
 
administration burden highlight the
 
challenges of, and
have limited access to, this mAb.
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16
Our Product Candidate: UB-311
We are developing a novel product candidate,
 
UB-311, as a potential disease-modifying
 
therapy for the treatment
 
of AD. We completed
a Phase 1 open label trial (V118-AD) and a Phase 2a randomized, double-blinded, placebo-controlled trial (the “Phase 2a Main Trial”)
in 2021 and believe
 
that UB-311 may offer several
 
differentiators versus aducanumab, including
 
the preferential targeting of
 
aggregated
Aβ oligomers over
 
monomers with modest
 
clearance of Aβ
 
plaques, and a
 
tolerability profile comparable
 
to placebo. No
 
signs of ARIA-
E related adverse events were reported in the Phase 2a Main Trial
 
despite more than two-thirds of the study participants being APOE4
carriers.
Post hoc
 
exploratory analyses
 
of UB-311’s
 
Phase 2a
 
clinical data
 
also suggest
 
that quarterly
 
dosing of
 
UB-311
 
might slow
cognitive decline in some
 
subjects by up to
 
50% when compared to
 
placebo, as measured by
 
Clinical Dementia Rating Sum of
 
Boxes
(“CDR-SB”), Alzheimer’s Disease Assessment Scale – Cognitive Subscale (“ADAS-Cog”), Alzheimer’s Disease Cooperative Study –
Activities of Daily Living (“ADCS-ADL”) and Mini-Mental State Examination (“MMSE”) scores, all clinically validated measures of
cognition or
 
function in
 
AD. In
 
this small
 
Phase 2a
 
study,
 
these were
 
secondary measures,
 
as the
 
study was
 
not designed
 
to assess
cognitive decline.
 
Although our
 
Phase 2a
 
trial was
 
a proof-of-concept
 
study,
 
not powered
 
to demonstrate
 
significant changes
 
in any
endpoint, we believe the data are suggestive of potential therapeutic efficacy and may lead to clinical benefit.
UB-311
 
is
 
formulated
 
for
 
intramuscular
 
administration
 
on
 
a
 
dosing
 
schedule
 
of
 
every
 
three
 
or
 
six
 
months.
 
In
 
addition,
 
lower
manufacturing costs may support meaningfully lower pricing. We
 
believe such advantages of UB-311,
 
if ever approved for use, could
position it not only to disrupt the emerging mAb-based treatment for early AD as both
 
a monotherapy and adjuvant therapy to existing
mAbs, but also to open up a new paradigm (i.e., for potential prophylactic use to delay or interrupt early disease onset).
Clinical Development
We
 
completed a randomized, double-blind, placebo-controlled Phase 2a
 
trial of two dosing regimens of
 
UB-311 in subjects with
 
mild
AD. The primary objective
 
of this trial was
 
to assess safety and
 
immunogenicity. Secondary measures for exploratory analyses
 
included
assessment of
 
changes in
 
the ADAS-Cog,
 
CDR-SB, ADCS-ADL
 
and MMSE
 
ratings, along
 
with amyloid
 
PET imaging
 
evaluations.
This study was
 
intended for proof-of-concept,
 
so no statistical
 
hypothesis testing was
 
planned, and exploratory
 
analyses were performed
to evaluate trends as described below.
A total
 
of 43
 
patients diagnosed
 
with mild
 
AD were
 
randomized (1:1:1)
 
to one
 
of three
 
treatment groups:
 
UB-311
 
high- frequency
(quarterly dosing, or “Q3M”) receiving a total of seven doses, UB-311 low-frequency (every six month dosing, or “Q6M”) receiving a
total of
 
five doses,
 
and placebo.
 
The high-frequency
 
cohort, which
 
included 14
 
subjects, received
 
an initial
 
regimen of
 
three 300μg
injections, one
 
injection at
 
the trial
 
start, one
 
at week
 
4 and
 
the final
 
at week
 
12, followed
 
by four
 
single 300μg
 
booster doses
 
administered
in three-month
 
intervals over
 
the subsequent
 
12
 
months. The
 
low-frequency cohort,
 
which included
 
15
 
subjects, involved
 
the same
initial schedule
 
of
 
three 300μg
 
injections administered
 
over
 
the
 
first
 
12-week
 
period,
 
followed by
 
the
 
administration of
 
two
 
300μg
booster doses given at six-month intervals. The placebo group comprised 14 subjects.
In the Phase
 
2a Main Trial,
 
UB-311 generated
 
an immune response
 
as measured by
 
ELISA in 28
 
out of 29
 
subjects. Across this
 
trial
and the
 
Phase 1
 
trial, 47
 
of the
 
48 subjects
 
(98%) that
 
received UB-311
 
registered an
 
immune response
 
(which we
 
define as
 
a 95%
confidence interval separation from placebo) as measured by ELISA. The intramuscular injection produced appreciable antibody titers
against
 
Aβ.
 
The antibody
 
titers
 
remained
 
elevated
 
through the
 
trial’s
 
duration.
 
Moreover,
 
in vitro
 
studies demonstrate
 
that
 
UB-311
generated serum anti-Aβ
 
antibody titers against
 
oligomers, the components
 
that form Aβ,
 
comparable or greater
 
than those measured
after maximum
 
therapeutic dosing
 
with aducanumab.
 
We
 
believe these
 
results underscore
 
the significant
 
promise of
 
our therapeutic
approach.
Generation of Antibodies Repeatable Across Clinical Studies, and Antibodies Bind Target with High
Specificity as Compared to Monoclonal Antibody
vaxxq410kp18i1.jpg vaxxq410kp18i0.jpg
17
Across Phase
 
1 and Phase
 
2a trials, UB-311
 
generated an over
 
95% response
 
rates in subjects.
 
In a comparative
 
in vitro
 
study with
aducanumab, we observed that UB-311 elicited titer levels comparable to mAbs.
Our Phase
 
1 and
 
Phase 2a
 
trials demonstrated
 
a repeatable
 
anti-Aβ titer
 
response. In
 
an in
 
vitro comparison
 
of titers
 
in serum
 
from
subjects dosed
 
with UB-311 versus
 
pre-immune serum
 
spiked with
 
aducanumab at
 
the published
 
Cmax concentration
 
following 10mg/kg
administration (183μg/mL),
 
antibodies generated
 
by UB-311 bond
 
to Aβ oligomers
 
similarly to or
 
greater than aducanumab
 
as measured
by EIA.
Exploratory analyses
 
of clinical and
 
imaging measures
 
were conducted.
 
Trends of changes
 
in disease assessment
 
scores suggest showing
of cognitive decline.
 
Changes in the
 
CDR-SB assessment at
 
week 78 of
 
the Phase 2a
 
Main Trial
 
showed a 48%
 
slowing in cognitive
decline from baseline relative to the placebo group; changes in ADAS-Cog measurements showed a 50% slowing in decline relative to
placebo and showed a 54% slowing in decline in ADCS-ADL relative to placebo.
UB-311 Phase 2a Suggests Slowing of Cognitive Decline in Mild Alzheimer’s Subjects (mITT)
UB-311 Phase 2a secondary endpoint data suggested possible slowing of clinical
 
decline by up to 50% in subjects with
 
mild AD. These
are exploratory analyses and no statistical inference was performed.
 
In addition,
 
functional MRI
 
suggested marginal
 
increases in
 
connectivity in
 
some brain
 
regions and
 
PET imaging
 
showed a
 
modest
reduction in
 
amyloid plaque
 
burden as
 
measured by
 
standard uptake
 
value ratio.
 
We
 
believe these
 
clinical and
 
biomarker endpoints
suggest a causal
 
effect of UB-311 impacting
 
the underlying
 
molecular pathology
 
of the disease
 
and slowing
 
of clinical
 
decline. Together,
these findings offer
 
some evidence that UB-311 may exhibit disease-modifying effects.
UB-311 Phase 2a Analysis of Clinical and Biomarker Endpoints Suggests Overall Disease-Modifying Effect
Compared to placebo,
 
UB-311
 
low-frequency dosing and
 
high-frequency dosing demonstrated
 
slowing of overall disease progression
in an independent analysis conducted by Pentara Corporation.
 
In addition to the
 
composite above, Pentara Corporation
 
performed a post hoc
 
analysis to estimate the
 
performance of UB-311
 
on the
integrated Alzheimer’s Disease Rating Scale (“iADRS”) versus placebo in the Phase 2a trial. The results of this analysis suggested
 
that
the UB-311 target dosing regimen (quarterly dosing) on average slowed decline versus placebo by approximately 59% over 78 weeks.
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18
iADRS Change from Baseline over Time vs. Placebo (Exploratory Analysis)
Compared to placebo, UB-311 (quarterly dosing) declined less on an iADRS-like clinical endpoint over
 
78 weeks in mild-moderate AD
subjects in
 
the Phase
 
2a Main
 
Trial. This analysis
 
was performed
 
by Pentara
 
Corporation. The
 
UB-311 Q6M group showed
 
26% decline
versus placebo which is not shown on the plot.
We
 
have
 
provided
 
a
 
side-by-side
 
summary
 
table
 
of
 
subject
 
baseline
 
characteristics below,
 
with
 
anti-Aβ
 
mAbs
 
using
 
data
 
from
 
the
exploratory endpoints of the Phase 2a Main
 
Trial, in particular CDR-SB, as
 
well as using the post hoc
 
iADRS-like endpoint (no head-
to-head clinical trials of UB-311 against mAbs
 
have been performed). We
 
believe the performance of aducanumab and donanemab on
CDR-SB and iADRS change from baseline over time, the respective primary
 
endpoints from the pivotal trials of those mAbs, represent
meaningful references.
Post hoc
 
side-by-side analyses suggested that UB-311 has
 
the potential to perform comparably to aducanumab
on
 
CDR-SB
 
change
 
from
 
baseline
 
over
 
time,
 
and
 
comparably
 
to
 
donanemab
 
on
 
iADRS
 
change
 
from
 
baseline
 
over
 
time,
 
in
 
an
appropriately powered
 
study, noting that
 
the UB-311 Phase
 
2a Main
 
Trial was a
 
proof-of-concept study
 
not powered
 
to detect
 
statistically
significant changes, and these are indirect comparisons with aducanumab and donanemab
 
trials. We have
 
provided an overview of the
sample sizes and baseline characteristics of the UB-311 Main Trial and various anti-Aβ mAb trials below.
Baseline Characteristics of Various Anti-Aβ Immunotherapy Clinical Trials
The Phase
 
2a Main
 
Trial recapitulated
 
the safety
 
and tolerability
 
profile of
 
UB-311 that
 
was observed
 
in an
 
earlier Phase
 
1 trial.
 
No
subjects discontinued trial
 
participation due to
 
a treatment emergent
 
adverse effect (“TEAE”).
 
No ARIA-E was
 
observed in quarterly
MRI
 
scans.
 
Aβ-related
 
imaging
 
abnormalities
 
related
 
to
 
microhemorrhages
 
or
 
hemosiderosis
 
seemed
 
similar
 
between
 
the
 
UB-311
treatment groups and placebo group. In the Phase 2a Main Trial, six serious adverse events were observed, including three in
 
the Q6M
dosing arm and one in the Q3M dosing arm. None was deemed related or likely related to UB-311.
Titers generated by UB-311 ramped up gradually over the
 
course of several months, as
 
opposed to titers following the
 
administration of
anti-Aβ mAbs,
 
which immediately
 
reach Cmax.
 
We
 
believe this
 
lead to
 
the relatively
 
low rates
 
of ARIA-E
 
observed in
 
our clinical
studies of UB-311 as compared to those observed in clinical studies of mAbs. No meningoencephalitis was observed.
vaxxq410kp20i0.jpg
19
Summary of Safety Data from UB-311 Phase 1 and Phase 2a Trials
As depicted
 
in the
 
table above,
 
UB-311 was well
 
tolerated across Phase
 
1 and
 
Phase 2a
 
trials. The
 
most common
 
TEAE was
 
site injection
reactivity, and there
 
were no discontinuations or withdrawals due to TEAEs
An
 
extension
 
of
 
the
 
Phase
 
2a
 
Main
 
Trial,
 
the
 
Phase
 
2a
 
LTE
 
trial,
 
involved
 
the
 
continued
 
participation
 
by
 
34
 
of
 
the
 
subjects
 
who
participated in the Phase 2a Main Tri
 
al for an additional 78 weeks. The objectives of
 
the Phase 2a LTE
 
trial were to assess the longer-
term tolerability of extended treatment with UB-311. Following a non-treatment period of up to 26 weeks, participants in the LTE
 
trial
were segmented
 
into two
 
groups: those
 
previously on drug
 
in the
 
Phase 2a
 
Main Trial
 
would receive
 
two placebo
 
doses and
 
a single
300μg priming dose at the start of the LTE
 
treatment period and those previously on placebo would receive three 300μg priming doses
over an
 
initial 12-week
 
period. Due
 
to an
 
error by
 
the CRO
 
responsible for
 
administering blinded
 
placebo and
 
active doses
 
to trial
subjects, which reduced the confidence of subsequently collected data, we decided to discontinue the LTE trial, having determined that
we had collected
 
sufficient data on
 
UB-311’s tolerability and immunogenicity. Analysis of
 
the data collected
 
before trial discontinuation
indicated that
 
UB-311 was
 
well tolerated,
 
with return
 
of anti-Aβ
 
antibody titers to
 
peak levels
 
achieved after
 
a gap of
 
as much
 
as 12
months between
 
doses and
 
a continued
 
trend toward evidence
 
of disease
 
modification. In
 
the Phase
 
2a LTE
 
trial, six
 
serious adverse
events were observed. One case of ARIA-E was observed in the Phase 2a LTE
 
trial. None was deemed related or likely related to UB-
311,
 
and all
 
such events
 
were recovered/resolved
 
by the
 
end of
 
the study.
 
Exploratory analyses
 
of the
 
clinical data
 
generated in
 
this
portion of the trial suggested that subjects in
 
the treatment cohorts showed sustained improvement, as
 
measured by the change in CDR-
SB from baseline.
We completed an open-label Phase 1 trial of UB-311 in 19 subjects with mild-to-moderate AD between the ages of 51 to 78 years. The
primary objective
 
of the
 
trial was
 
to assess
 
safety and
 
tolerability.
 
Secondary measures
 
included UB-311
 
antibody titers
 
along with
changes in the ADAS-Cog,
 
MMSE and the Alzheimer’s
 
Disease Cooperative Study-Clinician’s
 
Global Impression of Change
 
disease
assessment ratings. The 24-week,
 
open label trial was
 
designed as three intramuscular
 
injections of 300μg, the first
 
dose administered
at the start of the trial, a second at week four and a third at week 12. An observation study included additional follow-up visits up to 48
weeks after the
 
first injection to
 
assess the long-term
 
immunogenicity and safety
 
of UB-311.
 
In this trial,
 
UB-311 was
 
well tolerated,
with the most common TEAE being injection site redness and swelling. No TEAE resulted in the discontinuation or withdrawal of any
study participant in
 
the trial. In
 
the Phase 1
 
trial, one serious
 
adverse event was
 
observed: a case
 
of herpes zoster
 
deemed unlikely related
to UB-311.
Anti-Aβ
 
antibody
 
titers,
 
recorded
 
among
 
all
 
study
 
participants,
 
approached
 
a
 
100-fold
 
increase
 
during
 
weeks
 
16
 
to
 
48
 
after
administration of
 
the third
 
300μg injection
 
at week
 
12, demonstrating
 
the ability
 
of UB-311 to
 
elicit a
 
strong immune
 
response. Durability
of the response was reflected in elevated anti-Aβ antibody titers measurable well beyond the 24-week duration of the trial.
In a Western blot assay, we observed that UB-311 elicited antibody titers specific to toxic
 
forms of Aβ with minimal binding
 
to normal,
non-plaque-causing, forms of Aβ.
Pre-Clinical Data
Pre-clinical trials of UB-311
 
included multiple antibody titer studies involving
 
mice, guinea pigs, macaques and baboons. Application
of
 
specific
 
transgenic
 
animal
 
models
 
was
 
intended
 
to
 
emulate
 
both
 
therapeutic
 
and
 
preventive
 
treatment
 
paradigms.
 
These
 
trials
demonstrated that UB-311 generated high
 
antibody titers across
 
multiple species that selectively
 
target aggregated Aβ and
 
both slow the
accumulation of and reduce existing Aβ pathology.
vaxxq410kp21i0.jpg
20
We also observed the ability of UB-311
 
induced antibodies to penetrate the BBB, as well as preferentially bind to toxic Aβ aggregates.
In our study of UB-311 in cynomolgus
 
monkeys, we tested five escalating
 
dose levels of UB-311: 0μg, 30μg, 100μg,
 
300μg and 900μg.
Each dose level was
 
administered on weeks zero,
 
three and six by
 
intramuscular injection and the
 
cerebrospinal fluid (“CSF”): serum
ratio of
 
UB-311
 
calculated on
 
week eight
 
(two weeks
 
after the
 
last dose).
 
This analysis
 
concluded that
 
UB-311
 
antibody titers
 
were
detectable in the CSF in a
 
dose-dependent manner with CSF: serum
 
antibody ratios of 0.1% to
 
0.2%, ratios similar to published
 
data for
mAbs in development for neurodegenerative diseases.
UB-311 Shows Dependent Response in CSF in Pre-Clinical Study
The above graphs demonstrates that UB-311 achieved CSF: serum ratios in the 0.1% to 0.2% range across five doses in a pre
 
-clinical
study involving cynomolgus monkeys.
Development Plans for UB-311
We have completed a pre-Phase 3 meeting with the FDA and obtained guidance on the further development of UB-311.
Subject to the FDA’s review,
 
we expect to conduct a
 
randomized, double-blinded, placebo-controlled Phase
 
2b efficacy trial of UB-311
in approximately
 
670 subjects
 
with early
 
AD. The
 
Phase 2b
 
trial will
 
include subjects
 
diagnosed with
 
early AD
 
with MMSE
 
scores
between 22 and 30.
 
We will also screen to enrich
 
for positive amyloid
 
PET, positive tau PET and
 
positive plasma p-tau181, in
 
quantities
consistent with an early AD population. Subjects in the active arm will receive UB-311 as three 300μg priming doses at weeks 0, 4 and
12, followed by four 300μg
 
booster doses every three months
 
thereafter. The
 
primary objective of this trial will
 
be to assess the
 
effect
of
 
UB-311
 
on
 
the
 
decline
 
of
 
cognitive
 
and
 
functional
 
performance
 
as
 
measured
 
by
 
the
 
iADRS
 
over
 
the
 
78-week
 
treatment
 
period.
Secondary endpoints
 
will include
 
the changes
 
from baseline
 
measurements of
 
other validated
 
clinical outcomes
 
scores. The
 
effect of
UB-311 on specific AD biomarkers will also
 
be evaluated, including neurofilament light
 
arm (“NfL”), p-tau, total-tau, brain amyloid
 
as
measured by PET, Aβ-40 and Aβ-42, hippocampal volume and whole brain volume as measured by MRI, and an assessment of certain
CSF biomarkers. We expect to initiate this trial in the second half of 2022.
Assuming positive results in the
 
Phase 2b trial, we expect
 
to initiate a Phase 3
 
trial in subjects with early
 
AD. The Phase 3 program
 
may
involve one, but more
 
likely two, clinical trials,
 
conducted at multiple international
 
sites. Assuming positive
 
results in the Phase
 
2b trial,
we may also seek
 
FDA approval under the
 
accelerated approval pathway,
 
which allows for earlier
 
approval of drugs that
 
treat serious
conditions, and that fill an unmet medical need based on a surrogate endpoint.
 
We expect that together, the Phase 2b trial and the Phase
3 program, if successful, will provide sufficient data to enable BLA filing with the FDA, but there can be no guarantee that we will not
need to conduct additional trials or studies prior to a BLA filing with the FDA.
We believe UB-311 could
 
also have
 
a potential
 
therapeutic benefit
 
in a
 
prophylactic setting
 
for the
 
prevention of
 
AD in
 
high-risk patients.
We may seek to further develop UB-311
 
for the prevention of AD.
UB-312
An Overview of Parkinson’s
 
Disease
Parkinson’s disease currently affects approximately
 
one million people in
 
the United States
 
and more than
 
10 million people worldwide.
The economic burden of
 
PD is estimated at
 
$52 billion in the United
 
States alone. PD
 
is a chronic and
 
progressive neurodegenerative
disorder that affects
 
predominately dopamine-producing (“dopaminergic”) neurons
 
in the substantia
 
nigra area of
 
the brain. Although
the
 
mechanisms responsible
 
for
 
the
 
dopaminergic
 
cell
 
loss in
 
PD
 
are not
 
fully
 
elucidated, several
 
lines
 
of
 
evidence
 
suggest
 
that
 
α-
synuclein plays a central role in the neurodegenerative process.
21
Alpha-synuclein
 
is
 
a
 
protein
 
highly
 
expressed
 
in
 
neurons,
 
mostly
 
at
 
presynaptic
 
terminals,
 
suggesting
 
a
 
role
 
in
 
synaptic
 
vesicle
trafficking,
 
synaptic
 
functions
 
and
 
in
 
regulation
 
of
 
neurotransmitter
 
release
 
at
 
the
 
synapse.
 
Duplications,
 
point
 
mutations
 
or
 
single
nucleotide polymorphisms
 
in the
 
gene encoding
 
α-synuclein are
 
known to
 
cause or
 
increase the
 
risk of
 
developing PD
 
or LBD.
 
Mutations
have been shown to primarily alter the
 
secondary structure of α-synuclein, resulting in misfolded and aggregated
 
forms of α-synuclein
(i.e., pathological
 
forms). While
 
mutations in
 
the α-synuclein
 
gene are rare,
 
aggregates of
 
α-synuclein in
 
the form
 
of Lewy bodies
 
(“LB”)
and Lewy neurites are common neuropathological hallmarks of
 
both familial and sporadic PD, suggesting a
 
key role of α-synuclein in
PD
 
neuropathogenesis.
 
Moreover,
 
preformed
 
fibrils
 
of
 
α-synuclein
 
can
 
induce
 
the
 
formation
 
of
 
LB-like
 
inclusions
 
and
 
cellular
dysfunction in
 
cell-based assays
 
as well
 
as in
 
pre-clinical animal
 
models. Together, these data
 
strongly suggest
 
that targeting
 
pathological
forms of α-synuclein has therapeutic potential.
Limitations of Current Therapies
Most approved
 
therapeutic products
 
are aimed
 
at compensating
 
for the
 
dopaminergic deficits
 
and only
 
provide symptomatic
 
relief. While
existing products can indeed
 
provide meaningful symptomatic relief,
 
they often produce significant
 
side effects and lose their
 
beneficial
effects overtime. On the other hand, there are no currently approved disease-modifying therapeutics for PD.
Immunotherapy approaches targeting
 
α-synuclein have been
 
shown to ameliorate
 
α-synuclein pathology as
 
well as functional
 
deficits
in mouse models of PD
 
and are now being investigated in
 
the clinic. These include passive immunization
 
therapy using humanized or
human anti-α-synuclein mAbs or active immunization therapy aimed at inducing a humoral response against pathological α-synuclein.
These approaches have thus far demonstrated good tolerability profiles in Phase 1 clinical trials. A Phase 2 clinical trial in PD subjects
with prasinezumab, a
 
mAb that preferentially
 
recognizes oligomeric and
 
fibrillar forms of
 
α-synuclein significantly reduced
 
subjects’
motor function decline and delayed clinically meaningful worsening or motor symptoms, compared with placebo. Despite encouraging
preliminary data
 
observed with
 
this mAb,
 
we expect
 
that mAbs,
 
even if
 
approved as
 
therapeutic for
 
PD, would
 
be burdened
 
by the
general challenges of cost and administration.
Our Product Candidate: UB-312
We are developing UB-312,
 
an anti-α-synuclein product candidate, as a treatment for PD and other synucleinopathies. We
 
believe that
UB-312 has
 
the potential
 
to be
 
established as
 
a disease-modifying
 
treatment modality
 
for PD,
 
and possibly
 
for LBD
 
and MSA.
 
Pre-
clinical data indicated
 
that UB-312 elicits
 
antibodies that preferentially
 
recognize pathological forms
 
of a-synuclein and
 
improves motor
performance in
 
mouse models
 
of α-synucleinopathies.
 
Preliminary clinical
 
data from
 
our ongoing
 
Phase 1
 
trial indicate
 
that UB-312
elicits antibody levels
 
sufficient to
 
cross the BBB
 
(i.e., detectable in
 
CSF). In 2018,
 
the European Medical
 
Agency (“EMA”) granted
UB-312 orphan designation for MSA.
Clinical Development
We have conducted Part A of a randomized, placebo-controlled, double-blind, dose-escalating, single- center Phase 1 clinical trial of
UB-312 in which 50 healthy volunteers between the ages of 40 and 85 years received three intramuscular doses of either UB-312 or
placebo. During this 44-week Part A trial, subjects received three doses (on weeks 1, 5 and 13) with escalating doses ranging from
40μg to 2,000μg. Immunogenicity was evaluated by measuring changes in serum anti-α-synuclein antibody concentrations during
 
the
course of the study. Data from Part A indicated that UB-312 is generally well tolerated, with no significant safety findings. Data from
Part A also suggested that UB-312 is highly immunogenic, with all individuals in the 300μg/dose group showing detectable anti-α-
synuclein antibodies in both serum and CSF samples. CSF: serum ratios appeared similar to those observed in UB-311 non-human
primate studies (approximately 0.2%), and to those observed in clinical trials of mAbs. Based on these results, we are now evaluating
two dosing regimens of UB-312 in Part B of the Phase 1 trial: three doses of 300μg, and one dose of 300μg followed by two doses of
100μg. Part B will evaluate UB-312 and placebo in 20 PD subjects and began enrollment in January 2022. In addition to the endpoints
evaluated in Part A, an exploratory endpoint involving a clinical assessment using the Movement Disorder Society – Unified
Parkinson’s Disease Response Score will be used.
The Michael J. Fox Foundation (“MJFF”) is funding a 2-year collaborative project between Vaxxinity,
 
Mayo Clinic, and University of
Texas Houston using CSF collected from individuals enrolled in Part B of the Phase 1 trial of UB-312.
 
This work will evaluate the
potential of protein misfolding cyclic amplification (“PMCA”) to assess target engagement and will also aim to characterize the anti-
α-synuclein antibodies produced after immunization with UB-312. Demonstrating whether pathological forms of α-synuclein are
detectable in the CSF of PD subjects, and whether UB-312-derived antibodies prevent the formation of α-synuclein seeds measured by
PMCA, might provide a meaningful surrogate marker of target engagement.
 
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22
UB-312 Demonstrated Dose-Dependent Response in Phase 1 Part A Trial Including Penetration of Titers into CSF
Across
 
four cohorts,
 
UB-312 demonstrated
 
a dose-dependent
 
immunogenic response.
 
Antibodies generated
 
by UB-312
 
were
 
readily
detectable in CSF,
 
indicating BBB penetration with a CSF: serum ratio of approximately 0.2%.
We paused dosing in high dose
 
cohorts in Part A
 
of the trial after
 
one subject developed
 
an adverse effect (“AE”)
 
of special interest
 
(i.e.,
Grade 3 flu-like
 
symptoms) shortly after
 
receiving the second
 
1000μg dose of
 
UB-312. Although this AE
 
was transient and
 
not a serious
adverse event (“SAE”), data collected
 
until that point suggested that
 
the 100μg and 300μg dose
 
levels were well tolerated and
 
yielded
relatively high anti-α- synuclein titers.
 
During the evaluation of the AE,
 
the COVID-19 pandemic was becoming
 
increasingly pervasive
throughout Europe, increasing the risk to healthy
 
volunteers participating in the trial. We
 
therefore did not resume dose escalation and
selected 100μg and 300μg doses for Part B in PD subjects.
Pre-Clinical Data
We
 
have
 
conducted
 
pre-clinical
 
studies
 
of
 
UB-312
 
across
 
multiple
 
animal
 
species,
 
including
 
mice
 
and
 
guinea
 
pigs.
 
These
 
trials
demonstrated that
 
our product
 
candidates, including
 
UB-312, generated
 
high antibody
 
titers to
 
α-synuclein across
 
animal species.
 
In
addition, in vitro studies provided
 
evidence that anti-α-synuclein antibodies produced
 
after UB-312 immunization are highly
 
selective
to pathological α-synuclein, and do not bind to normal α-synuclein.
UB-312 Demonstrates Selective Binding Towards α-Synuclein Fibrils and Ribbons
This in vitro slot blot analysis of sera from guinea pigs dosed with UB-312 demonstrates that antibodies induced by UB-312 bind to α-
synuclein fibrils
 
and ribbons,
 
the toxic
 
forms of
 
α-synuclein believed
 
to underlie
 
PD, more
 
strongly than
 
they bind
 
to monomers,
 
the
normal form of α-synuclein in
 
the body. We believe this preference
 
will allow UB-312 antibodies to
 
avoid target-mediated clearance by
monomers and bind selectively to the toxic species
(Nimmo et al., Alzheimers Res Ther. 2020;12:159).
Anti-α-synuclein
 
antibodies
 
produced
 
by
 
UB-312
 
immunization
 
specifically
 
bind
 
pathogenic
 
species
 
of
 
α-synuclein,
 
including
aggregated fibrils, oligomers
 
and ribbons, while
 
demonstrating low affinity
 
for the monomer.
 
This species selectivity
 
contrasted with
Syn-1, a commercial research mAb used as a control, which failed to differentiate the toxic variants.
In an in vivo study of UB-312 using a transgenic mouse model of PD, we demonstrated prevention
 
of motor deficits in treated animals,
which was associated with significant
 
reduction of brain oligomeric forms
 
of α- synuclein. We
 
believe this data supports the
 
potential
of UB-312 to prevent behavioral motor deficits and reduce toxic forms of α-synuclein.
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23
UB-312 Demonstrates Improvement in Motor Symptoms in Pre-Clinical Study
UB-312
 
immunization
 
in a
 
transgenic mouse
 
model
 
(α-synuclein
 
overexpression)
 
demonstrates
 
improvement
 
in
 
beam
 
test
 
and
 
wire
hanging test, and reductions in α-synuclein oligomers in various brain regions (Nimmo et al., Acta Neuropathol. 2022;143:55-73).
We
 
have also observed
 
by immunohistochemistry that
 
serum antibodies from
 
guinea pigs dosed
 
with UB-312 can
 
bind to aberrant
 
α-
synuclein in PD, LBD and MSA brain sections.
Finally,
 
antibodies
 
derived
 
from
 
UB-312
 
showed
 
no
 
off-target
 
binding
 
on
 
human
 
tissue
 
sections.
 
UB-312-treated
 
transgenic
 
mice
showed no signs of neuroinflammation,
 
and GLP toxicity studies
 
in rats indicated a
 
good non-clinical safety and
 
tolerability profile. We
believe
 
our
 
preclinical
 
data
 
suggest
 
that
 
UB-312
 
may
 
potentially
 
induce
 
a
 
well-tolerated,
 
strong
 
and
 
specific
 
IgG
 
response
 
against
pathological forms of
a-synuclein
in PD subjects.
Development Strategy
While certain portions of
 
this Phase 1 trial
 
were interrupted by the
 
COVID-19 pandemic, Part
 
A in 50 healthy
 
volunteers was completed
in 2020,
 
and we
 
began dosing
 
PD subjects
 
in Part
 
B in
 
early 2022.
 
In Part
 
B we
 
expect to
 
include exploratory
 
endpoints potentially
relevant to
 
PD, such
 
as total
 
and free
 
α-synuclein in
 
serum and
 
CSF, in addition
 
to T-cell ELISpot analyses
 
and antibody
 
characterization.
Upon the completion of
 
the Phase 1
 
trial, we expect
 
to advance UB-312
 
into further clinical development,
 
which may comprise
 
trials
for various synucleinopathies.
Other Neurodegeneration Programs
We are
 
actively engaged in additional initiatives related to neurodegenerative disorders. One of these programs focuses specifically on
tau-protein pathology
 
and its
 
involvement in
 
diseases such
 
as AD
 
and related
 
tauopathies. We believe
 
that targeting
 
different pathological
tau variants simultaneously may enhance treatment efficacy,
 
which will most likely require targeting
 
multiple epitopes concomitantly.
Using
 
our
 
Vaxxine
 
Platform,
 
we
 
have
 
constructed
 
combination
 
product
 
candidates
 
that
 
target
 
these
 
multiple
 
epitopes
 
and
 
have
successfully demonstrated their utility to raise therapeutic antibody titers in in vitro studies as well as early in vivo animal models.
We are also investigating the use of a combination of product candidates targeting Aβ, α-synuclein, tau and C9ORF79 dipeptide repeat
proteins, as multiple proteins could be implicated in neurodegenerative diseases.
Next Wave Chronic Disease Treatments
Pathological
 
endogenous
 
proteins
 
(“self-proteins”)
 
drive
 
a
 
wide
 
range
 
of
 
chronic
 
diseases.
 
While
 
mAbs
 
and
 
small
 
molecules
 
have
provided therapeutic
 
benefits in
 
the treatment
 
of these
 
diseases, inherent
 
limitations of
 
these drug
 
classes have
 
restricted access
 
and
adherence to these treatment modalities globally.
Our next
 
wave chronic disease
 
program is
 
initially focused on
 
migraine and
 
hypercholesterolemia. Monoclonal antibodies
 
have been
approved in both therapeutic areas; however, their high costs have limited access and generally limited use to relatively severe disease.
We aim to develop product candidates in these therapeutic areas that could offer similar efficacy as mAbs at a meaningfully lower cost
24
and
 
improved
 
administrative
 
convenience
 
to
 
patients,
 
thereby
 
potentially
 
allowing
 
for
 
access
 
to
 
broader
 
patient
 
populations
 
versus
mAbs, and greater efficacy than small molecules.
UB-313
An Overview of Migraine
Migraine
 
is
 
a
 
chronic
 
and
 
debilitating disorder
 
characterized by
 
recurrent attacks
 
lasting four
 
to
 
72
 
hours
 
with
 
multiple symptoms,
including typically
 
one-sided, pulsating
 
headaches of
 
moderate to
 
severe pain
 
intensity that
 
are associated
 
with nausea
 
or vomiting,
sensitivity to sound
 
and sensitivity to
 
light. Over 90%
 
of the patients
 
are unable to
 
function normally during
 
a migraine attack. Many
experience comorbid conditions such as depression, anxiety and insomnia.
The Migraine Research
 
Foundation ranks migraine
 
as the world’s third
 
most prevalent illness.
 
The disease affects
 
39 million individuals
in the
 
United States and
 
approximately one billion individuals
 
globally.
 
Patients generally suffer
 
from chronic or
 
episodic migraines.
Chronic migraine is defined
 
as 15 headache days or
 
more per month, while
 
episodic migraine is defined
 
as fewer than 15 headache
 
days
per month. Both acute and prophylactic treatments are used to address chronic and episodic migraines.
CGRP’s
 
Role in Migraine
CGRP
 
is
 
a
 
neuropeptide
 
found
 
throughout
 
the
 
body,
 
including
 
in
 
the
 
spinal
 
cord.
 
CGRP
 
activates
 
CGRP
 
receptor
 
in
 
the
trigeminovascular system, which is
 
located within pain-signaling pathways,
 
intracranial arteries and mast
 
cells. Activation of the
 
CGRP
receptor has been demonstrated to induce migraine in migraineurs. Multiple anti-CGRP therapies
 
have been approved for the treatment
of migraine.
Limitations of Current Therapies
Since the early 1990s,
 
there has been minimal
 
improvement in the standard
 
treatment for migraine. Treatments are
 
characterized as elite
acute or prophylactic.
 
Triptans are
 
the current first-line
 
prescription therapy for
 
the acute treatment
 
of migraine, with
 
over 15 million
annual prescriptions written in the United States.
Prophylactic medications
 
approved for migraine
 
include beta
 
blockers, such
 
as propranolol, topiramate,
 
sodium valproate
 
and botulinum
toxin,
 
branded
 
as
 
Botox.
 
However,
 
many
 
of
 
these
 
medications
 
provide
 
limited
 
clinical
 
benefit.
 
In
 
addition,
 
they
 
are
 
often
 
not
 
well
tolerated, with AEs such as cognitive impairment, nausea, fatigue and sleep disturbance.
Therapeutics targeting
 
the CGRP pathway
 
represent an emerging
 
treatment paradigm. Three
 
anti-CGRP mAbs were
 
approved by the
FDA in
 
2018 for
 
the prophylactic
 
treatment of
 
migraine in
 
adults. These
 
mAbs, erenumab-aooe
 
(Aimovig), fremanezumab-vfrm
 
(Ajovy)
and
 
galcanezumab-gnlm
 
(Emgality),
 
are
 
all
 
administered
 
subcutaneously.
 
Their
 
side
 
effects
 
are
 
generally
 
mild,
 
including
 
pain
 
and
redness at the
 
site of injection,
 
nasal congestion and
 
constipation. Studies show that
 
these mAbs reduce
 
the number of
 
headache days
by 50% or more in approximately 50% of patients. Sales for marketed and clinical-stage anti-CGRP therapeutics are projected to reach
approximately $7.4 billion by
 
2026. Despite the commercial
 
success that this
 
class represents, many
 
of these treatments
 
require frequent
administration, creating inconvenience for patients.
Our Product Candidate: UB-313
We are developing UB-313
 
as a prophylactic treatment initially for chronic migraine. We
 
believe UB-313 has the potential to improve
upon the current
 
treatments for chronic
 
migraine in multiple
 
aspects: we expect
 
UB-313 will require
 
administration quarterly to
 
annually
in
 
contrast
 
to
 
monthly
 
to
 
quarterly
 
for
 
currently
 
marketed
 
mAbs
 
and
 
frequent
 
administration
 
for
 
small
 
molecules.
 
Furthermore,
 
a
potential long durability of response may offer physicians and patients
 
the option to administer UB-313 in an office setting, which
 
can
potentially improve adherence. We expect the cost of UB-313 treatment, if approved, to be lower than that of mAbs for migraine.
Pre-Clinical Studies
We
 
have completed both
 
in vitro
 
and in vivo
 
pre-clinical studies of
 
UB-313. We
 
used an
 
in vivo proof-of-concept
 
capsaicin-induced
dermal blood flow model in
 
mice to demonstrate target engagement
 
of the marketed CGRP-targeting mAbs.
 
In this model, we observed
similar rates in reduction of dermal blood flow as fremanezumab in a head-to-head comparison against fremanezumab.
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25
UB-313 Reduces Capsaicin-Induced Dermal Blood Flow in Mice
**Dunnett’s:
 
Ctl vs Vac
 
1p < 0.05; Ctl vs Vac
 
2 p < 0.05
In this preliminary study, dermal blood flow measurements were
 
taken 17 weeks following the first dose of UB-313. There were 3 to 11
animals per treatment group. Reduced dermal blood flow indicates target engagement with CGRP.
 
UB-313 reduced dermal blood flow
versus the control with an approximately similar magnitude to fremanezumab, which was administered 24 hours prior to the capsaicin
test.
We observed similar results in a capsaicin / dermal blood flow model in rats, comparing a rat version of UB-313 head-to-head against
galcanezumab.
Our
in vivo
 
studies of
 
UB-313 have
 
involved multiple
 
animal species.
 
High immunogenicity
 
was observed
 
in all
 
pre-clinical species
tested. Characterization of the antibodies produced after
 
immunization with UB-313 indicated that they have
 
limited, if any,
 
off-target
potential, are primarily IgG1
 
and IgG2, potently bind
 
to CGRP and potently
 
block CGRP activity
in vitro
. We
 
refer to potency
 
as the
amount
 
of
 
drug
 
required
 
to
 
produce
 
a
 
pharmacological
 
effect
 
of
 
given
 
intensity
 
and
 
is
 
not
 
a
 
measure
 
of
 
therapeutic
 
efficacy.
 
In
 
a
comparison
 
of
 
binding
 
affinities
 
with
 
fremanezumab
 
and galcanezumab,
 
UB-313-induced
 
IgG
 
antibodies
 
demonstrated
 
comparable
binding affinities.
UB-313 Demonstrated Induced Antibodies Comparable to Approved CGRP mAbs
We evaluated UB-313 formulations with two different
 
adjuvants in comparison to
 
fremanezumab and galcanezumab; both
 
formulations
demonstrated comparable IgG to these two approved CGRP mAbs.
Additional
in vitro
 
studies using human
 
SK-N-MC cells demonstrated
 
that UB-313-induced IgG
 
antibodies also had
 
comparable
in vitro
activity to CGRP-targeted mAbs.
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26
UB-313 Induced IgGs Have Comparable In Vitro Activities to Marketed CGRP mAbs
In a cyclic AMP
 
(“cAMP”) production assay
 
conducted in human SK-N-MC
 
cells, antibodies taken from
 
the serum of guinea
 
pigs 15
weeks following the first injection of UB-313 demonstrated similar properties to two approved CGRP mAbs.
Moreover, the binding potency of UB-313 was determined to be comparable to these mAbs.
UB-313 Induced IgGs Demonstrate Comparable Binding Potencies to Marketed CGRP mAbs
Antibodies taken from the serum
 
of guinea pigs 15
 
weeks following the first
 
injection of UB-313 demonstrated
 
similar binding potencies
to two approved CGRP mAbs as measured by ELISA.
Development Strategy
We
 
have identified
 
a lead
 
candidate and
 
anticipate submitting
 
a clinical
 
trial application
 
(“CTA”)
 
or an
 
IND in
 
2022. While
 
we are
currently developing
 
UB-313 as
 
a potential
 
treatment of
 
chronic migraine,
 
depending on
 
successful clinical
 
results, we
 
may seek
 
to
address episodic migraine and cluster headaches as well.
27
PCSK9
An Overview of Hypercholesterolemia
Hypercholesterolemia is
 
the presence
 
of high
 
levels of
 
cholesterol in
 
the blood
 
and typically
 
results from
 
a combination
 
of environmental
and genetic
 
factors. Cholesterol
 
is transported
 
in the
 
blood plasma
 
within particles
 
called lipoproteins.
 
Lipoproteins are
 
classified by
their density:
 
very low-density
 
lipoprotein, intermediate
 
density lipoprotein,
 
LDL and
 
high density
 
lipoprotein (“HDL”).
 
All lipoproteins
carry
 
cholesterol,
 
but
 
elevated
 
levels
 
of
 
lipoproteins
 
other
 
than
 
HDL,
 
particularly
 
LDL,
 
are
 
associated
 
with
 
the
 
development
 
of
cardiovascular disease.
 
Approximately 2 billion
 
people worldwide
 
have elevated
 
levels of
 
LDL, potentially
 
putting
 
them at
 
risk for
cardiovascular disease.
Although hypercholesterolemia itself is asymptomatic, elevation of serum cholesterol can over time
 
lead to atherosclerosis. Over many
years, elevated
 
serum cholesterol
 
contributes to
 
formation of
 
atheromatous plaques
 
in the
 
arteries. These
 
plaque deposits
 
can in
 
turn
lead to progressive narrowing of the
 
involved arteries. Smaller plaques may rupture
 
and cause a clot to form and
 
obstruct blood flow. A
sudden blockage of a coronary artery may result in a heart attack. A blockage of an artery supplying the brain can cause a stroke. If the
development
 
of
 
the
 
stenosis
 
or
 
occlusion
 
is
 
gradual,
 
blood
 
supply
 
to
 
the
 
tissues
 
and
 
organs
 
slowly
 
diminishes until
 
organ
 
function
becomes impaired.
PCSK9 is mainly expressed in
 
the liver and, to a
 
lesser extent, in the small intestine,
 
kidney, pancreas and
 
the central nervous system.
The LDL receptors (“LDLR”) at the cell surface bind and initiate ingestion of LDL particles from extracellular fluid into cells, leading
to a reduction in serum LDL
 
levels. PCSK9 protein plays a
 
major regulatory role in cholesterol
 
homeostasis, mainly by reducing LDLR
levels on the plasma membrane, which leads
 
to decreased metabolism of LDL by the
 
cells. Inhibition of PCSK9 prevents this reduction
in LDLR levels
 
on the plasma
 
membrane, and in
 
consequence the cellular
 
process of internalizing
 
LDL particles, resulting
 
in a reduction
of LDL.
Limitations of Current Therapies
Statins are the
 
most commonly used
 
drugs to treat
 
hypercholesterolemia and result
 
in a pronounced
 
reduction in LDL.
 
The unambiguous
benefits of
 
statins, together with
 
the prevalence of
 
coronary heart disease,
 
have made statins
 
the most highly
 
prescribed drug
 
class in
developed countries. However,
 
many patients are
 
unable to achieve
 
targeted lipid levels
 
despite intensive statins
 
therapy.
 
In addition,
continued patient adherence to statin therapy,
 
which is necessary to maintain a lower risk for cardiac events, is variable but
 
considered
to be low – as low as 30% to
 
40% after two years in persons following a
 
myocardial infarction. Importantly, at the transcriptional level,
statins
 
up-regulate
 
not
 
only
 
LDLR,
 
but
 
also
 
PCSK9,
 
causing
 
the
 
so-called
 
paradox
 
of
 
statin
 
treatment.
 
Although
 
statins
 
induce
 
a
beneficial increase in LDLR, they also increase
 
PCSK9, thus leading to LDLR degradation, which
 
indirectly increases LDL, mitigating
the overall LDL
 
reduction that statins
 
otherwise cause. Given
 
the limitations in
 
efficacy and adherence,
 
targeting PCSK9 in
 
combination
with statins treatment is an emerging treatment paradigm for hypercholesterolemia.
Two
 
mAbs
 
that
 
inhibit
 
activity
 
have
 
received
 
FDA
 
approval,
 
alirocumab
 
(Praluent)
 
and
 
evolocumab
 
(Repatha).
 
These
 
drugs
 
were
initially approved
 
to treat
 
the genetic
 
condition heterozygous
 
familial hypercholesterolemia,
 
although the
 
approved indications
 
were
expanded after
 
the publication
 
of studies
 
demonstrating that
 
the use
 
of a
 
PCSK9 inhibitor
 
in conjunction
 
with a
 
statin significantly
reduced the risk for major cardiovascular events, including heart attack, stroke, unstable angina requiring hospitalization or death from
coronary heart disease. In addition,
 
inclisiran (Leqvio), an siRNA
 
inhibitor of PCSK9 synthesis,
 
was approved by the EMA
 
in late 2020
for the treatment of heterozygous familial hypercholesterolemia in addition to other dyslipidemia.
While alirocumab
 
and evolucumab
 
have demonstrated clinical
 
benefit, their commercial
 
potential has been
 
limited by their
 
pricing. Both
launched
 
with
 
a
 
wholesale
 
acquisition
 
price
 
exceeding
 
$14,000
 
annually,
 
but
 
prices
 
for
 
both
 
were
 
subsequently
 
reduced
 
in
 
2018.
Nevertheless, this drug
 
class generated sales
 
of approximately $1.3 billion
 
in 2020 and
 
is expected to
 
grow to approximately
 
$5.2 billion
by 2026, including the addition of inclisiran to the market. In addition,
 
both must be administered bi-weekly, which represents what we
believe to be a
 
frequent and inconvenient administration schedule for
 
patients. While inclisiran represents an
 
improved administration
schedule compared
 
to alirocumab
 
and evolucumab, as
 
it must
 
be administered
 
only twice
 
annually,
 
we believe
 
that it
 
may encounter
similar pricing challenges due to the published cost effectiveness price.
Our Hypercholesterolemia Program
We
 
are developing an anti-PCSK9 product candidate
 
to treat hypercholesterolemia. Our program is
 
dedicated to developing a product
candidate that has long-acting treatment duration,
 
which we believe will offer
 
a more convenient treatment regimen of
 
every six to 12
months compared to
 
the up to
 
bi-weekly dosing required
 
by some mAbs.
 
We believe that lower manufacturing
 
costs commensurate with
the requirement of meaningfully less drug substance relative to mAbs, coupled with our ability to achieve commercial
 
scale production
rapidly may promote expanded use
 
of this drug class
 
as a first-line therapy treating
 
a greater number of hypercholesterolemia
 
patients
than currently treated with mAbs.
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Pre-Clinical Studies
Pre-clinical
 
studies
 
of
 
our
 
anti-PCSK9
 
vaccine
 
indicate
 
that
 
our
 
product
 
candidate
 
generates
 
therapeutic titer
 
levels
 
of
 
anti-PCSK9
antibodies. These studies
 
also indicate that it
 
produces a high
 
response rate among dosed
 
animals. We
 
achieved proof-of-concept in a
guinea pig
 
model, reducing
 
LDL cholesterol
 
by more
 
than 30%
 
over the
 
15-week treatment
 
duration, comparable
 
to the
 
reductions
observed with the use of anti-PCSK9 mAbs.
Anti-PCSK9 Product Candidate Reduces LDL by 30 to 50% Over 15 Weeks in Guinea Pigs (n=6)
Development Strategy
We plan to initiate IND-enabling studies of a lead anti-PCSK9 candidate in 2022.
 
Next Stage Development Candidates
In addition to
 
our initial focus
 
on migraines and
 
hypercholesterolemia, we
 
believe our Vaxxine Platform can
 
generate product candidates
for
 
a
 
range
 
of
 
chronic
 
diseases.
 
We
 
are
 
evaluating
 
opportunities
 
across
 
multiple
 
disease
 
areas,
 
including
 
allergy
 
(e.g.,
 
chronic
rhinosinusitis, atopic
 
dermatitis, food
 
allergy), autoimmune (e.g.,
 
psoriasis, psoriatic
 
arthritis), pain
 
(e.g., peripheral
 
neuropathy, diabetic
neuropathy) and bone
 
and muscle deterioration
 
(e.g., osteopenia, sarcopenia
 
of aging) indications
 
as they may
 
apply to geriatrics
 
and
space travel health.
COVID-19 Program
An Overview of COVID-19
COVID-19, caused
 
by SARS-CoV-2, has rapidly
 
swept throughout
 
the world.
 
The WHO
 
declared COVID-19
 
a public
 
health emergency
of international concern. As
 
of February 22, 2022, there
 
have been more than
 
420 million laboratory-confirmed COVID-19
 
patients and
more than 5.8 million deaths worldwide. Common symptoms of COVID-19 are fever, cough, lymphocytopenia and chest radiographic
abnormality. A proportion of
 
patients recovering from
 
COVID-19 continue shedding
 
virus for days,
 
and asymptomatic carriers
 
may also
transmit SARS-CoV-2, indicating a
 
risk of
 
a continuous
 
and long-term
 
pandemic. According
 
to Our
 
World in Data (ourworldindata.org),
as of March 2, 2022, approximately 87% of people in low-income countries have not received a single dose of a COVID-19 vaccine.
SARS-CoV-2
 
is an
 
enveloped, single-stranded,
 
positive-sense RNA
 
virus belonging
 
to the
 
family
Coronavidae
 
within the
 
genus β-
coronavirus. The genome of SARS-CoV-2 encodes one large Spike (“S”) protein that plays a pivotal role during
 
viral attachment to the
host receptor, angiotensin converting enzyme 2 (“ACE2”), and
 
entry into host cells. The S protein is the major principal antigen
 
target
for
 
vaccines
 
against
 
human
 
coronavirus,
 
including
 
SARS-Co-V-2.
 
Neutralizing
 
antibodies
 
targeting
 
the
 
receptor
 
binding
 
domain
(“RBD”) subunit
 
of the S
 
protein block the
 
virus from
 
binding to
 
host cells.
 
Over 90% of
 
all neutralizing
 
antibodies produced
 
in response
to infection are directed to the RBD subunit, and mAbs that have shown therapeutic activity target epitopes on the RBD.
More than twenty vaccines are
 
authorized for use in one
 
or more countries around the
 
world, including three in the
 
United States. These
vaccines are
 
based on
 
the S
 
protein of
 
the SARS-CoV-2, but rely
 
on different mechanisms
 
for presentation
 
or expression
 
of the
 
S antigen,
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29
including whole inactivated
 
virus, defective adenovirus
 
vectors (three different
 
types) or mRNA.
 
All have been
 
shown to be
 
safe and
effective in placebo- controlled clinical trials. Antiviral drugs and mAbs have limited availability and effectiveness.
COVID-19 Vaccine Market
Disparities in
 
COVID-19 vaccine
 
availability and distribution
 
continue to grow
 
despite the
 
myriad of
 
procurement efforts
 
underway.
There exists a shortfall
 
in the supply of
 
COVID-19 vaccines globally
 
for primary immunization,
 
driven by supply constraints
 
along with
substantial challenges
 
around distribution,
 
delivery and
 
poor logistical
 
capacity to
 
administer doses.
 
This primary
 
immunization shortfall
is
 
disproportionately pronounced
 
in low-
 
and middle-income
 
countries (“LMICs”).
 
We
 
estimate
 
that in
 
order
 
for
 
these
 
countries to
approach herd immunity (modeled at 70% vaccinated), there remains
 
a shortfall of hundreds of millions of doses
 
(excluding India and
China).
Furthermore,
 
as
 
knowledge of
 
SARS-CoV-2
 
and
 
its
 
circulating variants
 
(e.g.,
 
Omicron)
 
and
 
vaccination
 
efforts
 
grow,
 
the
 
need
 
for
booster immunizations has become more apparent. We estimate that the size of the COVID-19 vaccine booster dose market globally in
2022 will exceed 1.5 billion
 
doses. We
 
expect the need for heterologous
 
booster vaccines with low reactogenic
 
profiles, broad variant
coverage, durable immunity and mechanisms of action different from presently authorized vaccines to continue through 2022.
UB-612: Our COVID-19 Vaccine Initiative
We are
 
developing UB-612 as a product candidate for the prevention of COVID-19. UB-612 is
 
designed to activate both antibody and
cellular immunity against multiple viral targets. The vaccine is composed of a recombinant S1-RBD-sFc fusion protein combined with
rationally designed
 
synthetic Th
 
and CTL
 
epitope peptides
 
selected from
 
the S2
 
domain of
 
the spike,
 
membrane (“M”),
 
and nucleocapsid
(“N”) proteins. These peptides bind
 
to MHC I and II
 
without significant genetic restriction, so
 
that they may be recognized
 
by the entire
human population. Our mixture of peptides is designed to elicit T-cell activation, memory recall and effector
 
functions similar to those
of natural COVID-19. The
 
S1-RBD-sFc fusion protein
 
incorporates essential B-cell
 
epitopes that promote the
 
generation of neutralizing
antibodies to
 
the RBD of
 
SARS-CoV-2.
 
UB-612 is
 
formulated with
 
Adju-Phos, an
 
adjuvant widely used
 
in many
 
approved vaccines
globally. For
 
added safety,
 
synthetic peptides in UB-612
 
are adsorbed by our
 
propriety CpG1 excipient, a
 
Toll-like
 
receptor 9 agonist
molecule, known to
 
help to stimulate
 
balanced T-cell immunity in humans.
 
UB-612 can be
 
stored and shipped
 
at 2° to
 
8°C (conventional
cold chain
 
refrigerated temperatures).
 
An EUA
 
application for
 
UB-612 was
 
denied by
 
the TFDA
 
in August
 
2021 because
 
the neutralizing
antibody response generated by UB-612, as compared to a designated adenovirus vectored vaccine, did not meet the TFDA’s
 
specified
evaluation criteria but, in collaboration with UBIA, we are appealing the decision. We are now also pursuing paths to authorization for
UB-612 as a heterologous boost and have agreement with a high income regulator about our development approach.
Components of the UB-612 Multitope Vaccine Product Candidate
UB-612’s
 
construct contains an S1-RBD-sFc fusion protein
 
for the B-cell epitopes, plus five synthetic
 
Th/CTL peptides for class I and
II MHC molecules derived from
 
SARS-CoV-2 S2, M and
 
N proteins, and the UBITh1a
 
peptide. These components are formulated with
CpG1, which
 
binds the
 
positively charged
 
(by design)
 
peptides by
 
dipolar interactions
 
and also
 
serves as
 
an adjuvant,
 
which is
 
then
bound to Adju-Phos adjuvant to constitute the UB-612 product candidate.
Clinical Development
In
 
March
 
2022,
 
Vaxxinity
 
initiated
 
a
 
Phase
 
3
 
pivotal
 
study
 
to
 
compare
 
the
 
immune
 
responses
 
stimulated
 
by
 
mRNA
 
(BNT162b2),
adenovirus (ChAdOx1-S),
 
inactivated virus
 
(Sinopharm BIBP)
 
COVID-19 vaccines,
 
and UB-612,
 
when delivered
 
as third
 
dose boosters.
This is an
 
active-controlled, randomized, multicenter
 
study being conducted
 
in several countries
 
under a platform
 
protocol which enrolls
subjects 16
 
years and
 
older who
 
completed a
 
two-dose primary
 
immunization with
 
one or
 
more of
 
the vaccines
 
mentioned above.
 
Eligible
subjects will be
 
randomized into one
 
of two treatment
 
arms to receive
 
a single dose
 
of UB-612 or
 
an active comparator.
 
The primary
objective of
 
the study
 
is to
 
determine non-inferiority
 
of UB-612-stimulated
 
neutralizing antibodies
 
against the
 
comparator vaccines.
Additionally, Omicron
 
neutralizing antibodies, non-neutralizing antibodies and
 
T cell responses will
 
be analyzed as part
 
of secondary
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30
and exploratory objectives.
 
We expect that, if successful,
 
this study may
 
enable conditional approval
 
of UB-612 in
 
multiple high income
countries and LMICs.
3-Dose Data: Phase 1 Extension Trial
In early 2021, we completed an open-label dose escalation Phase 1 clinical trial to evaluate the safety, tolerability and
immunogenicity of UB-612 in healthy adults in Taiwan. This trial consisted of three cohorts of 20 subjects each. The first cohort
received two intramuscular injections of 10μg doses of UB-612, the second cohort received two 30μg
 
doses and the third cohort
received two 100μg doses. The first dose in each cohort was administered at the start of the trial, with the second dose administered
on day 28.
In a Phase 1 extension trial, 50 subjects from Phase 1 received a third booster dose of UB-612 approximately 7-9 months after their
second dose (100µg).
After one and two doses in the Phase 1 trial, UB-612 was considered to be generally safe and well tolerated, with a low frequency of
solicited and unsolicited AEs, which were all Grade 1 (mild) in severity.
 
We selected the highest dose (100μg) to take into the Phase
2 trial.
Similarly, in the Phase 1 extension trial, UB-612 was generally well tolerated after a third dose, with no vaccine-related SAEs
reported.
Local and Systemic Solicited Adverse Events Following 1, 2, and 3 Doses of UB-612 at Varying Dose Levels
Solicited adverse event data from Phase 1 and Phase 1 extension (n=50) suggests UB-612 is well tolerated after each of three doses
across varying dose levels.
 
Immunogenicity and safety data from the Phase 1 extension suggests that UB-612 elicits a multi-fold increase in neutralizing
antibody titers upon third dose, significantly exceeding those observed in human convalescent sera, and that the third dose is well
tolerated with no vaccine-related SAEs reported.
 
Published studies have shown a correlation between efficacy in randomized
controlled trials and the ratio of neutralizing titers in sera from vaccinated subjects to titers in human
convalescent sera.
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31
UB-612 Neutralizing Antibodies Against Wuhan
 
Strain of SARS-CoV-2
(GMT, WHO International Units)
UB-612 Phase 1 extension (n=50) demonstrated that a dose of 100μg UB-612 following three doses of various sizes of UB-612 elicits
a multi-fold increase in neutralizing antibody titers.
In collaboration with University College London and VisMederi,
 
we analyzed sera from subjects immunized with three doses of UB-
612. Data demonstrated that UB-612 elicited a broad IgG antibody response against multiple SARS-CoV-2 variants of concern,
including, Alpha, Beta, Delta, and Gamma, and Omicron, and higher levels of neutralizing antibodies against Omicron than three
doses of an approved mRNA vaccine.
IgG Binding to RBD by Variant of Concern after 2 and 3 Doses of UB-612
IgG binding titers against SARS-CoV-2 major variants of concern in sera collected 28 days after 2 doses and 14 days after 3 doses of
UB-612 (100µg) from Phase 1 trial participants (n=15).
 
The loss of antibody bindings to RBD of variants compared with the original
RBD (Wuhan) remains stable between 2 doses and 3 doses of UB-612 vaccine, along with a high overall increase in levels of binding
antibodies to RBD.
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32
Third immunization with UB-612 Produces Neutralizing Antibodies Against Omicron
 
Phase 1 extension subjects (n=15) received primary series with UB-612 100µg. Serum is taken 28 days after the second dose and 14
days after the third booster immunization administered 7-9 months after the primary series. Live virus neutralization test against
Wuhan and Omicron are
 
performed at VisMederi; results are
 
expressed as virus neutralization antibody GMT ± 95% CI.
2-Dose Data: Phase 2 Trial
A randomized, placebo-controlled,
 
multi-center Phase 2
 
trial of UB-612
 
in 3,850 healthy
 
volunteers aged 12
 
to 85 is ongoing
 
in Taiwan.
Subjects in this trial receive
 
two doses of 100μg UB-612, or
 
placebo, 28 days apart. The
 
objectives of this trial include
 
the analysis of
safety
 
and
 
immunogenicity
 
of
 
UB-612,
 
in
 
particular,
 
antigen-specific
 
antibodies
 
to
 
UB-612,
 
the
 
seroconversion
 
rate
 
and
 
lot-to-lot
consistency of antibody responses. An interim analysis of data from this Phase 2 trial in healthy volunteers 18 years and
 
older based on
the data cut-off
 
date of June 27,
 
2021 was submitted
 
to the TFDA
 
as part of
 
a filing for
 
an EUA in
 
Taiwan.
 
The EUA was
 
denied in
August 2021 by the TFDA, but, in collaboration with UBIA, we are appealing that decision.
 
In data from over 3,750 subjects, UB-612 appears well tolerated, with no significant safety findings to date. AEs were generally
mild, and no related SAEs were observed. Local injection site AEs occurred in half of the subjects, the most frequent being injection
site pain. Systemic AEs occurred in less than half of the subjects, and the incidence was similar in the active and placebo groups,
except for muscle pain which was more frequent in the active group. Aside from muscle pain, systemic reactions were comparable
across the active and placebo groups, with less than 10% of subjects in either group experiencing fever or chills. Systemic AEs were
similar after the first and second doses. The vast majority of AEs were mild (Grade 1), and all were self-limited. No subject had a
severe (Grade 3) local reaction. The incidence of severe (Grade 3) systemic reactions was <0.1%.
The Phase 2 interim
 
analysis suggests that Phase 1
 
observations on immunogenicity,
 
neutralizing titers and tolerability are
 
repeatable,
with an overall seroconversion rate of
 
94.7% one month after the second
 
dose. In a live virus (Wuhan) neutralization test,
 
sera collected
from UB-612 vaccinated
 
younger adults (19-64
 
years, n=322), 28
 
days after the
 
second dose (day
 
57) were estimated
 
to reach geometric
mean titers (“GMT”) of
 
102 of 50% virus-neutralizing
 
antibodies (VNT
50
).
Sera collected from a
 
subset of subjects (n=48)
 
28 days after
the second immunization was
 
shown to neutralize several
 
SARS-CoV-2
 
variants, with the loss
 
of neutralization activity against
 
Delta
estimated at 1.39-fold when compared to the neutralizing antibodies against the parental Wuhan virus.
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33
Immunogenicity Results from Phase 2 & Phase 1 were Consistent:
 
Live Virus Neutralization Versus
 
Convalescent Sera
Phase 1 (n=20 in 100μg dose group) and Phase 2 (n=322) sera (taken 28 days after the second dose) titer neutralizing activity, versus
a panel of human convalescent
 
serum titers taken from patients hospitalized with
 
COVID-19, as measured by a live virus
 
neutralization
test, VNT50, shows that two doses of UB-612 may yield neutralizing antibodies comparable to those found in convalescent patients.
Immunization with UB-612 in both
 
Phase 2 and Phase
 
1 studies led to
 
detectable T-cell
 
responses observed in a
 
subset of subjects. In
Phase 2, a total
 
of 88 subjects receiving UB-612
 
and 12 receiving placebo were
 
tested for T cell
 
responses at baseline and on
 
Day 57.
Preliminary results of ELISpot
 
(Interferon-γ and IL-4) and
 
intracellular cytokine staining indicate
 
robust responses to UB-612,
 
with a
strong
 
Th1
 
orientation.
 
Intracellular
 
cytokine
 
staining
 
(ICS)
 
confirmed
 
the
 
Th1
 
orientation
 
of
 
T
 
cell
 
responses.
 
UB-612
 
induced
measurable CD8+ T cell responses and CD107a+/Granzyme secreting cells, which are putative cytotoxic T cells.
UB-612 stimulates T-cell responses with predominately Th1 polarity
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34
Top panel: ELISPOT analysis of PBMCs collected on day 57 Phase 2 study. Bottom panels (A, B and C): ICS analysis of PBMCs
collected on day 57 Phase 2 study. Placebo (n=14) subjects without IgG ELISA, ACE2 and neutralizing antibody responses. UB-
612 n=86 subjects. Statistical analysis was performed using Mann-Whitney t test. (* p<0.05; ** p<0.01; ***p<0.001; ****
p<0.0001).
 
2-Dose Data: Phase 1 Trial
In early 2021, we completed an open-label dose escalation Phase 1 clinical trial to evaluate the safety, tolerability and immunogenicity
of UB-612 in healthy volunteers between
 
the ages of 20 and 55 in
 
Taiwan. This six-month trial consisted of three cohorts of 20
 
subjects
each. The first cohort received two intramuscular
 
injections of 10μg doses of UB-612, the
 
second cohort received two 30μg doses and
the third cohort received two 100μg doses. The first dose
 
in each cohort was administered at the start of the
 
trial, with the second dose
administered
 
on
 
day
 
28.
 
The
 
mean
 
titer
 
of
 
antigen-specific
 
antibodies
 
to
 
UB-612
 
and
 
the
 
seroconversion
 
rate
 
was
 
be
 
evaluated
throughout
 
the
 
six-month
 
duration
 
of
 
the
 
study
 
to
 
determine
 
the
 
humoral
 
immune
 
response
 
and
 
persistence
 
of
 
immunogenicity.
 
In
addition, T-cell responses were evaluated by interferon-γ ELISpot assay and intracellular cytokine staining by flow cytometry.
The Phase 1 clinical trial was sponsored by UBIA. UBIA
 
conducted the trial on our behalf in accordance with one
 
of our related party
master services agreements.
 
After one
 
and two
 
doses, UB-612
 
was considered
 
to be
 
generally safe
 
and well
 
tolerated, with
 
a low
 
frequency of
 
solicited and
 
unsolicited
AEs, which
 
were all
 
Grade 1
 
(mild) in
 
severity.
 
After each
 
vaccination, the
 
most common
 
AE was
 
injection site
 
pain, with
 
no clear
difference in reactogenicity between dose levels. In all dose groups, there was a trend towards
 
increased reactogenicity with increase in
dose.
 
Three
 
cases
 
of
 
mild
 
allergic
 
reactions
 
were
 
reported
 
(e.g.,
 
itching
 
at
 
vaccine
 
site),
 
which
 
were
 
all
 
resolved
 
within
 
1-3
 
days.
Importantly, and
 
in distinction to certain
 
vaccines authorized for emergency
 
use, no other increase
 
in AEs was seen
 
at second dose as
compared to first injection. We selected the highest dose (100μg) to take into the Phase 2 trial.
In an
 
anti-S1-RBD ELISA assay,
 
we observed that
 
all three dose
 
levels of UB-612
 
induced titer levels
 
comparable to or
 
greater than
those in sera
 
from patients hospitalized with
 
COVID-19. Furthermore, in a
 
cytopathic effect viral
 
neutralization assay (CPE VNT50),
we observed neutralizing titers comparable to those in sera from patients hospitalized with COVID-19.
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35
Since September 2020, a number of
 
genotypic variants of SARS-CoV-2
 
have emerged and contributed to
 
epidemic spread in multiple
countries. Notable among these
 
are the Alpha or B.1.1.7
 
(United Kingdom), Beta or B.1.351
 
(South Africa), Gamma or
 
P.1 (Brazil) and
the Delta
 
or B.1.617.2
 
variant (India)
 
and Omicron
 
(B.1.1.529).
 
Some SARS-CoV-2
 
variants containing
 
mutations in
 
the S
 
protein,
especially the N-terminal domain
 
and the RBD, show
 
reduced neutralization by antibody
 
against the Wuhan
 
strain, evidenced both in
persons
 
naturally
 
infected
 
and
 
in
 
vaccinated
 
individuals.
 
The
 
Beta
 
(South
 
Africa)
 
and
 
Omicron
 
variants
 
show
 
the
 
highest
 
level
 
of
resistance, with 13-fold
 
to over 30-fold
 
reduction in neutralization,
 
respectively,
 
and vaccines have
 
shown reduced protection
 
against
these variants.
 
Neutralizing activities of sample
 
sera from the Phase 1
 
trial were assessed against
 
live virus variants at the
 
Viral and Rickettsial Disease
Laboratory of the
 
California State Department
 
of Public
 
Health. The
 
results indicate
 
that UB-612
 
induces viral neutralizing
 
antibody
titers against the Alpha, Gamma and Delta variants of SARS-CoV-2, close to the neutralizing titer level against the original (wild-type,
WT) Wuhan
 
strain, while
 
the titer
 
level against
 
the Beta
 
variant is
 
lower in
 
comparison. The
 
latter finding
 
is anticipated
 
by
 
results
published for other COVID-19
 
vaccines, as pointed out
 
above. These data align
 
with observations taken from
 
a cynomolgus macaque
study of UB-612 as well.
We measured viral-neutralizing antibody titers
 
up to 154 days after the second dose (day 196) in the
 
Phase 1 trial of UB-612; the level
of VNT50 antibodies remained
 
at 52% of the
 
maximum level observed following
 
the second dose, on
 
average. Based on the
 
interim six-
month cutoff, the UB-612-specific neutralizing antibody half-life was estimated to be 195 days using an exponential model.
Time Course of SARS-CoV-2 Antibody Neutralization Responses after Vaccination
Data from a
 
micro-neutralization assay of
 
sera from subjects
 
who received two
 
100μg doses
 
of UB-612
 
yielded an
 
estimated neutralizing
titer half-life of 195 days (CI: 136, 349) using an exponential model.
Pre-Clinical Study Results for UB-612
 
Initial work to select
 
the S1-RBD-sFc antigen
 
was performed in
 
guinea pig immunogenicity
 
studies, which demonstrated
 
the superiority
of S1-RBD-sFc over other protein
 
designs tested. Product candidate dose
 
and formulation were explored in
 
rat immunogenicity studies,
which allowed the
 
selection of the current
 
formulation of UB-612.
 
Efficacy studies were
 
carried out in mouse
 
and nonhuman primate
models, in which
 
UB-612 showed protective
 
efficacy against
 
live viral challenge.
 
In a nonhuman
 
primate model challenge
 
study,
 
we
observed full protection against SARS-CoV-2.
A GLP toxicology study
 
in rats demonstrated an
 
acceptable safety profile and
 
enabled clinical testing of
 
UB-612. In addition to
 
these
studies, a Developmental and Reproductive Toxicity study yielded no significant findings.
Development Strategy
Based on UB-612 three-dose
 
titer data from the
 
Phase 1 extension, and
 
our belief in UB-612’s potential utility
 
as a heterologous booster
dose
 
(boosting
 
the
 
immunity
 
of
 
a
 
subject
 
who
 
has
 
already
 
received
 
a
 
different
 
vaccine),
 
we
 
are
 
pursuing
 
accelerated
 
pathways
 
to
authorization with regulators
 
in multiple jurisdictions,
including high income
 
countries and LMICs
 
based on a
 
heterologous booster trial
of UB-612 beginning in
 
the first half of
 
2022, with the first dose
 
administered in the U.S. in
 
the first quarter of 2022
 
under
FDA IND
clearance.
36
COVID-19 Diagnostics Program
We have developed an ELISA test that can quickly detect antibodies
 
in human sera or plasma to
 
determine if a patient has had a
 
SARS-
CoV-2 infection post fourteen days of onset. It
 
employs synthetic peptides derived
 
from the M, S and
 
N proteins of SARS-CoV2 for
 
the
detection
 
of
 
IgG
 
antibodies
 
to
 
SARS-CoV2
 
in
 
human
 
sera
 
or
 
plasma.
 
These
 
synthetic
 
peptides
 
bind
 
antibodies
 
specific
 
to
 
highly
antigenic segments of SARS- CoV2 structural
 
M, N and S proteins and
 
constitute the solid phase antigenic immunosorbant. The
 
FDA
issued an EUA for our ELISA test in January 2021. We are not actively pursuing commercialization of our ELISA tests at this time.
 
Competition
The
 
pharmaceutical
 
industry
 
is
 
characterized
 
by
 
rapidly
 
advancing
 
technologies,
 
intense
 
competition
 
and
 
a
 
strong
 
emphasis
 
on
proprietary
 
products.
 
While
 
we
 
believe
 
that
 
our
 
technology,
 
the
 
expertise
 
of
 
our
 
executive
 
and
 
scientific
 
teams,
 
research,
 
clinical
capabilities, development experience and scientific knowledge
 
provide us with competitive advantages, we face
 
increasing competition
from multiple
 
sources, including
 
pharmaceutical and
 
biotechnology companies,
 
academic institutions,
 
governmental agencies
 
and public
and private research institutions.
Vaccines
The global
 
vaccine market
 
is highly
 
concentrated among
 
a small
 
number of
 
multinational pharmaceutical
 
companies: Pfizer,
 
Merck,
GlaxoSmithKline and Sanofi together control most
 
of the global vaccine market.
 
Other pharmaceutical and biotechnology companies,
academic institutions, governmental agencies and public and private research institutions are also working toward new solutions
 
given
the continuing global unmet need.
More than twenty COVID-19
 
vaccines are currently authorized
 
for use in one
 
or more countries around
 
the world, including three
 
in the
United States. All have
 
been shown to be
 
safe and effective in
 
placebo-controlled clinical trials. All these
 
vaccines are based on
 
the S
protein of the
 
SARS-CoV-2
 
virus, but rely
 
on different
 
mechanisms for presentation
 
or expression of
 
the S antigen,
 
including whole,
inactivated virus, defective adenovirus vectors (three different types) or mRNA.
Neurodegenerative Disorders
We
 
expect
 
that,
 
if
 
approved,
 
our
 
product
 
candidates
 
will
 
compete
 
with
 
the
 
currently
 
approved
 
therapies
 
for
 
management
 
of
neurodegenerative diseases, such as AD and
 
PD. In AD, four drugs are
 
currently approved by the FDA for the
 
treatment of symptoms
of AD, based on
 
acetylcholinesterase (“AChE”) inhibition and NMDA receptor
 
antagonism. In addition to the
 
marketed therapies, we
are
 
aware
 
of
 
several
 
companies
 
currently
 
developing
 
therapies
 
for
 
AD,
 
including
 
Eisai,
 
Eli
 
Lilly,
 
Hoffman-LaRoche,
 
Otsuka
Pharmaceuticals, Novartis
 
and Biohaven
 
Pharmaceuticals. Biogen’s
 
aducanumab was
 
approved by
 
the FDA
 
in June
 
2021 under
 
the
accelerated approval pathway,
 
which allows for
 
earlier approval of
 
drugs that
 
treat serious
 
conditions, and that
 
fill an
 
unmet medical
need based on a surrogate endpoint. Regulatory approval of aducanumab is pending in Europe and Japan.
Pharmaceutical treatments for PD address its symptoms
 
only and do not treat the underlying causes
 
of PD. The majority of prescription
drugs
 
are
 
dopaminergic
 
medications
 
and
 
act
 
by
 
increasing
 
dopamine,
 
a
 
neurotransmitter.
 
We
 
are
 
aware
 
of
 
several
 
companies
 
with
product
 
candidates
 
at
 
various
 
stages
 
of
 
clinical
 
development,
 
including
 
Sanofi,
 
Kyowa
 
Kirin,
 
Cerevel
 
Therapeutics
 
and
 
Hoffman
LaRoche. Hoffman LaRoche is developing prasinezumab, a mAb, as a potential treatment for PD.
CGRP-Directed Migraine Treatments
Six migraine treatments have been approved by the FDA that target
 
CGRP.
 
Four of these therapeutics are mAbs and were approved to
prevent or reduce
 
the number of
 
migraine episodes. These
 
medications are galcanezumab
 
(Emgality), which was
 
developed by Lilly;
erenumabb (Aimovig), which was developed by Amgen in collaboration
 
with Novartis; fremanezumab (Ajovy), which was developed
by
 
Teva;
 
and
 
eptinezumab
 
(Vyepti),
 
which
 
was
 
developed
 
by
 
Alder,
 
acquired
 
by
 
Lundbeck.
 
Ubrogepant
 
(Ubvelvy),
 
developed
 
by
Allergan, was
 
approved for
 
the treatment
 
of acute
 
migraine episodes;
 
rimegepant (Nurtec),
 
also approved
 
for the
 
treatment of
 
acute
migraine, is sold by Biohaven.
PCSK-9 Inhibitors
Two
 
companies currently
 
have
 
PCSK-9
 
inhibitors
 
approved by
 
the
 
FDA
 
to
 
treat
 
hypercholesterolemia. Both
 
are mAbs.
 
Regeneron
Pharmaceuticals
 
developed
 
alirocumab
 
(Praluent),
 
in
 
collaboration
 
with
 
Sanofi,
 
and
 
Amgen
 
developed
 
evolocumab
 
(Repatha).
 
The
Medicines Company,
 
a
 
subsidiary of
 
Novartis, is
 
developing inclisiran,
 
an
 
RNAi construct,
 
to down-regulate
 
synthesis of
 
PCSK-9.
Inclisiran was approved by the EMA in December 2020.
37
Collaborations
From time
 
to time,
 
we may
 
enter into
 
licensing and
 
commercialization agreements
 
when they
 
align with
 
our mission,
 
including the
Platform
 
License
 
Agreement
 
described
 
under
 
“—Intellectual
 
Property—Platform
 
License
 
Agreement”
 
and
 
the
 
agreement
 
with
 
our
partner Aurobindo.
Aurobindo License Agreement
In
 
December
 
2020,
 
we
 
entered
 
into
 
an
 
exclusive
 
license
 
agreement
 
with
 
Aurobindo
 
(as
 
amended,
 
the
 
“Aurobindo
 
Agreement”)
 
to
develop and
 
commercialize UB-612
 
to India
 
and other
 
territories. Pursuant
 
to the
 
Aurobindo Agreement,
 
we granted
 
Aurobindo an
exclusive license (with
 
certain rights reserved
 
to us) to
 
develop, manufacture and
 
commercialize UB-612 in India
 
and other countries
through
 
UNICEF
 
and
 
a
 
non-exclusive
 
license
 
to
 
develop,
 
manufacture
 
and
 
commercialize
 
UB-612
 
in
 
other
 
selected
 
emerging
 
and
developing markets.
 
The Aurobindo Agreement may be terminated
 
(i) by Aurobindo, without cause at any
 
time after three years following the effective date
or
 
prior
 
to
 
such
 
time
 
if
 
UB-612
 
fails
 
to
 
meet
 
clinical
 
end-points
 
or
 
fails
 
in
 
development,
 
(ii)
 
by
 
us,
 
(a)
 
if
 
Aurobindo
 
disputes
 
the
patentability, enforceability or validity of our patent rights related to the UB-612 technology,
 
(b) in case of a suit alleging Aurobindo’s
use of
 
the licensed intellectual
 
property infringes a
 
third party’s
 
intellectual property rights
 
if we
 
reasonably believe the
 
license is no
longer commercially reasonable in light of such claim or (c) without cause at any time
 
after four years following the effective date, (iii)
by either
 
party in
 
the event
 
of the
 
other party’s
 
material breach
 
of its
 
obligations under
 
the Aurobindo
 
Agreement (subject
 
to a
 
cure
period) or (iv) by either party in the event of the other party’s insolvency.
Manufacturing
The manufacture of
 
our product candidates
 
encompasses both
 
the manufacture
 
of custom components
 
and the formulation,
 
fill and finish
of the final product.
 
We
 
do not currently own
 
or operate manufacturing facilities
 
for these processes. We
 
currently rely upon contract
manufacturing organizations, including those mentioned below, to produce our product candidates for both pre-clinical and clinical use
and will
 
continue to
 
rely upon
 
these relationships
 
for commercial
 
manufacturing if
 
any of
 
our product
 
candidates obtain
 
regulatory
approval. Although
 
we rely
 
upon contract
 
manufacturers, we
 
also have
 
personnel with
 
extensive manufacturing
 
experience that
 
can
oversee the relationships with our manufacturing partners.
Historically,
 
we
 
have
 
depended
 
heavily
 
on
 
UBI
 
and
 
its
 
affiliates
 
for
 
our
 
business
 
operations,
 
including
 
the
 
provision
 
of
 
research,
development
 
and
 
manufacturing
 
services.
 
Currently,
 
UBIA
 
provides
 
testing
 
services
 
for
 
UB-312
 
and
 
UB-612,
 
UBI
 
Pharma
 
Inc.
(“UBIP”)
 
provides
 
testing
 
relating
 
to
 
formulation-fill-finish
 
services
 
for
 
UB-312,
 
and
 
United
 
BioPharma,
 
Inc.
 
(“UBP”)
 
is
 
the
 
sole
manufacturer of protein for UB-612. Our commercial arrangements with UBI and its affiliates are described in more detail below.
Formulation-fill-finish services for UB-612 are provided by multiple contract manufacturers to ensure adequate capacity and minimize
supply
 
chain
 
risks.
 
For
 
supply
 
of
 
our
 
other
 
custom
 
components,
 
in
 
addition
 
to
 
protein
 
manufacturing
 
conducted
 
by
 
UBP,
 
we
 
have
engaged third party CMOs, including
 
C S Bio Co. (“CSBio”)
 
as our primary peptide supplier for
 
UB-612 peptides and Wuxi
 
STA
 
for
process development and manufacturing services of oligonucleotides.
 
UBI Group Manufacturing Partnership
We
 
primarily rely
 
on our
 
relationships with
 
third-party contract
 
manufacturing organizations
 
to produce
 
product candidates
 
for our
clinical trials. Historically, we have heavily depended on UBI as a
 
manufacturing partner for these efforts. In support
 
of our COVID-19
program (UB-612), we have entered into a
 
master services agreement with UBP and
 
an additional master services agreement with
 
UBI,
UBIA and UBP.
 
Pursuant to these agreements, UBI
 
and its affiliates have
 
provided research, development, testing
 
and manufacturing
services to us
 
and continue to
 
provide manufacturing services
 
for our protein.
 
Payment terms are
 
mutually agreed in
 
connection with
each work order relating
 
to services rendered. Our
 
agreement with UBP will
 
expire on the later
 
of March 2024 and
 
the completion of
all services
 
under the
 
last work
 
order executed
 
prior to
 
such scheduled
 
expiration and our
 
agreement with UBI,
 
UBIA and
 
UBP will
expire on
 
the later
 
of September
 
2023 and
 
the completion
 
of all
 
services under
 
the last
 
work order
 
executed prior
 
to such
 
scheduled
expiration. We also have
 
a management services
 
agreement with
 
UBI pursuant to
 
which UBI has
 
provided research and
 
prior back office
administrative services to us and acts as our agent with respect
 
to certain matters relating our COVID-19 program. UBI is compensated
for its services on a cost-plus basis. The agreement terminates upon mutual agreement between the parties.
In support of our
 
chronic disease pipeline,
 
we have entered into
 
master service agreements with
 
each of UBI, UBIA
 
and UBIP. Pursuant
to these agreements, UBI currently provides limited research services to us on a cost-plus basis, UBIA provides
 
testing services related
to UB-312 clinical trial material already manufactured
 
and UBIP has provided manufacturing, quality control,
 
testing, validation, GMP
warehousing and
 
supply services
 
to us
 
for UB-312
 
on payment
 
terms agreed
 
in connection
 
with work
 
orders relating
 
to the
 
services
rendered. UBI and its
 
affiliates no longer provide
 
clinical or manufacturing services for
 
other programs. These agreements
 
may all be
terminated for convenience upon 180 days’ notice or less.
38
We have
 
also entered into a research and development services agreement
 
with UBI. Pursuant to this agreement, UBI and
 
its affiliates
provide research and development services to us. Service fees payable by
 
us to UBI for research and development projects undertaken
in accordance with the research and development plan
 
will be determined by a joint steering
 
committee and set forth in a research and
development plan. The
 
aggregate services fees payable
 
by us under
 
the research and
 
development services agreement are
 
subject to a
quarterly cap throughout the term of the agreement. The research and development services agreement expires in August
 
2026.
Intellectual Property
Our ability to
 
obtain and maintain
 
intellectual property protection
 
for our product
 
candidates and core
 
technologies is fundamental
 
to
the
 
long-term
 
success
 
of
 
our
 
business.
 
We
 
rely
 
on
 
a
 
combination
 
of
 
intellectual
 
property
 
protection
 
strategies,
 
including
 
patents,
trademarks, trade secrets, license agreements, confidentiality policies and procedures, nondisclosure agreements, invention assignment
agreements and technical
 
measures designed to
 
protect the intellectual
 
property and commercially
 
valuable confidential information
 
and
data used in our business.
In summary, our patent estate includes issued patents and patent applications which claims cover our
 
Vaxxine
 
Platform and each of our
product candidates. As of December 31, 2021, our patent estate included ten U.S. issued patents, twelve U.S. patent applications, three
U.S. provisional patent
 
applications, four pending
 
Patent Cooperation Treaty
 
(“PCT”) patent applications,
 
98 issued non-U.S.
 
patents
and 194 pending non-U.S. patent applications.
For our
 
product candidates
 
targeting the
 
prevention and
 
treatment of
 
neurodegenerative disease,
 
including claims
 
covering UB-311,
UB-312, patent rights are provided by patents and patent applications, the majority of which are being prosecuted in the
 
United States,
Australia,
 
Brazil,
 
Canada,
 
China,
 
the
 
EPO,
 
Hong
 
Kong,
 
Indonesia,
 
India,
 
Israel,
 
Japan,
 
the
 
Republic
 
of
 
Korea,
 
Mexico,
 
Russia,
Singapore,
 
South
 
Africa,
 
Taiwan
 
and
 
the
 
United
 
Arab
 
Emirates
 
directed
 
to
 
peptide
 
vaccines
 
for
 
the
 
prevention
 
and
 
treatment
 
of
neurodegenerative diseases.
 
These issued
 
patents and
 
patent applications,
 
if issued,
 
are expected
 
to expire
 
between 2022
 
and 2039,
excluding any patent term adjustments or patent term extensions.
For our product candidates directed to peptide immunogens targeting CGRP and formulations thereof
 
for the prevention and treatment
of migraine, including
 
UB-313, patent rights
 
may be provided
 
by a patent
 
family being prosecuted
 
in the United
 
States, Australia, Brazil,
Canada, China,
 
India, Indonesia,
 
Japan, Mexico, Russia,
 
the Republic
 
of Korea, Singapore,
 
Taiwan and the United
 
Arab Emirates. These
patent applications, if issued, are expected to expire in 2039, excluding any patent term adjustments or patent term extensions.
For
 
our
 
product
 
candidates
 
targeting
 
cholesterol
 
and
 
cardiovascular
 
disease,
 
including
 
our
 
anti-PCSK9
 
product
 
candidate
 
targeting
PCSK9
 
and
 
formulations
 
thereof
 
for
 
prevention
 
and
 
treatment
 
of
 
PCSK9-mediated
 
disorders,
 
we
 
are
 
in
 
the
 
process
 
of
 
acquiring
 
a
pending patent application in Taiwan and a pending PCT patent application. This Taiwanese
 
patent application, if issued, and any U.S.
or non-U.S. patent issuing from this PCT
 
patent application, if such patent is issued,
 
is expected to expire in 2041, excluding
 
any patent
term adjustment or patent term extension.
For our product
 
candidates targeting SARS-CoV-2,
 
including UB-612 for
 
COVID-19, we have
 
pending patent applications
 
in Brazil,
Pakistan and Taiwan,
 
one pending PCT patent
 
application and three provisional
 
patent applications in the
 
United States. These patent
applications, if issued, and any U.S. or
 
non-U.S. patent issuing from this PCT or
 
provisional patent application, are expected to expire
between 2041 and 2042, excluding any patent term adjustments or patent term extensions.
For each product candidate utilizing
 
the Vaxxine
 
platform, additional patent rights directed
 
to artificial T helper
 
cell epitopes and to a
CpG delivery system are provided by
 
patents and patent applications, the majority
 
of which are being prosecuted in
 
the United States,
Australia, Austria,
 
Belgium, Brazil,
 
Canada, Chile,
 
China, Colombia,
 
Denmark, the
 
EPO, France,
 
Germany,
 
Hong Kong,
 
Indonesia,
India, Ireland, Israel, Italy, Japan, Mexico, the Netherlands, New Zealand, Peru, Philippines, the Republic of Korea, Russia, Singapore,
South
 
Africa,
 
Spain,
 
Sweden,
 
Switzerland/Liechtenstein,
 
Taiwan,
 
Thailand,
 
the
 
United
 
Arab
 
Emirates,
 
the
 
United
 
Kingdom
 
and
Vietnam. These
 
issued patents and patent
 
applications, if issued, are
 
expected to expire between
 
2023 and 2039, excluding
 
any patent
term adjustments or patent term extensions.
The term of
 
individual patents
 
depends on the
 
countries in which
 
they are obtained.
 
The patent
 
term is 20
 
years from the
 
earliest effective
filing date of a
 
non-provisional patent application in most
 
of the countries in
 
which we file, including the
 
United States. In the United
States, a
 
patent’s
 
term may
 
be lengthened
 
by patent
 
term adjustment,
 
which compensates
 
a patentee
 
for administrative
 
delays by
 
the
USPTO in
 
examining and granting
 
a patent, or
 
may be shortened
 
if a patent
 
is terminally disclaimed
 
over an earlier
 
filed patent. The
term of a patent that
 
covers a drug or biological product
 
may also be eligible for patent
 
term extension when FDA approval is
 
granted
for a
 
portion of
 
the term
 
effectively lost
 
as a
 
result of
 
the FDA
 
regulatory review
 
period, subject
 
to certain
 
limitations and
 
provided
statutory and regulatory requirements are met.
In addition to our reliance on patent protection for our inventions, products and technologies, we also seek to protect
 
our brand through
the procurement of trademark rights.
 
We
 
own registered trademarks and pending
 
trademark applications for our brands,
 
including our
“Vaxxinity”, “United Neuroscience” and “COVAXX” brands and
 
other related names
 
and logos, in
 
the United States
 
and certain
 
foreign
jurisdictions.
39
Furthermore, we
 
rely upon
 
trade secrets
 
and know-how
 
and continuing
 
technological innovation
 
to develop
 
and maintain
 
our competitive
position. However, trade
 
secrets and know-how can be
 
difficult to protect. We
 
generally control access to and
 
use of our trade
 
secrets
and know-how, through
 
the use
 
of internal
 
and external
 
controls, including
 
by entering
 
into nondisclosure
 
and confidentiality
 
agreements
with
 
our
 
employees
 
and
 
third
 
parties.
 
We
 
cannot
 
guarantee,
 
however,
 
that
 
we
 
have
 
executed
 
such
 
agreements
 
with
 
all
 
applicable
counterparties, that such agreements will not be breached or that these agreements will afford us adequate protection of our intellectual
property and
 
proprietary rights.
 
Furthermore, although
 
we take
 
steps to
 
protect our
 
proprietary information
 
and trade
 
secrets, third
 
parties
may independently develop
 
substantially equivalent proprietary
 
information and techniques
 
or otherwise gain
 
access to our trade
 
secrets
or disclose our technology. As a result, we may not be able to meaningfully protect our trade secrets. For further discussion of the risks
relating to intellectual property, see “Risk Factors—Risks Related to Our Intellectual Property Rights.”
Platform License Agreement
In August 2021, Vaxxinity
 
entered into a license
 
agreement (the “Platform License
 
Agreement”) with UBI and
 
certain of its affiliates
(collectively, the “Licensors”) that
 
expanded intellectual
 
property rights previously
 
licensed under
 
the Original
 
UBI Licenses (as
 
defined
below). Pursuant
 
to the
 
Platform License
 
Agreement, Vaxxinity
 
obtained a
 
worldwide, sublicensable
 
(subject to
 
certain conditions),
perpetual, fully paid-up, royalty-free (i) exclusive license (even as to the Licensors) under all patents owned or otherwise controlled by
the Licensors or their affiliates
 
existing as of the effective
 
date of the Platform License
 
Agreement, (ii) exclusive license (except
 
as to
the Licensors) under all patents owned or otherwise controlled by the Licensors or their affiliates arising after the effective
 
date during
the term of the Platform License Agreement, and (iii) non-exclusive
 
license under all know-how owned or otherwise controlled by the
Licensors or their affiliates existing as of the
 
effective date or arising during the term of
 
the Platform License Agreement, in each of
 
the
foregoing
 
cases,
 
to
 
research,
 
develop,
 
make,
 
have
 
made,
 
utilize,
 
import,
 
export,
 
market,
 
distribute,
 
offer
 
for
 
sale,
 
sell,
 
have
 
sold,
commercialize or otherwise exploit peptide-based vaccines in the field of all
 
human prophylactic and therapeutic uses, except for such
vaccines related to human
 
immunodeficiency virus (HIV), herpes
 
simplex virus (HSE) and
 
Immunoglobulin E (IgE). The
 
patents and
patent applications licensed
 
under the Platform
 
License Agreement inclusde
 
claims directed to
 
a CpG delivery
 
system, artificial T
 
helper
cell
 
epitopes
 
and
 
certain
 
designer
 
peptides
 
and
 
proteins
 
utilized
 
in
 
UB-612.
 
As
 
partial
 
consideration
 
for
 
the
 
rights
 
and
 
licenses
 
we
received pursuant to the Platform License Agreement, we granted UBI a warrant to purchase 1,928,020 shares of our Class A common
stock (“UBI Warrant”). The UBI
 
Warrant is exercisable at an
 
exercise price of
 
$12.45 per share
 
(subject to adjustment
 
pursuant thereto),
is not subject to vesting, and has a term of five years.
Vaxxinity
 
has the first right to control the filing, prosecution, maintenance and enforcement of the licensed patents
 
at Vaxxinity’s
 
own
expense, subject to the
 
Licensors’ right to comment on
 
and review any patent filings.
 
The Platform License Agreement shall
 
continue
until the parties mutually consent in writing to terminate the agreement. Upon such termination, all licenses granted
 
under the Platform
License Agreement shall
 
terminate and Vaxxinity
 
will assign any
 
regulatory documentation previously
 
assigned to Vaxxinity
 
back to
the Licensors.
Coverage and Reimbursement
Sales of
 
our product
 
candidates in
 
the United
 
States will
 
depend, in
 
part, on
 
the extent
 
to which
 
third- party
 
payors, including
 
government
health programs such
 
as Medicare and
 
Medicaid, commercial insurance
 
and managed health
 
care organizations provide
 
coverage and
establish
 
adequate
 
reimbursement levels
 
for
 
such
 
product
 
candidates.
 
The
 
process
 
for
 
determining whether
 
a
 
third-party payor
 
will
provide coverage for a pharmaceutical
 
or biological product is typically separate
 
from the process for setting
 
the price of such a
 
product
or for establishing the reimbursement rate
 
that the payor will pay for
 
the product once coverage is
 
approved, and we may also
 
need to
provide
 
discounts
 
to
 
purchasers,
 
private
 
health
 
plans
 
or
 
government
 
healthcare
 
programs,
 
as
 
increasingly,
 
third-party
 
payors
 
are
requiring that
 
drug companies provide
 
them with
 
predetermined discounts from
 
list prices and
 
are challenging the
 
prices charged
 
for
medical products.
 
As a
 
result, a
 
third-party payor’s
 
decision to
 
provide coverage
 
for a
 
pharmaceutical or
 
biological product
 
does not
imply that the reimbursement rate will be adequate for commercial viability, and inadequate reimbursement rates, including significant
patient
 
cost
 
sharing
 
obligations,
 
may
 
deter
 
patients
 
from
 
selecting
 
our
 
product
 
candidates.
 
Obtaining
 
coverage
 
and
 
reimbursement
approval of a
 
product from a
 
third-party payor is
 
a time-consuming and
 
costly process that
 
could require us
 
to provide to
 
each payor
supporting scientific, clinical
 
and cost-effectiveness data
 
for the use
 
of our product
 
on a payor-by-payor
 
basis, with no
 
assurance that
coverage and adequate reimbursement will
 
be obtained. Third-party payors may limit
 
coverage to specific products on an
 
approved list,
also known as a formulary, which might not include all of the approved products for a particular indication.
Further,
 
no uniform
 
policy for
 
coverage and
 
reimbursement exists
 
in the
 
United States,
 
and coverage
 
and reimbursement
 
can differ
significantly from
 
payor to payor. In
 
general, factors
 
a payor
 
considers in
 
determining coverage
 
and reimbursement
 
are based
 
on whether
the product is a covered benefit under its health plan; safe, effective,
 
and medically necessary, including its regulatory approval
 
status;
medically appropriate for the specific
 
patient; cost-effective; and neither experimental
 
nor investigational. Third-party payors
 
often rely
upon Medicare coverage policy and payment limitations in setting their own reimbursement
 
rates, but also have their own methods and
approval process apart from
 
Medicare determinations. As such,
 
one third-party payor’s
 
decision to cover a
 
particular medical product
or service does not ensure that other payors will also
 
provide coverage for the medical product or service, and the level
 
of coverage and
reimbursement can differ significantly from payor to payor. Even if favorable coverage and reimbursement status is attained for one or
40
more products for which
 
we receive regulatory approval,
 
less favorable coverage
 
policies and reimbursement
 
rates may be implemented
in the future.
Product Approval and Government Regulation
Government authorities in the United States, at the
 
federal, state and local level, and other countries extensively
 
regulate, among other
things,
 
the
 
research,
 
development,
 
testing,
 
manufacture,
 
quality
 
control,
 
approval,
 
labeling,
 
packaging,
 
storage,
 
record-keeping,
promotion, advertising, distribution,
 
post-approval monitoring and
 
reporting, marketing and
 
export and import
 
of products such as
 
those
we are
 
developing. Any
 
product candidate
 
that we
 
develop must
 
be approved
 
by the
 
FDA before
 
it may
 
be legally
 
marketed in
 
the
United States and by the appropriate foreign regulatory agency before it may be legally marketed in foreign countries.
U.S. Drug Development Process
In the United States,
 
the development, manufacturing and marketing
 
of human drugs and vaccines
 
are subject to extensive
 
regulation.
The FDA
 
regulates drugs
 
under the
 
Federal Food,
 
Drug and
 
Cosmetic Act
 
(“FDCA”) and
 
implementing regulations,
 
and biological
products, including vaccines, under provisions of the FDCA and the
 
Public Health Service Act. Drugs and vaccines are also subject
 
to
other federal, state
 
and local statutes
 
and regulations. The
 
process of obtaining
 
regulatory approvals and
 
the subsequent compliance
 
with
appropriate federal, state, local and foreign statutes and regulations
 
require the expenditure of substantial time and financial resources.
Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after
approval, may
 
subject an
 
applicant to
 
administrative or
 
judicial sanctions.
 
FDA sanctions
 
could include
 
refusal to
 
approve pending
applications, withdrawal of
 
an approval, clinical
 
hold, warning
 
letters, product recalls,
 
product seizures, total
 
or partial suspension
 
of
production or distribution, injunctions, fines,
 
refusals of government contracts, debarment,
 
restitution, disgorgement or civil or criminal
penalties. Any agency
 
or judicial enforcement
 
action could have
 
a material adverse
 
effect on us.
 
The process required
 
by the FDA
 
before
a drug or biological product may be marketed in the United States generally involves the following:
•
 
completion
 
of
 
nonclinical
 
laboratory
 
tests,
 
animal
 
studies
 
and
 
formulation
 
and
 
stability
 
studies
 
according
 
to
 
GLP
 
or
 
other
applicable regulations;
•
 
submission to the FDA of an application for an IND, which must become effective before human clinical trials may begin;
•
 
performance of adequate
 
and well-controlled human
 
clinical trials according
 
to the FDA’s
 
regulations commonly referred
 
to
as GCPs to establish the safety and efficacy of the proposed drug for its intended use;
•
 
submission to the FDA of an NDA or BLA for a new drug;
•
 
satisfactory completion of
 
an FDA inspection
 
of the manufacturing
 
facility or facilities
 
where the drug
 
is produced to
 
assess
compliance
 
with
 
the
 
FDA’s
 
cGMP,
 
to
 
assure
 
that
 
the
 
facilities,
 
methods
 
and
 
controls
 
are
 
adequate
 
to
 
preserve
 
the
 
drug’s
identity, strength, quality and purity;
•
 
potential FDA audit of the nonclinical and clinical trial sites that generated the data in support of the NDA or BLA; and
•
 
FDA review and approval of the NDA or BLA.
The
 
lengthy process
 
of
 
seeking required
 
approvals and
 
the continuing
 
need for
 
compliance with
 
applicable statutes
 
and
 
regulations
require the expenditure of substantial resources and approvals are inherently uncertain.
Before testing any compounds
 
with potential therapeutic value
 
in humans, the product
 
candidate enters the pre-clinical
 
study stage. Pre-
clinical tests, also
 
referred to as
 
nonclinical studies, include
 
laboratory evaluations of
 
product chemistry,
 
toxicity and formulation,
 
as
well as
 
animal studies
 
to assess
 
the potential
 
safety and
 
activity of
 
the product
 
candidate. The
 
conduct of
 
the pre-clinical
 
tests must
comply with federal regulations and requirements including GLP. The sponsor must submit the results of the pre-clinical tests, together
with manufacturing information, analytical data, any available clinical data
 
or literature and a proposed clinical protocol, to the FDA as
part of the
 
IND. The IND
 
automatically becomes effective
 
30 days after
 
receipt by the
 
FDA, unless the
 
FDA imposes a
 
clinical hold
within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical
trial can begin. The FDA may also impose clinical holds on
 
a product candidate at any time before or during clinical trials due to safety
concerns or non-compliance. Accordingly,
 
we cannot be sure that
 
submission of an IND will result
 
in the FDA allowing clinical trials
to begin, or that, once begun, issues will not arise that suspend or terminate such trial.
Clinical trials
 
involve the
 
administration of
 
the product
 
candidate to
 
healthy volunteers or
 
patients under
 
the supervision
 
of qualified
investigators,
 
generally
 
physicians
 
not
 
employed
 
by
 
or
 
under
 
the
 
trial
 
sponsor’s
 
direct
 
control.
 
Clinical
 
trials
 
are
 
conducted
 
under
protocols detailing, among other
 
things, the objectives of
 
the clinical trial, dosing
 
procedures, subject selection and
 
exclusion criteria,
and the parameters to be used to monitor subject safety. Each protocol must be submitted to
 
the FDA as part of the IND. Clinical trials
must be conducted in accordance
 
with the FDA’s regulations comprising the good clinical practices requirements. Further, each
 
clinical
41
trial must be reviewed and approved by
 
an independent IRB at or servicing each
 
institution at which the clinical trial will
 
be conducted.
An IRB is charged
 
with protecting the
 
welfare and rights
 
of trial participants
 
and considers such
 
items as whether
 
the risks to
 
individuals
participating in the clinical trials
 
are minimized and are reasonable
 
in relation to anticipated benefits.
 
The IRB also approves the
 
form
and content
 
of the
 
informed consent
 
that must
 
be signed
 
by each
 
clinical trial
 
subject or
 
his or
 
her legal
 
representative and
 
provide
oversight for the clinical trial until completed.
Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:
•
Phase 1
. The drug is initially introduced into healthy human subjects and tested for safety, dosage
tolerance, absorption, metabolism, distribution and excretion. In the case of some products for severe or life-threatening diseases,
especially when the product may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may
 
be
conducted in patients;
•
Phase 2
.
The
 
drug is evaluated in a limited patient population to identify possible adverse effects and safety
risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance, optimal
dosage and dosing schedule; and
•
Phase 3
. Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an
expanded patient population at geographically dispersed clinical trial sites. These clinical trials are intended to establish
 
the overall
risk/benefit ratio of the product and provide an adequate basis for product labeling. Generally, a well-controlled Phase 3 clinical trial is
required by the FDA for approval of an NDA or BLA.
Post-approval clinical trials, sometimes referred
 
to as Phase 4
 
clinical trials, may be
 
conducted after initial marketing approval.
 
These
clinical trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication.
During all
 
phases of
 
clinical development,
 
regulatory agencies
 
require extensive
 
monitoring and
 
auditing of
 
all clinical
 
activities, clinical
data and clinical trial investigators. Annual progress reports detailing the results of the clinical trials must be submitted to the FDA and
written IND safety reports must
 
be promptly submitted to the
 
FDA and the investigators for
 
serious and unexpected adverse events or
any finding from
 
tests in laboratory
 
animals that suggests
 
a significant risk
 
for human subjects.
 
Phase 1, Phase
 
2 and Phase
 
3 clinical
trials may
 
not be
 
completed successfully
 
within any
 
specified period,
 
if at
 
all. The
 
FDA or
 
the sponsor
 
or its
 
data safety
 
monitoring
board may
 
suspend a clinical
 
trial at
 
any time on
 
various grounds, including
 
a finding that
 
the research subjects
 
or patients
 
are being
exposed to
 
an unacceptable
 
health risk.
 
Similarly,
 
an IRB
 
can suspend
 
or terminate
 
approval of
 
a clinical
 
trial at
 
its institution
 
if the
clinical trial
 
is not being
 
conducted in accordance
 
with the IRB’s requirements
 
or if the
 
drug has been
 
associated with
 
unexpected serious
harm to patients.
Concurrently with clinical
 
trials, companies usually
 
complete additional animal
 
studies and must
 
also develop additional
 
information
about the chemistry and
 
physical characteristics of the drug
 
as well as finalize
 
a process for manufacturing
 
the product in commercial
quantities in
 
accordance with
 
cGMP requirements.
 
The manufacturing
 
process must
 
be capable
 
of consistently
 
producing quality
 
batches
of the product candidate and, among other things, must
 
develop methods for testing the identity, strength, quality and purity of the final
drug. Additionally,
 
appropriate packaging must be selected and
 
tested, and stability studies must
 
be conducted to demonstrate that
 
the
product candidate does not undergo unacceptable deterioration over its shelf life.
U.S. Review and Approval Processes
Assuming successful completion of all required
 
testing in accordance with all applicable
 
regulatory requirements, the results of product
development, nonclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical
 
tests conducted on
the
 
chemistry
 
of
 
the
 
drug,
 
proposed
 
labeling
 
and
 
other
 
relevant
 
information
 
are
 
submitted
 
to
 
the
 
FDA
 
as
 
part
 
of
 
an
 
NDA
 
or
 
BLA
requesting approval to market the product.
 
The submission of an NDA or BLA
 
is subject to the payment of substantial
 
fees; a waiver of
such fees may be obtained under certain limited circumstances.
In addition, under the Pediatric Research Equity Act (“PREA”), an NDA or
 
BLA or supplement to an NDA or BLA must contain data
to assess
 
the safety
 
and effectiveness
 
of the
 
drug for
 
the claimed
 
indications in
 
all relevant
 
pediatric subpopulations
 
and to
 
support
dosing and administration for each
 
pediatric subpopulation for which
 
the product is safe and
 
effective. The FDA may grant
 
deferrals for
submission of data
 
or full or
 
partial waivers. Unless
 
otherwise required by
 
regulation, PREA does
 
not apply to
 
any drug for
 
an indication
for which orphan designation has been granted.
The FDA reviews all NDAs or
 
BLAs submitted to determine if they
 
are substantially complete before it accepts
 
them for filing. If the
FDA determines that an
 
NDA or BLA is
 
incomplete or is found
 
to be non-navigable, the
 
filing may be refused
 
and must be re-submitted
for consideration. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA or BLA. Under the goals
and policies agreed to by the FDA under
 
the Prescription Drug User Fee Act (“PDUFA”),
 
the FDA has 10 months from acceptance of
filing in which to complete its initial review of a
 
standard NDA or BLA and respond to the applicant, and
 
six months from acceptance
of filing for a priority
 
NDA or BLA. The FDA does
 
not always meet its PDUFA
 
goal dates. The review process
 
and the PDUFA
 
goal
42
date
 
may
 
be
 
extended
 
by
 
three
 
months
 
or
 
longer
 
if
 
the
 
FDA
 
requests
 
or
 
the
 
NDA
 
or
 
BLA
 
sponsor
 
otherwise
 
provides
 
additional
information or clarification regarding information already provided in the submission before the PDUFA goal date.
After the NDA or BLA submission
 
is accepted for filing, the
 
FDA reviews the NDA or BLA
 
to determine, among other things,
 
whether
the proposed product is
 
safe and effective for
 
its intended use, and
 
whether the product is
 
being manufactured in accordance
 
with cGMP
to assure and preserve the product’s identity,
 
strength, quality and purity. The FDA may
 
refer applications for novel drug or biological
products or drug
 
or biological products
 
which present difficult
 
questions of safety
 
or efficacy to
 
an advisory committee,
 
typically a panel
that includes clinicians
 
and other experts,
 
for review, evaluation and
 
a recommendation as
 
to whether the
 
application should be
 
approved
and
 
under
 
what
 
conditions.
 
The
 
FDA
 
is
 
not
 
bound
 
by
 
the
 
recommendations
 
of
 
an
 
advisory
 
committee,
 
but
 
it
 
considers
 
such
recommendations carefully when making decisions.
 
During the drug approval
 
process, the FDA also
 
will determine whether a
 
REMS
is necessary to assure the safe use of the drug. If the FDA concludes a REMS
 
is needed, the sponsor of the NDA or BLA must submit
 
a
proposed REMS; the FDA will not approve the NDA or BLA without a REMS, if required.
Before approving an NDA or BLA, the FDA
 
will inspect the facilities at which the product
 
is manufactured. The FDA will not approve
the product unless
 
it determines that
 
the manufacturing processes
 
and facilities are
 
in compliance with
 
cGMP requirements and
 
adequate
to assure consistent
 
production of the
 
product within required
 
specifications. The FDA requires
 
vaccine manufacturers to
 
submit data
supporting
 
the
 
demonstration
 
of
 
consistency
 
between
 
manufacturing
 
batches,
 
or
 
lots.
 
The
 
FDA
 
works
 
together
 
with
 
vaccine
manufacturers to develop
 
a lot release
 
protocol, the tests
 
conducted on each
 
lot of vaccine
 
post-approval. Additionally, before approving
an NDA
 
or BLA, the
 
FDA will
 
typically inspect
 
the sponsor
 
and one
 
or more
 
clinical sites
 
to assure that
 
the clinical
 
trials were conducted
in
 
compliance
 
with
 
IND
 
study
 
requirements.
 
If
 
the
 
FDA
 
determines
 
that
 
the
 
application,
 
manufacturing
 
process
 
or
 
manufacturing
facilities are not acceptable it will outline the deficiencies in the submission and often will request additional testing or information.
The NDA
 
or BLA
 
review and
 
approval process
 
is lengthy
 
and difficult
 
and the
 
FDA may
 
refuse to
 
approve an
 
NDA or
 
BLA if
 
the
applicable regulatory criteria
 
are not satisfied
 
or may require
 
additional clinical data
 
or other data
 
and information. Even
 
if such data
and information
 
is submitted,
 
the FDA
 
may ultimately
 
decide that
 
the NDA
 
or BLA
 
does not
 
satisfy the
 
criteria for
 
approval. Data
obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret the same data.
 
The
FDA will issue a complete response letter if the agency decides not to approve the NDA or BLA. The complete
 
response letter usually
describes
 
all of
 
the
 
specific deficiencies
 
in the
 
NDA or
 
BLA
 
identified by
 
the FDA.
 
The deficiencies
 
identified may
 
be minor,
 
for
example, requiring
 
labeling changes,
 
or major,
 
for example,
 
requiring additional
 
clinical trials.
 
Additionally,
 
the complete
 
response
letter may include recommended actions that the applicant might take to place the application in a condition for approval. If a complete
response letter is issued,
 
the applicant may either
 
submit new information, addressing
 
all of the deficiencies
 
identified in the letter,
 
or
withdraw the application.
If a product receives regulatory
 
approval, the approval may be
 
significantly limited to specific diseases
 
and dosages or the
 
indications
for use may otherwise be
 
limited, which could restrict the commercial
 
value of the product. Further,
 
the FDA may require that
 
certain
contraindications, warnings or
 
precautions be included
 
in the product
 
labeling. In addition,
 
the FDA may
 
require post-marketing clinical
trials, sometimes referred to as Phase 4 clinical trials, which are
 
designed to further assess a product’s safety and effectiveness and may
require testing and surveillance programs to
 
monitor the safety of approved
 
products that have been commercialized. In
 
addition, new
government requirements, including those
 
resulting from new legislation,
 
may be established, or
 
the FDA’s
 
policies may change, which
could impact the timeline for regulatory approval or otherwise impact ongoing development programs.
Expedited Development and Review Programs
The FDA has a fast track program that is intended to expedite or facilitate the process for reviewing new drugs and biologics that meet
certain criteria. Specifically, new drugs and biologics are eligible for fast track designation if they are intended to treat a serious or life-
threatening condition and preclinical
 
or clinical data
 
demonstrate the potential to
 
address unmet medical needs
 
for the condition.
 
Fast
track designation
 
applies to
 
the combination of
 
the product and
 
the specific indication
 
for which
 
it is
 
being studied. The
 
sponsor can
request the FDA to designate the
 
product for fast track status any
 
time before receiving NDA or BLA
 
approval, but ideally no later than
the pre-NDA or pre-BLA meeting.
Additionally,
 
a
 
drug
 
or
 
biologic
 
may
 
be
 
eligible
 
for
 
designation
 
as
 
a
 
breakthrough
 
therapy
 
if
 
the
 
product
 
is
 
intended,
 
alone
 
or
 
in
combination with one or more other drugs or biologics, to treat a serious or life-threatening condition and
 
preliminary clinical evidence
indicates
 
that
 
the
 
product
 
may
 
demonstrate
 
substantial
 
improvement
 
over
 
currently
 
approved
 
therapies
 
on
 
one
 
or
 
more
 
clinically
significant endpoints.
 
The benefits
 
of breakthrough
 
therapy designation
 
include the
 
same benefits
 
as fast
 
track designation,
 
plus intensive
guidance from the FDA to facilitate an efficient drug development program.
Any product
 
submitted to
 
the FDA for
 
marketing, including under
 
a fast track
 
or breakthrough therapy
 
designation program,
 
may be
eligible for
 
other types
 
of FDA
 
programs intended
 
to expedite
 
development and
 
review, such as
 
priority review
 
and accelerated
 
approval.
Any product is eligible
 
for priority review if
 
it treats a serious or
 
life-threatening condition and, if
 
approved, would provide a
 
significant
improvement
 
in
 
safety
 
and
 
effectiveness
 
compared
 
to
 
available
 
therapies.
 
Priority
 
review
 
reduces
 
the
 
review
 
time
 
for
 
an
 
initial
 
or
supplemental marketing application by four months.
43
A product may be
 
eligible for accelerated
 
approval if it
 
treats a serious
 
or life-threatening condition
 
and generally provides
 
a meaningful
advantage over available therapies based on an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit or on a
clinical endpoint that
 
can be measured
 
earlier than irreversible
 
morbidity or mortality
 
("IMM") that is
 
reasonably likely to
 
predict an
effect on IMM
 
or other clinical
 
benefit. As a
 
condition of accelerated approval,
 
the FDA requires
 
that a sponsor of
 
a drug or
 
biologic
receiving
 
accelerated
 
approval
 
subsequently
 
provide
 
additional
 
data
 
confirming
 
the
 
anticipated
 
clinical
 
benefit,
 
for
 
example
 
by
performing adequate and well-controlled post-marketing clinical
 
trials. If clinical benefit is not confirmed,
 
accelerated approval may be
revoked. If the FDA concludes that a drug
 
or biologic shown to be effective can be safely
 
used only if distribution or use is restricted,
 
it
may require such post-marketing restrictions, as it deems necessary to assure safe use of the product.
Fast
 
track designation,
 
breakthrough therapy
 
designation, priority
 
review,
 
and accelerated
 
approval do
 
not
 
change the
 
standards for
approval but may expedite the development or approval process.
EUA Approval
The Commissioner
 
of the
 
FDA, under
 
delegated authority from
 
the Secretary of
 
the U.S. Department
 
of Health
 
and Human
 
Services
(“DHHS”) may,
 
under certain circumstances,
 
issue an EUA
 
that would permit
 
the use of
 
an unapproved drug
 
product or unapproved
use of an approved
 
drug product. Before
 
an EUA may be
 
issued, the Secretary
 
must declare an emergency
 
based on one of
 
the following
grounds:
•
 
a
 
determination
 
by
 
the
 
Secretary
 
of
 
the
 
Department
 
of
 
Homeland
 
Security
 
that
 
there
 
is
 
a
 
domestic
 
emergency,
 
or
 
a
significant potential for a domestic
 
emergency, involving a heightened risk of attack with
 
a specified biological, chemical,
radiological or nuclear agent or agents;
•
 
a determination by the
 
Secretary of the Department
 
of Defense that there
 
is a military emergency, or a significant
 
potential
for a military
 
emergency, involving a heightened
 
risk to U.S.
 
military forces
 
of attack with
 
a specified
 
biological, chemical,
radiological or nuclear agent or agents; or
•
 
a determination by the Secretary of the DHHS that a
 
public health emergency that affects, or has
 
the significant potential
to affect, national security and that involves a
 
specified biological, chemical, radiological or nuclear agent or agents, or
 
a
specified disease or condition that may be attributable to such agent or agent.
In order to be the subject of an EUA, the FDA Commissioner must conclude that, based on the totality of scientific evidence available,
it is
 
reasonable to
 
believe that
 
the product
 
may be
 
effective in
 
diagnosing, treating
 
or preventing
 
a disease
 
attributable to
 
the agents
described above, that the
 
product’s potential
 
benefits outweigh its potential
 
risks and that
 
there is no adequate
 
approved alternative to
the product.
Although an EUA cannot
 
be issued until after
 
an emergency has been
 
declared by the Secretary
 
of DHHS, the FDA
 
strongly encourages
an entity with a
 
possible candidate product,
 
particularly one at an
 
advanced stage of
 
development, to contact the
 
FDA center responsible
for the candidate
 
product before a determination
 
of actual or potential
 
emergency. Such an entity may submit
 
a request for consideration
that includes data to
 
demonstrate that, based on
 
the totality of scientific
 
evidence available, it is
 
reasonable to believe that
 
the product
may be
 
effective
 
in diagnosing,
 
treating or
 
preventing the
 
serious or
 
life-threatening disease
 
or condition.
 
This is
 
called a
 
pre-EUA
submission and
 
its purpose
 
is to
 
allow FDA
 
review considering
 
that during
 
an emergency,
 
the time
 
available for
 
the submission
 
and
review of an EUA request may be severely limited.
Post-Approval Requirements
Any drug or
 
biological products for
 
which we or
 
our collaborators receive
 
FDA approvals are
 
subject to continuing
 
regulation by the
FDA, including,
 
among other
 
things, record-keeping
 
requirements, reporting
 
of adverse
 
experiences with
 
the product,
 
providing the
FDA with updated safety and efficacy
 
information, product sampling and distribution requirements, complying with
 
certain electronic
records and
 
signature requirements
 
and complying
 
with FDA
 
promotion and
 
advertising requirements, which
 
include, among
 
others,
standards for
 
direct-to-consumer advertising,
 
promoting drugs
 
for uses
 
or in
 
patient populations
 
that are
 
not described
 
in the
 
drug’s
approved
 
labeling
 
(known
 
as
 
“off-label
 
use”),
 
industry-sponsored
 
scientific
 
and
 
educational
 
activities,
 
and
 
promotional
 
activities
involving the internet.
Failure to comply
 
with FDA requirements
 
can have negative
 
consequences, including adverse
 
publicity,
 
enforcement letters from
 
the
FDA,
 
mandated
 
corrective
 
advertising
 
or
 
communications
 
with
 
doctors,
 
and
 
civil
 
or
 
criminal
 
penalties.
 
Although
 
physicians
 
may
prescribe legally available drugs for off-label uses, manufacturers may not market or promote such off-label uses.
Manufacturers of
 
our product
 
candidates are
 
required to
 
comply with
 
applicable FDA
 
manufacturing requirements
 
contained in
 
the
FDA’s
 
cGMP
 
regulations.
 
cGMP
 
regulations
 
require,
 
among
 
other
 
things,
 
quality
 
control
 
and
 
quality
 
assurance
 
as
 
well
 
as
 
the
corresponding maintenance of records and documentation. Following approval, the FDA
 
continues to monitor vaccine quality through
44
real-time monitoring of lots by requiring manufacturers to submit certain information for each vaccine lot. Vaccine manufacturers may
only distribute a lot following release by the
 
FDA. Drug manufacturers and other entities involved
 
in the manufacture and distribution
of
 
approved drugs
 
are required
 
to register
 
their establishments
 
with the
 
FDA and
 
certain state
 
agencies, and
 
are subject
 
to periodic
unannounced inspections by the
 
FDA and certain state
 
agencies for compliance with
 
cGMP and other laws.
 
Accordingly, manufacturers
must continue to expend time, money and effort
 
in the area of production and quality
 
control to maintain cGMP compliance. Discovery
of problems with a product after approval may result in restrictions on a product, manufacturer or holder
 
of an approved NDA or BLA,
including withdrawal of
 
the product
 
from the
 
market. In
 
addition, changes
 
to the
 
manufacturing process generally
 
require prior
 
FDA
approval before being implemented, and other types of changes to the approved product, such as adding new indications and additional
labeling claims, are also subject to further FDA review and approval.
Taiwan Drug Development Process
The regulatory processes in Taiwan are generally similar with those in the United States, and include:
•
 
Extensive
 
pre-clinical
 
laboratory
 
tests,
 
pre-clinical
 
animal
 
studies
 
and
 
formulation
 
studies
 
in
 
accordance
 
with
 
applicable
regulations.
•
 
Submission to the
 
TFDA of
 
an IND, which
 
must be
 
approved by the
 
TFDA before human
 
clinical trials may
 
begin. Human
clinical trials in Taiwan typically include:
•
 
Phase
 
I
 
trials.
 
The
 
new
 
drug
 
product
 
is
 
initially
 
introduced
 
into
 
healthy
 
human
 
subjects
 
and
 
tested
 
for
 
safety,
 
dosage
tolerance,
 
absorption,
 
metabolism
 
and
 
side
 
effects
 
associated
 
with
 
increasing
 
doses.
 
If
 
possible,
 
early
 
evidence
 
of
effectiveness of the new drug product is collected as well.
•
 
Phase II trials. The new drug product is evaluated for its
 
efficacy and proposed indication in a limited patient population,
as well as its adverse effects and safety risks.
•
 
Phase III trials. The new drug
 
product is further evaluated for dosage
 
tolerance, efficacy and safety in an expanded
 
patient
population.
•
 
Submission to the TFDA
 
of an NDA, which
 
generally requires two Phase
 
III trials, unless the
 
NDA otherwise qualifies for
exemptions as provided by the TFDA.
In
 
addition
 
to
 
information
 
and
 
data
 
collected
 
from
 
the
 
pre-clinical
 
and
 
clinical
 
trials
 
of
 
the
 
new
 
drug
 
product,
 
chemistry
 
data
 
and
information regarding
 
manufacturing and
 
controls serve
 
as significant
 
considerations during
 
the course
 
of the
 
TFDA review
 
and approval
process. Where
 
a new
 
drug product
 
will be
 
manufactured in
 
facilities located
 
in Taiwan,
 
the TFDA
 
has the
 
authority to
 
inspect and
assess compliance with the Pharmaceutical Inspection Co-operation Scheme GMP regulations to ensure that the facilities,
 
methods and
controls are adequate to
 
preserve the drug’s
 
identity, strength,
 
quality and purity.
 
Further, the TFDA
 
may audit the pre-clinical
 
and/or
clinical trial
 
sites that
 
generated the
 
data in
 
support of
 
the NDA.
 
Finally,
 
the TFDA
 
must review
 
and approve
 
the NDA
 
prior to
 
any
commercial marketing or sale of the drug in Taiwan.
Regulation in Europe and Other Regions
In addition
 
to regulations
 
in the
 
United States
 
and Taiwan,
 
we and
 
our collaborators
 
are subject
 
to a
 
variety of
 
regulations in
 
other
jurisdictions governing, among other things, clinical trials and any commercial sales and distribution of our products.
Whether or
 
not we
 
or our
 
collaborators obtain
 
FDA approval
 
for a
 
product, we
 
must obtain
 
the requisite
 
approvals from
 
regulatory
authorities in
 
foreign countries
 
prior to
 
the commencement
 
of
 
clinical trials
 
or marketing
 
of
 
the product
 
in those
 
countries. Certain
countries outside
 
of the
 
United States
 
have a
 
similar process
 
that requires
 
the submission
 
of a
 
clinical trial
 
application much
 
like the
IND
 
prior
 
to
 
the
 
commencement
 
of
 
human
 
clinical
 
trials.
 
In
 
the
 
European
 
Union,
 
for
 
example,
 
a
 
CTA
 
must
 
be
 
submitted
 
to
 
each
country’s national
 
health authority and
 
an independent ethics committee,
 
much like the
 
FDA and IRB,
 
respectively. Once
 
the CTA
 
is
approved in accordance with a country’s requirements, clinical trial development may proceed.
The requirements and process governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country
to country.
 
In all cases,
 
the clinical trials
 
are conducted in
 
accordance with GCPs
 
and the
 
applicable regulatory requirements
 
and the
ethical principles that have their origin in the Declaration of Helsinki.
To
 
obtain regulatory
 
approval of
 
an investigational
 
drug or
 
biological product
 
under European
 
Union regulatory
 
systems, we
 
or our
strategic partners must submit a marketing authorization application.
 
The application in the European Union is
 
similar to that required
in the United States, with the exception of, among other things, country-specific document requirements.
45
For other countries
 
outside of the
 
European Union, such
 
as countries in
 
Asia, Europe and
 
Latin America, the
 
requirements governing
the conduct of clinical trials, product licensing,
 
pricing and reimbursement vary from country
 
to country. In all cases, again, the clinical
trials are conducted in
 
accordance with GCPs and
 
the applicable regulatory requirements
 
and the ethical principles
 
that have their origin
in the Declaration of Helsinki.
Employees and Human Capital Resources
As of December 31, 2021, we employed 89 full-time employees
 
and no part-time employees. Of these 89 full-time employees,
 
69 were
located in the United States, 5 were located in Taiwan and 5 were located in Ireland. None of our employees are represented by a labor
union or are party to a collective bargaining agreement, and we have had no labor-related work stoppages.
 
Compensation, Benefits, Recruitment and Retention Strategy
We aim to focus on attracting,
 
motivating and retaining
 
talented employees with
 
relevant experience who
 
can contribute to the
 
sustained
performance of the Company and its day-to-day operations.
We believe our total compensation package helps recruit
 
and retain our employees.
 
We strive to provide compensation and benefits that
are competitive to market
 
and create incentives
 
to attract and retain
 
employees. Our compensation
 
package includes market-competitive
pay,
 
broad-based stock
 
grants, health
 
care and
 
401(k) plan
 
benefits, paid
 
time off
 
and family
 
leave, among
 
others. We
 
also provide
annual incentive bonus opportunities that are
 
tied to both company performance
 
as well as individual performance
 
to foster a pay-for-
performance culture.
Scientific Advisory Board
We have assembled a highly qualified scientific
 
advisory board composed of advisors
 
who have deep expertise
 
in the fields of biologics
and
 
vaccine
 
development,
 
as
 
well
 
as
 
in
 
the
 
relevant
 
therapeutic
 
areas
 
for
 
our
 
product
 
candidates.
 
Our
 
scientific
 
advisory
 
board
 
is
composed of George Siber,
 
M.D.; Donna Ambrosino, M.D.; Brad
 
Boeve; Nick Fox, M.D.;
 
Richard Mohs, Ph.D.; Eric Reiman,
 
M.D.;
Jeffrey Cummings, M.D., ScD.; Barney
 
Graham, M.D., Ph.D.; Peter
 
A. Patriarca, M.D.; Stanley A.
 
Plotkin, M.D.; Sharon Lewin, A.O.,
FRACP.,
 
Ph.D., FAHMS,
 
Wayne Koff, Ph.D. and Thomas P.
 
Monath, M.D.
 
 
46
Item 1A. Risk Factors.
Investing in our Class
 
A common stock
 
involves a high
 
degree of risk.
 
The following information
 
sets forth risk
 
factors that could cause
our actual results to differ materially from those contained in forward-looking statements
 
we have made in this Annual Report on Form
10-K
 
and those
 
we may
 
make from
 
time to
 
time. You
 
should carefully
 
consider the
 
risks described
 
below,
 
in addition
 
to the
 
other
information contained in this Report
 
and our other public
 
filings, before you decide
 
to purchase shares of
 
our Class A common
 
stock.
Our business, financial condition or
 
results of operations could
 
be harmed by any
 
of these risks. The
 
risks and uncertainties described
below are not
 
the only ones
 
we face. Additional
 
risks not presently
 
known to us
 
or other factors
 
not perceived by
 
us to present
 
significant
risks to our business at this time also may impair our business operations.
 
Summary Risk Factors
Our business is
 
subject to a
 
number of risks,
 
including risks
 
that may prevent
 
us from achieving
 
our business
 
objectives or may
 
adversely
affect our business, financial condition, results of operations
 
and prospects. These risks are discussed
 
more fully under Part II, Item 1A.
“Risk Factors.” The following is a summary of some of the principal risks we face:
 
•
 
clinical drug development involves a lengthy and expensive process, and if
 
our pre-clinical development or clinical trials
are prolonged or delayed or do not achieve expected results, we may be unable to commercialize our product candidates;
 
•
 
we depend on intellectual property
 
licensed from UBI and its
 
affiliates, the termination of which could
 
result in the loss of
significant rights;
 
•
 
even if
 
we obtain
 
regulatory approval
 
of any
 
of our
 
product candidates
 
in Taiwan
 
or other
 
jurisdictions, we
 
may never
obtain approval for or commercialize our product candidates in other jurisdictions;
 
•
 
after receipt
 
of regulatory
 
approval for
 
a product
 
candidate, our
 
products will
 
remain subject
 
to regulatory
 
scrutiny and
post-marketing requirements, which may include burdensome post-approval study or risk management requirements;
 
•
 
if we
 
are able to
 
commercialize any product
 
candidate, the successful
 
commercialization of such
 
product candidate will
depend
 
on
 
the
 
extent
 
governmental
 
authorities,
 
private
 
health
 
insurers
 
and
 
other
 
third-party
 
payors
 
provide
 
coverage,
adequate reimbursement levels and favorable pricing policies;
 
•
 
the manufacture of peptide-based medicines is complex and manufacturers often encounter difficulties in production;
 
•
 
we have no history of commercializing
 
pharmaceutical products, which may make
 
it difficult to evaluate the prospects for
our future viability;
 
•
 
the regulatory
 
landscape that
 
will govern
 
our product candidates
 
is uncertain, and
 
changes in
 
regulatory requirements
 
could
result in delays or discontinuation of development of our product candidates or unexpected costs;
 
•
 
developments by competitors may
 
render our products or technologies
 
obsolete or non-competitive or
 
may reduce the size
of our markets;
 
•
 
our capital resources
 
may not be
 
sufficient to successfully
 
complete the
 
development and
 
commercialization of
 
our product
candidates, which could delay, limit, reduce or terminate our development or commercialization efforts;
 
•
 
we have incurred significant losses
 
since inception, and we expect
 
to incur losses for the
 
foreseeable future and may never
achieve or maintain profitability;
 
•
 
conflicts of interest and disputes exist and may further arise between us and UBI and its affiliates, and these conflicts and
disputes might ultimately be resolved in a manner unfavorable to us;
•
 
we will need to
 
expand our organization, and
 
we may experience difficulties
 
in managing this growth,
 
which could disrupt
our operations;
 
•
 
the
 
dual-class
 
structure
 
of
 
our
 
common
 
stock
 
and
 
the
 
Voting
 
Agreement
 
(as
 
defined
 
below)
 
will
 
have
 
the
 
effect
 
of
concentrating voting power, which will significantly limit your ability to influence significant corporate decisions;
 
•
 
we rely on contract manufacturers
 
for the manufacture of raw
 
materials for our research programs,
 
pre-clinical studies and
clinical
 
trials
 
and
 
we
 
do
 
not
 
have
 
long-term
 
contracts
 
with
 
many
 
of
 
these
 
parties,
 
which
 
could
 
impact
 
our
 
ability
 
to
commercialize our products;
 
47
•
 
undetected errors or defects in our production could harm our reputation or expose us to product liability claims;
 
•
 
we rely on in-licensed intellectual
 
property and technology,
 
and the loss of
 
such rights, our licensors’ inability
 
or refusal
to
 
enforce
 
or
 
defend
 
such
 
rights,
 
and
 
the
 
requirement
 
to
 
pay
 
royalties,
 
milestones
 
and
 
other
 
amounts
 
could
 
harm
 
our
business;
 
•
 
the degree
 
of protection
 
afforded
 
by our
 
intellectual property
 
rights is
 
uncertain because
 
such rights
 
offer
 
only limited
protection and may not adequately protect our rights or permit us to gain or keep a competitive advantage;
 
•
 
we have identified significant deficiencies and material weaknesses,
 
and have previously identified material weaknesses,
in our
 
internal control
 
over financial
 
reporting and
 
if we
 
are unable
 
to remediate
 
our existing
 
deficiencies and
 
material
weaknesses and otherwise develop and
 
maintain an effective system
 
of internal control over financial
 
reporting, we may
not be able to
 
accurately report our financial results
 
or prevent fraud, and
 
as a result, shareholders
 
could lose confidence
in our financial and other public reporting, which would harm
 
our business and the trading price of our Class
 
A common
stock;
 
•
 
cyberattacks
 
or
 
other
 
failures
 
in
 
our
 
or
 
our
 
third-party
 
vendors’,
 
contractors’
 
or
 
consultants’
 
telecommunications
 
or
information
 
technology
 
systems
 
could
 
result
 
in
 
information
 
theft,
 
compromise,
 
or
 
other
 
unauthorized
 
access,
 
data
corruption and significant disruption of our business operations, and could harm our reputation and subject us to liability,
lawsuits and actions from governmental authorities; and
 
•
 
we are
 
subject to
 
privacy,
 
tax, anti-corruption
 
and other
 
stringent laws,
 
regulations, policies
 
and contractual
 
obligations
across multiple jurisdictions and changes
 
in, or our failure to
 
comply with, such laws, regulations,
 
policies and contractual
obligations could adversely affect our business, financial condition, results of operations and prospects.
Risks Related to the Discovery and Development of Product Candidates
 
Clinical drug development
 
involves a lengthy and
 
expensive process with uncertain
 
timelines and uncertain outcomes,
 
and results
of earlier studies and trials may not be predictive of future results. If
 
our pre-clinical development or clinical trials are prolonged
 
or
delayed, or
 
if we
 
do not
 
or cannot
 
achieve the
 
results we
 
expect, we
 
may be
 
unable to
 
obtain required
 
regulatory approvals,
 
and
therefore be unable to commercialize our product candidates on a timely basis or at all.
Our business is
 
dependent on the
 
successful development, regulatory approval
 
and commercialization of
 
product candidates based
 
on
our
 
Vaxxine
 
Platform.
 
If
 
we
 
and
 
our
 
collaborators
 
are
 
unable
 
to
 
obtain
 
approval
 
for
 
and
 
effectively
 
commercialize
 
our
 
product
candidates, our business
 
would be significantly
 
harmed. Even if
 
we complete the
 
necessary pre-clinical studies
 
and clinical trials,
 
the
regulatory
 
approval
 
process
 
is
 
expensive,
 
time-
 
consuming
 
and
 
uncertain,
 
and
 
we
 
may
 
not
 
be
 
able
 
to
 
obtain
 
approvals
 
for
 
the
commercialization of any product candidates we may develop. Changes in regulatory approval policies, changes in or the enactment of
additional statutes or
 
regulations, or changes
 
in regulatory review
 
processes, may cause
 
delays in the
 
approval of a
 
particular product
candidate or rejection
 
of an
 
application for a
 
particular product candidate.
 
We
 
have not obtained
 
regulatory approval for
 
any product
candidate to date, and
 
it is possible that
 
none of our existing
 
product candidates or any
 
product candidates we may
 
seek to develop in
the future will ever obtain regulatory approval. Any regulatory
 
approval we ultimately obtain may be limited or subject to
 
restrictions,
including labeling requirements,
 
or post-approval commitments
 
that render the
 
approved product not
 
commercially viable. While
 
our
enzyme-linked immunosorbent
 
assay (“ELISA”)
 
test has
 
received an
 
EUA from
 
the FDA,
 
there can
 
be no
 
assurance that
 
any of
 
our
product candidates will receive
 
an EUA or regulatory
 
approval or that there
 
will not be changes
 
in formulation, whether required
 
by any
regulatory
 
authority
 
or
 
at
 
our
 
determination
 
for
 
operational
 
or
 
scientific
 
reasons,
 
affecting
 
the
 
use
 
of
 
our
 
products.
 
Further,
 
some
countries may not rely on an
 
EUA or regulatory approval issued
 
by another jurisdiction, and we
 
may be required to seek
 
separate EUAs
or regulatory approval from different regulatory authorities in different jurisdictions. See
 
“Risk Factors—Even if we obtain approval of
any of
 
our product
 
candidates in
 
one jurisdiction,
 
we may
 
never obtain
 
approval for
 
or commercialize
 
any of
 
our products
 
in other
jurisdictions, which would limit our ability to realize their full market potential.”
 
To obtain
 
the requisite regulatory approvals to
 
market and sell any
 
of our product candidates, we
 
must demonstrate through extensive
pre-clinical studies and clinical trials
 
that our products are safe
 
and effective in humans. Clinical
 
testing is expensive and can take
 
many
years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. The results of
pre-clinical studies and early clinical
 
trials of our product candidates
 
may not be predictive
 
of the results of later-stage clinical
 
trials and
results from post-hoc data analysis
 
may not be predictive of
 
final results and may not
 
support product approval. Product candidates in
later stages
 
of clinical
 
trials may
 
fail to
 
show the
 
desired safety
 
and efficacy
 
characteristics despite
 
having progressed
 
through pre-
clinical
 
studies
 
and
 
initial
 
clinical
 
trials.
 
For
 
example,
 
an
 
EUA
 
for
 
UB-612
 
was
 
denied
 
by
 
the
 
TFDA
 
in
 
August
 
2021
 
because
 
the
neutralizing antibody
 
response generated
 
by UB-612,
 
as compared
 
to a
 
designated adenovirus
 
vectored vaccine,
 
did not
 
meet the
 
TFDA’s
specified evaluation criteria, but,
 
in collaboration with UBIA,
 
we are appealing the decision.
 
The outcome of that appeal
 
remains highly
uncertain. If
 
results from
 
our clinical
 
trials differ
 
from previous
 
reports or
 
market expectations,
 
such as
 
a potential
 
development of
market expectations that COVID-19 boosters or vaccines be developed specifically to address certain variants which we fail
 
to satisfy,
or
 
if we
 
fail to
 
obtain a
 
required regulatory
 
approval, the
 
price of
 
our Class
 
A common
 
stock could
 
decrease substantially.
 
Several
48
companies in
 
the biopharmaceutical
 
industry have
 
suffered significant
 
setbacks in
 
advanced clinical
 
trials due
 
to lack
 
of efficacy
 
or
adverse safety profiles, notwithstanding promising results in earlier trials. Our ongoing and future clinical trials may not be successful.
Further, while we have conducted limited
 
head-to-head comparisons in pre-clinical studies of UB-313, we have not
 
conducted a head-
to-head comparison
 
of any
 
competing products
 
to any
 
of our
 
product candidates
 
in any
 
clinical trial
 
to date.
 
We
 
have compared
 
the
published data for certain of our competitors’ products to the clinical trial results of certain of our product candidates. Accordingly, the
value of comparisons
 
of our product
 
candidates to any
 
alternative products in
 
this report may
 
be limited because
 
they are not
 
derived
from a
 
head-to-head trial,
 
rather
 
they
 
are from
 
trials that
 
were
 
conducted under
 
different
 
protocols, at
 
different
 
sites, with
 
different
patient populations,
 
at different
 
times and
 
results were
 
analyzed using
 
non-standardized assays
 
performed internally
 
or by
 
different
clinical research
 
organizations (“CROs”).
 
Without head-to-head
 
data, we
 
will be
 
unable to
 
make comparative
 
claims for
 
our product
candidates, if any such product
 
candidate is approved. Future clinical
 
trials may not confirm the comparisons
 
or analyses we have made
to date.
Clinical trials must be conducted in
 
accordance with applicable regulatory authorities’
 
legal requirements, regulations or guidelines and
are subject
 
to oversight
 
by these
 
governmental agencies
 
as well
 
as Institutional
 
Review Boards
 
(“IRBs”) at
 
the medical
 
institutions
where the clinical trials are
 
conducted. In addition, clinical trials
 
must be conducted with supplies
 
of our product candidates produced
in
 
accordance
 
with
 
current
 
good
 
manufacturing
 
practices
 
(“cGMP”)
 
and
 
other
 
legal
 
and
 
regulatory
 
requirements.
 
Defects
 
in
manufacturing of
 
a clinical
 
trial batch
 
or
 
a failure
 
of
 
a batch
 
to meet
 
all quality
 
control test
 
specifications could
 
result in
 
delays to
initiation of
 
our clinical
 
trials. We
 
depend on
 
medical institutions
 
and CROs
 
to conduct
 
our clinical
 
trials in
 
compliance with
 
good
clinical
 
practice
 
(“GCP”),
 
and
 
other
 
applicable
 
laws
 
and
 
regulations.
 
Failure
 
to
 
follow
 
and
 
document
 
adherence
 
to
 
such
 
laws
 
and
regulations may
 
lead to significant
 
delays in the
 
availability of product
 
for our clinical
 
trials, result in
 
the termination of
 
or a
 
clinical
hold being
 
placed on
 
one or
 
more of
 
our clinical
 
trials, or
 
delay or
 
prevent submission
 
or approval
 
of marketing
 
applications for
 
our
product candidates.
To the extent our CROs fail
 
to enroll participants
 
for our clinical trials,
 
fail to conduct the
 
trial in accordance with
 
the trial protocol GCP
or are
 
delayed for
 
a significant
 
time in
 
the execution
 
of trials,
 
including achieving
 
full enrollment,
 
we may
 
be affected
 
by increased
costs, program
 
delays or
 
both, which
 
may harm
 
our business
 
and delay
 
our ability
 
to seek
 
approval for
 
our product
 
candidates. For
example, due to an error by
 
the CRO responsible for administering
 
blinded placebo and active doses
 
to trial subjects, which reduced
 
the
confidence
 
of
 
subsequently
 
collected
 
data,
 
we
 
decided
 
to
 
discontinue
 
a
 
Phase
 
2a
 
LTE
 
trial
 
for
 
UB-311.
 
In
 
that
 
case,
 
however,
 
we
determined that we had collected sufficient data
 
on UB-311’s tolerability and immunogenicity. To
 
date, we have not completed clinical
trials sufficient for obtaining marketing approvals for any of our product candidates. Our most advanced
 
candidates are UB-612, which
initiated a Phase 3
 
pivotal study in March
 
2022 and has an
 
ongoing Phase 2 clinical
 
trial, and UB-311,
 
which is in Phase
 
2 of clinical
development. Our
 
product candidate UB-312
 
is in
 
Phase 1
 
of clinical
 
development and
 
UB-313 is
 
undergoing IND-enabling
 
studies.
All of our other research programs are in the pre-clinical development stage.
The completion of clinical trials for our clinical product candidates may be delayed, suspended or terminated because of
 
many factors,
including but not limited to:
•
 
the delay or refusal of regulators or IRBs to authorize us to commence a clinical trial at a prospective trial site;
•
 
changes in regulatory requirements, policies and guidelines;
•
 
delays or failure to reach agreement
 
on acceptable terms with prospective
 
CROs and clinical trial sites, the
 
terms of which
can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
•
 
delays in patient enrollment and variability in the number and types of patients available for clinical trials;
•
 
negative or
 
inconclusive results,
 
which may
 
require us
 
to conduct
 
additional pre-clinical
 
or clinical
 
trials or
 
to abandon
product candidates that we expect to be promising;
•
 
delays in manufacturing and control of clinical trial materials;
•
 
shortages of materials required for the production of our product candidates;
•
 
disruptions from events surrounding the Russia-Ukraine conflict
•
 
the timing, scope and effectiveness of U.S. and international governmental, regulatory, fiscal, monetary and public health
responses to the COVID-19 pandemic;
•
 
safety or tolerability concerns
 
causing us to suspend
 
or terminate a trial
 
if it is determined
 
that the participants are
 
being
exposed to unacceptable health risks;
49
•
 
lower than anticipated retention rates of patients and volunteers in clinical
 
trials and difficulty in maintaining contact with
patients after treatment, resulting in incomplete data;
•
 
failure of us, our CROs or clinical trial sites to comply with regulatory requirements;
•
 
failure of our CROs or clinical trial sites to meet their contractual obligations to us in a timely manner, or at all, deviating
from the clinical trial protocol or dropping out of a trial;
•
 
delays relating to adding new clinical trial sites;
•
 
delays in establishing necessary pre-clinical or clinical data;
•
 
the occurrence of unexpected severe or serious product-related adverse events in a clinical trial;
•
 
the quality or stability of the product candidate falling below acceptable standards;
•
 
the inability to produce
 
or obtain sufficient quantities of
 
the product candidate to
 
complete clinical trials on
 
time, or delays
in sufficiently developing, characterizing or controlling a manufacturing process suitable for clinical trials;
•
 
supply chain constraints and inflationary pressures;
•
 
the lack of adequate funding to continue the clinical trial;
•
 
developments
 
observed
 
in
 
trials
 
conducted
 
by
 
competitors
 
for
 
related
 
technology
 
that
 
raises
 
general
 
concerns
 
from
regulatory authorities about risk to patients of similar vaccine technology;
•
 
the determination that a product candidate will not be producible in relevant quantities at the manufacturing stage;
•
 
the failure of regulatory authorities such as the FDA or the TFDA to approve our manufacturing processes or
 
facilities or
those of contract manufacturers with which we contract for clinical and commercial supplies; and
•
 
the transfer of manufacturing
 
processes to larger-scale
 
facilities operated by contract
 
manufacturers or by us,
 
and delays
or failure by our contract manufacturers or us to make any necessary changes to such manufacturing process.
In addition,
 
pre-clinical and
 
clinical data
 
are often
 
susceptible to
 
varying interpretations
 
and analyses
 
and results
 
from post-hoc
 
data
analysis
 
may
 
not
 
be
 
predictive
 
of
 
final
 
results
 
and
 
may
 
not
 
support
 
product
 
approval.
 
Many
 
companies
 
that
 
believed
 
their
 
product
candidates performed
 
satisfactorily in
 
pre-clinical studies
 
and clinical
 
trials have
 
nonetheless failed
 
to obtain
 
marketing approval
 
for
their product candidates. Regulatory authorities have substantial discretion in
 
the approval process and in determining when or whether
regulatory approval will be
 
obtained for any of
 
our product candidates. Additionally,
 
the FDA typically does not
 
accept post-hoc data
analyses as
 
support for
 
regulatory approval.
 
Even if
 
we believe
 
the data
 
collected from
 
clinical trials
 
of
 
our product
 
candidates are
promising, such data may not be
 
sufficient to support approval by regulatory
 
authorities. Regulatory authorities may disagree with the
design or implementation
 
of our clinical trials
 
and may disagree
 
with our interpretation
 
of data from
 
pre-clinical studies or
 
clinical trials.
In
 
some
 
instances,
 
there
 
can
 
be
 
significant
 
variability
 
in
 
safety
 
and/or
 
efficacy
 
results
 
between
 
different
 
trials
 
of
 
the
 
same
 
product
candidate due to
 
numerous factors, including
 
changes in trial
 
procedures set forth
 
in protocols, differences
 
in the size
 
and type of
 
the
patient populations, adherence to the dosing regimen and
 
other trial procedures and the rate of dropout
 
among clinical trial participants.
Further, none
 
of our trials
 
to date of
 
UB-311 and
 
UB-312 have been
 
large enough to
 
determine whether their
 
assessments of efficacy
were statistically significant. Therefore, we are
 
able to report potential trends on
 
such measures, but we will not
 
be able to make more
definitive
 
statements
 
about
 
the
 
efficacy
 
of
 
our
 
product
 
candidates
 
until
 
we
 
complete
 
clinical
 
trials
 
that
 
are
 
adequately
 
powered
 
to
demonstrate statistical significance of clinically meaningful results.
Moreover, for AD,
 
given the difficulties in
 
assessing whether a product candidate
 
is disease-modifying in terms of
 
delaying cognition
and other symptoms of
 
AD, we plan to include
 
in our trial designs for
 
UB-311 biomarker endpoints and, if our
 
trial results warrant, may
apply for regulatory approval based on biomarker data. While the FDA recently
 
approved aducanumab based on biomarker data, there
is no assurance that the FDA will accept biomarker data for other product candidates, including UB-311, in the future.
 
Even if we obtain approval of any of our product candidates
 
in one jurisdiction, we may never obtain approval for
 
or commercialize
any of our products
 
in other jurisdictions,
 
which would limit
 
our ability to realize
 
the full market
 
potential of our
 
product candidates.
To
 
market
 
any
 
products,
 
we
 
must
 
establish
 
and
 
comply
 
with
 
numerous
 
and
 
varying
 
regulatory
 
requirements
 
in
 
different
 
countries
regarding safety and efficacy and obtain relevant approvals to market our product candidates. As discussed in another risk factor above
(“
Clinical drug
 
development involves
 
a lengthy
 
and expensive
 
process…
”) an
 
EUA for
 
UB-612 was
 
denied by
 
the TFDA
 
in August
50
2021, which decision we have appealed in collaboration with UBIA. Approval by the TFDA or by another foreign regulatory authority
in any
 
other jurisdiction
 
does not
 
ensure approval
 
by comparable
 
regulatory authorities
 
in other
 
countries or
 
jurisdictions, including
approval by the FDA in the
 
United States. The failure to obtain
 
approval in one jurisdiction may delay or
 
otherwise negatively impact
our
 
ability
 
to
 
obtain
 
approval
 
elsewhere.
 
In
 
addition,
 
clinical
 
trials
 
conducted
 
in
 
one
 
country
 
may
 
not
 
be
 
accepted
 
by
 
regulatory
authorities in
 
other countries.
 
Approval procedures
 
vary among
 
countries and
 
even if
 
we have
 
obtained approval
 
in one
 
country, approval
in other countries can involve additional product testing and validation and additional administrative review periods.
Seeking
 
regulatory
 
approvals
 
in
 
different
 
countries
 
could
 
result
 
in
 
additional
 
and
 
unexpected
 
costs
 
for
 
us,
 
including
 
as
 
a
 
result
 
of
additional required pre-clinical studies or clinical trials which would be costly and time-consuming.
 
Satisfying regulatory requirements
is costly,
 
time-consuming, uncertain and may
 
be subject to unanticipated
 
delays. In addition, our
 
failure to obtain regulatory
 
approval
in any country may delay or have negative
 
effects on the process for regulatory approval in
 
other countries. Apart from our ELISA test,
which
 
has
 
been
 
approved
 
for
 
sale
 
by
 
the
 
FDA
 
through
 
an
 
EUA,
 
we
 
do
 
not
 
have
 
any
 
product
 
candidates
 
approved
 
for
 
sale
 
in
 
any
jurisdiction, including international markets. We
 
do not have experience in obtaining regulatory approval in international markets, and
we
 
will
 
be
 
relying
 
on
 
our
 
collaboration
 
partners
 
such
 
as
 
UBIA
 
to
 
assist
 
us
 
in
 
this
 
process.
 
If
 
we
 
fail
 
to
 
comply
 
with
 
regulatory
requirements in international markets or to obtain and maintain required approvals, our ability
 
to realize the full market potential of our
products will be harmed.
Interim, “top-line” and preliminary
 
data from our clinical trials
 
that we announce or publish
 
from time to time may
 
change as more
patient data become available and are also
 
subject to audit and verification procedures that could
 
result in material changes in the
final data.
From time to
 
time, we may
 
publicly disclose
 
preliminary or top-line
 
data from our
 
pre-clinical studies and
 
clinical trials, which
 
are based
on a preliminary analysis of then-available data, and
 
the results and related findings and conclusions are
 
subject to change following a
more comprehensive review of the
 
data related to the particular
 
study or trial. We also may make assumptions,
 
estimations, calculations
and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all
data.
 
As
 
a
 
result,
 
the
 
top-line
 
or
 
preliminary
 
results
 
that
 
we
 
report
 
may
 
differ
 
from
 
future
 
results
 
of
 
the
 
same
 
studies,
 
or
 
different
conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Top-line data also
remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data
we previously published. As a result, top-line data should be viewed with caution until the final data are available.
From time to
 
time, we may
 
also disclose interim
 
data from our
 
pre-clinical studies and
 
clinical trials. Interim
 
data from clinical
 
trials
that we
 
may complete
 
are subject
 
to the
 
risk that
 
one or
 
more of
 
the clinical
 
outcomes may
 
materially change
 
as patient
 
enrollment
continues
 
and more
 
patient
 
data
 
become
 
available or
 
as patients
 
from our
 
clinical
 
trials continue
 
other
 
treatments for
 
their
 
disease.
Adverse
 
differences
 
between
 
preliminary
 
or
 
interim
 
data
 
and
 
final
 
data
 
could
 
significantly
 
harm
 
our
 
business
 
prospects.
 
Further,
disclosure of interim data by us or by our competitors could result in volatility in the price of our Class A common stock.
Further, others, including regulatory
 
authorities, may not accept or agree with
 
our assumptions, estimates, calculations, conclusions or
analyses
 
or
 
may
 
interpret or
 
weigh
 
the
 
importance of
 
data
 
differently,
 
which
 
could
 
impact
 
the
 
value
 
of
 
the particular
 
program,
 
the
approvability
 
or
 
commercialization
 
of
 
the
 
particular
 
product
 
candidate
 
or
 
product
 
and
 
the
 
Company
 
in
 
general.
 
In
 
addition,
 
the
information
 
we
 
choose
 
to
 
publicly
 
disclose
 
regarding
 
a
 
particular
 
study
 
or
 
clinical
 
trial
 
is
 
based
 
on
 
what
 
is
 
typically
 
extensive
information, and you or others may
 
not agree with what we determine
 
is material or otherwise appropriate information
 
to include in our
disclosure.
If we encounter difficulties enrolling patients in our clinical trials, our clinical
 
development activities could be delayed and result in
increased costs and longer development periods or otherwise be adversely affected.
We
 
will be
 
required to
 
identify and
 
enroll a
 
sufficient number
 
of patients
 
for our
 
planned clinical
 
trials. Trial
 
participant enrollment
could be
 
limited in
 
future trials
 
given that
 
many potential
 
participants may
 
be ineligible
 
because of
 
pre-existing conditions,
 
medical
treatments
 
or
 
other
 
reasons.
 
For
 
example,
 
trial
 
participant
 
enrollment
 
for
 
UB-612
 
could
 
be
 
negatively
 
impacted
 
as
 
COVID-19
vaccination rates continue to
 
increase and the number
 
of potential unvaccinated participants
 
continues to decrease. Similarly,
 
the next
phase of
 
our UB-311
 
trial could
 
be affected
 
by worldwide
 
effects
 
resulting from
 
the Russia-Ukraine
 
conflict and
 
other geopolitical
factors. We may not be able to
 
initiate or continue clinical
 
trials required by applicable
 
regulatory authorities or any
 
of our other product
candidates that we
 
pursue if we
 
are unable to
 
locate and enroll
 
enough eligible patients
 
or volunteers to
 
participate in these
 
clinical trials.
Patient enrollment is
 
affected by other
 
factors, as well,
 
including the incidence
 
and severity of
 
the disease under
 
investigation; the design
of the clinical trial
 
protocol; the size and
 
nature of the patient
 
population; the eligibility criteria
 
for the trial in
 
question; the perceived
risks and benefits of the product candidate under trial; the perceived safety and tolerability
 
of the product candidate; the proximity and
availability of
 
clinical trial sites
 
for prospective
 
patients; the availability
 
of competing therapies
 
and clinical
 
trials; effects of
 
the COVID-
19 pandemic on our clinical trial sites; our ability to monitor patients adequately during and after treatment; patient referral
 
practices of
physicians; clinicians’ and
 
patients’ perceptions as
 
to the potential
 
advantages of
 
the drug being
 
studied in relation
 
to other
 
available
therapies, including standard-of-care
 
and any new
 
drugs that may
 
be approved for
 
the indications we
 
are investigating; and
 
efforts to
facilitate timely enrollment in clinical trials.
51
We
 
also may
 
encounter difficulties
 
in identifying
 
and enrolling
 
such patients
 
with a
 
stage of
 
disease appropriate
 
for our
 
ongoing or
future clinical
 
trials. In
 
addition, the
 
process of
 
finding and
 
diagnosing patients
 
may prove
 
costly.
 
Our inability
 
to enroll
 
a sufficient
number of
 
patients for
 
any of
 
our clinical
 
trials would
 
result in
 
significant delays
 
or may
 
require us
 
to abandon
 
one or
 
more clinical
trials.
Even if
 
we obtain
 
regulatory approval
 
for a
 
product candidate,
 
our products
 
will remain
 
subject to
 
regulatory scrutiny
 
and post-
marketing requirements.
Any regulatory approvals that we
 
may receive for our product
 
candidates will require the submission
 
of reports to regulatory authorities
and ongoing surveillance to monitor the safety and efficacy
 
of the product candidate, may contain significant limitations related to use
restrictions for specified
 
age groups, warnings,
 
precautions or contraindications,
 
and may include
 
burdensome post-approval study
 
or
risk management
 
requirements. For
 
example, the
 
FDA may
 
require a
 
Risk Evaluation
 
and Mitigation Strategy
 
(“REMS”) to
 
approve
our
 
product
 
candidates,
 
which
 
could
 
entail
 
requirements
 
for
 
a
 
medication
 
guide,
 
physician
 
training
 
and
 
communication
 
plans
 
or
additional elements
 
to ensure safe
 
use, such
 
as restricted distribution
 
methods, patient registries
 
and other risk
 
minimization tools. In
addition, if
 
one of
 
our product
 
candidates is
 
approved in
 
the United
 
States or
 
abroad, it
 
will be
 
subject to
 
ongoing regulatory
 
requirements
for manufacturing, labeling,
 
packaging, storage, advertising,
 
promotion, sampling, record-keeping,
 
conduct of post-marketing
 
studies
and
 
submission
 
of
 
safety,
 
efficacy
 
and
 
other
 
post-
 
market
 
information.
 
Manufacturers
 
and
 
manufacturers’
 
facilities
 
are
 
required
 
to
comply with
 
extensive requirements
 
by regulatory
 
authorities, including
 
ensuring that
 
quality control
 
and manufacturing
 
procedures
conform to cGMP regulations. As such,
 
we and our contract manufacturers will
 
be subject to continual review and inspections
 
to assess
compliance with cGMP and adherence to commitments made in any approved marketing application. Accordingly, we and others with
whom
 
we
 
work
 
must
 
continue
 
to
 
expend
 
time,
 
money
 
and
 
effort
 
in
 
all
 
areas
 
of
 
regulatory
 
compliance,
 
including
 
manufacturing,
production and quality control.
If a
 
regulatory authority
 
such as
 
the FDA
 
discovers previously
 
unknown problems
 
with a
 
product, such
 
as adverse
 
events of
 
unanticipated
severity
 
or
 
frequency,
 
or
 
problems
 
with
 
product
 
quality
 
or
 
the
 
facility
 
where
 
the
 
product
 
is
 
manufactured,
 
or
 
disagrees
 
with
 
the
promotion,
 
marketing or
 
labeling of
 
a product,
 
such regulatory
 
authorities may
 
impose restrictions
 
on
 
that
 
product or
 
us,
 
including
requiring withdrawal of
 
the product from
 
the market. If
 
we fail to
 
comply with applicable
 
regulatory requirements, a
 
regulatory authority
or
 
enforcement
 
authority
 
may,
 
among
 
other
 
things:
 
issue
 
warning
 
letters;
 
impose
 
civil
 
or
 
criminal
 
penalties;
 
suspend
 
or
 
withdraw
regulatory approval; suspend any of our clinical trials; refuse to approve pending applications or supplements to approved applications
submitted
 
by
 
us;
 
impose
 
restrictions
 
on
 
our
 
operations,
 
including
 
closing
 
our
 
contract
 
manufacturers’
 
facilities;
 
or
 
seize
 
or
 
detain
products, or require a product recall.
Any government
 
investigation of
 
alleged violations of
 
law could
 
require us
 
to expend
 
significant time
 
and resources
 
in response
 
and
could
 
generate
 
negative
 
publicity.
 
Any
 
failure
 
to
 
comply
 
with
 
ongoing
 
regulatory
 
requirements
 
may
 
adversely
 
affect
 
our
 
ability
 
to
commercialize and generate revenue from our
 
products. If regulatory sanctions are applied or
 
if regulatory approval is withdrawn, our
business will be seriously harmed. Further,
 
if a regulatory authority identifies previously unknown problems with our
 
platform, any or
all of our product candidates may also be affected.
Furthermore, the burden of these requirements may outweigh any benefit
 
or revenue that we could generate from product sales. Even if
we obtain
 
regulatory approval
 
for a
 
product candidate,
 
compliance with
 
the many
 
post-approval regulations
 
may be
 
so costly
 
that it
becomes
 
financially
 
prudent
 
to
 
abandon
 
the
 
product
 
or
 
sell
 
ownership
 
of
 
the
 
underlying
 
intellectual
 
property
 
at
 
prices
 
that
 
are
 
not
sufficient to recoup our investment in developing the product.
 
Moreover, the policies of regulatory authorities may change, and additional government regulations may be enacted that could prevent,
limit or delay
 
regulatory approval of
 
our product candidates.
 
We cannot predict the likelihood,
 
nature or extent
 
of government regulation
that may arise
 
from future legislation
 
or administrative or
 
executive action, either
 
in the United
 
States or abroad.
 
If we are
 
slow or unable
to adapt to changes in
 
existing requirements or the
 
adoption of new requirements
 
or policies, or if
 
we are not able to
 
maintain regulatory
compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.
We have no history of
 
commercializing pharmaceutical
 
products, which may
 
make it difficult to
 
evaluate the prospects
 
for our future
viability.
We commenced operations
 
through UNS
 
and COVAXX in 2014
 
and 2020,
 
respectively, and as
 
Vaxxinity in March 2021.
 
Our operations
to date
 
have been
 
limited to
 
organizing and
 
staffing Vaxxinity,
 
business planning,
 
raising capital,
 
developing our
 
Vaxxine
 
Platform,
identifying
 
and
 
testing
 
potential
 
product
 
candidates
 
and
 
conducting
 
clinical
 
trials.
 
We
 
have
 
a
 
limited
 
track
 
record
 
of
 
successfully
conducting late-stage clinical trials,
 
obtaining marketing approvals, manufacturing
 
a commercial-scale product, or
 
arranging for a third-
party
 
to
 
do
 
so
 
on
 
our
 
behalf,
 
or
 
conducting
 
sales
 
and
 
marketing
 
activities
 
necessary
 
for
 
successful
 
product
 
commercialization.
Accordingly, you
 
should consider our prospects
 
considering the costs, uncertainties,
 
delays and difficulties frequently
 
encountered by
companies in the early stages
 
of development, especially clinical-stage biopharmaceutical
 
companies such as ours. Any
 
predictions you
make about our future
 
success or viability may not
 
be as accurate as
 
they could be if we
 
had a longer operating history
 
or a history of
successfully developing and commercializing pharmaceutical products.
52
We
 
may
 
encounter
 
unforeseen
 
expenses,
 
difficulties,
 
complications,
 
delays
 
and
 
other
 
known
 
or
 
unknown
 
factors
 
in
 
achieving
 
our
business objectives.
 
We will eventually need
 
to transition from
 
a company
 
with a development
 
focus to a
 
company capable
 
of supporting
commercial activities. We may not be successful in such a transition.
We
 
expect our financial
 
condition and operating
 
results to continue
 
to fluctuate significantly
 
from quarter to
 
quarter and year
 
to year
due to a variety of factors, many of which are beyond our control. Accordingly, you should not rely upon the results of any
 
quarterly or
annual periods as indications of future operating performance.
Our product
 
candidates may
 
cause undesirable
 
side effects that
 
could delay
 
or prevent
 
their regulatory
 
approval, limit
 
the commercial
profile of an approved label or result in significant negative consequences following regulatory approval, if any.
Undesirable
 
side
 
effects
 
that
 
may
 
be
 
caused
 
by
 
our
 
product
 
candidates could
 
cause us,
 
our
 
collaboration partners
 
or
 
the
 
regulatory
authorities to
 
interrupt, delay
 
or halt
 
clinical trials
 
and could
 
result in
 
a more
 
restrictive label
 
or the
 
delay or
 
denial of
 
approval by
regulatory authorities. Results
 
of our trials
 
could reveal a
 
high and unacceptable
 
severity and prevalence
 
of side effects.
 
In such an
 
event,
our trials could be suspended or terminated and regulatory authorities could
 
order us to cease further development of or deny approval
of our
 
product candidates
 
for any
 
or all
 
targeted indications.
 
The product-related
 
side effects
 
could affect
 
patient recruitment
 
or the
ability of enrolled
 
patients to complete
 
the trial or
 
result in potential
 
product liability claims. Any
 
of these occurrences
 
may harm our
business, financial condition, results of operations and prospects significantly.
Clinical trials assess a sample of the potential patient population.
 
With a limited number of patients
 
and duration of exposure, rare and
severe side
 
effects of our
 
product candidates
 
may only
 
be uncovered
 
with a significantly
 
larger number of
 
patients exposed
 
to the
 
product
candidate. If our product candidates receive
 
an EUA or regulatory approval and
 
we or others identify undesirable side
 
effects caused by
such product candidates (or any other similar products)
 
after such approval, a number of potentially significant negative
 
consequences
could result, including:
•
 
regulatory authorities may withdraw
 
or limit their approval
 
of such product candidates
 
and require us to
 
take our approved
product(s) off the market;
•
 
regulatory authorities may require the addition of labeling statements, such
 
as a “boxed” warning or a contraindication, or
submission of field alerts to physicians and pharmacies;
•
 
we may be required to create a medication guide outlining the risks of such side effects for distribution to patients;
•
 
we may be required to change
 
the way such product candidates
 
are distributed or administered, conduct
 
additional clinical
trials or change the labeling of the product candidates;
•
 
actual or potential drug-related side effects could negatively affect patient recruitment or the ability of enrolled
 
patients to
complete a trial for our products or product candidates;
•
 
market
 
acceptance
 
of
 
our
 
products
 
by
 
patients
 
and
 
physicians
 
may
 
be
 
reduced
 
and
 
sales
 
of
 
the
 
product
 
may
 
decrease
significantly;
•
 
regulatory
 
authorities
 
may
 
require
 
a
 
REMS
 
plan
 
to
 
mitigate
 
risks,
 
which
 
could
 
include
 
medication
 
guides,
 
physician
communication plans, or
 
elements to assure
 
safe use, such
 
as restricted distribution methods,
 
patient registries and
 
other
risk minimization tools;
•
 
we may be subject to regulatory investigations and government enforcement actions;
•
 
we may decide or be required to remove such product candidates from the marketplace;
•
 
we could be sued and potentially held liable for injury caused to individuals exposed to or taking our product candidates;
•
 
sales of the product(s) may decrease substantially; and
•
 
our reputation may suffer.
Any of
 
these events
 
could prevent
 
us from
 
achieving or
 
maintaining market
 
acceptance of
 
the affected
 
product candidates
 
and could
substantially increase
 
the costs
 
of commercializing
 
our product
 
candidates, if
 
approved, and
 
therefore could
 
have a
 
material adverse
effect on our business, financial condition, results of operations and prospects.
53
The regulatory landscape that will govern our product candidates is uncertain. Regulations that impact our
 
product candidates are
still
developing, and
 
changes in
 
regulatory requirements
 
could result
 
in delays
 
or discontinuation
 
of development
 
of our
 
product
candidates or unexpected costs in obtaining regulatory approval.
The regulatory requirements to which our product
 
candidates will be subject are complex
 
and uncertainties exist. Even with respect to
more established vaccine
 
products, the regulatory
 
landscape is still
 
developing, especially as
 
it relates to
 
novel adjuvants in
 
vaccines,
such as CpG1,
 
which we use
 
at low concentration
 
in UB-612. Although
 
regulatory authorities decide
 
whether individual clinical
 
trial
protocols may proceed, the review process and determinations of other reviewing bodies can impede or delay the initiation
 
of a clinical
trial, even if another
 
regulatory authority has reviewed
 
the trial and authorizes
 
its initiation. The FDA,
 
for example, can place
 
an IND
on clinical hold even if other regulatory agencies have provided a favorable review. In addition, adverse developments in clinical trials
involving novel adjuvants in vaccines, such as CpG1, conducted by others may cause regulatory
 
authorities to change the requirements
for approval of any of our product candidates.
Complex regulatory environments exist in other jurisdictions in which we might consider seeking regulatory approvals for our product
candidates, further
 
complicating the
 
regulatory landscape.
 
For example,
 
in the
 
European Union
 
a special
 
committee called
 
the Committee
for Advanced Therapies was established within the European Medicines
 
Authority in accordance with Regulation (EC) No 1394/2007
on
 
advanced-therapy medicinal
 
products
 
(“ATMPs”),
 
to
 
assess
 
the
 
quality,
 
safety
 
and
 
efficacy
 
of
 
ATMPs,
 
and
 
to
 
follow
 
scientific
developments in the field.
These various regulatory review committees and advisory groups and new or revised
 
guidelines that they promulgate from time to time
may lengthen the regulatory
 
review process, require us
 
to perform additional studies,
 
increase our development costs,
 
lead to changes
in
 
regulatory
 
positions
 
and
 
interpretations,
 
delay
 
or
 
prevent
 
approval
 
and
 
commercialization
 
of
 
our
 
product
 
candidates
 
or
 
lead
 
to
significant post-approval limitations or
 
restrictions. We may face even more cumbersome and
 
complex regulations than those emerging
for novel
 
adjuvants. Furthermore,
 
even if
 
our product
 
candidates obtain
 
required regulatory
 
approvals, such
 
approvals may
 
later be
withdrawn because of changes in regulations or the interpretation of regulations by applicable regulatory authorities.
Even if we receive
 
regulatory approval to
 
market any of
 
our product candidates,
 
we will be subject
 
to ongoing obligations
 
and continued
regulatory review, which may materially
 
adversely affect our business,
 
financial condition, results
 
of operations and
 
prospects. We have
not
 
previously
 
submitted
 
a
 
biologics
 
license application
 
(“BLA”)
 
to
 
the
 
FDA,
 
or
 
similar
 
regulatory
 
approval
 
filings
 
to
 
comparable
foreign authorities, for any product candidate
 
and never received regulatory approval for
 
any of our product candidates. Further,
 
other
jurisdictions may consider our product candidates
 
to be new drugs, not biologics or
 
medicinal products, and require different marketing
applications. Even if a regulatory authority
 
approves any of our product candidates,
 
the manufacturing processes, labeling, packaging,
distribution, product sampling,
 
adverse event reporting,
 
storage, advertising, marketing,
 
promotion and recordkeeping
 
for the product
will be
 
subject to
 
extensive and
 
ongoing regulatory
 
requirements. These
 
requirements include
 
submissions of
 
safety and
 
other post-
marketing information and reports and registration,
 
as well as continued compliance with
 
cGMPs and GCPs for any clinical
 
trials that
we conduct post-approval,
 
all of which
 
may result in
 
significant expense and
 
limit our ability
 
to commercialize such
 
products. There
also
 
are
 
continuing,
 
annual
 
program
 
user
 
fees
 
for
 
any
 
marketed
 
products.
 
In
 
the
 
United
 
States,
 
biologic
 
manufacturers
 
and
 
their
subcontractors
 
are
 
required
 
to
 
register
 
their
 
establishments
 
with
 
the
 
FDA
 
and
 
certain
 
state
 
agencies
 
and
 
are
 
subject
 
to
 
periodic
unannounced
 
inspections
 
by
 
the
 
FDA
 
and
 
certain
 
state
 
agencies
 
for
 
compliance
 
with
 
cGMP,
 
which
 
impose
 
certain
 
procedural
 
and
documentation requirements upon us and our contract manufacturers. Changes to the manufacturing process are strictly regulated, and,
depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require
investigation and correction of any deviations from cGMP and impose reporting requirements upon us and
 
any contract manufacturers
that we may
 
decide to
 
use. Accordingly, manufacturers
 
must continue
 
to expend
 
time, money
 
and effort in
 
production and
 
quality control
to maintain compliance with cGMP and other aspects of regulatory compliance.
Any regulatory approvals that we receive
 
for our product candidates may also
 
be subject to limitations on
 
the approved indicated uses
for which the product may
 
be marketed or to
 
the conditions of approval, or
 
contain requirements for potentially costly post-marketing
testing and surveillance to monitor the
 
safety and efficacy of the product. For
 
example, the FDA has the authority
 
to require a REMS as
part of a
 
BLA or after
 
approval, which may
 
impose further requirements
 
or restrictions on
 
the distribution or
 
use of an
 
approved product,
such
 
as
 
limiting prescribing
 
to
 
certain physicians
 
or
 
medical centers
 
that have
 
undergone
 
specialized training,
 
limiting treatment
 
to
patients who meet certain safe-use criteria and requiring treated patients to
 
enroll in a registry.
 
Later discovery of previously unknown
problems
 
with
 
a
 
product,
 
including
 
adverse
 
events
 
of
 
unanticipated
 
severity
 
or
 
frequency,
 
or
 
with
 
our
 
contract
 
manufacturers
 
or
manufacturing processes, or failure to comply with regulatory requirements may result in, among other things:
•
 
restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or voluntary or
mandatory product recalls;
•
 
fines, warning letters, untitled letters or holds on clinical trials;
•
 
refusal by regulatory authorities to
 
approve pending applications or supplements to
 
approved applications, or suspension
or revocation of product approvals;
54
•
 
requirements
 
to
 
conduct
 
additional
 
clinical
 
trials,
 
change
 
our
 
product
 
labeling
 
or
 
submit
 
additional
 
applications
 
or
application supplements;
•
 
product seizure or detention, or refusal to permit the import or export of products;
•
 
mandated modification of promotional materials and labeling and the issuance of corrective information;
•
 
consent decrees, corporate integrity agreements, debarment or exclusion from federal healthcare programs;
•
 
the
 
issuance
 
of
 
safety
 
alerts,
 
Dear
 
Healthcare
 
Provider
 
letters,
 
press
 
releases
 
and
 
other
 
communications
 
containing
warnings or other safety information about the product; or
•
 
injunctions or the imposition of civil or criminal penalties.
In addition, regulatory policies may change
 
or additional government regulations or legislation
 
may be enacted that could prevent,
 
limit
or delay regulatory
 
approval of our product
 
candidates, particularly in countries
 
where elections may result
 
in changes in government
administration. If we fail to
 
comply with existing requirements, are
 
slow or unable to
 
adapt to changes in existing
 
requirements or the
adoption of new requirements or policies, or
 
if we are not able to maintain regulatory
 
compliance, we may lose any regulatory approval
that we
 
may have
 
obtained or
 
face regulatory
 
or enforcement
 
actions, which
 
may materially
 
adversely affect
 
our business,
 
financial
condition, results of operations and prospects.
The FDA strictly
 
regulates the promotional claims
 
that may be
 
made about prescription products
 
in the United
 
States. In particular,
 
a
product may not be promoted for
 
uses that are not approved
 
by the FDA as reflected
 
in the product’s
 
approved labeling. If we receive
marketing approval for
 
a product candidate,
 
physicians may nevertheless
 
prescribe it to
 
their patients in
 
a manner that
 
is inconsistent
with the approved label. If we
 
are found to have promoted such
 
off-label uses, we may become subject to significant
 
liability. The FDA
and other agencies actively enforce the laws
 
and regulations prohibiting the promotion of
 
off-label uses, and a company that is found to
have improperly
 
promoted off-label
 
uses may
 
be subject
 
to significant
 
sanctions. Federal
 
and state
 
government agencies
 
have levied
large civil and criminal fines against companies for
 
alleged improper promotion and has enjoined several companies from engaging
 
in
off-label
 
promotion.
 
The
 
FDA
 
has
 
also
 
requested
 
that
 
companies
 
enter
 
into
 
consent
 
decrees
 
or
 
permanent
 
injunctions under
 
which
specified promotional conduct is changed or curtailed.
Any government
 
investigation of
 
alleged violations of
 
law could
 
require us
 
to expend
 
significant time
 
and resources
 
in response
 
and
could generate negative publicity.
 
Any failure to comply with
 
ongoing regulatory requirements may significantly
 
and adversely affect
our ability to commercialize our product candidates.
A
 
breakthrough
 
therapy
 
designation
 
or
 
fast
 
track
 
designation
 
by
 
the
 
FDA
 
for
 
a
 
product
 
candidate
 
may
 
not
 
lead
 
to
 
a
 
faster
development or regulatory
 
review or approval
 
process, and it
 
would not increase
 
the likelihood that
 
the product candidate
 
will receive
marketing approval.
We may
 
in the future seek a breakthrough therapy designation or fast track designation for
 
one or more product candidates eligible for
such designation. A breakthrough therapy is defined
 
as a product candidate that is intended,
 
alone or in combination with one
 
or more
other
 
drugs,
 
to
 
treat
 
a
 
serious
 
or
 
life-threatening
 
disease
 
or
 
condition,
 
and
 
preliminary
 
clinical
 
evidence
 
indicates
 
that
 
the
 
product
candidate may
 
demonstrate substantial
 
improvement over
 
existing therapies
 
on one
 
or more
 
clinically significant
 
endpoints, such
 
as
substantial treatment effects observed early in clinical development. For product candidates that have been designated as breakthrough
therapies, interaction and communication between
 
the FDA and the sponsor
 
of the trial can help
 
to identify the most efficient
 
path for
clinical development while minimizing the number of patients placed in ineffective control regimens. Product candidates designated as
breakthrough therapies by the FDA are also eligible for priority review if supported
 
by clinical data at the time of the submission of the
BLA.
Designation as
 
a breakthrough
 
therapy is
 
within the
 
discretion of
 
the FDA.
 
Accordingly,
 
even if
 
we believe
 
that one
 
of our
 
product
candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree
 
and instead determine not to make such
designation. In
 
any event,
 
the receipt
 
of a
 
breakthrough therapy
 
designation for
 
a product
 
candidate may
 
not result
 
in a
 
faster development
process, review or approval compared to product candidates considered for approval under conventional FDA procedures and it would
not assure ultimate approval by the FDA. In addition, even if one or more
 
of our product candidates qualify as breakthrough therapies,
the FDA may
 
later decide that
 
the product candidate
 
no longer meets
 
the conditions
 
for qualification or
 
it may decide
 
that the time
 
period
for FDA
 
review or
 
approval will
 
not be
 
shortened. Further,
 
certain of
 
our product
 
candidates, including
 
UB-612, are
 
not eligible
 
for
breakthrough therapy designation, and we will be unable to take advantage of such designation for such product candidates.
Fast track designation is designed to
 
facilitate the development and expedite the review
 
of therapies to treat serious
 
conditions and fill
an
 
unmet
 
medical
 
need.
 
Programs
 
with
 
fast
 
track
 
designation
 
may
 
benefit
 
from
 
early and
 
frequent
 
communications with
 
the
 
FDA,
potential priority review and the ability to submit
 
a rolling application for regulatory review.
 
Fast track designation applies to both the
product candidate
 
and the
 
specific indication
 
for which
 
it is
 
being studied.
 
However,
 
even if
 
one or
 
more of
 
our product
 
candidates
55
qualify for fast
 
track designation, we
 
may not be
 
able to meet
 
the criteria of
 
the fast track designation,
 
or if our clinical
 
trials are delayed,
suspended or terminated, or put on clinical
 
hold due to unexpected adverse events or issues
 
with clinical supply, we will not receive the
benefits associated
 
with the
 
fast track
 
program. Furthermore,
 
fast track
 
designation does
 
not change
 
the standards
 
for approval.
 
Fast
track designation alone does not guarantee qualification for the FDA’s
 
priority review procedures. Fast track designation also does not
guarantee our product candidate will be approved in a timely manner, if at all.
We
 
are currently attempting to secure approval
 
of certain product candidates through
 
the use of an accelerated
 
approval pathway.
 
If we are
 
unable to obtain
 
such approval, we
 
may be required
 
to conduct additional
 
pre-clinical studies or
 
clinical trials beyond
 
those
that we contemplate, which could increase the expense of obtaining,
 
and delay the receipt of, necessary marketing approvals. Even
if our product
 
candidates receive accelerated
 
approval from regulatory
 
authorities, if our
 
confirmatory trials do
 
not verify clinical
benefit,
 
or
 
if
 
we
 
do
 
not
 
comply
 
with
 
rigorous
 
post-marketing
 
requirements,
 
such
 
regulatory
 
authorities
 
may
 
seek
 
to
 
withdraw
accelerated approval.
We are developing certain
 
product candidates
 
for the
 
treatment of
 
serious or
 
life-threatening conditions,
 
including UB-311, and
 
therefore
may decide to seek approval of such product candidates under the FDA’s
 
accelerated approval pathway. A product may be eligible
 
for
accelerated approval
 
if
 
it is
 
designed to
 
treat a
 
serious or
 
life-threatening disease
 
or
 
condition and
 
generally provides
 
a meaningful
advantage over available therapies
 
upon a determination that
 
the product candidate has
 
an effect on a surrogate
 
endpoint or intermediate
clinical endpoint that
 
is reasonably likely
 
to predict clinical
 
benefit. The FDA
 
considers a clinical
 
benefit to be
 
a positive therapeutic
effect that
 
is clinically
 
meaningful in
 
the context
 
of a
 
given disease,
 
such as
 
irreversible morbidity
 
or mortality.
 
For the
 
purposes of
accelerated approval, a
 
surrogate endpoint is
 
a marker,
 
such as a
 
laboratory measurement, radiographic
 
image, physical sign
 
or other
measure that is
 
thought to predict
 
clinical benefit but
 
is not itself
 
a measure of
 
clinical benefit. An
 
intermediate clinical endpoint
 
is a
clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality that
 
is reasonably likely to predict an
effect on irreversible morbidity or mortality or other clinical benefit.
The accelerated approval
 
pathway may be used
 
in cases in which
 
the advantage of a
 
new drug over available
 
therapy may not
 
be a direct
therapeutic advantage
 
but is
 
a clinically
 
important improvement
 
from a
 
patient and
 
public health
 
perspective. If
 
granted, accelerated
approval is
 
usually contingent
 
on the
 
sponsor’s agreement
 
to conduct,
 
in a
 
diligent manner, additional
 
post-approval confirmatory
 
studies
to verify and
 
describe the drug’s clinical benefit.
 
If the sponsor
 
fails to conduct
 
such studies in
 
a timely manner, or
 
if such post- approval
studies fail to validate the drug’s predicted clinical benefit, the FDA may withdraw its approval of the drug on an expedited basis.
If we decide to
 
submit a BLA seeking accelerated
 
approval or receive an expedited
 
regulatory designation for our product
 
candidates,
there can be no
 
assurance that such submission or
 
application will be accepted or
 
that any expedited development, review or
 
approval
will be granted on a timely
 
basis, or at all. Failure to
 
obtain accelerated approval or any other
 
form of expedited development, review
 
or
approval for a product candidate would result in a longer time period to commercialization of such product candidate, if any, and could
increase the cost of
 
development of such product
 
candidate, which could harm
 
our competitive position in
 
the marketplace. An EUA
 
for
UB-612 was denied by the TFDA in
 
August 2021. If we do not
 
receive an EUA from regulatory authorities for product
 
candidates for
which we request
 
such approval, we
 
may be required
 
to conduct further
 
clinical trials which
 
could increase the
 
expense of obtaining,
and delay
 
the receipt
 
of, marketing
 
approvals in
 
any jurisdiction
 
where we
 
do not
 
receive an
 
EUA. Some
 
regulatory authorities,
 
including
the
 
FDA,
 
have
 
ceased
 
granting
 
EUAs
 
for
 
product
 
candidates
 
targeting
 
COVID-19
 
or
 
otherwise,
 
which
 
could
 
delay
 
our
 
ability
 
to
commercialize product candidates.
Because we are developing product candidates for the treatment or prevention of diseases in which there is little clinical experience
using new technologies, there
 
is increased risk that the
 
FDA, the TFDA or other
 
foreign regulatory authorities may
 
not consider the
endpoints of our clinical trials to provide clinically meaningful results and that these results may be difficult to analyze.
As we are developing novel treatments and preventative
 
measures for diseases in which we believe there is
 
limited clinical experience
with new endpoints and methodologies, there is heightened risk
 
that the applicable regulatory authorities may not consider the
 
clinical
trial endpoints to provide clinically meaningful results, and the resulting clinical data and results may be more difficult to analyze. It is
difficult to determine how
 
long it will take, if
 
ever, or how
 
much it will cost to
 
obtain regulatory approvals for our
 
product candidates
in the United States, Taiwan or other jurisdictions, if ever. Further, approvals by one regulatory authority may not be indicative of what
other regulatory authorities may require for approval.
During the regulatory
 
review process, we
 
will need to identify
 
success criteria and
 
endpoints such that
 
regulatory authorities will
 
be able
to determine the clinical efficacy
 
and safety profile of any product
 
candidates we may develop. Because our
 
initial focus is to identify
and develop product candidates
 
to treat or prevent
 
diseases in which there
 
is little clinical experience
 
using new technologies, there
 
is
heightened risk that regulatory authorities may
 
not consider the clinical trial endpoints that
 
we propose to provide clinically meaningful
results. In addition, the resulting clinical data and results may be difficult to analyze.
In the United States, the
 
FDA also weighs the benefits
 
of a product against its
 
risks, and the FDA may
 
view the efficacy results
 
in the
context of safety as not being supportive of regulatory approval.
 
The TFDA and other foreign regulatory authorities may make similar
comments with respect
 
to these endpoints
 
and data. Any
 
product candidate we
 
may develop will
 
be based on
 
a novel technology
 
that
makes it difficult to predict the time and cost of development and of subsequently obtaining regulatory approval.
56
We and our collaboration partners have conducted and intend
 
to conduct additional clinical trials
 
for selected product candidates at
sites outside the United States, and for any of our product
 
candidates for which we seek approval in the United States, the
 
FDA may
not accept data from trials conducted in such locations or may require additional U.S.-based trials.
We
 
and our collaboration partners
 
have conducted, currently are
 
conducting and intend in
 
the future to conduct,
 
clinical trials outside
the United States, particularly in Taiwan where we have reported interim results of our UB-612 Phase 2 clinical trial.
Although the FDA may
 
accept data from clinical
 
trials conducted outside the
 
United States, acceptance
 
of these data is
 
subject to certain
conditions imposed by the FDA. For example, the clinical trial must be conducted by qualified investigators in accordance with GCPs,
and the FDA must be able to validate the trial data through an on-site inspection, if necessary. Generally, the patient population for any
clinical trial conducted outside of
 
the United States must be
 
representative of the population for
 
which we intend to seek
 
approval in the
United States. There can be
 
no assurance that the FDA
 
will accept data from trials
 
conducted outside of the United
 
States. If the FDA
does not accept the data from any clinical trials that
 
we or our collaboration partners conduct outside the United States, it
 
would likely
result in the need for additional
 
clinical trials, which would be costly
 
and time-consuming and delay or permanently halt
 
our ability to
develop and
 
market these
 
or other
 
product candidates
 
in the
 
United States.
 
In other
 
jurisdictions, for
 
instance, in
 
Taiwan,
 
there is
 
a
similar risk regarding the acceptability of clinical trial data conducted outside of that jurisdiction.
In addition, there
 
are risks inherent
 
in conducting clinical trials
 
in multiple jurisdictions,
 
inside and outside
 
of the United
 
States, such
as:
•
 
regulatory and administrative requirements
 
of the jurisdiction
 
where the trial is
 
conducted that could
 
burden or limit our
ability to conduct our clinical trials;
•
 
foreign exchange fluctuations;
•
 
manufacturing, customs, shipment and storage requirements;
•
 
cultural differences in medical practice and clinical research; and
•
 
the risk that the patient
 
populations in such trials are
 
not considered representative as compared to
 
the patient population
in the target markets where approval is being sought.
If any of our
 
product candidates receive an
 
EUA or regulatory approval,
 
such products may not
 
achieve broad market acceptance
among government agencies, physicians, patients, the medical community and third-party payors, in which case revenue generated
from their sales would be limited.
The
 
commercial
 
success
 
of
 
our
 
product
 
candidates
 
and
 
our
 
ability
 
to
 
generate
 
revenues
 
from
 
our
 
products
 
will
 
depend
 
upon
 
their
acceptance
 
among
 
government
 
agencies,
 
physicians,
 
patients
 
and
 
the
 
medical
 
community.
 
The
 
degree
 
of
 
market
 
acceptance
 
of
 
our
product candidates will depend on a number of factors, including:
•
 
limitations
 
or
 
warnings
 
contained
 
in
 
the
 
approved
 
labeling
 
for
 
a
 
product
 
candidate
 
and
 
any
 
other
 
product
 
insert
requirements of regulatory authorities;
•
 
changes in the standard of care for the targeted indications for any of our product candidates;
•
 
limitations in the approved clinical indications for our product candidates;
•
 
demonstrated clinical safety and efficacy compared to other products;
•
 
the impact of disease variants, such as the Delta variant of SARS-CoV-2, on the efficacy and marketability of our product
candidates targeting such diseases;
•
 
lack of significant adverse side effects, and the prevalence and severity of any side effects;
•
 
sales, marketing and distribution support;
•
 
availability of coverage and extent of reimbursement from managed care plans and other third-party payors;
•
 
timing of market introduction and perceived effectiveness of our products as well as competitive products;
•
 
continued projected growth of the markets in which our products compete;
57
•
 
the degree of cost-effectiveness of our product candidates;
•
 
the impact of past product price increases and limitations on future price increases for our products;
•
 
availability of alternative therapies;
•
 
whether the product is designated
 
under physician treatment guidelines as
 
a first-line therapy or
 
as a second or third-line
therapy for particular diseases;
•
 
whether the product can be used effectively with other therapies to achieve higher response rates;
•
 
adverse publicity about our product candidates or favorable publicity about competitive products;
•
 
if and when we are able to obtain regulatory approvals for indications for our products;
•
 
our ability to establish and maintain a continuous supply of our products for commercial sale;
•
 
potential or perceived advantages or disadvantages of our products over alternative treatments;
•
 
convenience and ease of administration of our products; and
•
 
the effect of current and future healthcare laws.
If any of
 
our product candidates are
 
approved, but do
 
not achieve an
 
adequate level of
 
acceptance by government
 
agencies as well
 
as
physicians, patients and the medical community, we may not generate sufficient revenue from these products, and we may not
 
become
or
 
remain
 
profitable.
 
In
 
addition,
 
efforts
 
to
 
educate
 
the
 
medical
 
community
 
and
 
third-party
 
payors
 
on
 
the
 
benefits
 
of
 
our
 
product
candidates may require significant resources and may never be successful.
We
 
may
 
focus
 
on
 
potential
 
product
 
candidates
 
that
 
may
 
prove
 
to
 
be
 
unsuccessful
 
and
 
such
 
focus
 
may
 
require
 
us
 
to
 
forego
opportunities to develop other product candidates that may prove to be more successful.
We may choose to
 
focus our efforts
 
and resources
 
on a potential
 
product candidate
 
that ultimately
 
proves to be
 
unsuccessful, or to
 
license
or purchase
 
a marketed
 
product that
 
does not
 
meet our
 
financial expectations.
 
Furthermore, we
 
have limited
 
financial and
 
personnel
resources and
 
are placing
 
significant focus
 
on the
 
development of
 
our lead
 
product candidates,
 
and as
 
such, we
 
may forgo
 
or delay
pursuit of
 
opportunities with
 
other future
 
product candidates
 
that later
 
prove to
 
have greater
 
commercial potential.
 
Our spending
 
on
current and future
 
research and development
 
programs and other
 
future product candidates
 
for specific indications
 
may not yield
 
any
commercially viable future product candidates and
 
could result in spending on
 
raw materials that cannot be
 
repurposed. As a result of
our resource
 
allocation decisions,
 
we may
 
fail to capitalize
 
on viable commercial
 
products or
 
profitable market
 
opportunities, be
 
required
to forego
 
or delay
 
pursuit of
 
opportunities with
 
other product
 
candidates or
 
other diseases
 
that may
 
later prove
 
to have
 
greater commercial
potential,
 
fail
 
to
 
identify
 
novel
 
product
 
candidates
 
that
 
may
 
be
 
successful,
 
or
 
relinquish
 
valuable
 
rights
 
to
 
such
 
product
 
candidates
through
 
collaboration,
 
licensing
 
or
 
other
 
arrangements
 
in
 
cases
 
in
 
which
 
it
 
would
 
have
 
been
 
advantageous
 
for
 
us
 
to
 
retain
 
sole
development
 
and
 
commercialization rights.
 
If
 
we
 
are
 
unable
 
to
 
identify
 
and
 
successfully
 
commercialize additional
 
suitable
 
product
candidates, or if
 
the additional
 
product candidates
 
we do identify
 
and develop
 
prove to be
 
ineffective, incapable of
 
being commercialized
on a large scale
 
or otherwise fail
 
to achieve market
 
success, this would
 
adversely impact our
 
business strategy and
 
our financial position.
Risks Related to Our Financial Position and Need for Additional Capital
We cannot
 
assure you of the adequacy of our
 
capital resources to successfully complete the development and
 
commercialization of
our product candidates, and a
 
failure to obtain additional capital,
 
if needed, could force us
 
to delay, limit, reduce
 
or terminate one
or more of our product development programs or commercialization efforts.
As of December 31, 2021, we had cash and cash equivalents amounting to $144.9 million. We
 
believe that we will continue to expend
substantial resources
 
for the
 
foreseeable future
 
developing our
 
proprietary product
 
candidates. These
 
expenditures will
 
include costs
associated with research
 
and development, conducting
 
pre-clinical studies and
 
clinical trials, seeking
 
regulatory approvals, as
 
well as
launching
 
and
 
commercializing
 
products
 
approved
 
for
 
sale
 
and
 
costs
 
associated
 
with
 
manufacturing
 
products.
 
In
 
addition,
 
other
unanticipated costs
 
may arise.
 
Because the
 
outcomes of
 
our anticipated
 
clinical trials
 
are highly
 
uncertain, we cannot
 
reasonably estimate
the actual amounts necessary to successfully complete the development and commercialization of our proprietary product candidates.
Our future funding requirements will depend on many factors, including but not limited to:
•
 
the numerous risks and uncertainties associated with developing product candidates and maintaining our platform;
58
•
 
the number and characteristics of product candidates that we pursue;
•
 
the rate of
 
enrollment, progress, cost
 
and outcomes of
 
our clinical trials,
 
which may or
 
may not meet
 
their primary end-
points;
•
 
the timing of, and cost involved in, conducting non-clinical studies that are regulatory prerequisites to conducting
 
clinical
trials of sufficient duration for successful product registration;
•
 
the cost of manufacturing clinical supply and establishing commercial supply of our product candidates;
•
 
the costs
 
and timing
 
of preparing,
 
filing and
 
prosecuting patent
 
applications, maintaining
 
and enforcing
 
our intellectual
property rights and defending any intellectual property-related claims;
•
 
tax and
 
other compliance
 
costs associated
 
with operating
 
in foreign
 
jurisdictions (including
 
any withholding
 
requirements);
•
 
the timing
 
of, and
 
the costs
 
involved in,
 
obtaining regulatory
 
approvals for
 
our product
 
candidates if
 
clinical trials
 
are
successful;
•
 
the timing of, and costs involved in, conducting post-approval studies that may be required by regulatory authorities;
•
 
the cost of commercialization activities for our product candidates, including product manufacturing, pharmacovigilance,
marketing and distribution
 
of product candidates
 
generated from our
 
platform and any
 
other product opportunity
 
for which
we receive marketing approval in the future;
•
 
the terms and timing
 
of any collaborative, licensing
 
and other arrangements
 
that we are currently
 
party to or may
 
establish,
including any required milestone and royalty payments thereunder and any non-dilutive funding that we may receive;
•
 
the costs
 
involved in
 
preparing, filing,
 
prosecuting, maintaining,
 
defending and
 
enforcing patent
 
claims, including
 
litigation
costs, if any, and the outcome of any such litigation;
•
 
the timing, receipt and amount
 
of sales of, or royalties
 
or milestones on, our future
 
products, if any,
 
including the risk of
potential nonpayment by buyers of our future products, if any;
•
 
the costs to recruit and build the organization including key executives needed to
 
transform to a commercial organization;
and
•
 
the costs of operating as a public company, including hiring additional personnel.
In addition, our
 
operating plan may
 
change as a
 
result of many
 
factors currently unknown
 
to us. As
 
a result of
 
these factors, we
 
may
need additional funds sooner than planned. We expect to finance future cash needs primarily through public or private equity offerings,
strategic collaborations and debt financing. If sufficient funds on acceptable terms are not available when needed, or at all, we could be
forced to significantly
 
reduce operating
 
expenses and
 
delay, limit, reduce or
 
terminate one
 
or more
 
of our
 
product development
 
programs
or
 
commercialization
 
efforts,
 
which
 
would
 
have
 
a
 
negative
 
impact
 
on
 
our
 
business,
 
financial
 
condition,
 
results
 
of
 
operations
 
and
prospects.
We
 
have incurred
 
significant losses
 
since our
 
inception, and
 
we expect
 
to incur
 
losses for
 
the foreseeable
 
future and
 
may never
achieve or maintain profitability.
We
 
have incurred significant losses
 
since our inception. We
 
had net losses
 
of approximately $137.2 million
 
and $40.0 million for
 
the
years
 
ended
 
December
 
31,
 
2021
 
and
 
2020,
 
respectively.
 
As
 
of
 
December
 
31,
 
2021,
 
our
 
consolidated
 
accumulated
 
deficit
 
was
$229.5 million.
 
Our
 
expectation is
 
that we
 
will
 
continue
 
to
 
incur
 
losses as
 
we
 
continue our
 
research
 
and
 
development of,
 
and
 
seek
regulatory approvals for, our product candidates and maintain and
 
develop new platforms, prepare for and begin to commercialize any
approved product candidates and
 
add infrastructure and personnel
 
to support our product
 
development efforts and operations
 
as a public
company. We
 
have devoted substantially all
 
of our financial resources
 
and efforts to
 
research and development, including pre-clinical
studies and clinical trials and we anticipate that our expenses will continue to increase over the next several years as we continue these
activities. The net losses and negative cash flows incurred to date, together
 
with expected future losses, have had, and may continue to
have, an adverse effect on our working capital. The amount of future net losses will depend, in part, on the rate of future growth of our
expenses and our ability to generate revenue.
Because of the numerous
 
risks and uncertainties associated
 
with biopharmaceutical product development, we
 
are unable to accurately
predict the timing or
 
amount of increased expenses
 
or when, or if,
 
we will be able
 
to achieve profitability.
 
For example, our expenses
59
could increase if we
 
are required by regulatory
 
authorities such as the
 
FDA to perform trials
 
in addition to those
 
that we currently expect
to perform,
 
or if there
 
are any
 
delays in
 
completing our
 
currently planned
 
clinical trials,
 
the partnering
 
process for
 
our proprietary
 
product
candidates or in the development of any of our proprietary product candidates.
Our revenue
 
to date
 
has been
 
generated from
 
the sales
 
of our
 
ELISA test
 
and the
 
sale of
 
an option
 
to negotiate
 
a license
 
with UNS
(which option has expired).
 
Our ability to generate
 
revenue and achieve profitability in
 
the future depends in
 
large part on
 
our ability,
alone or with our collaborators, to achieve milestones and to
 
successfully complete the development of, obtain the necessary
 
regulatory
approvals for,
 
and commercialize,
 
our product
 
candidates and
 
Vaxxine
 
Platform. We
 
may never
 
succeed in
 
these activities
 
and may
never generate revenue from product sales that is significant enough
 
to achieve profitability. Even if
 
we successfully obtain regulatory
approvals to market one or more of our product candidates, our revenues will be dependent, in part, upon the size of the markets
 
in the
territories for which we gain regulatory
 
approval and have commercial rights.
 
If the markets for patient subsets
 
that we are targeting are
not as significant as we
 
estimate, we may not
 
generate significant revenues from
 
sales of such products, if
 
approved. Even if we
 
achieve
profitability in the future, we may not be able to sustain profitability in
 
subsequent periods. Our failure to become or remain profitable
could depress our market value
 
and could impair our ability
 
to raise capital, expand our
 
business, develop other product candidates
 
or
continue our operations. A decline in our value could also cause you to lose all or part of your investment.
Raising additional capital
 
may cause dilution
 
to our shareholders,
 
restrict our operations
 
or require us
 
to relinquish rights
 
to our
technology or product candidates.
We expect our expenses to continue to increase in connection
 
with our planned operations. To the extent that we
 
raise additional capital
through the sale of our Class A common stock, convertible securities or other equity securities, your ownership interest will be diluted,
and the
 
terms of
 
these securities could
 
restrict our
 
operations or
 
include liquidation or
 
other preferences
 
and anti-dilution
 
protections
that could adversely affect your rights as a stockholder. The issuance of additional equity securities, or the possibility of such issuance,
may cause the
 
market price
 
of our Class
 
A common stock
 
to decline.
 
In addition,
 
debt financing, if
 
available, may
 
result in fixed
 
payment
obligations and may
 
involve agreements that
 
include restrictive covenants
 
that limit our
 
ability to take
 
specific actions, such
 
as incurring
additional debt, making
 
capital expenditures, creating liens,
 
redeeming shares or
 
declaring dividends, that
 
could adversely impact our
ability to conduct our business. Securing financing could require a
 
substantial amount of time and attention from our management and
may divert a disproportionate amount of their attention away
 
from day-to-day activities, which may adversely affect our management’s
ability to oversee the development of our product candidates.
If we raise additional funds through collaborations or marketing,
 
distribution or licensing arrangements with third parties, we may
 
have
to relinquish valuable rights
 
to our technologies, future
 
revenue streams or product
 
candidates or grant licenses
 
on terms that may
 
not
be favorable to us. If we are unable
 
to raise additional funds when needed, we may be
 
required to delay, limit,
 
reduce or terminate our
product
 
development
 
or
 
future
 
commercialization
 
efforts
 
or
 
grant
 
rights
 
to
 
develop
 
and
 
market
 
product
 
candidates
 
that
 
we
 
would
otherwise prefer to develop and market ourselves.
We cannot be
 
certain that additional funding will be available on acceptable terms, or at all. If
 
we are unable to raise additional capital
in sufficient
 
amounts or on
 
terms acceptable to
 
us, we may
 
have to
 
significantly delay,
 
scale back or
 
discontinue the development
 
or
commercialization of
 
our product
 
candidates or
 
other research
 
and development
 
initiatives. Our
 
current or
 
future license
 
agreements
may also be terminated if we are unable to meet the payment or other obligations under the agreements.
Changes in or
 
reinterpretations of tax
 
laws and regulations,
 
including their application
 
to us or
 
our customers as
 
reviewed by the
relevant tax authorities, may
 
have a material adverse
 
effect on our business,
 
results of operations, financial
 
condition and prospects.
We are
 
subject to complex and evolving tax laws and regulations. New income, sales, use or
 
other tax laws, statutes, rules, regulations
or ordinances could be
 
enacted at any time,
 
which could affect the
 
tax treatment of any
 
of our future domestic
 
and foreign earnings. Any
new
 
taxes
 
could
 
adversely
 
affect
 
our
 
domestic
 
and
 
international
 
business
 
operations,
 
and
 
our
 
business
 
and
 
financial
 
performance.
Further, existing tax
 
laws, statutes, rules, regulations or
 
ordinances could be interpreted,
 
changed, modified or applied
 
adversely to us
or our customers. Future
 
changes in applicable tax laws
 
and regulations, or their
 
interpretation and application, could have
 
an adverse
effect on our business, financial conditions, results of operations and prospects.
In addition,
 
our determination
 
of our
 
tax liability
 
is subject
 
to review
 
by applicable
 
tax authorities.
 
Any adverse
 
outcome of
 
such a
review could harm our results of operations, cash flow and overall financial condition.
 
The determination of our tax liabilities requires
significant
 
judgment
 
and,
 
in
 
the
 
ordinary
 
course
 
of
 
business,
 
there
 
are
 
many
 
transactions
 
and
 
calculations
 
where
 
the
 
ultimate
 
tax
determination is complex and uncertain.
Our ability
 
to use
 
our net
 
operating loss
 
carryforwards and
 
other tax
 
attributes to
 
offset future
 
taxable income
 
may be
 
subject to
certain limitations.
As of December 31, 2021, we
 
had U.S. federal net operating
 
loss carryforwards (“NOLs”) of $134.6 million,
 
which may be available to
offset future taxable income,
 
if any,
 
and have no expiration date
 
but are limited in
 
their usage to an
 
annual deduction equal to 80%
 
of
annual taxable
 
income. In
 
general, under
 
Sections 382
 
and 383
 
of the
 
Internal Revenue
 
Code of
 
1986, as
 
amended (the
 
“Code”), a
60
corporation that
 
undergoes an
 
“ownership change,”
 
generally defined
 
as a
 
greater than
 
50% change
 
by value
 
in its
 
equity ownership
over a three-year period, is subject to limitations on its ability to utilize its pre-change NOLs and its research and other tax attributes to
offset
 
future
 
taxable
 
income.
 
Our
 
existing
 
NOLs
 
and
 
tax
 
attributes
 
may
 
be
 
subject
 
to
 
limitations
 
arising
 
from
 
previous
 
ownership
changes, and if
 
we undergo future ownership
 
changes, our ability
 
to utilize NOLs
 
and research and
 
tax attributes could
 
be further limited
by Sections 382 and
 
383 of the Code.
 
For these reasons, we
 
may not be able
 
to utilize a portion
 
of our existing NOLs
 
or research and
tax attributes.
Risks Related to the Manufacturing of Our Product Candidates
The formulation of peptide-based medicines is complex and manufacturers
 
often encounter difficulties in production. If we, UBI or
any
 
of
 
our
 
other
 
contract
 
manufacturers
 
encounter
 
difficulties,
 
our
 
ability
 
to
 
provide
 
product
 
candidates
 
for
 
clinical
 
trials
 
or
products, if approved, to patients or future customers could be delayed or halted.
The
 
formulation
 
of
 
peptide-based
 
medicines
 
is
 
complex
 
and
 
requires
 
significant
 
expertise
 
and
 
capital
 
investment,
 
including
 
the
development of
 
advanced manufacturing
 
techniques and
 
analytics. We
 
are currently
 
dependent on
 
contract manufacturers,
 
including
UBI,
 
its
 
affiliates,
 
WuXi
 
STA
 
and
 
CSBio,
 
to
 
conduct
 
the
 
manufacturing
 
and
 
supply
 
activities
 
for
 
our
 
product
 
candidates
 
and
 
the
underlying
 
component
 
parts,
 
but
 
may
 
choose
 
to
 
conduct
 
these
 
manufacturing
 
activities
 
ourselves
 
in
 
the
 
future.
 
If
 
our
 
contract
manufacturers are unable to manufacture our product candidates in clinical quantities or, when necessary, in commercial quantities and
at
 
sufficient
 
yields,
 
then
 
we
 
will
 
need
 
to
 
identify
 
and
 
reach
 
supply
 
arrangements with
 
additional
 
third
 
parties.
 
Further,
 
our
 
product
candidates may be
 
in competition with other
 
products for access to
 
these facilities and may
 
be subject to delays
 
in manufacture if our
contract manufacturers give
 
other products
 
higher priority.
 
We
 
and our
 
contract manufacturers must
 
comply with
 
cGMP,
 
regulations
and guidelines for the manufacturing
 
of our product candidates used
 
in pre-clinical studies and clinical
 
trials and, if approved, marketed
products. If
 
we or
 
our contract
 
manufacturers do
 
not receive
 
any regulatory
 
approvals, or
 
lose existing
 
approvals,
 
required to
 
manufacture
our
 
product
 
candidates,
 
production
 
and
 
fulfilment
 
of
 
orders
 
will
 
be
 
delayed,
 
which
 
may
 
materially
 
adversely
 
affect
 
our
 
business.
Manufacturers
 
of
 
biotechnology
 
products
 
often
 
encounter
 
difficulties
 
in
 
production,
 
particularly
 
in
 
scaling
 
up
 
and
 
validating
 
initial
production. Furthermore, if
 
microbial, viral or
 
other contaminations are
 
discovered in our
 
product candidates or
 
in the manufacturing
facilities
 
where
 
our
 
product
 
candidates
 
are
 
made,
 
such
 
manufacturing
 
facilities
 
may
 
be
 
closed
 
for
 
an
 
extended
 
period
 
of
 
time
 
to
investigate and
 
remedy the
 
contamination. Shortages
 
of raw
 
materials may
 
also extend the
 
period of time
 
required to
 
develop our
 
product
candidates.
Manufacturing
 
these
 
products
 
requires
 
facilities
 
specifically
 
designed
 
for
 
and
 
validated
 
for
 
this
 
purpose
 
and
 
sophisticated
 
quality
assurance
 
and
 
quality
 
control procedures
 
are necessary.
 
Slight deviations
 
anywhere
 
in
 
the
 
manufacturing process,
 
including filling,
labeling, packaging, storage and shipping and quality control and testing, may result in lot failures, product
 
recalls or spoilage. Further,
delays in our clinical
 
trials or in any
 
regulatory approvals may result
 
in the expiration of
 
manufactured product, which could
 
in turn lead
to further delays.
 
When changes are
 
made to the
 
manufacturing process, we
 
may be required
 
to provide pre-clinical
 
and clinical data
showing
 
the
 
comparable
 
identity,
 
strength,
 
quality,
 
purity
 
or
 
potency
 
of
 
the
 
products
 
before
 
and
 
after
 
such
 
changes.
 
The
 
use
 
of
biologically derived
 
ingredients can
 
also lead
 
to allegations
 
of harm,
 
including infections
 
or allergic
 
reactions, or
 
closure of
 
product
facilities due to possible contamination.
In addition,
 
there are
 
risks associated
 
with large
 
scale manufacturing
 
for clinical
 
trials or
 
commercial scale
 
including, among
 
others,
cost overruns,
 
potential problems
 
with process
 
scale-up, process
 
reproducibility, stability issues, compliance
 
with cGMP, lot consistency
and timely availability of raw materials. Even if we obtain marketing approval for
 
any of our product candidates, there is no assurance
that we or our manufacturers will be able to manufacture the approved product to specifications acceptable to regulatory authorities, to
produce it in sufficient quantities
 
to meet the requirements
 
for the potential commercial
 
launch of the product
 
or to meet potential
 
future
demand. If
 
we or
 
our manufacturers
 
are unable
 
to produce
 
sufficient quantities
 
for clinical
 
trials, advance
 
purchase commitments
 
or
commercialization, more generally,
 
our development and commercialization efforts
 
would be impaired, which
 
would have an adverse
effect on our business, financial condition, results of operations and prospects.
We cannot assure you that any disruptions or other issues relating to the manufacture of any of our product candidates will not occur in
the future. Any delay
 
or interruption in the supply
 
of clinical trial supplies
 
could delay the completion
 
of planned clinical trials,
 
increase
the costs
 
associated with
 
maintaining clinical
 
trial programs
 
and, depending
 
upon the
 
period of
 
delay,
 
require us
 
to commence
 
new
clinical trials at additional
 
expense or terminate clinical
 
trials completely.
 
Any adverse developments affecting
 
clinical or commercial
manufacturing
 
of
 
our
 
product
 
candidates
 
or
 
products
 
may
 
result
 
in
 
shipment
 
delays,
 
inventory
 
shortages,
 
lot
 
failures,
 
product
withdrawals or recalls or other interruptions in
 
the supply of our product candidates. We may also have to take inventory
 
write-offs and
incur other
 
charges and
 
expenses for
 
product candidates
 
that fail
 
to meet
 
specifications, undertake
 
costly remediation
 
efforts or
 
seek
more costly manufacturing
 
alternatives. Accordingly, failures or
 
difficulties faced at
 
any level of
 
our supply chain
 
could delay or
 
impede
the development and
 
commercialization of any
 
of our product
 
candidates and could
 
have an adverse
 
effect on
 
our business, financial
condition, results of operations and prospects.
61
We
 
and our
 
contract manufacturers and
 
suppliers could be
 
subject to
 
liabilities, fines, penalties
 
or other
 
sanctions under federal,
state,
 
local
 
and
 
foreign
 
environmental,
 
health
 
and
 
safety
 
laws
 
and
 
regulations
 
if
 
we
 
or
 
they
 
fail
 
to
 
comply
 
with
 
such
 
laws
 
or
regulations or otherwise incur costs that could have a material adverse effect on our business.
We currently rely on
 
and expect
 
to continue
 
to rely
 
on contract
 
manufacturers for
 
the manufacturing
 
and supply
 
of our
 
product candidates
and custom
 
components. We
 
and these
 
contract manufacturers
 
are subject
 
to various
 
federal, state,
 
local and
 
foreign environmental,
health
 
and
 
safety
 
laws
 
and
 
regulations,
 
including
 
those
 
governing
 
laboratory
 
procedures
 
and
 
the
 
generation,
 
handling,
 
labeling,
transportation, use, manufacture, storage,
 
treatment and disposal of
 
hazardous materials and wastes
 
and worker health and
 
safety. We
do
 
not
 
have
 
control
 
over
 
a
 
manufacturer’s
 
or
 
supplier’s
 
compliance
 
with
 
environmental,
 
health
 
and
 
safety
 
laws
 
and
 
regulations.
Liabilities they incur pursuant to these laws and regulations could result in significant costs or in certain circumstances, an interruption
in operations, any of which could adversely affect our business, financial condition, results of operations and prospects.
With respect
 
to any
 
hazardous materials or
 
waste which
 
we are
 
currently,
 
or in
 
the future
 
will be,
 
generating, handling,
 
transporting,
using, manufacturing, storing, treating or disposing of, we
 
cannot eliminate the risk of contamination or
 
injury from these materials or
waste, including
 
at third-party
 
disposal sites.
 
In the
 
event of
 
such contamination
 
or injury,
 
we could
 
be held
 
liable for
 
any resulting
damages and liability. We also could be subject to significant civil or criminal fines
 
and penalties, cessation of operations, investigation
or remedial costs
 
or other sanctions
 
for failure to
 
comply with applicable
 
environmental, health and
 
safety laws. In
 
addition, we may
incur substantial costs in order to comply with current or future environmental,
 
health and safety laws and regulations. These current or
future laws and regulations may impair our research, development or production
 
efforts or otherwise have a material adverse effect
 
on
our business.
Undetected errors or defects in our production could harm our reputation or expose us to product liability claims.
Undetected errors and defects in the cGMP materials used in the production of our product candidates could result
 
in a lower quality of
any products we produce, and could give rise to
 
reputational harm to us and to the contract manufacturers with
 
whom we work. If any
such errors
 
or defects
 
are discovered,
 
we may
 
incur significant
 
costs, the
 
attention of
 
our key
 
personnel could
 
be diverted,
 
or other
significant problems
 
may arise.
 
We
 
may also
 
be subject
 
to warranty
 
and liability
 
claims for
 
damages related
 
to errors
 
or defects
 
in
products made with our cGMP materials. In addition, if we do not meet
 
industry or quality standards, if applicable, such products may
be subject to
 
recall. A material
 
liability claim, recall
 
or other occurrence
 
that harms our
 
reputation or decreases
 
market acceptance of
such products could harm our business and operating results.
Risks Related to Our Reliance on UBI, Collaborators and Other Third Parties
Conflicts of interest and disputes
 
have and may arise
 
between us and UBI and
 
its affiliates, and these
 
conflicts and disputes might
ultimately be resolved in a manner unfavorable to us.
UBI is
 
our largest
 
stockholder,
 
the licensor
 
of certain
 
of our
 
intellectual property
 
and is
 
a commercial
 
partner for
 
the Company.
 
In
addition, Dr. Chang Yi Wang,
 
UBI’s founder, holds shares of our common stock.
 
Our co-founders (Mei Mei Hu and
 
Louis Reese), one
of their affiliates and
 
UBI (collectively, our “principal
 
stockholders”), are party
 
to a voting
 
agreement (the “Voting Agreement,”), which
provides Mei Mei Hu
 
with the authority (and
 
irrevocable proxies) to vote
 
the shares of capital
 
stock held by
 
the stockholders party to
the Voting
 
Agreement at her discretion on all matters
 
to be voted upon by stockholders.
 
Our CEO, Mei Mei Hu, and
 
two of our other
directors, Louis Reese and James Chui, also serve on and constitute a majority of the board of directors of UBI.
 
UBI’s equity interests
in the Company, and the overlapping directorships, could give rise to conflicts of interest, in particular when a decision could favor the
interests of UBI (or its affiliates)
 
or us over the other.
 
Further, we have historically depended
 
heavily on UBI and its affiliates
 
for our
business
 
operations,
 
including
 
the
 
provision
 
of
 
research,
 
development
 
and
 
manufacturing
 
services.
 
While
 
we
 
have
 
taken
 
steps
 
to
separate our
 
operations from
 
those of
 
UBI and
 
currently anticipate
 
taking additional
 
steps to
 
lessen our
 
dependence, we
 
still have
 
ongoing
commercial
 
relationships
 
with
 
UBI
 
and
 
its
 
affiliates.
 
With
 
respect
 
to
 
our
 
UB-612
 
program,
 
we
 
have
 
partnered
 
with
 
UBIA
 
for
 
the
development of UB-612 in
 
Taiwan, UBIP for the formulation-fill-finish services,
 
and UBP as the
 
sole manufacturer of protein.
 
Relating
to our
 
chronic disease pipeline,
 
we continue to
 
work with UBI
 
on certain early
 
stage research activities,
 
and UBIP and
 
UBIA for the
production and testing of clinical material for our UB-312 program.
Conflicts of
 
interest may arise
 
with respect to
 
existing or possible
 
future commercial arrangements
 
between us and
 
UBI or
 
any of
 
its
affiliates in which the terms and conditions of the arrangements are subject to
 
negotiation or dispute. For example, conflicts of interest
could arise over matters such as:
•
 
disputes over
 
the cost
 
or quality
 
of the
 
manufacturing and
 
testing services
 
provided to
 
us by
 
UBI with
 
respect to
 
our product
candidates;
•
 
the allocation of UBI’s resources as between our business objectives and UBI’s own objectives;
•
 
a
 
decision
 
whether
 
to
 
engage
 
UBI
 
or
 
its
 
affiliates
 
in
 
the
 
future
 
to
 
manufacture,
 
test
 
and
 
supply
 
of
 
additional
 
custom
components or product candidates for us;
62
•
 
decisions as to which particular product candidates we will commit sufficient development efforts to; or
•
 
business opportunities unrelated to our current products that may be attractive both to us and to the other company.
We
 
also cannot
 
guarantee conflicts
 
of interest
 
will not
 
arise in
 
connection with
 
the negotiation
 
or execution
 
of any
 
future agreement
with UBI, its affiliates or any other related party.
 
Further, we have been advised that there is currently
 
an ongoing dispute within UBI between Dr. Wang
 
and the other four members of
UBI’s board of directors relating to
 
certain corporate governance matters,
 
including the overall management
 
and control of UBI,
 
as well
as its relationship with the Company. Specifically, we have been advised that Dr. Wang attempted to replace the UBI board of
 
directors
in July and
 
August 2021
 
and is
 
currently asserting
 
that she
 
is the
 
majority shareholder
 
of UBI,
 
which we
 
understand UBI’s other
 
directors
dispute as invalid and incorrect, respectively.
 
This dispute has created risks
 
and uncertainties for us, and this
 
dispute or any resolution
of it
 
could negatively
 
impact us,
 
including, without
 
limitation, by
 
impairing our
 
ability to
 
work with
 
UBI and
 
its affiliates
 
as a
 
commercial
partner in the future and/or otherwise adversely affecting other existing arrangements with or involving
 
UBI or its affiliates. Late in the
day
 
on
 
November 9,
 
2021,
 
counsel
 
to
 
the
 
Company
 
received
 
correspondence
 
on
 
behalf
 
of
 
Dr.
 
Wang
 
(the
 
“Correspondence”).
 
The
Correspondence outlined
 
Dr.
 
Wang’s
 
concerns that
 
the preliminary
 
prospectus for
 
our initial
 
public offering,
 
subject to
 
completion,
dated November 5, 2021 did not accurately describe the relationship between the Company and UBI, namely
 
the Company’s ability to
operate independently from UBI.
 
The Correspondence also relayed
 
Dr. Wang’s
 
concerns that the preliminary
 
prospectus did not fully
describe
 
the
 
disruption
 
to
 
the
 
Company’s
 
business
 
that
 
could
 
result
 
from
 
the
 
abovementioned
 
dispute,
 
including
 
with
 
respect
 
to
intellectual property
 
agreements among
 
the Company
 
and UBI
 
and its
 
affiliates. Various
 
other claims
 
have been
 
made by
 
Dr.
 
Wang
regarding
 
UBI’s
 
corporate
 
governance,
 
the
 
operations
 
of
 
the
 
Company
 
and
 
the
 
disclosures
 
for
 
our
 
initial
 
public
 
offering,
 
and
 
the
Company cannot predict
 
the course of
 
this dispute. However,
 
the Company has
 
carefully considered Dr.
 
Wang’s
 
concerns and, based
on the disclosures included in
 
the preliminary prospectus and in
 
the final prospectus for our
 
initial public offering and
 
the Company’s
diligence efforts, the Company remains confident in the appropriateness and accuracy of its disclosures.
We
 
will
 
rely
 
on
 
contract
 
manufacturers
 
for
 
the
 
manufacture
 
of
 
raw
 
materials
 
for
 
our
 
research
 
programs,
 
pre-clinical studies and clinical trials and we do not have
 
long-term contracts with many of these parties. This reliance on
 
contract
manufacturers increases
 
the risk
 
that we
 
will not
 
have sufficient
 
quantities of
 
such materials
 
or product
 
candidates that
 
we may
develop and commercialize, or that such supply will not be available to us at an acceptable cost or on an acceptable timeline, which
could delay, prevent or impair our development or commercialization efforts.
We rely on contract manufacturers, including UBI and its affiliates, for the manufacture of raw materials for our
 
clinical trials and pre-
clinical and clinical development. We
 
do not have a long-term agreement with
 
some of the contract manufacturers we currently
 
use to
provide
 
pre-clinical
 
and
 
clinical
 
raw
 
materials.
 
Certain
 
of
 
these
 
manufacturers
 
are
 
critical
 
to
 
our
 
production,
 
and
 
the
 
loss
 
of
 
these
manufacturers to one of
 
our competitors or otherwise,
 
or an inability to
 
obtain quantities at an
 
acceptable cost or quality,
 
could delay,
prevent
 
or
 
impair
 
our
 
ability
 
to
 
timely
 
conduct
 
pre-clinical
 
studies
 
or
 
clinical
 
trials,
 
and
 
would
 
materially
 
adversely
 
affect
 
our
development and commercialization efforts.
We expect to continue to
 
rely on contract
 
manufacturers for the
 
commercial supply of
 
any of our
 
product candidates for
 
which we obtain
marketing approval, if any. We may be unable to maintain or
 
establish long-term agreements with contract
 
manufacturers or to do so
 
on
acceptable terms. Even
 
if we are
 
able to establish
 
agreements with contract
 
manufacturers, reliance on
 
contract manufacturers entails
additional risks, including:
•
 
the failure
 
of the
 
contract manufacturer
 
to manufacture
 
our product
 
candidates according
 
to our
 
schedule, or
 
at all,
 
including
if our contract manufacturers
 
give greater priority to the
 
supply of other products
 
over our product candidates
 
or otherwise
do not satisfactorily perform according to the terms of the agreements between us and them;
•
 
the reduction or termination of production or deliveries by suppliers, or the raising of prices or renegotiation of terms;
•
 
the termination
 
or nonrenewal
 
of arrangements
 
or agreements
 
by our
 
contract manufacturers
 
at a
 
time that
 
is costly
 
or
inconvenient for us;
•
 
the breach by the contract manufacturers of our agreements with them;
•
 
the failure of contract manufacturers to comply with applicable regulatory requirements;
•
 
the failure of the contract manufacturer to manufacture our product candidates according to our specifications;
•
 
the
 
mislabeling
 
of
 
clinical
 
supplies,
 
potentially
 
resulting
 
in
 
the
 
wrong
 
dose
 
amounts
 
being
 
supplied
 
or
 
active
 
drug
 
or
placebo not being properly identified;
63
•
 
clinical supplies not being delivered to clinical sites on time, leading to clinical trial interruptions, or of drug
 
supplies not
being distributed to commercial vendors in a timely manner, resulting in lost sales; and
•
 
the misappropriation or
 
unauthorized disclosure of
 
our intellectual property
 
or other proprietary
 
information, including our
trade secrets and know-how.
We
 
do not have
 
complete control over
 
all aspects of
 
the manufacturing process
 
of, and are
 
dependent on, our
 
contract manufacturing
partners
 
for
 
compliance
 
with
 
cGMP
 
regulations
 
for
 
manufacturing
 
both
 
custom
 
components
 
and
 
finished
 
products.
 
Contract
manufacturers may not be able to comply
 
with cGMP regulations or similar regulatory requirements
 
outside of the United States. If our
contract
 
manufacturers
 
cannot
 
successfully
 
manufacture
 
material
 
that
 
conforms
 
to
 
our
 
specifications
 
and
 
the
 
strict
 
regulatory
requirements of applicable regulatory authorities, they will not
 
be able to secure and/or maintain authorization
 
for their manufacturing
facilities. In
 
addition, we do
 
not have
 
full control over
 
the ability of
 
our contract manufacturers
 
to maintain adequate
 
quality control,
quality assurance and
 
qualified personnel.
 
Further, our manufacturing
 
partners may
 
be unable to
 
successfully increase
 
the manufacturing
capacity for any of
 
our product candidates in a
 
timely or cost-effective manner,
 
or at all, and quality
 
issues may arise during any
 
such
scale-up activities.
 
If regulatory
 
authorities do
 
not authorize
 
these facilities
 
for the
 
manufacture of
 
our product
 
candidates or
 
if they
withdraw
 
any
 
such
 
authorization
 
in
 
the
 
future,
 
we
 
may
 
need
 
to
 
find
 
alternative
 
manufacturing facilities,
 
which
 
would
 
significantly
impact our ability to develop, obtain marketing
 
approval for or market our product candidates,
 
if approved. Our failure, or the failure
 
of
our
 
contract
 
manufacturers,
 
to
 
comply
 
with
 
applicable
 
regulations
 
could
 
result
 
in
 
sanctions
 
being
 
imposed
 
on
 
us,
 
including
 
fines,
injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of
 
product candidates
or drugs, operating restrictions and criminal prosecutions, any of which could significantly and
 
adversely affect supplies of our product
candidates or drugs and harm our business and results of operations.
We
 
depend
 
on
 
strategic
 
partnerships,
 
collaborations
 
and
 
license
 
agreements
 
in
 
connection
 
with
 
the
 
research,
 
development
 
and
commercialization of our Vaxxine Platform and product candidates. If our existing or future partners, collaborators or licensees do
not perform as
 
expected, if we
 
fail to maintain
 
any of these
 
strategic partnerships, collaborations or
 
license agreements, or
 
if they
are not
 
successful, our
 
ability to
 
commercialize our
 
product candidates
 
successfully and
 
to generate
 
revenues may
 
be materially
adversely affected.
We
 
have
 
established
 
and
 
intend
 
to
 
continue
 
to
 
establish
 
strategic
 
partnerships,
 
collaborations,
 
licensing
 
agreements,
 
or
 
other
arrangements with third parties. For our research, development and commercialization activities, we have
 
depended, and will continue
to depend, on our partners to design and conduct their own clinical studies. As a result, these
 
activities may not be able to be conducted
in the manner or on the time schedule we currently contemplate, which may negatively impact our business operations. While we have
certain contractual rights to information about pre-clinical and clinical developments and results under certain of our collaboration and
license
 
agreements,
 
including
 
our
 
agreements
 
with
 
UBIA
 
and
 
Aurobindo,
 
we
 
cannot
 
be
 
certain
 
that
 
clinical
 
trials
 
conducted
 
in
connection with
 
such collaboration
 
programs will
 
be conducted
 
in a
 
manner consistent
 
with the
 
best interests
 
of our
 
business. In
 
addition,
if any
 
of our
 
partners, collaborators or
 
licensees withdraw support
 
for these programs
 
or proposed products
 
or otherwise
 
impair their
development, our business
 
could be negatively
 
affected. Also, our inability
 
to find a partner
 
for any of our
 
product candidates may
 
result
in our termination of that specific product candidate program or evaluation of a product candidate in a particular indication. Because of
contractual restraints and the limited
 
number of contract manufacturers
 
with the expertise, required
 
regulatory approvals and facilities
to manufacture
 
our product
 
candidates on
 
a commercial
 
scale, replacement
 
of
 
a contract
 
manufacturer may
 
be expensive
 
and time-
consuming and may
 
cause interruptions in
 
the production of
 
our product candidates,
 
which could delay
 
our clinical trials
 
or interrupt
our potential future
 
commercial sales. Even
 
if we find
 
or establish a
 
strategic partner,
 
collaborator or licensee
 
for one or
 
more of our
product candidates, there is no assurance
 
that upon the approval of one or
 
more of such product candidates that such
 
product candidates
will be successfully commercialized.
Furthermore, our licenses and collaboration
 
agreements impose, and any
 
future agreement we enter
 
into may also impose, restrictions
on our ability to license certain of our intellectual property to third parties or to develop or commercialize certain product candidates or
technologies ourselves.
In the future, we may enter into additional collaborations or license agreements to fund our development programs
 
or to gain access to
sales, marketing
 
or distribution
 
capabilities of
 
other parties.
 
While certain
 
of our
 
existing collaboration
 
and license
 
agreements, including
our agreements with Aurobindo, impose development or commercialization obligations on our collaborators or
 
licensees, we cannot be
certain that our
 
collaboration partners will
 
allocate sufficient resources
 
or attention to
 
our collaboration programs,
 
that they will
 
progress
our collaboration
 
programs consistent
 
with the
 
best interests
 
of our
 
business or
 
that they
 
will otherwise
 
meet their
 
obligations under
these agreements in
 
a timely manner
 
or at all.
 
Our existing collaborations
 
and licenses, and
 
any future collaborations
 
and licenses we
enter into, therefore may pose a number of risks, including the following:
•
 
collaborators or licensees may have
 
significant discretion in determining the
 
efforts and resources that
 
they will apply to
developing
 
or
 
commercializing
 
our
 
product
 
candidates,
 
and
 
they
 
may
 
not
 
sufficiently
 
fund
 
the
 
development
 
or
commercialization of a product candidate;
64
•
 
collaborators and licensees may not perform their obligations as expected by us or by health authorities,
 
such as the FDA,
the TFDA or comparable foreign regulatory authorities;
•
 
collaborators and licensees may dissolve, merge, be bought or may otherwise become unwilling to fulfill the initial terms
of the collaboration with us, or we may be unwilling to continue our arrangement following such an occurrence;
•
 
collaborators and licensees
 
may fail to
 
perform their obligations
 
under their agreements
 
or may be
 
slow in performing
 
their
obligations;
•
 
collaborations and licensees may be terminated for
 
the convenience of the collaborator or
 
licensee and, if terminated, we
could be required to raise additional capital to pursue further development or commercialization of the applicable product
candidates;
•
 
collaborators and licensees may not pursue commercialization of any product candidates that achieve regulatory approval
or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes
in the collaborators’
 
or licensees’ strategic
 
focus or available
 
funding, or external
 
factors, such as
 
an acquisition, that
 
divert
resources or create competing priorities, or due to the actual or perceived competitive situation in a specific indication;
•
 
collaborators and licensees may delay clinical trials, stop a
 
clinical trial or abandon a product candidate, repeat or conduct
additional clinical trials or may require a new formulation of a product candidate for clinical testing;
•
 
collaborators and licensees could
 
independently develop, or develop with
 
third parties, products that
 
compete directly or
indirectly with our products or product candidates if the collaborators believe that competitive
 
products are more likely to
be successfully developed or can be commercialized under terms that are more economically attractive than ours;
•
 
product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own
product candidates or
 
products, which may
 
cause collaborators to
 
cease to devote
 
resources to the
 
commercialization of
our product candidates;
•
 
disagreements with collaborators or licensees, including disagreements over
 
proprietary rights, contract interpretation and
breach of contract claims, payment obligations or the preferred course of development, might cause delays or termination
of
 
the
 
research,
 
development
 
or
 
commercialization
 
of
 
products
 
or
 
product
 
candidates,
 
might
 
lead
 
to
 
additional
responsibilities,
 
including
 
financial
 
obligations
 
for
 
us
 
with
 
respect
 
to
 
products
 
or
 
product
 
candidates,
 
or
 
delays
 
or
withholding of payments due to us or might result in litigation
 
or arbitration, any of which would be time-
 
consuming and
expensive, and could limit
 
our ability to execute
 
on our strategies and
 
delay or prevent our
 
ability to devote resources
 
to
other product candidates;
•
 
collaborators or licensees
 
may not properly
 
obtain, maintain, enforce
 
or defend our
 
intellectual property or
 
may use our
proprietary
 
information
 
in
 
such
 
a
 
way
 
that
 
could
 
jeopardize
 
or
 
invalidate
 
our
 
intellectual
 
property
 
or
 
proprietary
information or expose us to potential litigation; and
•
 
collaborators may infringe,
 
misappropriate or otherwise
 
violate the intellectual
 
property of third
 
parties, which may
 
expose
us to litigation and potential liability.
If our collaborations and licenses related to the research, development and commercialization of product candidates do not result in the
successful
 
development
 
and
 
commercialization
 
of
 
our
 
product
 
candidates,
 
or
 
if
 
one
 
of
 
our
 
collaborators
 
or
 
licensees
 
terminates
 
its
agreement with us, we may not
 
receive any future research funding or
 
milestone or royalty payments under the
 
collaboration or license,
and we may be unable to continue the development and commercialization of the product candidate. Further, even if our collaborations
and licenses do result in successful development and commercialization of products, if
 
one of our collaborators breaches its obligations
under its
 
agreement with us
 
or enters bankruptcy
 
or insolvency,
 
there may be
 
a material delay
 
in our receipt
 
of payments under
 
such
agreements, or we
 
may never
 
receive such
 
payments. If
 
we do
 
not receive
 
the payments
 
we expect
 
under these
 
agreements, our own
development and commercialization
 
activities could be
 
delayed or prevented
 
altogether, and we may
 
need to secure
 
additional resources
to develop our proprietary product candidates. Moreover, maintaining our relationships with our collaborators and
 
licensees may divert
significant time and effort of
 
our scientific staff and management team,
 
which may harm our ability
 
to effectively allocate our resources
to multiple
 
internal and
 
other projects.
 
All of
 
the risks
 
relating to
 
product development,
 
regulatory approval
 
and commercialization
described in this report also apply to the activities of our collaborators and licensees.
Additionally, subject
 
to its contractual obligations to us,
 
if one of our collaborators or
 
licensors is involved in a
 
business combination,
merger,
 
acquisition
 
or
 
other
 
similar
 
transaction,
 
the
 
collaborator
 
or
 
licensor
 
might
 
deprioritize
 
or
 
terminate
 
the
 
development
 
or
commercialization of any product
 
candidate licensed to it
 
by us. If one
 
of our collaborators or
 
licensors terminates its agreement
 
with
us, we
 
may be
 
unable to
 
attract new
 
collaborators in
 
a timely
 
manner or
 
at all,
 
which may
 
delay or
 
prevent our
 
ability to
 
develop or
commercialize one or more of our product candidates.
65
We rely on third parties to conduct our pre-clinical
 
studies and clinical trials and
 
perform other tasks for us.
 
If these third parties do
not successfully carry
 
out their contractual
 
duties, meet expected
 
deadlines, or comply
 
with legal and
 
regulatory requirements, we
may not be able to obtain regulatory approval for or commercialize our
 
product candidates and our business could be substantially
harmed.
We have relied upon and plan to continue to
 
rely upon CROs to execute
 
certain of our pre-clinical and
 
clinical trials, and to monitor
 
and
manage data for our ongoing pre-clinical and clinical programs and to provide us with significant data and other information related to
our projects, pre-clinical studies and clinical
 
trials. If such third parties provide
 
inaccurate, misleading or incomplete data,
 
our business,
financial condition and results of operations and
 
prospects could be materially adversely affected. We have control over limited aspects
of our CROs’ activities; nevertheless,
 
we are responsible for,
 
and our reliance on
 
CROs does not relieve us
 
of our responsibilities for,
ensuring that each
 
of our trials
 
is conducted in
 
accordance with the
 
applicable protocol, legal,
 
regulatory, scientific and ethical
 
standards.
We
 
and our
 
CROs and
 
other vendors
 
are required
 
to comply
 
with cGMP,
 
GCP,
 
Good Laboratory
 
Practice (“GLP”)
 
and other
 
laws,
regulations and guidelines
 
enforced by applicable
 
regulatory authorities for
 
all of our
 
product candidates during
 
both pre-clinical and
clinical
 
development.
 
Regulatory
 
authorities
 
enforce
 
these
 
regulations
 
through
 
periodic
 
inspections
 
of
 
study
 
sponsors,
 
principal
investigators, trial sites and other contractors. If we or any of our CROs
 
or vendors fail to comply with applicable regulations, the data
generated in our
 
pre-clinical and clinical
 
trials may be
 
deemed unreliable and
 
regulatory authorities may
 
require us to
 
perform additional
pre-clinical
 
and
 
clinical
 
trials
 
before
 
approving
 
our
 
marketing
 
applications.
 
We
 
cannot
 
assure
 
you
 
that
 
upon
 
inspection
 
by
 
a
 
given
regulatory
 
authority,
 
such
 
regulatory
 
authority
 
will
 
determine
 
that
 
all
 
of
 
our
 
clinical
 
trials
 
comply
 
with
 
cGCP
 
regulations
 
or
 
other
applicable laws
 
and regulations.
 
Our failure
 
to comply with
 
applicable laws
 
and regulations may
 
require us
 
to repeat clinical
 
trials, which
would delay the regulatory approval process and require significant additional expenditures, which we may be unable to meet.
If any of our relationships with
 
these CROs terminates, we may not
 
be able to enter into arrangements
 
with alternative CROs or do so
on commercially reasonable terms or in a timely manner. We
 
would also incur additional costs and delays while engaging a new CRO,
which we
 
may not
 
be able
 
to engage
 
on commercially
 
reasonable terms
 
or at
 
all. In
 
addition, our
 
CROs are
 
not our
 
employees, and
except for remedies available to us
 
under our agreements with such CROs,
 
we cannot control whether or not
 
they devote sufficient time
and
 
resources
 
to
 
our
 
ongoing
 
pre-clinical
 
and
 
clinical
 
programs.
 
If
 
CROs
 
do
 
not
 
successfully
 
carry
 
out
 
their
 
contractual
 
duties
 
or
obligations, meet
 
expected deadlines,
 
conduct our
 
studies in
 
accordance with
 
regulatory requirements
 
or our
 
stated study
 
plans
 
and
protocols, if they need to be replaced or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to
our protocols, regulatory requirements, or for other reasons, our clinical trials may be extended, delayed or terminated and we may not
be able to
 
obtain regulatory approval
 
for or successfully
 
commercialize our product
 
candidates in a
 
timely manner or
 
at all. For
 
example,
due to
 
an error
 
by the
 
CRO responsible
 
for administering
 
blinded placebo
 
and active
 
doses to
 
trial subjects,
 
which reduced
 
the confidence
of subsequently collected data, we
 
decided to discontinue a Phase
 
2a LTE
 
trial for UB-311.
 
In that case, however,
 
we determined that
we had collected
 
sufficient data on
 
UB-311’s tolerability and immunogenicity. CROs
 
or any of
 
our other collaborators
 
may also
 
generate
higher costs than
 
anticipated. As a
 
result, our results
 
of operations and
 
the commercial prospects
 
for our product
 
candidates could be
harmed, our costs could increase and our ability to generate revenue could be delayed.
Though we carefully
 
manage our relationships
 
with our CROs,
 
there can be
 
no assurance that
 
we will not
 
encounter challenges or
 
delays
in the future
 
or that these
 
delays or challenges
 
will not have
 
a material adverse
 
impact on our
 
business, financial condition,
 
results of
operations and prospects.
We
 
do not have multiple
 
sources of commercial supply
 
for some of the
 
components used in our
 
product candidates, nor long-term
supply contracts with our existing suppliers, and
 
certain of our suppliers are critical to
 
our production. If we were to lose
 
a critical
supplier or if an approved supplier
 
experiences delays due to raw
 
material constraints, it could have
 
a material adverse effect on our
ability to complete the
 
development of our product
 
candidates. If we obtain regulatory
 
approval for any of
 
our product candidates,
we cannot guarantee that our suppliers will be able to meet our increased demands for supply.
We do not have multiple sources
 
of commercial supply
 
for each of the
 
components used in the
 
manufacturing of our
 
product candidates,
nor do we have long-term supply
 
agreements with all of our
 
component suppliers. Manufacturing suppliers
 
are subject to cGMP quality
and regulatory requirements, covering manufacturing, testing,
 
quality control and record keeping relating to
 
our product candidates and
are
 
subject
 
to
 
ongoing
 
inspections
 
by
 
applicable
 
regulatory
 
authorities.
 
Manufacturing
 
suppliers
 
are
 
also
 
subject
 
to
 
licensing
requirements as well as local, state and
 
federal regulations and regulations in foreign jurisdictions
 
in which they operate. Failure by any
of our suppliers to comply with all applicable regulations and requirements may result in long delays and interruptions
 
in supply.
The number of suppliers of the raw material components
 
of our product candidates is limited. In the event it is
 
necessary or desirable to
acquire supplies from
 
alternative suppliers, we
 
might not be
 
able to obtain
 
such supply on
 
commercially reasonable terms,
 
if at all.
 
It
could also require significant time and expense
 
to redesign our manufacturing processes to work
 
with another company and redesign of
processes can trigger the need
 
for conducting additional studies such as
 
comparability or bridging studies. Additionally,
 
certain of our
suppliers are critical to
 
our production, and the
 
loss of these suppliers
 
to one of our
 
competitors or otherwise would
 
materially adversely
affect our development
 
and commercialization efforts. Further,
 
if such critical suppliers
 
experience delays in their
 
ability to supply of
components due
 
to limited availability
 
of raw materials
 
or other difficulties
 
which may be
 
beyond our
 
or their control,
 
our manufacturing
efforts may be materially adversely affected.
66
As part of any marketing approval, regulatory authorities conduct inspections that must be successful prior to the approval
 
of a product
candidate. Failure of manufacturing suppliers to successfully complete these regulatory inspections will result in
 
delays. If supply from
the approved supplier is interrupted, an alternative vendor would need to be qualified through an NDA amendment or supplement, and
this
 
could result
 
in
 
significant disruption
 
in commercial
 
supply.
 
Regulatory authorities
 
may
 
also require
 
additional studies
 
if
 
a new
supplier is relied upon for commercial production. Switching vendors may
 
involve substantial costs and is likely to result
 
in a delay in
our desired clinical and commercial timelines.
If we are unable to obtain the supplies we need at a reasonable price or on a timely basis, it could have a material adverse effect on our
ability
 
to
 
complete
 
the
 
development
 
of
 
our
 
product
 
candidates
 
or,
 
if
 
we
 
obtain
 
regulatory
 
approval
 
for
 
our
 
product
 
candidates,
 
to
commercialize them.
Risks Related to Our Intellectual Property Rights
We depend on intellectual
 
property licensed
 
from UBI
 
and its
 
affiliates, the termination
 
of which
 
could result
 
in the
 
loss of
 
significant
rights, which would harm our business.
We
 
are dependent on
 
technology,
 
patents, know-how and
 
proprietary information, both
 
our own and
 
those licensed from
 
UBI and its
affiliates. We
 
entered into the Platform License Agreement in August 2021 pursuant
 
to which we obtained a worldwide, sublicensable
(subject to
 
certain conditions),
 
perpetual, fully
 
paid-up, royalty-free
 
(i) exclusive
 
license (even
 
as to
 
the Licensors)
 
under all
 
patents
owned or otherwise controlled
 
by the Licensors or
 
their affiliates existing
 
as of the effective
 
date of the Platform
 
License Agreement,
(ii) exclusive
 
license (except
 
as to
 
the Licensors)
 
under all
 
patents owned
 
or otherwise
 
controlled by
 
the Licensors
 
or their
 
affiliates
arising after the effective date
 
during the term of the Platform
 
License Agreement, and (iii) non-exclusive license under
 
all know-how
owned
 
or
 
otherwise controlled
 
by
 
the
 
Licensors or
 
their
 
affiliates
 
existing
 
as
 
of
 
the
 
effective
 
date
 
or arising
 
during the
 
term
 
of
 
the
Platform License
 
Agreement, in
 
each of
 
the foregoing
 
cases, to
 
research, develop,
 
make, have
 
made, utilize,
 
import, export,
 
market,
distribute, offer for
 
sale, sell,
 
have sold, commercialize
 
or otherwise
 
exploit peptide-based
 
vaccines in the
 
field of all
 
human prophylactic
and therapeutic uses, except for such vaccines related to human immunodeficiency virus, herpes simplex virus and Immunoglobulin E.
The patents licensed to us under the Platform License Agreement include patents directed to a CpG delivery system,
 
artificial T helper
cell epitopes
 
and certain
 
designer peptides
 
and proteins,
 
each of
 
which is
 
utilized in
 
UB-612. Any
 
termination of
 
these licenses
 
will
result in the loss of significant rights and will restrict our ability to develop and commercialize our product candidates.
Our
 
reliance
 
on
 
in-licensed
 
intellectual
 
property
 
and
 
technology
 
results
 
in
 
a
 
number
 
of
 
risks
 
to
 
the
 
development
 
and
commercialization of our
 
product candidates, including
 
the loss of
 
such rights,
 
our licensors’ inability
 
or refusal to
 
enforce or defend
such rights, and the requirement to pay royalties, milestones, and other amounts.
Agreements under which we
 
license intellectual property or
 
technology to or from
 
UBI, its affiliates
 
and from other third
 
parties may
be complex,
 
and certain
 
provisions in
 
such agreements
 
may be
 
susceptible to
 
multiple interpretations. The
 
resolution of
 
any contract
interpretation disagreement that
 
may arise could
 
narrow what we
 
believe to be
 
the scope of
 
our rights to
 
the relevant intellectual
 
property
or technology or increase what
 
we believe to be our
 
financial or other obligations under
 
the relevant agreement, either of
 
which could
have
 
a
 
material
 
adverse
 
effect
 
on
 
our
 
business,
 
financial
 
condition,
 
results
 
of
 
operations
 
and
 
prospects.
 
Moreover,
 
if
 
disputes
 
over
intellectual property that we
 
have licensed prevent or
 
impair our ability to
 
maintain our current licensing
 
arrangements on commercially
acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates. Our business
 
may also
suffer if any
 
current or future licensors
 
fail to abide by
 
the terms of the
 
license, if the licensors
 
fail to enforce licensed
 
patents against
infringing third parties, if the licensed patents or
 
other rights are found to be
 
invalid or unenforceable, or if we are
 
unable to enter into
necessary licenses on acceptable terms or at
 
all. In the event of a
 
bankruptcy by one of our licensors, our
 
intellectual property licenses
could
 
also
 
be
 
affected.
 
For
 
example,
 
while
 
the
 
U.S.
 
Bankruptcy
 
Code
 
allows
 
a
 
licensee
 
to
 
retain
 
its
 
rights
 
under
 
its
 
license
notwithstanding the
 
bankrupt licensor’s
 
rejection of
 
such license,
 
such protections
 
may not
 
be available
 
to us
 
in the
 
event a
 
licensor
declares bankruptcy in a
 
foreign jurisdiction. Our licensors may
 
also own or control
 
intellectual property that has not
 
been licensed to
us and,
 
as a
 
result, we
 
may be
 
subject to
 
claims, regardless of
 
their merit, that
 
we are
 
infringing or otherwise
 
violating the
 
licensors’
rights.
Furthermore, while we cannot currently determine the amount of the royalty obligations we would be required to pay on
 
sales of future
products,
 
if
 
any,
 
the
 
amounts may
 
be
 
significant.
 
The
 
amount
 
of
 
our
 
future
 
royalty
 
obligations
 
will
 
depend
 
on
 
the
 
technology
 
and
intellectual property
 
we use
 
in products
 
that we
 
successfully develop
 
and commercialize,
 
if any.
 
Therefore, even
 
if we
 
successfully
develop and commercialize products, we may be unable to achieve or maintain profitability.
We believe
 
the growth of our business may depend in part on our ability to acquire or
 
in-license additional intellectual property rights,
including to advance our research or
 
allow commercialization of our product candidates. If
 
we are unable to obtain additional
 
licenses
we need to
 
develop and commercialize
 
our product candidates,
 
or if we
 
obtain such licenses
 
and they are
 
terminated, we may
 
be required
to expend considerable time and resources in an attempt to develop
 
or license replacement technology. We
 
may also need to cease use
of the compositions or methods covered by such third-party intellectual property rights, and our ability
 
to license or develop alternative
67
approaches that do not infringe
 
on such intellectual property
 
rights may entail significant additional
 
costs and development delays, even
if we were able to develop or license such alternatives, which may not be feasible.
The
 
licensing
 
and
 
acquisition
 
of
 
third-party
 
intellectual
 
property
 
rights
 
is
 
a
 
competitive
 
practice,
 
and
 
companies
 
that
 
may
 
be
 
more
established, or have greater resources than we do, may also be pursuing strategies to license or acquire third-party intellectual property
rights that we may consider necessary or attractive in order to commercialize our product candidates. More established companies may
have a competitive advantage over us due to their larger size and cash resources or greater clinical development and commercialization
capabilities. There can be no assurance that we will
 
be able to successfully complete such negotiations and
 
ultimately acquire the rights
to the intellectual property
 
surrounding the additional product
 
candidates that we may
 
seek to acquire. Even
 
if we are able
 
to obtain a
license under such intellectual property rights, any such license may be non-exclusive, which may allow our competitors’ access to the
same technologies licensed to us.
Licensing of intellectual property
 
is of critical importance
 
to our business and
 
involves complex legal, business
 
and scientific issues and
is complicated by the rapid pace of scientific discovery in our industry. Disputes may also arise between us and our licensors regarding
intellectual property subject to a license agreement, including those relating to:
•
 
the scope of rights granted under the license agreement and other interpretation-related issues;
•
 
whether and the extent
 
to which our technology
 
and processes infringe on intellectual
 
property of the licensor
 
that is not
subject to the license agreement;
•
 
our right to sublicense patent and other rights to third parties under collaborative development relationships;
•
 
our compliance with reporting, financial or other obligations under the license agreement;
•
 
the amount and timing of payments owed under license agreements; and
•
 
the allocation of ownership of inventions and know-how resulting from the creation or use of intellectual property by our
licensors and by us and our partners.
We
 
may
 
also
 
not
 
be
 
able
 
to
 
fully
 
protect
 
our
 
licensed
 
intellectual
 
property
 
rights
 
or
 
maintain
 
our
 
licenses
 
under
 
our
 
licensing
arrangements. Our existing
 
and future licensors
 
could retain the
 
right to prosecute,
 
maintain, defend and
 
enforce the intellectual
 
property
rights licensed to us, in which case we
 
would depend on the ability and will of
 
our licensors to do so. Our licensors may
 
take different
approaches to
 
prosecuting patents
 
than we
 
would, and
 
it is
 
possible our
 
inability to
 
control such
 
activities could
 
harm our
 
business.
Furthermore, our
 
licensors may
 
determine not
 
to pursue
 
litigation against
 
other companies
 
or may
 
pursue such
 
litigation less
 
aggressively
than we would. We
 
may also rely upon
 
obtaining the consent of
 
our licensors to settle
 
legal claims. If our
 
licensors do not adequately
protect or enforce such licensed intellectual property, competitors may be able to use such intellectual
 
property and erode or negate any
competitive advantage we may have, which could materially harm our business, negatively affect our position in the marketplace, limit
our ability
 
to commercialize our products and product candidates and delay or render impossible our achievement of profitability.
If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements
on acceptable
 
terms or
 
at all,
 
we may
 
be unable
 
to successfully
 
develop and
 
commercialize the
 
affected product
 
candidates. We
 
are
generally also subject to all of the same risks with respect to protection of intellectual property that
 
we license as we are for intellectual
property that we own, which are described below.
 
If we or our licensors fail to adequately protect
 
this intellectual property, our
 
ability
to develop or commercialize our products could suffer.
Furthermore, our existing license agreements may impose,
 
and we expect that future license agreements
 
will impose, various diligence,
milestone payment, royalty and
 
other obligations on us
 
and if our licensors,
 
licensees or collaborators conclude
 
that we have failed
 
to
comply with our
 
obligations under these
 
agreements, including due
 
to the impact
 
of the COVID-19
 
pandemic on our
 
business operations
or our use of the intellectual property licensed to us in a manner the licensor believe is unauthorized, or we are subject to a bankruptcy,
we may be required to pay damages and
 
the licensor may have the right to
 
terminate the license. Any of the foregoing
 
could result in us
being unable to
 
develop, manufacture and
 
sell products that
 
are covered by
 
the licensed technology
 
or enable a
 
competitor to gain
 
access
to the
 
licensed technology.
 
We
 
might not
 
have the
 
necessary rights
 
or the
 
financial resources
 
to develop,
 
manufacture or
 
market our
current or future product candidates
 
without the rights granted under
 
our licenses, and the loss of
 
sales or potential sales in such
 
product
candidates could have a material adverse effect on our business, financial condition, results of operations and prospects.
Moreover,
 
our rights
 
to our
 
in-licensed patents
 
and patent
 
applications may
 
depend, in
 
part, on
 
inter- institutional
 
or other
 
operating
agreements between the joint owners
 
of such in-licensed patents and
 
patent applications or the owners
 
of such in-licensed patents and
patent applications and their
 
affiliates. We may not be aware
 
of each party’s rights and
 
obligations under such inter-institutional
 
or other
operating agreements and, as such, the ownership of our in-licensed patents and
 
patent applications may be uncertain. If one or more of
these
 
owners
 
breaches
 
such
 
inter-institutional
 
or
 
other
 
operating
 
agreements,
 
our
 
rights
 
to
 
such
 
in-licensed
 
patents
 
and
 
patent
applications may be adversely affected. In addition, the development of certain of our product candidates may be funded by grants that
68
impose certain
 
pricing limitations
 
on such
 
product candidates
 
and limit
 
our ability
 
to commercialize
 
such product
 
candidates and
 
to
achieve
 
or
 
maintain
 
profitability.
 
Any
 
of
 
the
 
foregoing
 
could
 
have
 
a
 
material
 
adverse
 
effect
 
on
 
our
 
competitive
 
position,
 
business,
financial conditions, results of operations and prospects.
We
 
may
 
be
 
required
 
to
 
license
 
or
 
obtain
 
rights
 
to
 
use
 
third
 
party
 
intellectual
 
property
 
or
 
technology
 
in
 
connection
 
with
 
the
development and commercialization of our product candidates.
We
 
may not
 
be aware
 
of all
 
technologies developed
 
or under
 
development by
 
third parties,
 
and other
 
pharmaceutical companies
 
or
academic institutions may also have filed or may be planning
 
to file patent applications potentially relevant to our business and
 
product
candidates. The technologies
 
used in
 
connection with the
 
formulations of our
 
product candidates may
 
also be
 
covered by
 
intellectual
property rights held by
 
others. From time to time,
 
in order to avoid
 
infringing these third-party patents, we
 
may be required to license
technology from additional third parties to further
 
develop, manufacture, use, sell or commercialize our product
 
candidates, or that we
otherwise deem necessary
 
for our
 
business operations. We
 
may fail
 
to obtain
 
any such
 
licenses at
 
a reasonable
 
cost or
 
on reasonable
terms, if
 
at all,
 
and as
 
a result
 
we may
 
be unable
 
to develop
 
or commercialize
 
the affected
 
product candidates,
 
and we
 
may have
 
to
abandon development of the relevant research programs or product candidates, which would harm our business.
If we are unable to obtain and
 
maintain intellectual property protection for
 
our products or product candidates, or
 
if the duration or
scope of
 
our intellectual
 
property protection
 
is not
 
sufficiently broad,
 
our ability
 
to commercialize
 
our product
 
candidates successfully
and to compete effectively may be materially adversely affected.
Our success depends
 
on our ability to
 
obtain and maintain
 
patent and other
 
intellectual property protection
 
in the United
 
States and other
countries with
 
respect to
 
our current
 
and future
 
proprietary product
 
candidates. We
 
rely upon
 
a combination
 
of patents,
 
trade secret
protection
 
and
 
confidentiality
 
agreements
 
to
 
protect
 
the
 
intellectual
 
property
 
related
 
to
 
our
 
technology,
 
manufacturing
 
processes,
products and
 
product candidates.
 
We,
 
UBI and
 
our other
 
collaborators and
 
licensors have
 
primarily sought
 
to protect
 
our proprietary
positions by filing
 
patent applications in
 
the United States
 
and abroad related
 
to our proprietary
 
technology, manufacturing
 
processes
and product candidates
 
that are important
 
to our business.
 
Despite our or
 
our third party
 
collaborators’ or licensors’
 
efforts to
 
protect
these proprietary rights, unauthorized parties
 
may be able to obtain
 
and use information that we
 
regard as proprietary. Third parties may
also seek to invalidate our patents or those of our licensors. If
 
we are unable to obtain rights to required third-party intellectual
 
property
rights or
 
maintain the
 
existing intellectual
 
property rights
 
we have,
 
we may
 
be required
 
to expend
 
significant time
 
and resources
 
to
redesign our technology,
 
product candidates or
 
the methods for manufacturing
 
them or to
 
develop or license
 
replacement technology,
all of which may not
 
be feasible on a technical
 
or commercial basis. We could also lose expected
 
revenues under license agreements we
maintain
 
with
 
third
 
parties.
 
If
 
we
 
are
 
unable
 
to
 
obtain
 
or
 
maintain
 
our
 
intellectual
 
property,
 
we
 
may
 
be
 
unable
 
to
 
develop
 
or
commercialize the affected technology and
 
product candidates or could
 
lose revenue, either of
 
which could harm our business,
 
financial
condition, results of operations and prospects significantly.
The patent prosecution
 
process is expensive
 
and time-consuming, and
 
we may not
 
be able to
 
file and prosecute
 
all necessary or
 
desirable
patent applications at
 
a reasonable cost
 
or in a
 
timely manner or
 
in all jurisdictions
 
where protection may
 
be commercially advantageous.
It is also possible
 
that we may fail
 
to identify patentable aspects
 
of our research and
 
development output before it
 
is too late to
 
obtain
patent protection.
 
In addition, we, UBI or our
 
other collaborators and licensors, may
 
only pursue, obtain or maintain patent
 
protection in a limited number
of countries. Because patent applications in
 
the United States, Europe and many
 
other foreign jurisdictions are typically not
 
published
until 18 months after filing, or in some cases not at all, and because publications of discoveries in scientific literature lag behind actual
discoveries, we cannot be certain that we or our
 
licensors were the first to make the inventions claimed in
 
any of our owned or any in-
licensed issued patents or
 
pending patent applications, or
 
that we or our
 
licensors were the first
 
to file for protection
 
of the inventions
set forth in our
 
patents or patent applications.
 
As a result, we
 
may not be able
 
to obtain or maintain
 
protection for certain inventions,
 
and
there
 
can
 
be
 
no
 
assurance
 
that
 
the
 
patents
 
we
 
file,
 
or
 
those
 
that
 
are
 
issued,
 
will
 
not
 
be
 
vulnerable
 
to
 
claims
 
of
 
invalidity
 
or
unenforceability.
Even if
 
patents do
 
successfully issue,
 
our owned
 
or in-licensed
 
patents may
 
not adequately
 
protect our
 
intellectual property,
 
provide
exclusivity for
 
our products
 
or product
 
candidates, prevent
 
others from
 
designing around
 
our claims
 
or otherwise
 
provide us
 
with a
competitive advantage. Competitors may use our technologies in
 
jurisdictions where we have not obtained or are unable
 
to adequately
enforce patent protection to develop
 
their own products and, further,
 
may export otherwise infringing products
 
to territories where we
have patent protection, but enforcement is not as strong as that in the United States
 
and Europe. These products may compete with our
products, and our patents
 
or other intellectual property
 
rights may not be
 
effective or sufficient to prevent
 
them from competing with
 
us.
We also cannot offer any
 
assurances about which,
 
if any, patents will
 
issue, the breadth
 
of any such
 
patents or whether
 
any issued patents
will
 
be
 
found
 
invalid
 
or
 
unenforceable
 
or
 
will
 
be
 
threatened
 
by
 
third
 
parties.
 
In
 
addition,
 
third
 
parties
 
may
 
challenge
 
the
 
validity,
enforceability, ownership, inventorship or scope of any of
 
our patents. Any successful challenge
 
to any of our patents or
 
our in-licensed
patents could
 
deprive us
 
of rights
 
necessary for
 
the successful
 
commercialization of
 
any product
 
candidate that
 
we may
 
develop and
could impair or eliminate our ability to collect future revenues and royalties with respect to such products or product candidates. If any
of our
 
patent applications
 
with respect
 
to our
 
product candidates
 
fail to
 
issue as
 
patents, if
 
their breadth
 
or strength
 
of protection
 
is
69
narrowed or
 
threatened, or
 
if they
 
fail to
 
provide meaningful
 
exclusivity or
 
competitive position,
 
it could
 
dissuade companies
 
from
collaborating with us or otherwise adversely affect our competitive position.
In addition,
 
patents have
 
a limited
 
lifespan. In
 
the United States,
 
for example,
 
the natural expiration
 
of a
 
patent is
 
generally 20
 
years
after its effective filing date. Various
 
extensions may be available, however,
 
the life of a patent and the
 
protection it affords is limited.
Given the amount of time required for the development, testing, regulatory review and approval of new
 
product candidates, our patents
protecting such candidates might expire before
 
or shortly after such candidates are commercialized.
 
If we encounter delays in obtaining
regulatory approvals, the period
 
of time during which
 
we could market a
 
product under patent protection
 
could be further reduced.
 
Even
if patents covering our
 
product candidates are obtained, once
 
such patents expire, or
 
if such patents are waived
 
or suspended, we may
be vulnerable to competition from similar
 
or biosimilar products. For example, in
 
2021, the Biden administration indicated its
 
support
for a proposal at the World Trade Organization to waive patent rights with respect to COVID-19 vaccines. The current proposal is for a
temporary waiver of intellectual property rights that cover COVID-19 vaccines, however,
 
the ultimate timing and scope of the waiver,
if approved, is unknown. The scope and
 
timing of such waiver will likely be
 
subject to extensive negotiations given the complexity of
the
 
matter,
 
which
 
may result
 
in prolonged
 
uncertainty and
 
therefore could
 
adversely affect
 
our business.
 
Any expiration,
 
waiver
 
or
suspension of our patent or other intellectual property protection by the U.S. or other foreign governments could lead to the launch
 
of a
similar or biosimilar version of one of our
 
products and would likely result in an immediate
 
and substantial reduction in the demand for
our product, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
We may not be able to protect or
 
enforce our intellectual property
 
rights in all jurisdictions,
 
and we cannot guarantee that
 
the patent
rights we have will prevent others from competing with us.
The
 
patent
 
position
 
of
 
pharmaceutical
 
companies
 
is
 
generally
 
uncertain
 
because
 
it
 
involves
 
complex
 
legal,
 
scientific
 
and
 
factual
considerations for
 
which legal
 
principles remain
 
unsolved. The
 
standards applied
 
by the
 
United States
 
Patent and
 
Trademark Office
(“USPTO”) and foreign
 
patent offices in
 
granting patents are
 
not always applied
 
uniformly or predictably, and
 
can change. Additionally,
the laws
 
of some
 
foreign countries do
 
not protect intellectual
 
property rights
 
to the
 
same extent
 
as the
 
laws of
 
the United States,
 
and
many companies have encountered significant challenges in protecting and defending such rights in foreign jurisdictions. We may face
similar challenges.
 
The legal
 
systems of
 
certain countries,
 
particularly certain
 
developing countries,
 
do not
 
favor the
 
enforcement of
patents and other
 
intellectual property rights,
 
particularly those relating
 
to biotechnology,
 
which could make
 
it difficult
 
for us
 
to stop
the
 
infringement,
 
misappropriation
 
or
 
other
 
violation
 
of
 
our
 
patents
 
or
 
other
 
intellectual
 
property,
 
including
 
the
 
unauthorized
reproduction of our manufacturing or other know-how or the marketing
 
of competing products in violation of our intellectual property
rights generally.
 
Any of these outcomes could
 
impair our ability to prevent
 
competition from third parties, which
 
may have a material
adverse effect on our business, financial condition, results of operations and prospects.
Further, the
 
existence of
 
issued patents
 
does not
 
guarantee our
 
right to
 
practice the
 
patented technology
 
or commercialize
 
a patented
product candidate. Third
 
parties may design
 
around our
 
patents, or have
 
or obtain
 
rights to
 
patents which they
 
may use to
 
prevent or
attempt to prevent us from practicing our
 
patented technology or commercializing any of our patented
 
product candidates. As a result,
we could be prevented from selling our products unless we were able to obtain a license under such third-party patents, which may not
be available on
 
commercially reasonable terms
 
or at all.
 
In addition, third
 
parties may seek
 
approval to market
 
their own products
 
similar
to or
 
otherwise competitive
 
with our
 
products and
 
such products
 
may not
 
violate our
 
patent rights.
 
We
 
may also
 
need to
 
assert our
patents against third parties, including by filing lawsuits alleging patent infringement. In any such proceeding, a third party may assert,
and a court
 
or agency of
 
competent jurisdiction may
 
find, our asserted
 
patents to be
 
invalid or unenforceable.
 
Any of the
 
foregoing could
have a material adverse effect on our business, financial condition, results of operations and prospects.
There is a substantial amount
 
of intellectual property litigation
 
in the biotechnology and pharmaceutical
 
industries, and we may become
party to, or threatened
 
with, litigation or other
 
adversarial proceedings regarding intellectual property rights.
 
Proceedings to defend or
enforce our patent
 
rights, whether or
 
not successful and
 
whether or not
 
meritorious, could result
 
in substantial
 
costs and divert
 
our efforts
and attention from other aspects of our business, could put our patents at risk of being invalidated or held unenforceable, or interpreted
more narrowly. There can be no assurance that
 
we will have sufficient financial or
 
other resources to file and
 
pursue such claims, which
often last for years before they are concluded. Some claimants may have substantially greater resources than we do and may be able to
sustain the costs of complex intellectual
 
property litigation to a greater
 
degree and for longer periods of
 
time than we could. In addition,
patent holding companies that
 
focus solely on extracting
 
royalties and settlements by
 
enforcing patent rights may
 
target us, especially
as we gain greater visibility and market exposure as a public company. In addition, our enforcement of our patent rights could provoke
third parties to
 
assert counterclaims against
 
us. Third parties
 
also may raise
 
similar claims before
 
administrative bodies in
 
the United
States or abroad, even
 
outside the context of
 
litigation. We may not prevail in
 
any lawsuits or administrative
 
proceedings that we initiate
and the
 
damages or
 
other remedies
 
awarded, if
 
any,
 
may not
 
be commercially
 
meaningful. If
 
a third
 
party were
 
to prevail
 
on a
 
legal
assertion of invalidity or
 
unenforceability, we
 
could lose part or
 
all of the patent
 
protection on one or
 
more of our product
 
candidates,
which could result
 
in our competitors
 
and other third
 
parties using our
 
technology to compete
 
with us. An
 
adverse outcome in
 
a litigation
or administrative proceeding involving our patents could limit our ability to
 
assert our patents against competitors, affect our ability to
receive royalties or
 
other licensing consideration
 
from our licensees,
 
and may curtail
 
or preclude our
 
ability to exclude
 
third parties from
making, using
 
and selling
 
similar or
 
competitive products.
 
Any of
 
these occurrences
 
could have
 
a material
 
adverse effect
 
on our
 
business,
financial condition, results
 
of operations and
 
prospects. Accordingly,
 
our efforts to
 
enforce our intellectual
 
property rights around
 
the
world may be
 
inadequate to obtain
 
a significant commercial
 
advantage from the
 
intellectual property that
 
we develop, acquire
 
or license.
70
Many countries, including certain countries in Asia, have compulsory licensing laws under which a patent owner may be
 
compelled to
grant licenses to third
 
parties. In addition,
 
many countries limit
 
the enforceability of
 
patents against government
 
agencies or government
contractors. In these countries, the patent owner may have
 
limited remedies, which could materially diminish the value of
 
such patent.
If we
 
or any
 
of our
 
licensors is
 
forced to
 
grant a
 
license to
 
third parties
 
with respect
 
to any
 
patents relevant
 
to our
 
business, our
 
competitive
position may
 
be impaired,
 
and our
 
business, financial
 
condition, results
 
of operations
 
and prospects
 
may be
 
adversely affected.
 
Our
owned and in-licensed patents may be
 
subject to a reservation of rights
 
by one or more third parties.
 
For example, the research resulting
in certain
 
of our
 
licensors’ patents
 
and technology,
 
including patents
 
and technology
 
relating to
 
UB-612, was
 
funded in
 
part by
 
the
Taiwanese government. As a result, the Taiwanese government may have certain rights to such patent rights and technology.
Furthermore, certain of our patents and technology, including patents and technology relating to UB-312, were funded
 
in part by grants
from
 
nonprofit
 
third
 
parties, including
 
the
 
MJFF.
 
We
 
are required
 
to
 
fulfill certain
 
contractual obligations
 
with
 
respect
 
to
 
products
created using such grant funding, including certain reporting requirements. We also have submitted grant proposals relating to our UB-
612 product candidate. If these grant
 
proposals are awarded, or if we
 
receive funding from other nonprofit third
 
parties in the future, we
may be required to fulfill other contractual obligations, such as publishing the
 
results of our scientific studies, making certain products
available at an affordable price in
 
a list of clearly defined low
 
and lower-middle income countries and ensuring
 
that certain products are
available in geographic regions where there has been an outbreak of an infectious disease at certain reduced economic rates.
If we or
 
our licensors infringe,
 
misappropriate, or otherwise
 
violate intellectual property
 
of third parties,
 
we may face
 
increased costs
or we may be unable to commercialize our product candidates.
Many of our current
 
and former employees, consultants
 
and independent contractors including
 
our senior management, were
 
previously
employed at universities or
 
at other biotechnology or
 
pharmaceutical companies, including
 
some which may be
 
competitors or potential
competitors.
 
Although
 
we
 
try
 
to
 
ensure
 
that
 
our
 
employees,
 
consultants
 
and
 
independent
 
contractors
 
do
 
not
 
use
 
the
 
proprietary
information
 
or
 
know-how
 
of
 
others
 
in
 
their
 
work
 
for
 
us,
 
we
 
may
 
be
 
subject
 
to
 
claims
 
that
 
we
 
or
 
these
 
employees,
 
consultants
 
or
independent contractors have
 
used or
 
disclosed intellectual property,
 
including trade secrets
 
or other proprietary
 
information, of such
individual’s current or former employers, or that patents and applications we have filed to
 
protect inventions of these individuals, even
those related to one or more
 
of our current or future
 
product candidates, are rightfully owned
 
by their former or concurrent
 
employer. In
addition, while we typically require our employees, consultants
 
and independent contractors who may be involved in
 
the development
of intellectual property to execute
 
agreements assigning such intellectual property to us,
 
we may be unsuccessful in
 
executing such an
agreement with each party
 
who in fact develops
 
intellectual property that we
 
regard as our own,
 
or such agreements may
 
be breached
or alleged
 
to be ineffective,
 
and the assignment
 
may not be
 
self-executing, which may
 
result in claims
 
by or
 
against us related
 
to the
ownership of such intellectual property or may result in such intellectual property becoming assigned to third parties.
Third parties have, and
 
may in the future
 
have, U.S. and non-U.S.
 
issued patents and
 
pending patent applications relating
 
to compounds,
methods of manufacturing compounds
 
or methods of use
 
for the treatment of
 
the disease indications for
 
which we are developing
 
our
product candidates that may cover our product candidates.
 
For example, we are aware of
 
certain third-party U.S. and non-U.S. patents
and patent applications, including those of our competitors, that relate to anti-alpha synuclein binding molecules that may
 
be construed
to cover the
 
technology used in our
 
anti-alpha synuclein vaccine product
 
candidate. We
 
are also aware of
 
certain third-party U.S. and
non-U.S. patents
 
and patent
 
applications, including
 
those of
 
our competitors,
 
that relate
 
to coronavirus
 
vaccines and
 
treatments and
vaccines against other infectious diseases and
 
we expect such third parties to
 
have filed additional patent applications, which
 
have not
yet been published and to file additional patent applications in the future.
In the event that any of these
 
patent rights were asserted against us,
 
we believe that we have defenses
 
against any such action, including
that such patents would not
 
be infringed by our product
 
candidates and/or that such patents
 
are not valid. However,
 
if any such patent
rights were to
 
be asserted against
 
us and our
 
defenses to such
 
assertion were unsuccessful, unless
 
we obtain a
 
license to such
 
patents,
we could be liable for damages, which
 
could be significant and include treble damages
 
and attorneys’ fees if we are found
 
to willfully
infringe such patents.
 
We
 
could also be
 
precluded from commercializing any
 
product candidates that
 
were ultimately held
 
to infringe
such patents, any of which
 
could have a material adverse
 
effect on our business, financial condition,
 
results of operations and prospects.
Uncertainties resulting from
 
our participation in
 
patent litigation or other
 
proceedings could have a
 
material adverse effect on
 
our ability
to
 
compete
 
in
 
the
 
marketplace.
 
Furthermore,
 
because
 
of
 
the
 
substantial
 
amount
 
of
 
discovery
 
required
 
in
 
certain
 
jurisdictions
 
in
connection
 
with
 
intellectual
 
property
 
litigation,
 
there
 
is
 
a
 
risk
 
that
 
some
 
of
 
our
 
confidential
 
information
 
could
 
be
 
compromised
 
by
disclosure during this type of
 
litigation. There could also be
 
public announcements of the results of
 
hearings, motions or other interim
proceedings or developments. If securities analysts
 
or investors perceive these results to
 
be negative, the perceived value of
 
our product
candidates or
 
intellectual property
 
could be
 
diminished. Accordingly,
 
the market
 
price of
 
our Class
 
A common
 
stock could
 
decline.
Uncertainties resulting from the initiation
 
and continuation of patent litigation
 
or other proceedings could have
 
a material adverse effect
on our business, financial condition, results of operations and prospects.
71
Changes to
 
the patent law
 
in the
 
United States and
 
other jurisdictions could
 
increase the uncertainties
 
and costs surrounding
 
the
prosecution of our patent applications and the enforcement or
 
defense of our issued patents, thereby impairing our
 
ability to protect
our technologies and product candidates.
As is the case with
 
other biopharmaceutical companies, our success
 
is heavily dependent on intellectual property,
 
particularly patents.
Obtaining and
 
enforcing patents
 
in the
 
biopharmaceutical industry
 
involves both
 
technological and
 
legal complexity
 
and is
 
therefore
costly,
 
time-consuming and
 
inherently uncertain.
 
Changes in
 
either the
 
patent laws
 
or interpretation
 
of the
 
patent laws
 
in the
 
United
States or
 
abroad could increase
 
the uncertainties and
 
costs surrounding the
 
prosecution of patent
 
applications and the
 
enforcement or
defense of
 
issued patents. For
 
example, recent U.S.
 
Supreme Court rulings
 
have narrowed
 
the scope of
 
patent protection available
 
in
certain
 
circumstances
 
and
 
weakened
 
the
 
rights
 
of
 
patent
 
owners
 
in
 
certain
 
situations.
 
Specifically,
 
these
 
decisions
 
stand
 
for
 
the
proposition that
 
patent claims
 
that recite
 
laws of
 
nature are
 
not themselves
 
patentable unless
 
those patent
 
claims have
 
sufficient additional
features
 
that
 
provide
 
practical
 
assurance
 
that
 
the
 
processes
 
are
 
genuine
 
inventive
 
applications
 
of
 
those
 
laws.
 
What
 
constitutes
 
a
“sufficient” additional feature
 
is uncertain. Furthermore,
 
in view of
 
these decisions, since
 
December 2014, the
 
USPTO has
 
published
and continues
 
to publish
 
revised guidelines
 
for patent
 
examiners to
 
apply when
 
examining process
 
claims for
 
patent eligibility.
 
This
combination of
 
events has
 
created uncertainty with
 
respect to
 
the validity
 
and enforceability
 
of patents,
 
even once
 
they are
 
obtained.
Depending on future actions by the U.S. Congress, the federal courts
 
and the USPTO, the laws and regulations governing patents could
change in
 
unpredictable ways. In
 
addition, the
 
complexity and uncertainty
 
of European
 
and Asian
 
patent laws
 
have also
 
increased in
recent years.
 
For example,
 
in October
 
2020, China
 
adopted amendments
 
to its
 
patent law
 
(the “Amended
 
PRC Patent
 
Law”), which
became
 
effective
 
on
 
June 1,
 
2021.
 
The
 
Amended
 
PRC
 
Patent
 
Law
 
contains
 
both
 
patent
 
term
 
extension
 
and
 
a
 
mechanism
 
for
 
early
resolution of
 
patent disputes.
 
However,
 
the provisions
 
for patent
 
term extension
 
and an
 
early resolution
 
mechanism are
 
unclear and
remain subject to
 
the approval of
 
implementing regulations that
 
have yet to
 
be finalized, leading
 
to uncertainty about
 
their scope
 
and
implementation. Complying with
 
these laws and
 
regulations could have
 
a material adverse
 
effect on
 
our existing patent
 
portfolio and
our ability to protect and enforce our intellectual property in the future.
Obtaining and maintaining our
 
patent protection, including patents
 
licensed from third parties,
 
depends on compliance with
 
various
procedural, documentary, fee payment and other requirements imposed by governmental patent agencies, and
 
our patent protection
could be reduced or eliminated for noncompliance with these requirements.
Periodic maintenance fees,
 
renewal fees,
 
annuity fees
 
and various
 
other governmental
 
fees on
 
patents and
 
patent applications will
 
be
due to
 
be paid
 
to the
 
USPTO and
 
various government
 
patent agencies
 
outside the
 
United States
 
over the
 
lifetime of
 
our patents
 
and
patent applications and any patent rights we may own or license in the future. Additionally, the USPTO and various government patent
agencies
 
outside
 
the
 
United
 
States
 
require
 
compliance
 
with
 
a
 
number
 
of
 
procedural,
 
documentary,
 
fee
 
payment
 
and
 
other
 
similar
provisions during the patent application process. In certain cases, an inadvertent lapse can be cured
 
by payment of a late fee or by other
means in accordance
 
with rules applicable
 
to the particular
 
jurisdiction. However, there are
 
situations in which
 
noncompliance can result
in
 
abandonment
 
or
 
lapse
 
of
 
the
 
patent
 
or
 
patent
 
application,
 
resulting
 
in
 
partial
 
or
 
complete
 
loss
 
of
 
patent
 
rights
 
in
 
the
 
relevant
jurisdiction. For example,
 
certain of our
 
patents which include
 
claims utilized in
 
our UB-311 anti-Aβ vaccine
 
product candidate recently
lapsed in certain European and Asian countries due to non-payment of fees. Noncompliance events that could
 
result in abandonment or
lapse of a patent or patent application include failure to respond to official communications within prescribed time limits, non-payment
of
 
fees and
 
failure to
 
properly legalize
 
and submit
 
formal documents.
 
If we
 
or our
 
licensors fail
 
to maintain
 
the patents
 
and patent
applications
 
covering or
 
otherwise
 
protecting our
 
technologies or
 
our product
 
candidates, our
 
competitors may
 
be
 
able
 
to
 
enter
 
the
market with similar
 
or identical products
 
or technology without
 
infringing our patents,
 
which could have
 
a material adverse
 
effect on
our business.
 
In addition,
 
to the
 
extent that
 
we have
 
responsibility for
 
taking any
 
action related
 
to the
 
prosecution or
 
maintenance of
patents or patent
 
applications in-licensed from
 
a third party, any
 
failure on our
 
part to maintain
 
the in-licensed intellectual
 
property could
jeopardize our rights under
 
the relevant license and
 
may have a material
 
adverse effect on
 
our business, financial condition,
 
results of
operations and prospects.
If we do not obtain
 
patent term extensions and data exclusivity for
 
each of our product candidates, our
 
business may be materially
harmed.
Depending upon the timing, duration
 
and specifics of any FDA
 
marketing approval in the United
 
States of any product
 
candidates we
may develop, one or more of our
 
U.S. patents may be eligible for limited
 
patent term extension under the Drug Price
 
Competition and
Patent Term Restoration Action of 1984
 
(“Hatch-Waxman Amendments”). The Hatch-Waxman Amendments permit a patent
 
extension
term of up to five years as
 
compensation for patent term lost during
 
the FDA regulatory review process. A
 
patent term extension cannot
extend the
 
remaining term
 
of a
 
patent beyond
 
a total
 
of 14
 
years from
 
the date
 
of product
 
approval, only
 
one patent
 
applicable to
 
an
approved drug may
 
be extended and
 
only those claims
 
covering the approved
 
drug, a method for
 
using it, or a
 
method for manufacturing
it may be extended. The length of the patent term extension
 
is typically calculated as one half of the clinical trial period
 
plus the entire
period of time during the
 
review of the NDA
 
or BLA by the
 
FDA, minus any time of
 
delay by the applicant during
 
these periods. We
might not be
 
granted a patent
 
term extension at
 
all, because of,
 
for example, failure
 
to apply within
 
the applicable period,
 
failure to apply
prior to the expiration of relevant patents or otherwise failure to satisfy any of the numerous applicable requirements.
In the
 
European Union,
 
a maximum
 
of five
 
and a
 
half years
 
of supplementary
 
protection can
 
be achieved
 
for an
 
active ingredient
 
or
combinations of active ingredients of
 
a medicinal product protected by
 
a basic patent, if
 
a valid marketing authorization exists
 
(which
72
must be
 
the first authorization
 
to place the
 
product on the
 
market as a
 
medicinal product) and
 
if the product
 
has not already
 
been the
subject of supplementary
 
protection. Although all
 
countries in Europe
 
must provide supplementary
 
protection certificates, there
 
is no
unified legislation among
 
European countries and
 
so supplementary protection
 
certificates must be
 
applied for and
 
granted on a
 
country-
by-country basis. This can lead to a substantial cost to apply for
 
and receive these certificates, which may vary among countries or not
be provided at all. Further, we may not
 
receive an extension because of, for
 
example, failing to exercise due
 
diligence during the testing
phase or regulatory review process, failing to apply within applicable deadlines, failing to apply
 
prior to expiration of relevant patents,
or otherwise failing
 
to satisfy applicable
 
requirements. Moreover,
 
the length of
 
the extension could
 
be less than
 
we request. If
 
we are
unable to obtain patent term extension or if
 
the term of any such extension is less
 
than we request, our competitors may obtain approval
of competing products earlier than expected following our patent expiration, and our
 
business, financial condition, results of operations
and prospects could be materially harmed.
If we
 
are unable
 
to protect
 
the confidentiality
 
of our
 
proprietary information
 
and trade
 
secrets, the
 
value of
 
our technology
 
and
products could be materially adversely affected.
In addition to patent
 
protection, we also
 
rely on trade secrets
 
and confidentiality agreements
 
to protect other
 
proprietary information that
is not patentable or that
 
we elect not to
 
patent. To maintain the confidentiality of trade
 
secrets and proprietary information,
 
we enter into
confidentiality agreements with our employees, consultants, independent contractors, collaborators, contract manufacturers, CROs and
others upon the commencement of their relationships with us. These agreements require that all confidential information developed by
the individual or entity
 
or made known to
 
the individual or entity
 
by us during the course
 
of the individual’s or entity’s relationship with
us be kept
 
confidential and not
 
disclosed to third
 
parties. Our agreements
 
with employees as
 
well as our
 
personnel policies also
 
generally
provide that any inventions conceived by the individual in the course of rendering services to us shall be our exclusive property or that
we may obtain full rights to such
 
inventions at our election. However,
 
we cannot guarantee that we have entered into
 
such agreements
with each party that may have or has had access to our trade secrets
 
or proprietary technology and processes and cannot guarantee that
individuals with whom
 
we have these
 
agreements will comply
 
with their terms.
 
In the event
 
of unauthorized use
 
or disclosure of
 
our
trade secrets or proprietary information,
 
these agreements, even if obtained,
 
may not provide meaningful protection,
 
particularly for our
trade secrets.
We may not have adequate remedies
 
in the event of
 
unauthorized use or disclosure
 
of our proprietary information
 
in the case of
 
a breach
of
 
any
 
such
 
agreements
 
and
 
our
 
trade
 
secrets
 
and
 
other
 
proprietary
 
information
 
could
 
be
 
disclosed
 
to
 
third
 
parties,
 
including
 
our
competitors. Many of
 
our partners also
 
collaborate with our
 
competitors and other
 
third parties. The
 
disclosure of our
 
trade secrets to
our competitors,
 
or more
 
broadly,
 
would impair
 
our competitive
 
position and
 
may materially
 
harm our
 
business, financial
 
condition,
results of operations and prospects. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our
proprietary
 
rights,
 
and
 
failure
 
to
 
maintain
 
trade
 
secret
 
protection
 
could
 
adversely
 
affect
 
our
 
competitive
 
business
 
position.
 
The
enforceability of confidentiality agreements may vary from jurisdiction to
 
jurisdiction. Courts outside the United States are sometimes
less willing to
 
protect proprietary information,
 
technology and know-how.
 
In addition, others
 
may independently discover
 
or develop
substantially
 
equivalent
 
or
 
superior
 
proprietary
 
information
 
and
 
techniques,
 
and
 
the
 
existence
 
of
 
our
 
own
 
trade
 
secrets
 
affords
 
no
protection against such independent discovery.
If our trademarks
 
and trade names
 
are not adequately
 
protected, we may
 
not be able
 
to build name
 
recognition in our
 
markets of
interest and our business, financial condition, results of operations and prospects may be adversely affected.
We rely on our trademarks
 
for name recognition
 
by potential partners
 
and customers
 
in our markets
 
of interest. However,
 
our trademarks
or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other
 
marks. We may
not be
 
able to
 
protect our
 
rights to
 
these trademarks
 
and trade
 
names or
 
may be
 
forced to
 
stop using
 
these names
 
or marks.
 
During
trademark registration proceedings,
 
we may receive
 
rejections that we
 
may be unable
 
to overcome. In
 
addition, in the
 
USPTO and in
comparable agencies in many foreign jurisdictions,
 
third parties are given an opportunity
 
to oppose pending trademark applications and
to seek to cancel
 
registered trademarks. Opposition
 
or cancellation proceedings
 
may be filed against
 
our trademarks, and
 
our trademarks
or trademark applications
 
may not survive
 
such proceedings. If
 
we are unable
 
to establish name
 
recognition based on
 
our trademarks
and trade names,
 
we may not
 
be able to
 
compete effectively and
 
our business, financial condition,
 
results of operations
 
and prospects
may be adversely affected.
Intellectual property rights do not necessarily address all potential threats.
The degree of future
 
protection afforded by
 
our proprietary and intellectual
 
property rights is uncertain
 
because such rights offer
 
only
limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage. For example:
•
 
others may be
 
able to develop
 
products that are
 
similar to,
 
or better than,
 
our product candidates
 
in a way
 
that is not
 
covered
by the claims of the patents we license or may own currently or in the future;
•
 
we,
 
or
 
our
 
licensing
 
partners
 
or
 
current
 
or
 
future
 
collaborators,
 
might
 
not
 
have
 
been
 
the
 
first
 
to
 
make
 
or
 
file
 
patent
applications
 
for
 
the
 
inventions
 
covered
 
by
 
issued
 
patents
 
or
 
pending
 
patent
 
applications
 
that
 
we
 
license
 
or
 
may
 
own
currently or in the future;
73
•
 
we may
 
not have
 
the financial
 
or other
 
resources necessary
 
to enforce
 
a patent
 
infringement or
 
other proprietary
 
rights
violation action;
•
 
we may choose not to file a patent for certain trade secrets or know-how,
 
and a third party may subsequently file a patent
covering such intellectual property;
•
 
our trade
 
secrets or
 
proprietary know-how
 
may be
 
unlawfully disclosed,
 
thereby losing
 
their trade
 
secret or
 
proprietary
status;
•
 
our competitors or
 
other third parties
 
might conduct research
 
and development activities
 
in countries where
 
we do not
 
have
patent rights
 
and then
 
use the
 
information learned
 
from such
 
activities to
 
develop competitive
 
products for
 
sale in
 
our
major commercial markets;
•
 
it is possible that there are prior public disclosures that could invalidate our or our licensors’ patents;
•
 
the patents of third parties
 
or pending or future
 
applications of third parties, if
 
issued, may have an adverse
 
effect on our
business;
•
 
third parties could design around our patents, or independently develop trade secrets that provide them with an advantage
over us;
•
 
any patents that
 
we obtain may
 
not provide
 
us with any
 
competitive advantages
 
or may ultimately
 
be found
 
not to
 
be owned
by us, or to be invalid or unenforceable; or
•
 
we may not develop additional proprietary technologies that are patentable.
Should any of these events occur, they could significantly harm our business, financial conditions, results of operations and prospects.
Risks Related to Our Business and Industry
Even if
 
we, or
 
any current
 
or future
 
collaborators, are
 
able to
 
commercialize any
 
product candidate
 
that we
 
or they
 
develop, the
successful commercialization of our product candidates
 
will depend in part on the extent to
 
which governmental authorities, private
health insurers
 
and other
 
third-party payors
 
provide coverage
 
and adequate
 
reimbursement levels
 
and implement
 
pricing policies
favorable
 
for
 
our
 
product
 
candidates.
 
Failure
 
to
 
obtain
 
or
 
maintain
 
coverage
 
and
 
adequate
 
reimbursement
 
for
 
our
 
product
candidates, if approved, could limit our ability to market those products and decrease our ability to generate revenue.
The healthcare industry
 
is acutely focused
 
on cost containment,
 
both in the
 
United States and
 
elsewhere. Government authorities
 
and
third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement. The insurance coverage and
reimbursement status of newly approved products
 
is uncertain and failure to obtain or
 
maintain adequate coverage and reimbursement
for our
 
product candidates
 
could limit
 
our ability
 
to generate
 
revenue. Our
 
business model
 
is also
 
focused on
 
lowering the
 
cost and
increasing the accessibility of healthcare. Even if we are successful in driving down the cost of healthcare, third- party payors may still
not view our product candidates, if
 
approved, as cost-effective, and coverage and
 
reimbursement may not be available to
 
our patients or
may
 
not
 
be
 
sufficient
 
to
 
allow our
 
products,
 
if
 
any,
 
to be
 
marketed
 
on
 
a
 
competitive basis.
 
If
 
coverage and
 
reimbursement are
 
not
available, or reimbursement is
 
available only to limited
 
levels, patient subpopulations
 
of labeled indications, or
 
otherwise restricted, we,
or any collaborators, may not be able
 
to successfully commercialize our product candidates.
 
Even if coverage is provided, the approved
reimbursement amount may not be high enough to allow us, or any collaborators, to establish or maintain pricing sufficient to realize a
sufficient return on our or
 
their investments. Cost-control initiatives
 
could also cause us to
 
decrease any price we
 
might establish for our
product candidates,
 
which could
 
result in
 
lower than
 
anticipated product
 
revenues. Moreover,
 
eligibility for
 
reimbursement does
 
not
imply that any product
 
will be paid for
 
in all cases or
 
at a rate that
 
covers our costs, including
 
our costs related to
 
research, development,
manufacture, sale
 
and distribution.
 
Reimbursement rates
 
may vary,
 
by way
 
of example,
 
according to
 
the use
 
of the
 
product and
 
the
clinical setting
 
in which
 
it is
 
used. For
 
products administered
 
under the
 
supervision of
 
a physician,
 
obtaining coverage
 
and adequate
reimbursement may be difficult because of the higher
 
costs often associated with administering such
 
drugs. If the prices for our product
candidates, if approved, decrease or if governmental and other
 
third-party payors do not provide adequate coverage or
 
reimbursement,
our business, financial condition, results of operations and prospects will suffer, perhaps materially.
There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States,
the Centers
 
for Medicare
 
and Medicaid
 
Services (“CMS”),
 
the federal
 
agency responsible
 
for administering
 
the Medicare
 
program,
makes the principal decisions about coverage and reimbursement for new treatments under Medicare. Private payors may follow
 
CMS
to a substantial degree. It is difficult to predict what CMS will decide with respect to reimbursement for novel
 
products such as ours. In
addition, certain Affordable
 
Care Act marketplace
 
and other private
 
payor plans are
 
required to include
 
coverage for certain
 
preventative
services,
 
including
 
vaccinations
 
recommended
 
by
 
the
 
U.S.
 
Centers
 
for
 
Disease
 
Control’s
 
Advisory
 
Committee
 
on
 
Immunization
74
Practices (“ACIP”)
 
without cost
 
share obligations
 
(i.e., co-
 
payments, deductibles
 
or co-insurance)
 
for plan
 
members. For
 
Medicare
beneficiaries, our product candidates, apart from UB-612,
 
may be covered for reimbursement under either
 
the Part B program or Part
 
D
depending on several
 
criteria, including the
 
type of vaccine
 
and the beneficiary’s
 
coverage eligibility.
 
If our product
 
candidates, once
approved, are
 
reimbursed only
 
under the
 
Part D
 
program, physicians
 
may be
 
less willing
 
to use
 
our products
 
because of
 
the claims
adjudication costs and time related to
 
the claims adjudication process and
 
collection of copayments associated with
 
the Part D program.
If our product
 
candidates, once approved,
 
are reimbursed only
 
under the Part
 
B program, certain
 
potential drawbacks associated
 
with
the Part B
 
program, such as
 
the time and effort
 
required to seek reimbursement
 
after purchase, may make
 
our product candidates less
attractive to clinics or
 
other potential customers. Outside
 
of Medicare, private insurance
 
is likely to raise
 
similar claims adjudication and
copayment considerations, which may also make our product candidates less attractive to potential customers using private insurance.
Outside the United States, certain
 
countries set prices and reimbursement for
 
pharmaceutical products, with limited participation from
the marketing authorization
 
holders. We cannot be sure that
 
such prices and reimbursement
 
will be acceptable
 
to us or
 
our collaborators.
If the regulatory
 
authorities in these
 
jurisdictions set prices
 
or reimbursement levels
 
that are not
 
commercially attractive for
 
us or our
collaborators, our
 
revenues from
 
sales by
 
us
 
or
 
our collaborators,
 
and
 
the potential
 
profitability of
 
our product
 
candidates,
 
in
 
those
countries would
 
be negatively
 
affected. Additionally,
 
some countries
 
require approval
 
of the
 
sale price
 
of a
 
product before
 
it can
 
be
marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. As a result, we
might obtain marketing approval for
 
a product in a particular
 
country, but then may experience delays in the
 
reimbursement approval of
our product or be subject to price regulations that would
 
delay our commercial launch of the product, possibly for lengthy time
 
periods,
which could negatively impact the revenues we are able to generate from the sale of the product in that particular country.
Moreover, an
 
increasing number of
 
countries are taking
 
initiatives to attempt
 
to reduce large
 
budget deficits by
 
focusing cost-cutting
efforts on pharmaceuticals for their
 
state-run healthcare systems. These international price control
 
efforts have impacted all regions
 
of
the world, notably in the European Union. In
 
some countries, in particular in many Member States
 
of the European Union, we may be
required
 
to
 
conduct a
 
clinical
 
trial
 
or
 
other
 
studies
 
that
 
compare
 
the
 
cost-effectiveness
 
of
 
our
 
product candidates
 
to
 
other
 
available
therapies in order to obtain or maintain reimbursement or
 
pricing approval. In addition, publication of discounts by third-
 
party payors
or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries.
If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory
 
levels, our business,
financial condition, results of operations or prospects could be materially adversely affected. Cost-control initiatives could cause us, or
any collaborators, to decrease
 
the price we, or
 
they, might
 
establish for products, which
 
could result in lower
 
than anticipated product
revenues. Further, our competitors have more experience dealing with and contracting with payors for preferred coverage, which could
potentially
 
put
 
us
 
at
 
a
 
competitive
 
disadvantage.
 
An
 
inability
 
to
 
promptly
 
obtain
 
coverage
 
and
 
adequate
 
payment
 
rates
 
from
 
both
government-funded and
 
private payors
 
for any
 
of our
 
product candidates
 
for which
 
we, or
 
any future
 
collaborator, obtain
 
marketing
approval could
 
significantly harm our
 
operating results,
 
our ability
 
to raise
 
capital needed
 
to commercialize products
 
and our
 
overall
financial condition.
Our business
 
and current
 
and future
 
relationships with
 
third-party payors,
 
healthcare professionals
 
and customers
 
in the
 
United
States and elsewhere will be subject to applicable healthcare laws and regulations, which could expose us to significant
 
penalties.
Healthcare
 
providers,
 
physicians
 
and
 
third-party
 
payors
 
in
 
the
 
United
 
States
 
and
 
elsewhere
 
will
 
play
 
a
 
primary
 
role
 
in
 
the
recommendation
 
and
 
prescription
 
of
 
any
 
product
 
candidates
 
for
 
which
 
we
 
obtain
 
marketing
 
approval.
 
Our
 
current
 
and
 
future
arrangements with healthcare
 
professionals, third-party payors and
 
customers expose us to
 
broadly applicable fraud and
 
abuse and other
healthcare laws and regulations, including, without limitation, the federal Anti-Kickback
 
Statute and the federal civil False Claims Act,
that may constrain the
 
business or financial
 
arrangements and relationships
 
through which we conduct
 
clinical research, sell,
 
market and
distribute any products for
 
which we obtain marketing
 
approval. In addition, we
 
may be subject to
 
physician payment transparency
 
laws
and
 
patient
 
privacy
 
regulation
 
by
 
the
 
federal government
 
and
 
by
 
the
 
U.S.
 
states
 
and
 
foreign
 
jurisdictions in
 
which
 
we
 
conduct our
business.
Efforts to
 
ensure that
 
our business
 
arrangements with
 
third parties
 
will comply
 
with applicable
 
healthcare laws
 
and regulations
 
may
involve substantial
 
costs. It
 
is possible
 
that governmental
 
authorities will
 
conclude that
 
our business
 
practices, including
 
our relationships
with
 
physicians
 
and
 
other
 
healthcare
 
providers,
 
some
 
of
 
whom
 
may
 
recommend,
 
purchase
 
or
 
prescribe
 
our
 
product
 
candidate,
 
if
approved,
 
may
 
not
 
comply
 
with
 
current
 
or
 
future
 
statutes,
 
regulations
 
or
 
case
 
law
 
involving
 
applicable
 
fraud
 
and
 
abuse
 
or
 
other
healthcare laws and regulations.
If our operations are found to be
 
in violation of any of these laws or
 
any other governmental regulations that may apply to
 
us, we may
be
 
subject
 
to
 
significant
 
civil,
 
criminal
 
and
 
administrative
 
penalties,
 
including,
 
without
 
limitation,
 
damages,
 
fines,
 
disgorgement,
individual imprisonment, exclusion from participation in government healthcare programs, such as Medicare and
 
Medicaid, additional
reporting requirements and
 
oversight if we
 
become subject to
 
a corporate integrity
 
agreement or similar
 
agreement to resolve
 
allegations
of noncompliance with these laws and the curtailment or restructuring of our operations, which could have a material adverse effect on
our business. If any of the physicians or other healthcare providers or entities with whom we expect to
 
do business is found not to be in
compliance
 
with
 
applicable
 
laws,
 
they
 
may
 
be
 
subject
 
to
 
criminal,
 
civil
 
or
 
administrative
 
sanctions,
 
including
 
exclusions
 
from
participation in government healthcare programs, which could also materially affect our business.
75
Cyberattacks or other
 
failures in our
 
or our third-party
 
vendors’, contractors’ or
 
consultants’ telecommunications or
 
information
technology systems
 
could result
 
in information
 
theft, compromise,
 
or other
 
unauthorized access,
 
data corruption
 
and significant
disruption
 
of
 
our
 
business
 
operations,
 
and
 
could
 
harm
 
our
 
reputation
 
and
 
subject
 
us
 
to
 
liability,
 
lawsuits
 
and
 
actions
 
from
governmental authorities.
The success of our research and development
 
programs depends on data which is stored
 
and transmitted digitally, the corruption or loss
of which could cause significant setback to
 
one or all of our programs. We face a number of risks
 
related to our use, processing, storage
and security of this critical
 
information, including loss of access,
 
inappropriate use or disclosure, inappropriate
 
modification corruption,
unauthorized access or processing.
 
Because we use third-party
 
vendors and subcontractors to
 
manage our sensitive information,
 
we also
may
 
not
 
have
 
the
 
ability
 
to
 
adequately
 
monitor,
 
audit
 
or
 
modify
 
the
 
security
 
controls
 
over
 
this
 
critical
 
information.
 
Despite
 
the
implementation of security measures, given the size and complexity of our
 
internal information technology (“IT”) systems and those of
our
 
third-party
 
vendors,
 
contractors
 
and
 
consultants,
 
such
 
IT
 
systems
 
are
 
potentially
 
vulnerable
 
to
 
breakdown
 
or
 
other
 
damage
 
or
interruption
 
from
 
service
 
interruptions,
 
system
 
malfunction,
 
natural
 
disasters,
 
terrorism,
 
war,
 
and
 
telecommunication
 
and
 
electrical
failures.
Cyber threats are persistent and constantly evolving. Such
 
threats, which may include ransomware or other malware, phishing
 
attacks,
denial of services
 
attacks, man-in-the-middle attacks
 
and others, have
 
increased in frequency, scope
 
and potential impact
 
in recent years,
which increase the difficulty
 
of detecting and successfully
 
defending against them.
 
We may not be able to
 
anticipate all types
 
of security
threats, and, despite
 
our efforts, we
 
may not be
 
able to implement preventive
 
measures effective against
 
all such security
 
threats. The
techniques used by cyber criminals change frequently,
 
may not be recognized until launched, and
 
can originate from a wide variety of
sources, including outside groups such
 
as external service providers,
 
organized crime affiliates, terrorist organizations or hostile
 
foreign
governments or
 
agencies. There
 
can be
 
no assurance
 
that we
 
or our
 
third-party service
 
providers, contractors
 
or consultants
 
will be
successful
 
in
 
preventing
 
cyberattacks
 
or
 
successfully
 
mitigating
 
their
 
effects.
 
Our
 
IT
 
systems
 
and
 
those
 
of
 
our
 
third-party
 
service
providers,
 
contractors or
 
consultants
 
are
 
additionally
 
vulnerable
 
to
 
security
 
breaches
 
from
 
inadvertent or
 
intentional
 
actions
 
by
 
our
employees, third-party
 
vendors, contractors,
 
consultants, business
 
partners and/or
 
other third
 
parties. These
 
threats pose
 
a risk
 
to the
security of our
 
systems and networks,
 
the confidentiality and
 
the availability,
 
security and integrity
 
of our data,
 
and these risks
 
apply
both to us and to
 
third parties on whose
 
systems we rely for
 
the conduct of our
 
business. If the IT systems
 
of our third-party vendors and
other contractors
 
and consultants
 
become subject
 
to disruptions
 
or security
 
breaches, we
 
may have
 
insufficient recourse
 
against such
third parties and
 
we may have
 
to expend significant
 
resources to mitigate
 
the impact of
 
such an event,
 
and to develop
 
and implement
protections to prevent future
 
events of a
 
similar nature from occurring.
 
Any cyberattack or destruction
 
or loss of, unauthorized
 
access
to, processing of, or
 
exfiltration of data could have
 
a material adverse effect
 
on our business, financial condition,
 
results of operations
and prospects. For example, if
 
such an event were to occur
 
and cause interruptions in our
 
operations, or those of our third-party
 
vendors
and other contractors and consultants, it could result in
 
a material disruption or delay of the development of our
 
product candidates. In
addition, we may suffer reputational
 
harm or face litigation
 
or adverse regulatory action as
 
a result of cyberattacks
 
or other data security
breaches, particularly
 
those involving
 
personal information
 
or protected
 
health information,
 
and may
 
incur significant
 
additional expense
to implement
 
further data
 
protection measures.
 
As cyber
 
threats continue
 
to evolve,
 
we may
 
be required
 
to incur
 
material additional
expenses in order to enhance our protective measures or to remediate any information security vulnerability.
We are subject to
 
stringent privacy laws, information security laws, regulations, policies and contractual obligations related to data
privacy and security and changes
 
in such laws, regulations,
 
policies and contractual obligations
 
could adversely affect our business,
financial condition, results of operations and prospects.
We
 
are subject
 
to data
 
privacy and
 
security laws
 
and regulations
 
that apply
 
to the
 
collection, transmission,
 
storage, use,
 
processing,
destruction, retention and security of personal information, which among other things, including additional laws or regulations relating
to
 
health
 
information.
 
The
 
legislative
 
and
 
regulatory
 
landscape
 
for
 
privacy
 
and
 
data
 
protection
 
continues
 
to
 
evolve
 
in
 
jurisdictions
worldwide, and these laws may at times be conflicting. It is possible that these
 
laws may be interpreted and applied in a manner that is
inconsistent with our practices and our efforts to comply with the evolving data protection rules may
 
be unsuccessful. We
 
must devote
significant
 
resources
 
to
 
understanding
 
and
 
complying
 
with
 
this
 
changing
 
landscape.
 
Failure
 
to
 
comply
 
with
 
federal,
 
state
 
and
international laws regarding privacy
 
and security of personal information
 
could expose us to penalties
 
under such laws, orders requiring
that we
 
change our
 
practices, claims
 
for damages
 
or other
 
liabilities, regulatory
 
investigations and
 
enforcement action,
 
litigation and
significant costs for remediation,
 
any of which could adversely
 
affect our business. Even if
 
we are not determined
 
to have violated these
laws,
 
government
 
investigations
 
into
 
these
 
issues
 
typically
 
require
 
the
 
expenditure
 
of
 
significant
 
resources
 
and
 
generate
 
negative
publicity, which have
 
a material
 
adverse effect
 
on our
 
business, financial
 
condition, results
 
of operations
 
and prospects.
 
Failure to
 
comply
with any of these
 
laws and regulations could
 
result in enforcement
 
action against us, including
 
fines, criminal prosecution
 
of employees,
claims for
 
damages by
 
affected individuals
 
and damage
 
to our
 
reputation and
 
loss of
 
goodwill, any
 
of which
 
could have
 
a material
adverse effect on our
 
business, financial condition,
 
results of operations
 
and prospects. Additionally, if we
 
are unable to
 
properly protect
the
 
privacy
 
and
 
security
 
of
 
personal
 
information,
 
including
 
protected
 
health
 
information,
 
we
 
could
 
be
 
found
 
to
 
have
 
breached
 
our
contracts with certain third parties.
There are numerous U.S.
 
federal and state laws
 
and regulations related to
 
the privacy and security
 
of personal information. In
 
particular,
HIPAA,
 
as
 
amended
 
by
 
the
 
Health
 
Information
 
Technology
 
for
 
Economic
 
and
 
Clinical Health
 
Act
 
of
 
2009
 
(“HITECH”) and
 
their
76
respective implementing
 
regulations, establish
 
privacy and
 
security standards
 
that limit
 
the use
 
and disclosure
 
of individually
 
identifiable
health
 
information,
 
or
 
protected
 
health
 
information,
 
and
 
require
 
the
 
implementation
 
of
 
administrative,
 
physical
 
and
 
technological
safeguards to protect the
 
privacy of protected health
 
information and ensure the confidentiality,
 
integrity and availability of
 
electronic
protected health
 
information. Determining
 
whether protected
 
health information
 
has been handled
 
in compliance
 
with applicable privacy
standards and
 
our
 
contractual obligations
 
can be
 
complex and
 
may be
 
subject to
 
changing interpretation.
 
If we
 
fail
 
to
 
comply with
applicable privacy
 
laws, including
 
applicable HIPAA
 
privacy and
 
security standards, we
 
could face
 
civil and
 
criminal penalties.
 
The
HHS has
 
the discretion
 
to impose
 
penalties without
 
attempting to
 
first resolve
 
violations. HHS
 
enforcement activity
 
can result
 
in financial
liability
 
and
 
reputational
 
harm,
 
and
 
responses
 
to
 
such
 
enforcement
 
activity
 
can
 
consume
 
significant
 
internal
 
resources.
 
Even
 
when
HIPAA
 
does not
 
apply,
 
failing to
 
take appropriate steps
 
to keep consumers’
 
personal information secure
 
can constitute unfair
 
acts or
practices in or affecting commerce and be construed as a violation of Section 5(a) of the
 
Federal Trade Commission Act (the “FTCA”),
15 U.S.C § 45(a). The FTC expects a company’s
 
data security measures to be reasonable and appropriate in light of the sensitivity and
volume of consumer information
 
it holds, the size and
 
complexity of its business, and
 
the cost of available tools
 
to improve security and
reduce vulnerabilities. Individually identifiable
 
health information is
 
considered sensitive data
 
that merits stronger
 
safeguards and the
FTC’s guidance for appropriately securing consumers’ personal information is similar
 
to what is required by the HIPAA Security Rule.
In addition, state attorneys general are
 
authorized to bring civil actions seeking either
 
injunctions or damages in response to violations
that threaten
 
the privacy
 
of state
 
residents. We
 
cannot be
 
sure how
 
these regulations
 
will be
 
interpreted, enforced
 
or applied
 
to our
operations. In
 
addition to
 
the risks
 
associated with
 
enforcement activities
 
and potential
 
contractual liabilities,
 
our ongoing
 
efforts to
comply with evolving
 
laws and regulations
 
at the federal
 
and state level
 
may be costly
 
and require ongoing
 
modifications to our
 
policies,
procedures and systems.
Internationally,
 
laws,
 
regulations
 
and
 
standards
 
in
 
many
 
jurisdictions
 
apply
 
broadly
 
to
 
the
 
collection,
 
transmission,
 
storage,
 
use,
processing, destruction,
 
retention and
 
security of
 
personal information.
 
For example,
 
in the
 
European Union,
 
the collection,
 
transmission,
storage, use, processing,
 
destruction, retention and
 
security of personal
 
data is governed
 
by the provisions
 
of the General
 
Data Protection
Regulation (the “GDPR”) in addition to other applicable laws and regulations. The GDPR came into effect in May 2018, repealing and
replacing the European Union Data Protection Directive, and imposing revised data privacy and
 
security requirements on companies in
relation to the processing of personal data
 
of European Union data subjects. The
 
GDPR, together with national legislation, regulations
and
 
guidelines
 
of
 
the
 
European
 
Union
 
Member
 
States
 
governing
 
the
 
collection,
 
transmission,
 
storage,
 
use,
 
processing,
 
destruction,
retention
 
and
 
security
 
of
 
personal
 
data,
 
impose
 
strict
 
obligations
 
with
 
respect
 
to,
 
and
 
restrictions
 
on,
 
the
 
collection,
 
use,
 
retention,
protection, disclosure, transfer and processing of
 
personal data. The GDPR also imposes
 
strict rules on the transfer
 
of personal data to
countries outside the European
 
Union that are not
 
deemed to have protections
 
for personal information,
 
including the United States.
 
The
GDPR authorizes
 
fines for
 
certain violations
 
of up
 
to 4%
 
of the
 
total global
 
annual turnover
 
of the
 
preceding financial
 
year or
 
€20 million,
whichever is greater. Such fines are
 
in addition to any civil litigation claims by data subjects. Separately,
 
Brexit has led and could also
lead to legislative and regulatory changes and may increase our compliance costs. As of January 1, 2021, and the expiry of
 
transitional
arrangements agreed to between the United Kingdom and the European Union,
 
data processing in the United Kingdom is governed by
a United Kingdom version of the
 
GDPR (combining the GDPR and the Data
 
Protection Act 2018), exposing us to two
 
parallel regimes,
each of which authorizes similar fines and other potentially divergent enforcement actions for certain violations. On June 28, 2021, the
European Commission
 
adopted an
 
adequacy decision
 
for the
 
United Kingdom,
 
allowing for
 
the relatively
 
free exchange
 
of personal
information
 
between
 
the
 
European
 
Union
 
and
 
the
 
United
 
Kingdom.
 
Other
 
jurisdictions
 
outside
 
the
 
European
 
Union
 
are
 
similarly
introducing or enhancing privacy and data security
 
laws, rules and regulations, which could increase
 
our compliance costs and the risks
associated with noncompliance. We cannot guarantee that we are, or will be, in
 
compliance with all applicable international regulations
as they are enforced now or as they evolve.
We face potential liability related to the privacy of health information we obtain from clinical trials sponsored by us.
Most healthcare providers, including research
 
institutions from which we
 
obtain patient health information,
 
are subject to privacy
 
and
security regulations promulgated under HIPAA,
 
as amended by the Health Information
 
Technology for
 
Economic and Clinical Health
Act. We do not believe
 
that we are currently classified as a covered entity or business associate under HIPAA
 
and thus are not directly
subject to its requirements or penalties. However,
 
any person may be prosecuted under HIPAA’s
 
criminal provisions either directly or
under aiding-and-abetting or conspiracy principles. Consequently, depending on the facts and circumstances, we could face substantial
criminal penalties if
 
we knowingly receive
 
individually identifiable health information
 
from a HIPAA
 
-covered healthcare provider or
research
 
institution that
 
has not
 
satisfied HIPAA’s
 
requirements for
 
disclosure of
 
individually identifiable
 
health
 
information. Even
when HIPAA
 
does not
 
apply,
 
according to
 
the FTC
 
failing to
 
take appropriate
 
steps to
 
keep consumers’
 
personal information
 
secure
constitutes unfair
 
acts or
 
practices in
 
or affecting
 
commerce in
 
violation of
 
the FTCA.
 
The FTC
 
expects a
 
company’s
 
data security
measures
 
to
 
be
 
reasonable
 
and
 
appropriate
 
in
 
light
 
of
 
the
 
sensitivity
 
and
 
volume
 
of
 
consumer
 
information
 
it
 
holds,
 
the
 
size
 
and
complexity of its business, and
 
the cost of available tools
 
to improve security and reduce
 
vulnerabilities. Individually identifiable health
information is considered sensitive data that merits stronger safeguards.
In addition, we may maintain
 
sensitive personally identifiable information,
 
including health information, that we
 
receive throughout the
clinical
 
trial
 
process,
 
in
 
the
 
course
 
of
 
our
 
research
 
collaborations.
 
As
 
such,
 
we
 
may
 
be
 
subject
 
to
 
state
 
laws,
 
including
 
the
 
CCPA,
requiring notification of
 
affected individuals
 
and state regulators
 
in the event
 
of a
 
breach of personal
 
information, which is
 
a broader
class of information
 
than the
 
health information
 
protected by
 
HIPAA. Our clinical trial
 
programs outside
 
the United
 
States may
 
implicate
international data protection laws, including the GDPR and legislation of the EU member states implementing it.
77
Our activities
 
outside the
 
United States
 
impose additional
 
compliance requirements
 
and generate
 
additional risks
 
of enforcement
 
for
noncompliance. Failure by our CROs and other
 
contractors to comply with the strict rules
 
on the transfer of personal data outside of
 
the
EU into
 
the United
 
States may
 
result in
 
the imposition
 
of criminal
 
and administrative
 
sanctions on
 
such collaborators,
 
which could
adversely affect
 
our business.
 
Furthermore, certain
 
health privacy
 
laws, data
 
breach notification
 
laws, consumer
 
protection laws
 
and
genetic testing laws
 
may apply directly
 
to our operations
 
and/or those of
 
our collaborators and
 
may impose restrictions
 
on our collection,
use and dissemination of individuals’ health information.
Moreover, patients about whom we
 
or our collaborators obtain health information, as
 
well as the providers who share this
 
information
with us, may have
 
statutory or contractual rights
 
that limit our ability
 
to use and disclose
 
the information. We may be required
 
to expend
significant capital
 
and other
 
resources to
 
ensure ongoing
 
compliance with
 
applicable privacy
 
and data
 
security laws.
 
Claims that
 
we
have violated
 
individuals’ privacy rights
 
or breached
 
our contractual obligations,
 
even if
 
we are
 
not found
 
liable, could be
 
expensive
and time-consuming to defend and could result in adverse publicity that could harm our business.
If
 
we
 
or our
 
contract manufacturers,
 
CROs or
 
other
 
contractors or
 
consultants fail
 
to
 
comply with
 
applicable federal,
 
state or
 
local
regulatory privacy requirements, we could be subject to a range of regulatory actions that could affect our or our contractors’ ability to
develop
 
and
 
commercialize
 
our
 
product
 
candidates
 
and
 
could
 
harm
 
or
 
prevent
 
sales
 
of
 
any
 
affected
 
products
 
that
 
we
 
are
 
able
 
to
commercialize, or could substantially increase
 
the costs and expenses of
 
developing, commercializing and marketing
 
our products. Any
threatened
 
or
 
actual
 
government
 
enforcement
 
action
 
could
 
also
 
generate
 
adverse
 
publicity
 
and
 
require
 
that
 
we
 
devote
 
substantial
resources
 
that
 
could
 
otherwise
 
be
 
used
 
in
 
other
 
aspects
 
of
 
our
 
business.
 
Increasing
 
use
 
of
 
social
 
media
 
could
 
give
 
rise
 
to
 
liability,
breaches of data security or
 
reputational damage. Any of the
 
foregoing could have a material
 
adverse effect on our
 
business, financial
condition, results of operations and prospects.
We
 
face substantial
 
competition, which
 
may result
 
in others
 
discovering, developing
 
or commercializing
 
products before
 
or more
successfully than we do.
The biotechnology and pharmaceutical
 
industries are characterized by rapidly
 
advancing technologies, intense competition
 
and a strong
emphasis on proprietary products. We face and will continue to face competition from third parties that use similar platforms and from
third parties focused on developing and commercializing other peptide and peptide-based product candidates. The
 
competition is likely
to
 
come
 
from
 
multiple
 
sources,
 
including
 
large
 
and
 
specialty
 
pharmaceutical
 
and
 
biotechnology
 
companies,
 
academic
 
research
institutions, government agencies and public and private research institutions.
Many
 
of
 
our
 
potential
 
competitors,
 
alone
 
or
 
with
 
their
 
strategic
 
partners,
 
have
 
substantially
 
greater
 
financial,
 
technical
 
and
 
other
resources
 
than
 
we
 
do,
 
such
 
as
 
larger
 
research
 
and
 
development,
 
clinical,
 
marketing
 
and
 
manufacturing
 
organizations.
 
Mergers
 
and
acquisitions in the biotechnology and pharmaceutical industries may result in even
 
greater concentration of resources among a smaller
number of competitors.
 
Our commercial opportunity could
 
be reduced or eliminated
 
if competitors develop
 
and commercialize products
that are safer,
 
more effective, have
 
fewer or less
 
severe side effects,
 
are more convenient or
 
are less expensive
 
than any products
 
that
we may develop. Our
 
competitors also may obtain
 
FDA or other
 
regulatory approvals for their
 
products faster or
 
earlier than we
 
may
obtain approval
 
for ours,
 
which could
 
result in
 
our competitors
 
establishing a
 
strong market
 
position before
 
we are
 
able to
 
enter the
market. For example, some of
 
our competitors have already received
 
approval from the FDA and other
 
regulatory authorities for their
COVID-19 vaccines and
 
boosters to address
 
variants of SARS-CoV-2.
 
Additionally,
 
technologies developed by
 
our competitors may
render our
 
product candidates
 
uneconomical or
 
obsolete, and
 
we may
 
not be
 
successful in
 
marketing our
 
product candidates
 
against
competitors’ products. In addition, the availability of our competitors’ products and the
 
lack of complementary products offered by our
sales and distribution team as compared to competitors
 
with more extensive product lines, could limit
 
the demand and the prices we are
able to charge for any products that we may develop and commercialize.
78
Developments by
 
competitors may
 
render our
 
products or
 
technologies obsolete
 
or non-competitive
 
or may
 
reduce the
 
size of
 
our
markets.
Our
 
industry
 
has
 
been
 
characterized
 
by
 
extensive
 
research
 
and
 
development
 
efforts,
 
rapid
 
developments
 
in
 
technologies,
 
intense
competition and a
 
strong emphasis on
 
proprietary products.
 
We expect our product candidates
 
to face intense
 
and increasing competition
as new
 
products enter
 
the relevant
 
markets and
 
advanced technologies
 
become available.
 
We
 
face potential
 
competition from
 
many
different
 
sources, including
 
pharmaceutical, biotechnology
 
and specialty
 
pharmaceutical companies.
 
Academic research
 
institutions,
governmental
 
agencies
 
and
 
public
 
and
 
private
 
institutions
 
are
 
also
 
potential
 
sources
 
of
 
competitive
 
products
 
and
 
technologies.
 
Our
competitors may have
 
or may develop
 
superior technologies or
 
approaches and have
 
different business models
 
from us which
 
do not
focus
 
on
 
democratizing
 
healthcare
 
and
 
on
 
lower
 
cost,
 
all
 
of
 
which
 
may
 
provide
 
them
 
with
 
competitive
 
advantages. Many
 
of
 
these
competitors may also have compounds already approved or in development in the therapeutic categories that we
 
are targeting with our
product candidates.
 
The global
 
vaccine market
 
is highly
 
concentrated among
 
a small
 
number of
 
multinational pharmaceutical
 
companies:
Pfizer, Merck,
 
GlaxoSmithKline and Sanofi
 
together control most
 
of the global
 
vaccine market. While
 
we are not
 
aware of all
 
of our
competitors’ efforts,
 
there are
 
more than
 
twenty COVID-19
 
vaccines already
 
approved for
 
use in
 
one or
 
more countries
 
around the
world, including
 
three in
 
the United
 
States. We also face
 
substantial competition
 
in therapeutic
 
areas outside
 
of COVID-19.
 
For example,
the FDA approved aducanumab in June 2021 as the first FDA-approved immunotherapy for AD. In addition, many of our competitors,
either alone or together with
 
their collaborative partners, may operate larger
 
research and development programs or have
 
substantially
greater financial resources than we do, as well as greater experience in:
•
 
developing product candidates;
•
 
undertaking pre-clinical testing and clinical trials;
•
 
obtaining NDA approval by the FDA;
•
 
obtaining comparable foreign regulatory approvals of product candidates;
•
 
formulating and manufacturing products;
•
 
launching, marketing and selling products; and
•
 
competing for market share, obtaining reimbursement and securing payor contractors for preferential coverage.
If these
 
competitors access
 
the marketplace
 
with safer, more
 
effective, or less
 
expensive therapeutics,
 
our product
 
candidates, if
 
approved
for commercialization, may not
 
be profitable to
 
sell or worthwhile
 
to continue to
 
develop. Technology
 
in the pharmaceutical industry
has undergone rapid and significant change,
 
and we expect that it
 
will continue to do so.
 
Any compounds, products or processes
 
that we
develop may
 
become obsolete
 
or uneconomical
 
before we
 
recover any
 
expenses incurred
 
in connection
 
with their
 
development. The
success of
 
our product
 
candidates will
 
depend upon
 
factors such
 
as product
 
efficacy,
 
safety,
 
reliability,
 
availability,
 
timing, scope
 
of
regulatory
 
approval,
 
acceptance
 
and
 
price,
 
among
 
other
 
things.
 
Other
 
important
 
factors
 
to
 
our
 
success
 
include
 
speed
 
in
 
developing
product
 
candidates,
 
completing
 
clinical
 
development
 
and
 
laboratory
 
testing,
 
obtaining
 
regulatory
 
approvals
 
and
 
manufacturing
 
and
selling commercial quantities of potential products.
Our product
 
candidates are
 
intended to
 
compete directly
 
or indirectly
 
with existing
 
products and
 
products currently
 
in development.
Even if approved
 
and commercialized, our
 
product candidates may
 
fail to achieve
 
market acceptance with
 
hospitals, physicians, patients
or
 
third-party
 
payors.
 
Hospitals,
 
physicians
 
or
 
patients
 
may
 
conclude
 
that
 
our
 
products
 
are
 
less
 
safe
 
or
 
effective
 
or
 
otherwise
 
less
attractive than existing drugs.
 
If our product candidates
 
do not receive market
 
acceptance for any reason, our
 
revenue potential would
be diminished, which would materially adversely affect our ability to become profitable.
Many of
 
our competitors
 
have substantially
 
greater capital
 
resources, robust
 
product candidate
 
pipelines, established
 
presence in
 
the
market and expertise in research and development,
 
manufacturing, pre-clinical and clinical testing, obtaining regulatory approvals
 
and
reimbursement and marketing
 
approved products than
 
we do. As
 
a result, our
 
competitors may achieve
 
product commercialization or
patent or other
 
intellectual property protection
 
earlier than we
 
can. Smaller or
 
early-stage companies may
 
also prove to
 
be significant
competitors, particularly
 
through collaborative
 
arrangements with
 
large
 
and established
 
companies. These
 
competitors also
 
compete
with us in recruiting and retaining
 
qualified clinical, regulatory, scientific, sales, marketing and management
 
personnel and establishing
clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies
 
complementary to, or necessary for, our
programs. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are
safer, more effective,
 
have fewer or less severe side
 
effects, are more convenient, or are
 
less expensive than any products that
 
we may
develop or that would render any products that we may develop obsolete or noncompetitive.
79
We
 
are subject to anti-corruption
 
laws, including the U.S.
 
Foreign Corrupt Practices Act
 
(“FCPA”), and
 
similar laws of non-U.S.
jurisdictions where we conduct business.
 
If we fail to comply with
 
these laws, we could be subject
 
to civil or criminal penalties,
 
other
remedial measures,
 
and legal
 
expenses, which
 
could adversely
 
affect our
 
business, financial
 
condition, results
 
of operations
 
and
prospects.
We are currently subject to anti-corruption laws, including the FCPA.
 
The FCPA, the U.K. Bribery Act 2010 and other applicable anti-
bribery and
 
anti-corruption laws generally
 
prohibit us,
 
our employees
 
and intermediaries from
 
bribing, being
 
bribed or
 
making other
prohibited
 
payments
 
to
 
government
 
officials
 
or
 
other
 
persons
 
to
 
obtain
 
or
 
retain
 
business
 
or
 
gain
 
other
 
business
 
advantages.
 
In
furtherance of our goal to democratize
 
healthcare, we intend to distribute any
 
product candidates that are approved or
 
receive an EUA
in various countries around the world, including countries with a heightened corruption risk. This may raise the risk of non-compliance
with anti-corruption laws and other
 
rules and regulations prohibiting bribery
 
and other crimes. We also participate in collaborations and
relationships
 
with
 
third
 
parties
 
whose
 
actions
 
could
 
potentially
 
subject
 
us
 
to
 
liability
 
under
 
the
 
FCPA
 
or
 
other
 
jurisdictions’
 
anti-
corruption laws, which
 
in turn could
 
result in internal
 
and external investigations,
 
associated legal costs
 
and even civil
 
fines and criminal
charges, any of which
 
would divert time
 
and resources away
 
from our core
 
business operations even
 
if we and
 
our employees and
 
agents
do not violate laws and regulations. The FCPA also requires public companies to make and keep books and records that accurately and
fairly reflect
 
the transactions
 
of the
 
corporation and
 
to devise
 
and maintain
 
an adequate
 
system of
 
internal accounting
 
controls. Our
business
 
is
 
heavily
 
regulated
 
and
 
therefore
 
involves
 
significant
 
interaction
 
with
 
public
 
officials,
 
including
 
officials
 
of
 
non-U.S.
governments. Additionally, in many other countries, the
 
health care providers who prescribe
 
pharmaceuticals are (directly or indirectly)
employed
 
by
 
their
 
government,
 
and
 
the
 
purchasers
 
of
 
pharmaceuticals
 
are
 
government
 
entities;
 
therefore,
 
our
 
dealings
 
with
 
these
prescribers and
 
purchasers are subject
 
to regulation under,
 
but not
 
limited to,
 
the FCPA.
 
In recent
 
years, the SEC
 
and Department of
Justice have also increased their FCPA enforcement activities with respect to pharmaceutical companies.
We are in the process of establishing
 
a program to govern
 
the compliance of any
 
potential sales or marketing
 
operations of our products,
should any of them be approved or receive an EUA. To date, we have not had a robust compliance program. We cannot ensure that our
operations to
 
date have
 
complied, and
 
that our future
 
operations will
 
comply, with our compliance
 
program or
 
laws, rules
 
and regulations
governing the sales
 
and marketing of
 
pharmaceutical products, government
 
contracting and other
 
aspects of our
 
business. We have used,
and plan to use, a network of agents in countries around the world to conduct our sales and marketing operations. These agents will not
be our employees, and while we intend
 
to have a robust diligence program in
 
connection with engaging agents, our diligence program
and compliance program may not be sufficient to prevent wrong-doing.
There is
 
also no
 
assurance that
 
we will
 
be completely
 
effective in
 
ensuring our
 
compliance with
 
all applicable
 
anti-corruption laws,
including the FCPA, particularly given the high level of complexity of these laws. We
 
have adopted a code of conduct applicable to all
of our employees and contractors, but it is not always possible to identify and deter misconduct by these parties and other third parties,
and the precautions we
 
take to detect and
 
prevent this activity may
 
not be effective in controlling
 
unknown or unmanaged
 
risks or losses
or in protecting us from governmental
 
investigations or other actions, claims or lawsuits stemming
 
from a failure to comply with
 
such
laws or regulations. If
 
we are not in
 
compliance with the FCPA
 
or other anti-corruption laws,
 
we may be subject
 
to criminal and civil
penalties, disgorgement
 
and other
 
sanctions and
 
remedial measures,
 
and legal
 
expenses, which
 
could have
 
an adverse
 
impact on
 
our
business, financial condition, results
 
of operations and
 
prospects. Similarly,
 
any investigation of any
 
potential violations of
 
the FCPA
or other
 
anti-corruption laws
 
by authorities
 
in the
 
United States
 
or other
 
jurisdictions where
 
we conduct
 
business could
 
also have
 
an
adverse impact on our reputation, business, financial condition, results of operations and prospects.
As a result of our geographically diverse operations, we are more susceptible to certain risks.
We
 
have offices
 
in two different
 
countries and additional
 
operations in an
 
additional two different
 
countries. We
 
have also used,
 
and
plan to use, a
 
network of agents
 
in countries around the
 
world to conduct
 
our sales and marketing
 
operations. If we are
 
unable to manage
the risks
 
of our
 
global operations,
 
including fluctuations
 
in foreign
 
exchange and
 
inflation rates,
 
international hostilities
 
such as
 
the
Russia-Ukraine conflict,
 
natural disasters,
 
security breaches,
 
our ability
 
to supply
 
our product
 
candidates on
 
a timely
 
and large
 
scale
basis in local markets, lead times for shipping, accounts receivable collection times, import or
 
export licensing requirements, language
barriers, failure to maintain compliance with our clients’ control requirements and multiple legal and regulatory systems, our results of
operations and
 
ability to
 
grow could
 
be materially
 
adversely affected.
 
In particular,
 
our business
 
and stock
 
price may
 
be affected
 
by
fluctuations in foreign exchange
 
rates between currencies in
 
different jurisdictions in which
 
operate or in which
 
we may have sales
 
in
the future.
Certain
 
legal
 
and
 
political risks
 
are
 
also
 
inherent
 
in
 
foreign
 
operations. Foreign
 
sales of
 
our
 
product
 
candidates
 
could be
 
adversely
affected by the imposition
 
of governmental controls,
 
political and economic instability, trade restrictions
 
and changes in tariffs.
 
In many
countries, the pricing
 
of prescription pharmaceuticals
 
is subject to
 
governmental control. In
 
these countries, pricing
 
negotiations with
governmental authorities
 
can
 
take
 
considerable time
 
after
 
the
 
receipt
 
of
 
marketing
 
approval for
 
a
 
drug.
 
There
 
is
 
a
 
risk
 
that
 
foreign
governments may
 
nationalize private
 
enterprises in
 
certain countries
 
where we
 
may operate.
 
In certain
 
countries or
 
regions, terrorist
activities and the
 
response to such
 
activities may threaten
 
our operations more
 
than in the
 
United States. Social
 
and cultural norms
 
in
certain countries may not
 
support compliance with our
 
corporate policies, including those
 
that require compliance with
 
substantive laws
and regulations. Also,
 
changes in general
 
economic and political
 
conditions in countries
 
where we may
 
operate are a
 
risk to our
 
financial
performance and future growth. Additionally,
 
the need to identify
 
financially and commercially strong partners
 
for commercialization
80
outside the United States who will
 
comply with the high manufacturing and
 
legal and regulatory compliance standards we require
 
is a
risk to our financial performance. As we operate our business globally, our success will depend, in part, on our ability to anticipate and
effectively manage these and other related risks. There can be no
 
assurance that the consequences of these and other factors relating to
our international operations will not have an adverse effect on our business, financial condition, results of operations and prospects.
We
 
are
 
exposed
 
to
 
potential
 
product
 
liability
 
and
 
professional
 
indemnity
 
risks
 
that
 
are
 
inherent
 
in
 
the
 
research,
 
development,
manufacturing, marketing and use of pharmaceutical products.
The use of our investigational medicinal products in clinical trials,
 
the sale of our ELISA test and the sale of
 
any approved products in
the
 
future
 
may
 
expose
 
us
 
to
 
liability
 
claims.
 
These
 
claims
 
might
 
be
 
made
 
by
 
patients
 
who
 
use
 
the
 
product,
 
health
 
care
 
providers,
pharmaceutical companies or others selling such
 
products. Any claims against us, regardless
 
of their merit, could be difficult and costly
to defend
 
and could
 
materially adversely
 
affect the
 
market for
 
our product
 
candidates or
 
any prospects
 
for commercialization
 
of our
product candidates.
In addition, regulations
 
vary significantly across
 
jurisdictions regarding the
 
clinical trial sponsor’s responsibility
 
to provide free medical
care and compensation
 
to clinical trial
 
participants who experience
 
an injury or
 
illness during the
 
trial. For example,
 
there is no
 
legal
requirement in the United States for sponsors to provide free medical
 
treatment or compensation to a participant injured during a study;
as a result, sponsors
 
usually agree to pay
 
for the medical care
 
to diagnose and treat
 
participant injuries to
 
the extent related to
 
the clinical
trial and
 
typically do
 
not pay
 
unless the
 
injury is
 
determined to
 
be related
 
to participation
 
in the
 
trial. In
 
contrast, India
 
requires free
medical care
 
until it is
 
established that
 
the injury
 
is not
 
related to
 
the study
 
and compensation for
 
any injury that
 
is determined
 
to be
related to
 
the study.
 
In 2019,
 
India’s
 
Ministry of
 
Health and
 
Family Welfare
 
published the
 
“New Drugs
 
and Clinical
 
Trials
 
Rules,”
which increased a clinical
 
trial sponsor’s liability for
 
injuries related to clinical trial
 
trials. Under the regulation, sponsors
 
are required
to (i)
 
provide “free medical
 
management” to participants
 
that experience an
 
injury that, in
 
the investigator’s
 
opinion, is related
 
to the
study or until it
 
is established that the
 
injury is not related
 
to the study and
 
(ii) “compensate” clinical trial
 
participants for trial-related
injuries. Clinical
 
trials conducted
 
in
 
jurisdictions with
 
broad
 
compensation and
 
medical care
 
requirements could
 
result in
 
increased
overall research costs and adversely affect our ability to conduct clinical trials.
Although the clinical trial process is
 
designed to identify and assess
 
potential side effects, it is always possible
 
that a product, even after
regulatory approval, may
 
exhibit unforeseen side
 
effects, including rare
 
side effects
 
more likely to
 
be seen in
 
commercial use than
 
in
clinical studies. If any of our product candidates were to cause adverse side effects during clinical trials or
 
after approval of the product
candidate, we may be exposed to substantial liabilities. Physicians and patients may not comply with any warnings
 
that identify known
potential adverse effects and patients who should not use our product candidates.
To
 
cover such
 
liability claims,
 
we purchase
 
clinical trial
 
insurances in
 
the conduct
 
of each
 
of our
 
clinical trials
 
(typically conducted
through our
 
CROs). It
 
is possible
 
that our
 
liabilities could
 
exceed our
 
insurance coverage
 
or that
 
our insurance
 
will not
 
cover all
 
situations
in which a claim against
 
us could be made. We also intend to expand
 
our insurance coverage to include
 
the sale of commercial products
if we receive marketing approval for any of
 
our proprietary products. However, we may not be able to maintain
 
insurance coverage at a
reasonable cost or obtain insurance coverage that will be adequate to
 
satisfy any liability that may arise. If a successful product liability
claim or series of claims is brought against
 
us for uninsured liabilities or in excess of
 
insured liabilities, our assets may not be
 
sufficient
to cover such claims and our business operations could be impaired. Should any of the events described above occur, this could
 
have a
material adverse effect on our business, financial condition, results of operations and prospects, including, but not limited to:
•
 
decreased demand for our future product candidates;
•
 
adverse publicity and injury to our reputation;
•
 
withdrawal of clinical trial participants;
•
 
initiation of investigations by regulators;
•
 
costs to defend the related litigation;
•
 
a diversion of management’s time and our resources;
•
 
compensation in response to a liability claim;
•
 
product recalls, withdrawals or labeling, marketing or promotional restrictions;
•
 
loss of revenue;
•
 
exhaustion of any available insurance and our capital resources; and
81
•
 
the inability to commercialize our products or product candidates.
We could be adversely affected if we are
 
subject to negative publicity. We could also be adversely
 
affected if any of our
 
products or any
similar products distributed by other companies prove to be, or are asserted to be, harmful to patients. Any adverse publicity associated
with illness or other adverse
 
effects resulting from patients’ use
 
or misuse of our products
 
or any similar products distributed
 
by other
companies could have a material adverse impact on our business, financial condition, results of operations or prospects.
We
 
will need
 
to expand
 
our organization,
 
and we
 
may experience
 
difficulties
 
in managing
 
this growth,
 
which could
 
disrupt our
operations.
We expect to
 
expand our organization, and as a result, we may encounter difficulties
 
in managing our growth, which could disrupt our
operations. We expect to experience significant growth in the number of our employees and the scope of our operations, particularly in
the areas
 
of clinical
 
development and
 
regulatory affairs,
 
as well
 
as to
 
support our
 
public company
 
operations. For
 
example, we
 
may
build our own focused sales, distribution and marketing infrastructure to
 
market our product candidates, if approved, in markets around
the world,
 
which involves
 
significant expenses
 
and risks.
 
To manage these
 
growth activities,
 
we must
 
continue to
 
implement and
 
improve
our managerial, operational and financial systems, expand our facilities and continue to recruit and
 
train additional qualified personnel.
Our
 
management
 
may
 
need
 
to
 
devote
 
a
 
significant
 
amount of
 
its
 
attention
 
to
 
managing
 
these
 
growth
 
activities. Due
 
to
 
our
 
limited
financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may
not be able to
 
effectively manage the expansion
 
of our operations, retain
 
key employees or identify, recruit and
 
train additional qualified
personnel.
 
Our
 
inability
 
to
 
manage
 
the
 
expansion
 
or
 
relocation
 
of
 
our
 
operations
 
effectively
 
may
 
result
 
in
 
weaknesses
 
in
 
our
infrastructure,
 
give
 
rise
 
to
 
operational
 
mistakes,
 
loss
 
of
 
business
 
opportunities,
 
loss
 
of
 
employees
 
and
 
reduced
 
productivity
 
among
remaining employees. Our expected growth could also require significant capital expenditures and may divert financial resources from
other projects, such as the
 
development of additional product candidates.
 
If we are unable to
 
effectively manage our expected
 
growth,
our expenses may increase more than expected,
 
our ability to generate revenues could be
 
reduced and we may not be able to
 
implement
our business
 
strategy,
 
including the
 
successful development
 
and commercialization
 
of our
 
product candidates.
 
Any of
 
the foregoing
could have
 
a material
 
adverse effect
 
on
 
our business,
 
financial condition,
 
results of
 
operations and
 
prospects. Future
 
growth would
impose significant additional responsibilities on our management, including:
•
 
the need to identify, recruit, maintain, motivate and integrate additional employees, consultants and contractors;
•
 
managing our internal
 
development efforts effectively, including the
 
clinical and regulatory
 
review process for
 
our product
candidates, while complying with our contractual obligations to contractors and other third parties; and
•
 
improving our operational, financial and management controls, reporting systems and procedures. We
 
currently rely, and
for the
 
foreseeable future
 
will continue
 
to rely,
 
in substantial
 
part on
 
certain related
 
parties, independent
 
organizations,
advisors and consultants to
 
provide certain services, including
 
substantially all aspects
 
of regulatory approval, clinical
 
trial
management and manufacturing. There
 
can be no
 
assurance that the
 
services of independent organizations,
 
advisors and
consultants will continue to be available to us on a
 
timely basis when needed, or that we can find qualified replacements.
In addition, if
 
we are unable
 
to effectively
 
manage our outsourced
 
activities or if
 
the quality or
 
accuracy of the
 
services
provided by consultants is
 
compromised for any reason,
 
our clinical trials may
 
be extended, delayed or
 
terminated, and we
may not be able to obtain regulatory approval of our
 
product candidates or otherwise advance our business. There can be
no
 
assurance
 
that
 
we
 
will
 
be
 
able
 
to
 
manage
 
our
 
existing
 
consultants
 
or
 
find
 
other
 
competent
 
outside
 
contractors
 
and
consultants on economically reasonable terms, or
 
at all. If we are not able
 
to effectively expand our organization by hiring
new employees and expanding our
 
groups of consultants and contractors,
 
or we are not
 
able to effectively build
 
out new
facilities to
 
accommodate this
 
expansion, we
 
may not
 
be able
 
to successfully
 
implement the
 
tasks necessary
 
to further
develop
 
and
 
commercialize
 
our
 
product
 
candidates
 
and,
 
accordingly,
 
may
 
not
 
achieve
 
our
 
research,
 
development
 
and
commercialization goals.
Many of the biotechnology and
 
pharmaceutical companies that we compete
 
against for qualified personnel and
 
consultants have greater
financial and other
 
resources, different risk
 
profiles and a
 
longer history in
 
the industry than
 
we do. If
 
we are unable
 
to continue to
 
attract
and retain high-quality
 
personnel and consultants,
 
the rate and
 
success at which
 
we can discover
 
and develop product
 
candidates and
operate our business will be limited.
We only have a limited number of employees to manage and operate our business, which may lead to certain operational issues.
As
 
of
 
December
 
31,
 
2021,
 
we
 
had
 
89
 
full-time
 
employees.
 
Our
 
focus
 
on
 
the
 
development
 
of
 
UB-311,
 
UB-612
 
and
 
other
 
product
candidates requires us to manage and operate our business
 
in a highly efficient manner.
 
We have
 
a limited number of employees upon
which we rely to effectively manage and operate our business and we cannot assure you that operational issues will not arise.
While we intend to identify,
 
recruit, maintain, motivate and integrate additional
 
employees, consultants and contractors to support
 
our
growth, we cannot assure you that
 
we will be able to hire
 
and/or retain adequate staffing levels to develop
 
our product candidates or run
our operations and/or to accomplish all of the objectives that we otherwise would seek to accomplish.
82
If
 
we
 
lose
 
key
 
management
 
or
 
scientific
 
personnel,
 
cannot
 
recruit
 
qualified
 
employees,
 
directors,
 
officers
 
or
 
other
 
significant
personnel or experience increases in our compensation costs, our business may materially suffer.
We
 
are highly dependent on our management and directors.
 
Due to the specialized knowledge each of our
 
officers and key employees
possesses with respect to our product candidates
 
and our operations, the loss of service
 
of any of our officers or directors could delay
 
or
prevent the
 
successful enrollment
 
and completion
 
of our
 
clinical trials.
 
We
 
do not
 
carry key
 
person life
 
insurance on
 
any officers
 
or
directors. In general, the employment
 
arrangements that we have
 
with our executive officers do not
 
prevent them from terminating their
employment with us at any time. Our agreements with our employees generally provide for at-will employment.
In addition,
 
our future
 
success and
 
growth will depend
 
in part on
 
the continued service
 
of our
 
directors, employees and
 
management
personnel
 
and
 
our
 
ability
 
to
 
identify,
 
hire
 
and
 
retain
 
additional
 
personnel.
 
If
 
we
 
lose
 
one
 
or
 
more
 
of
 
our
 
executive
 
officers
 
or
 
key
employees, our
 
ability to
 
implement our
 
business strategy
 
successfully could
 
be seriously
 
harmed. Furthermore,
 
replacing executive
officers
 
and
 
key
 
employees
 
may
 
be
 
difficult
 
or
 
costly
 
and
 
may
 
take
 
an
 
extended
 
period
 
of
 
time
 
because
 
of
 
the
 
limited
 
number
 
of
individuals in our industry with
 
the breadth of skills and experience
 
required to develop, gain regulatory
 
approval of and commercialize
product candidates
 
successfully.
 
Competition to
 
hire from
 
this limited
 
pool is
 
intense, and
 
we may
 
be unable
 
to hire,
 
train, retain
 
or
effectively incentivize these additional key personnel
 
on acceptable terms given the competition among
 
numerous pharmaceutical and
biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from
universities and research
 
institutions. In addition,
 
we rely on consultants
 
and advisors, including
 
scientific and clinical
 
advisors, to assist
us in formulating our research, development and commercialization strategy.
 
Our consultants and advisors may be engaged by entities
other than us and
 
may have commitments under consulting
 
or advisory contracts with other
 
entities that may limit their
 
availability to
us. If we are unable
 
to continue to attract
 
and retain high quality
 
personnel, our ability to
 
develop and commercialize product
 
candidates
will be limited.
Many of our employees have become or will soon become vested in a substantial amount of our Class A
 
common stock or a number of
common stock options.
 
Our employees may
 
be more
 
likely to leave
 
us if
 
the shares
 
they own have
 
significantly appreciated in
 
value
relative to
 
the original purchase
 
prices of the
 
shares, or if
 
the exercise prices
 
of the options
 
that they hold
 
are significantly below
 
the
market price
 
of Class
 
A our
 
common stock,
 
particularly after
 
the expiration
 
of the
 
lock-up agreements
 
in connection
 
with our
 
initial
public offering. Our
 
future success also depends
 
on our ability to
 
continue to attract and
 
retain additional executive officers
 
and other
key employees.
If we engage in future acquisitions, joint ventures or strategic collaborations,
 
this may increase our capital requirements, dilute our
stockholders, cause us to incur debt or assume contingent liabilities and subject us to other risks.
We may evaluate various
 
acquisitions and
 
collaborations, including
 
licensing or
 
acquiring complementary
 
products, intellectual
 
property
rights, technologies, or businesses. Any potential acquisition, joint venture, or collaboration may entail numerous risks, including:
•
 
increased operating expenses and cash requirements;
•
 
the assumption of additional indebtedness or contingent liabilities;
•
 
assimilation of
 
operations, intellectual
 
property and
 
products of
 
an acquired
 
company,
 
including difficulties
 
associated
with integrating new personnel;
•
 
the diversion of
 
our management’s attention from
 
our existing product
 
programs and initiatives
 
in pursuing such
 
a strategic
merger or acquisition;
•
 
retention of
 
key employees,
 
the loss
 
of key
 
personnel and
 
uncertainties in
 
our ability
 
to maintain
 
key business
 
relationships;
•
 
risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their
existing products or investigational medicines and regulatory approvals; and
•
 
our inability to generate
 
revenue from acquired technology
 
or products sufficient to meet
 
our objectives in undertaking
 
the
acquisition or even to offset the associated acquisition and maintenance costs.
In addition, if we undertake acquisitions, we
 
may utilize our cash, issue dilutive securities,
 
assume or incur debt obligations, incur large
one-time expenses and acquire intangible assets that could result in significant future amortization expense.
Moreover, we may not be able to locate suitable
 
acquisition or strategic collaboration opportunities, and this inability could impair our
ability to grow or obtain access to technology or products that may be important to the development of our business.
83
We
 
or
 
the
 
third
 
parties
 
upon
 
whom
 
we
 
depend
 
may
 
be
 
adversely
 
affected
 
by
 
natural
 
disasters
 
or
 
pandemics
 
and
 
our
 
business
continuity and disaster recovery plans may not adequately protect us from a serious disaster.
Natural disasters or pandemics,
 
other than or in
 
addition to COVID-19 and
 
including any potential future
 
waves of COVID-19, could
severely
 
disrupt
 
our
 
operations
 
and
 
have
 
a
 
material
 
adverse
 
effect
 
on
 
our
 
business,
 
results
 
of
 
operations,
 
financial
 
condition
 
and
prospects. For example, our main laboratory is located
 
on the Eastern coast of Florida, a
 
location that is at a higher risk
 
of exposure to
hurricanes. If a hurricane or natural disaster causes us
 
to sustain significant damage to our Florida laboratory,
 
or if we must shut down
our operations there for an extended period of time, our business and financial results would be adversely impacted.
 
If a natural
 
disaster, power
 
outage, pandemic, such as
 
the COVID-19 pandemic, or
 
other event occurred
 
that prevented us from
 
using
all or
 
a significant portion
 
of our
 
headquarters, that damaged
 
critical infrastructure, such
 
as the
 
manufacturing facilities on
 
which we
rely,
 
or that
 
otherwise disrupted
 
operations, it
 
may be
 
difficult or,
 
in certain
 
cases, impossible
 
for us
 
to continue
 
our business
 
for a
substantial period of time. The disaster recovery and business continuity plans we have in place may prove inadequate
 
in the event of a
serious disaster or
 
similar event. We may incur
 
substantial expenses as
 
a result of
 
the limited nature
 
of our disaster
 
recovery and business
continuity plans, which could have a material adverse effect on our business.
Unstable market and economic
 
conditions may have serious
 
adverse consequences on our
 
business, financial condition and
 
share
price.
The
 
global
 
economy,
 
including
 
credit and
 
financial
 
markets,
 
has
 
experienced extreme
 
volatility and
 
disruptions,
 
including
 
severely
diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment
rates and
 
uncertainty about
 
economic stability.
 
For example,
 
the COVID-19
 
pandemic has
 
resulted in
 
widespread unemployment, an
economic slowdown and extreme
 
volatility in the capital
 
markets. While these effects of
 
COVID-19 have abated as countries,
 
including
the United States,
 
have re-opened and
 
the rate of
 
vaccinations have increased,
 
COVID-19 continues to
 
cause significant disruptions
 
both
in the United States and globally. If the equity and credit markets deteriorate, it may make any necessary debt or equity financing more
difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive. In addition, there is a risk that
 
one or more of
our CROs,
 
suppliers, contract
 
manufacturers or
 
other third-party
 
providers may
 
not survive
 
an economic
 
downturn, or
 
that industry
trends with respect to pricing models, supply chains and delivery mechanisms, among
 
other things, deviate from our expectations. As a
result, our business, results of operations and price of our Class A common stock may be adversely affected.
Our insurance policies
 
are expensive and protect
 
us only from some
 
business risks, which leaves
 
us exposed to significant
 
uninsured
liabilities.
Though
 
we
 
have
 
insurance
 
coverage for
 
clinical
 
trial
 
product
 
liability,
 
we
 
do
 
not
 
carry
 
insurance
 
for
 
all
 
categories
 
of
 
risk
 
that
 
our
business may encounter. Some of the policies
 
we currently maintain include general
 
liability, auto, renters’, workers’ compensation and
directors’ and officers’ insurance.
Any additional product liability insurance coverage
 
we acquire in the future may
 
not be sufficient to reimburse
 
us for any expenses or
losses we
 
may suffer. Moreover, insurance
 
coverage is
 
becoming increasingly
 
expensive and
 
in the
 
future we
 
may not
 
be able
 
to maintain
insurance coverage
 
at a
 
reasonable cost
 
or in
 
sufficient amounts
 
to protect
 
us against
 
losses due
 
to liability.
 
If we
 
obtain marketing
approval for
 
any of
 
our product
 
candidates, we
 
intend to
 
acquire insurance
 
coverage to
 
include the
 
sale of
 
commercial products;
 
however,
we may be unable to obtain product
 
liability insurance on commercially reasonable terms
 
or in adequate amounts. A successful product
liability claim
 
or
 
series of
 
claims brought
 
against us
 
could cause
 
our stock
 
price to
 
decline and,
 
if judgments
 
exceed our
 
insurance
coverage,
 
could
 
adversely
 
affect
 
our
 
results
 
of
 
operations
 
and
 
business,
 
including
 
preventing
 
or
 
limiting
 
the
 
development
 
and
commercialization of any product candidates
 
we develop. We
 
do not carry specific biological
 
or hazardous waste insurance
 
coverage,
and our renters’ and general liability insurance policies
 
specifically exclude coverage for damages and fines arising
 
from biological or
hazardous waste exposure or contamination. Accordingly, in the event of contamination or injury,
 
we could be held liable for damages
or be penalized with fines in an amount exceeding our resources, and our clinical trials or regulatory approvals could be suspended.
We also
 
expect that operating as a public company will make it more
 
difficult and more expensive for us to obtain director
 
and officer
liability insurance, and we may
 
be required to accept reduced
 
policy limits and coverage or
 
incur substantially higher costs
 
to obtain the
same or
 
similar coverage.
 
As a
 
result, it
 
may be
 
more difficult
 
for us
 
to attract
 
and retain
 
qualified people
 
to serve
 
on our
 
board of
directors, our board
 
committees or as
 
executive officers. We
 
do not know,
 
however, if
 
we will be
 
able to maintain
 
existing insurance
with adequate levels of coverage. Any significant
 
uninsured liability may require us to
 
pay substantial amounts, which would adversely
affect our cash and cash equivalents position and results of operations.
The
 
ongoing
 
coronavirus
 
pandemic
 
has
 
caused
 
interruptions
 
or
 
delays
 
of
 
our
 
business
 
plan.
 
Delays
 
caused
 
by
 
the
 
coronavirus
pandemic may have a significant adverse effect on our business.
In December 2019,
 
a strain of
 
coronavirus, COVID-19, was
 
reported to have
 
surfaced in Wuhan,
 
China, and on
 
March 12, 2020, the
World Health Organization
 
declared COVID-19 to be a pandemic. In an effort
 
to contain and mitigate the spread of COVID-19, many
countries, including
 
the United
 
States, Canada
 
and China,
 
have imposed
 
unprecedented restrictions
 
on travel,
 
quarantines and
 
other
84
public health safety measures. The extent to
 
which the pandemic may impact our business
 
will depend on future developments, which
are
 
highly uncertain
 
and
 
cannot be
 
predicted,
 
but
 
the
 
development
 
of
 
clinical
 
supply
 
materials
 
could
 
be
 
delayed
 
and
 
enrollment of
patients in our studies may
 
be delayed or suspended, as
 
hospitals and clinics in areas
 
where we are conducting trials
 
shift resources to
cope with the COVID-19
 
pandemic and may limit
 
access or close clinical
 
facilities due to the
 
COVID-19 pandemic. Additionally, if our
trial participants are unable to travel to our clinical study sites as a result
 
of quarantines or other restrictions resulting from the COVID-
19
 
pandemic,
 
we
 
may
 
experience higher
 
drop-out
 
rates
 
or
 
delays
 
in
 
our
 
clinical
 
studies.
 
We
 
have
 
manufacturers
 
and
 
collaboration
partners located in foreign
 
jurisdictions, and travel restrictions
 
have limited, and may
 
continue to limit, our
 
ability to visit their locations
in person and conduct on-site inspections.
Government-imposed quarantines and restrictions may also require us to temporarily suspend or terminate activity at our clinical sites.
Furthermore, if we determine that our trial participants
 
may suffer from exposure to COVID-19
 
as a result of their participation in
 
our
clinical trials, we may voluntarily
 
terminate certain clinical sites as a
 
safety measure until we reasonably believe
 
that the likelihood of
exposure has subsided.
 
As a result,
 
we may encounter
 
difficulties or delays
 
in initiating, enrolling,
 
conducting or completing
 
our planned
and ongoing clinical trials, and our expected development timelines
 
for our product candidates may be negatively impacted. We cannot
predict the ultimate
 
impact of the
 
COVID-19 pandemic as consequences
 
of such an
 
event are highly
 
uncertain and subject
 
to change.
We
 
do not
 
yet know
 
the full
 
extent of
 
potential delays
 
or impacts
 
on our
 
business, our
 
clinical studies
 
or as
 
a whole;
 
however,
 
the
COVID-19 pandemic
 
may materially
 
disrupt or
 
delay our
 
business operations,
 
further divert
 
the attention
 
and efforts
 
of the
 
medical
community
 
to
 
coping
 
with
 
COVID-19,
 
disrupt
 
the
 
marketplace
 
in
 
which
 
we
 
operate,
 
and/or
 
have
 
a
 
material
 
adverse
 
effect
 
on
 
our
operations.
Moreover, the various precautionary measures taken by many governmental authorities around the world in order to limit the spread of
COVID-19 has had and may continue to
 
have an adverse effect on
 
the global markets and global economy generally,
 
including on the
availability and pricing of employees,
 
resources, materials, manufacturing and
 
delivery efforts and other aspects
 
of the global economy.
There have been business
 
closures and a substantial
 
reduction in economic activity
 
in countries that have
 
had significant outbreaks of
COVID-19. Significant uncertainty remains as
 
to the potential impact of the
 
COVID-19 pandemic on the global economy
 
as a whole. It
is currently not possible
 
to predict how long
 
the pandemic will last
 
or the time that
 
it will take for
 
economic activity to return
 
to prior
levels.
 
The COVID-19
 
pandemic could
 
materially disrupt
 
our business
 
and
 
operations, interrupt
 
our sources
 
of
 
supply,
 
hamper our
ability to raise additional funds or sell or securities, continue to slow down the overall economy or curtail consumer spending.
Due to the vaccination rate, the demand for our COVID-19 product candidate may decrease significantly or disappear entirely.
An EUA for
 
UB-612 was denied
 
by the TFDA
 
in August 2021.
 
In addition to
 
appealing that decision,
 
we are exploring
 
paths to approval
of UB-612 as a
 
three-dose regimen and as
 
a heterologous boost
 
(boosting the immunity of
 
a subject who has
 
already received a different
vaccine). Other companies
 
have also responded
 
to the pandemic
 
at a faster pace,
 
and to date more
 
than twenty COVID-19
 
vaccines have
been approved for use in one
 
or more countries around the world,
 
including three in the United States.
 
As our competitors continue to
develop, receive regulatory approval
 
for and commercialize
 
their own COVID-19 vaccines
 
and boosters, vaccination rates
 
will continue
to increase, which
 
will result in
 
a material decrease
 
in demand for
 
our COVID-19 product
 
candidate and a
 
corresponding decrease in
our potential revenues. Further, the existence and significance of the opportunity
 
to provide COVID-19 boosters in the future is highly
uncertain, and there can be no assurance that we will commercially benefit from the development of a COVID-19 booster market.
Risks Related to Our Class A Common Stock
 
An active trading market for our Class A common stock may not continue to be developed or sustained.
Prior to our initial public offering, there was no public market for our Class A
 
common stock.
 
Although our Class A common stock is
now listed on The
 
Nasdaq Global Market, an
 
active trading market for
 
our shares of Class
 
A common stock may
 
never develop or be
sustained.
 
If an
 
active market for
 
our Class
 
A common
 
stock does
 
not develop
 
or is
 
not sustained,
 
it may
 
be difficult
 
for you
 
to sell
shares of our Class A common
 
stock at an attractive price or
 
at all.
 
An inactive market may also impair our
 
ability to raise capital by
selling shares of our
 
common stock, our ability to
 
motivate our employees through
 
equity incentive awards, and our
 
ability to acquire
other companies, products or technologies by using our common stock as consideration for such acquisitions.
The price of
 
our Class A
 
common stock
 
may be volatile
 
and may be
 
affected by market
 
conditions beyond
 
our control, and
 
purchasers
of our Class A common stock could incur substantial losses.
Our results
 
of operations
 
are likely
 
to fluctuate in
 
the future
 
as a
 
publicly traded
 
company.
 
In addition, securities
 
markets worldwide
have experienced, and are likely to continue to
 
experience, significant price and volume fluctuations. This market volatility,
 
as well as
general economic, market or political
 
conditions, could subject the market
 
price of our shares of
 
Class A common stock to
 
wide price
fluctuations
 
regardless
 
of
 
our
 
operating
 
performance,
 
which
 
could
 
cause
 
a
 
decline
 
in
 
the
 
market
 
price
 
of
 
our
 
common
 
stock.
 
Price
volatility may be greater
 
if the public float
 
and trading volume of
 
shares of our Class
 
A common stock is
 
low. Some
 
factors that may
cause the market price of our Class A common stock to fluctuate, in addition to the other risks mentioned in
 
this Report, include:
•
 
our operating and financial performance and prospects;
85
•
 
our
 
announcements or
 
our competitors’
 
announcements regarding
 
new products
 
or
 
services, enhancements,
 
significant
contracts, acquisitions or strategic investments;
•
 
any delay in our development or
 
regulatory filings for our product candidates and
 
any adverse development or perceived
adverse development with respect to the applicable regulatory authority’s review of such filings;
•
 
if any of
 
our product candidates
 
receives an
 
EUA or regulatory
 
approval, the terms
 
of such approval
 
and market acceptance
and demand for such product candidates;
•
 
the success of any efforts to acquire or in-license additional technologies, products or product candidates;
•
 
changes in earnings estimates or recommendations by securities analysts who cover our Class A common stock;
•
 
fluctuations in
 
our financial
 
results or,
 
in the
 
event we
 
provide it
 
from time
 
to time,
 
earnings guidance,
 
or the
 
financial
results or earnings guidance of companies perceived by investors to be similar to us;
•
 
changes
 
in
 
our
 
capital
 
structure,
 
such
 
as
 
future
 
issuances
 
of
 
securities,
 
sales
 
of
 
large
 
blocks
 
of
 
common
 
stock
 
by
 
our
stockholders, including our principal stockholders, or the incurrence of additional debt;
•
 
additions and departure of key personnel;
•
 
any disputes relating
 
to our intellectual
 
property,
 
including any intellectual
 
property infringement lawsuit
 
or opposition,
interference or cancellation proceeding in which we may become involved;
•
 
reputational issues, including reputational issues involving our competitors and their products;
•
 
actions by institutional stockholders;
•
 
changes in general economic and market conditions, including related to the COVID-19 pandemic;
•
 
changes in
 
industry conditions
 
or perceptions
 
or changes
 
in the
 
market outlook
 
for the
 
industry in
 
which we
 
compete,
including changes in the structure of healthcare payment systems; and
•
 
changes in applicable laws, rules or regulations or regulatory actions affecting us or our clients and other dynamics.
These and other factors may cause the market price for shares of our Class A common stock to fluctuate substantially, which may limit
or prevent investors from readily selling their shares of our Class A common stock and may otherwise negatively affect the liquidity of
our Class A common stock. In addition, in the past, when the market price of a stock has been volatile, holders of that stock sometimes
have instituted securities class action litigation against
 
the company that issued the stock.
 
Securities litigation against us, regardless of
the merits or outcome,
 
could result in substantial
 
costs and divert the
 
time and attention of
 
our management from the
 
business, which
could significantly harm our business, results of operation, financial condition or reputation.
86
The dual-class structure of our common stock and
 
the Voting
 
Agreement will have the effect of concentrating voting
 
power, which
will significantly limit
 
stockholders’ ability to
 
influence the outcome
 
of matters submitted
 
to our stockholders
 
for approval, including
the election
 
of our
 
board of
 
directors, the
 
adoption of
 
amendments to
 
our Charter
 
and Bylaws
 
and the
 
approval of
 
any merger,
consolidation, sale of all or substantially all of our assets or other major corporate transaction.
Our Class A common stock has one vote per
 
share, and our Class B common stock has ten
 
votes per share. Our principal stockholders
have entered into the
 
Voting
 
Agreement. Mei Mei Hu,
 
as proxyholder under the
 
Voting
 
Agreement, controls approximately 58.6%
 
of
the total voting power
 
of our outstanding capital
 
stock. The Voting Agreement provides Mei Mei Hu with
 
the authority (and irrevocable
proxies) to direct the vote and vote the shares
 
of capital stock held by the parties to
 
the voting agreement at her discretion on all
 
matters
to be voted upon
 
by stockholders. The voting
 
power covered by the
 
Voting
 
Agreement may increase over
 
time as the UBI
 
Warrant
 
is
exercised and
 
as our
 
principal stockholders exercise
 
or vest
 
equity awards
 
that were outstanding
 
at the time
 
of the
 
completion of our
initial public offering.
 
If all such
 
equity awards
 
held by our
 
principal stockholders
 
had been exercised
 
or vested and
 
exchanged for shares
of common stock and the UBI Warrant
 
had been exercised in full for shares of Class A common stock as of the date
 
of the completion
of our initial public
 
offering, assuming no other
 
equity awards had
 
been exercised or
 
vested, the Voting Agreement would have covered,
in the aggregate
 
as of the
 
completion of our
 
initial public offering,
 
approximately 67.6% of
 
the total voting
 
power of our
 
outstanding
capital stock.
 
As a
 
result, if
 
our principal
 
stockholders retain
 
all or
 
a large
 
portion their
 
common stock,
 
including the
 
common stock
issuable upon the
 
exercise or vesting
 
of such principal
 
stockholders’ outstanding equity
 
awards or upon
 
the exercise of
 
the UBI Warrant,
our principal stockholders will be
 
able to significantly influence (if
 
not control) any action requiring
 
the approval of our stockholders,
including the election
 
of our board
 
of directors, the
 
adoption of amendments
 
to our
 
amended and restated
 
certificate of incorporation
(the
 
“Charter”) and
 
our
 
amended
 
and
 
restated
 
bylaws
 
(the
 
“Bylaws”)
 
and
 
the
 
approval
 
of
 
any
 
merger,
 
consolidation,
 
sale
 
of
 
all
 
or
substantially all of our assets or other major corporate transaction. Assuming our principal stockholders
 
retain their equity interests and
the Voting Agreement remains in
 
effect, our principal
 
stockholders will
 
effectively control all
 
such matters submitted
 
to the stockholders
for the
 
foreseeable future.
 
Our principal
 
stockholders will
 
also have
 
the voting
 
power to
 
determine the
 
composition of
 
our board
 
of
directors, which in turn will be able to determine matters affecting us, including, among others:
•
 
any determination with respect to our business direction and policies, including the appointment and removal of officers;
•
 
the adoption of amendments to our Charter and Bylaws;
•
 
determinations with respect to mergers, business combinations or disposition of assets;
•
 
compensation and benefit programs and other human resources policy decisions;
•
 
the payment of dividends on our common stock; and
•
 
determinations with respect to tax matters.
Our principal stockholders may have interests that differ from yours and may vote in a way with which you
 
disagree and which may be
adverse to your interests. This concentrated
 
control may have the effect
 
of delaying, preventing or deterring
 
a change in control of the
Company, could deprive our stockholders of
 
an opportunity to receive
 
a premium for their
 
capital stock as part
 
of a sale in
 
the Company
and
 
might ultimately
 
affect
 
the market
 
price
 
of
 
our
 
Class A
 
common
 
stock. In
 
addition, each
 
share of
 
Class
 
B
 
common
 
stock
 
will
automatically convert into
 
one share of
 
Class A common
 
stock upon
 
any transfer,
 
whether or not
 
for value
 
and whether voluntary
 
or
involuntary or by operation of law,
 
except for certain transfers described in our Charter,
 
including, without limitation, certain transfers
for tax and estate planning purposes. Such issuances will be dilutive to holders of our Class A common stock.
 
We are an “emerging growth company”
 
and a “smaller reporting
 
company” and will be
 
able to avail ourselves
 
of reduced disclosure
requirements applicable to emerging growth companies
 
and smaller reporting companies, which could
 
make our Class A common
stock less attractive to investors and adversely affect the market price of our Class A common stock.
We are an “emerging growth company,”
 
as defined in the JOBS Act. We will remain an emerging growth company until the earliest of
(i) the last day of the fiscal year
 
in which we have annual gross revenues of
 
$1.07 billion or more; (ii) the date on which
 
we have issued
more than $1.0 billion in
 
non-convertible debt in the
 
previous three years; (iii)
 
the date we qualify
 
as a “large
 
accelerated filer” under
the Exchange Act,
 
which would occur
 
at the
 
end of
 
a given
 
fiscal year
 
if the market
 
value of
 
our common
 
stock that is
 
held by
 
non-
affiliates is $700 million
 
or more as
 
of the last
 
business day of
 
the second fiscal
 
quarter of such
 
year (and we
 
have been a
 
public company
for at
 
least 12
 
months and
 
have filed
 
one annual
 
report on
 
Form 10-K);
 
and (iv)
 
the last
 
day of
 
the fiscal
 
year ending
 
after the
 
fifth
anniversary of our initial public offering.
 
For so long as we
 
remain an emerging growth
 
company, we
 
are permitted and intend to
 
rely
on
 
exemptions
 
from
 
certain
 
disclosure
 
requirements
 
that
 
are
 
applicable
 
to
 
other
 
public
 
companies
 
that
 
are
 
not
 
emerging
 
growth
companies. These exemptions include:
•
 
not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;
87
•
 
not being
 
required to
 
comply with
 
any requirement
 
that may
 
be adopted
 
by the
 
Public Company
 
Accounting Oversight
Board regarding
 
mandatory audit
 
firm rotation
 
or a
 
supplement to
 
the auditor’s
 
report providing
 
additional information
about the audit and the financial statements;
•
 
being required
 
to provide
 
only two
 
years of
 
audited financial
 
statements in
 
addition to
 
any required
 
unaudited interim
financial statements;
•
 
permitting
 
an
 
extended
 
transition
 
period
 
for
 
complying
 
with
 
new
 
or
 
revised
 
accounting
 
standards,
 
which
 
allows
 
an
emerging growth
 
company to
 
delay the
 
adoption of
 
certain accounting
 
standards until
 
those standards
 
would otherwise
apply to private companies;
•
 
reduced disclosure obligations regarding executive compensation; and
•
 
exemptions
 
from
 
the
 
requirements
 
of
 
holding
 
a
 
nonbinding
 
advisory vote
 
on
 
executive
 
compensation
 
and
 
shareholder
approval of any golden parachute payments not previously approved.
We
 
may choose
 
to take
 
advantage of
 
some, but
 
not all,
 
of the
 
available exemptions.
 
We
 
have elected
 
to use
 
the extended
 
transition
period for new or revised accounting standards during the period in which we remain an emerging growth company.
 
To the extent that
we continue to qualify as a “smaller reporting company,” as such term is defined in Rule 12b-2 under the Exchange Act, after we cease
to qualify as an emerging growth company, we will continue
 
to be permitted to make certain
 
reduced disclosures in our periodic reports
and other documents that we file
 
with the SEC. We cannot predict whether investors will find our
 
Class A common stock less attractive
as a result of
 
our reliance on these
 
exemptions. If some investors find
 
our Class A common
 
stock less attractive as
 
a result, there may
be a less active trading market for our Class A common stock and our stock price may be more volatile.
As long as
 
our principal stockholders
 
hold a majority
 
of the voting
 
power of our
 
capital stock, we
 
may rely on
 
certain exemptions
from the corporate governance requirements of the Nasdaq available for “controlled companies.”
We
 
are a
 
“controlled company”
 
within the
 
meaning of
 
the corporate
 
governance requirements
 
of
 
the Nasdaq
 
because our
 
principal
stockholders will continue to hold more than 50% of the voting power of our outstanding shares of capital stock as a result of our dual-
class
 
common
 
stock
 
structure
 
and
 
the
 
Voting
 
Agreement.
 
A
 
controlled
 
company
 
may
 
elect
 
not
 
to
 
comply
 
with
 
certain
 
corporate
governance requirements
 
of the
 
Nasdaq. Accordingly,
 
our board
 
of directors
 
will not
 
be required
 
to have
 
a majority
 
of independent
directors
 
and
 
our
 
Compensation
 
Committee
 
and
 
Nominating
 
and
 
Governance
 
Committee
 
will
 
not
 
be
 
required
 
to
 
meet
 
the
 
director
independence
 
requirements
 
to
 
which
 
we
 
would
 
otherwise
 
be
 
subject
 
until
 
such
 
time
 
as
 
we
 
cease
 
to
 
be
 
a
 
“controlled
 
company.”
Accordingly, you
 
will not have certain of
 
the protections afforded to stockholders
 
of companies that are subject
 
to all of the
 
corporate
governance requirements of the Nasdaq.
Your percentage ownership in us may
 
be diluted by
 
future issuances of
 
capital stock, which
 
could reduce your
 
influence over matters
on which stockholders vote.
Pursuant to our Charter and Bylaws, our
 
board of directors has the authority,
 
without action or vote of our
 
stockholders, to issue all or
any part of our authorized
 
but unissued shares of common
 
stock, including shares issuable upon
 
the exercise of options, or
 
shares of our
authorized but
 
unissued preferred
 
stock. Issuances of
 
shares of
 
common stock
 
or shares
 
of voting
 
preferred stock
 
would reduce
 
your
influence over matters on which our
 
stockholders vote and, in the case
 
of issuances of shares of
 
preferred stock, would likely result in
your interest in us being subject to the prior rights of holders of that preferred stock.
Future sales of a substantial number of shares of our Class A common stock may depress the price of our shares.
If our stockholders sell a large
 
number of shares of our Class
 
A common stock, or if we
 
issue a large number of
 
shares of our Class A
common
 
stock in
 
connection with
 
future acquisitions,
 
financings or
 
other
 
circumstances, the
 
market price
 
of
 
shares of
 
our
 
Class A
common stock could decline significantly. Moreover, the perception in
 
the public market that our stockholders might sell shares of our
Class A common
 
stock could
 
depress the market
 
price of those
 
shares. In
 
addition, sales
 
of a substantial
 
number of shares
 
of our common
stock by our principal stockholders could adversely affect the market price of our Class A common stock.
We
 
do not anticipate
 
declaring or paying
 
regular dividends on
 
our Class A
 
common stock in
 
the near term,
 
and any indebtedness
could limit our ability to pay dividends on our Class A common stock.
We have never declared and do
 
not anticipate declaring
 
or paying regular cash
 
dividends on our Class
 
A common stock
 
in the near term.
We currently intend to use our future earnings, if any, to pay any debt obligations, to fund our growth and develop our business and for
general corporate purposes. Therefore, you
 
are not likely to receive
 
any cash dividends on your
 
Class A common stock in
 
the near term,
and the success of an investment in shares
 
of our Class A common stock will
 
depend upon any future appreciation in their value,
 
which
is not certain to
 
occur. There is no guarantee
 
that shares of
 
our Class A common
 
stock will appreciate
 
in value or even
 
maintain the price
at which they are initially offered. Any
 
future declaration and payment of cash dividends or other
 
distributions of capital will be at the
88
discretion of our board of directors and the payment of any
 
future cash dividends or other distributions of capital will depend on many
factors, including our financial condition, earnings, cash needs, regulatory constraints, capital requirements (including
 
requirements of
our subsidiaries) and any
 
other factors that our
 
board of directors deems relevant
 
in making such a determination.
 
We cannot assure you
that we will
 
establish a dividend
 
policy or pay
 
cash dividends in
 
the future or
 
continue to pay
 
any cash dividend
 
if we do
 
commence
paying cash dividends pursuant to a dividend policy or otherwise.
Our Charter designates courts in the State of Delaware as the sole and exclusive forum for certain types
 
of actions and proceedings
that may be
 
initiated by our stockholders,
 
and also provide
 
that the federal district
 
courts will be
 
the exclusive forum
 
for resolving
any complaint
 
asserting a
 
cause of
 
action arising
 
under the
 
Securities Act,
 
each of
 
which could
 
limit our
 
stockholders’ ability
 
to
choose the judicial forum for disputes with us or our directors, officers, stockholders or employees.
Our Charter provides that, subject
 
to limited exceptions, the Court
 
of Chancery for the State
 
of Delaware or other specified courts
 
in the
State of Delaware will be the sole and exclusive forum to the fullest extent of the law for:
•
 
any derivative action or proceeding brought on our behalf;
•
 
any action asserting a claim of breach
 
of a fiduciary duty owed by any
 
of our directors, officers or other
 
employees to us
or our stockholders;
•
 
any action asserting
 
a claim against
 
us arising pursuant
 
to any provision
 
of the Delaware
 
General Corporation Law
 
(the
“DGCL”), our Charter or our Bylaws;
•
 
any action to interpret, apply, enforce or determine the validity of our Charter or Bylaws; and
•
 
any other action asserting a claim against us that is governed by the internal affairs doctrine.
Our Charter also provides that the federal district
 
courts of the United States of America
 
will be the exclusive forum for the
 
resolution
of
 
any complaint
 
asserting a
 
cause of
 
action against
 
us
 
or any
 
of our
 
directors, officers,
 
employees or
 
agents and
 
arising under
 
the
Securities Act.
 
However, Section 22
 
of the Securities
 
Act provides
 
that federal
 
and state
 
courts have
 
concurrent jurisdiction
 
over lawsuits
brought pursuant to the Securities Act or the rules and regulations thereunder.
 
To the extent the
 
exclusive forum provision restricts the
courts in which claims arising under the Securities Act may be brought, there is uncertainty as to whether a court would enforce such a
provision. We
 
note that
 
investors cannot
 
waive compliance
 
with the
 
federal securities
 
laws and
 
the rules
 
and regulations
 
thereunder.
This provision does not apply to claims brought under the Exchange Act.
Any person or entity purchasing or otherwise acquiring any interest in shares of our capital
 
stock shall be deemed to have notice of and
to have consented to
 
these provisions. These provisions
 
may limit a stockholder’s ability
 
to bring a claim in
 
a judicial forum that it
 
finds
favorable for
 
disputes with
 
us or
 
our directors,
 
officers or
 
other employees,
 
which may
 
discourage such
 
lawsuits against
 
us and
 
our
directors, officers and employees. Alternatively, if a court were
 
to find these provisions of
 
our Charter inapplicable to, or unenforceable
in respect of, one or more of
 
the specified types of actions or
 
proceedings, we may incur additional costs
 
associated with resolving such
matters in other jurisdictions, which could adversely affect our business or financial condition.
Delaware law and provisions in our Charter and Bylaws might discourage, delay or prevent a change in control of the Company or
changes in our management and, therefore, depress the trading price of our Class A common stock.
Provisions of
 
our Charter
 
and Bylaws
 
and of
 
state law
 
may delay,
 
deter, prevent
 
or render
 
more difficult
 
a takeover
 
attempt that
 
our
stockholders might consider in their best interests, including the following provisions:
•
 
our
 
dual-class
 
common
 
stock
 
structure
 
and
 
the
 
Voting
 
Agreement,
 
which
 
provide
 
our
 
principal
 
stockholders
 
with
 
a
majority of the
 
voting power of
 
our capital stock
 
will enable our
 
principal stockholders to
 
influence the outcome
 
of matters
submitted to our stockholders for
 
approval even if they own
 
significantly less than a majority
 
of the number of shares
 
of
our outstanding common stock;
•
 
our Charter does not provide for cumulative voting in the election of directors;
•
 
vacancies on our board of directors may be filled only by our board of directors and not by stockholders;
•
 
our
 
stockholders
 
may
 
act
 
by
 
written
 
consent
 
only
 
so
 
long
 
as
 
the
 
Voting
 
Agreement
 
is
 
in
 
effect
 
and
 
our
 
principal
stockholders hold a majority of the voting power of then-outstanding shares of our capital stock;
•
 
a special meeting of our
 
stockholders may only be called
 
by the chairperson of our
 
board of directors, our Chief
 
Executive
Officer, our President, a
 
majority of
 
our board of
 
directors or, so
 
long as the
 
Voting Agreement is in effect
 
and our principal
stockholders hold a majority of the voting power of then-outstanding shares of our capital stock, our stockholders;
89
•
 
amendments
 
to
 
certain
 
provisions
 
of
 
our
 
Charter
 
and
 
stockholder-proposed
 
amendments
 
to
 
our
 
Bylaws
 
require
 
the
affirmative vote of
 
the holders of at
 
least 66 2/3% in
 
voting power of all
 
the then outstanding shares
 
of our capital stock
entitled to vote thereon at any time the Voting
 
Agreement is not in effect or our principal stockholders do not hold, in the
aggregate, a majority of the voting power of then-outstanding shares of our capital stock;
•
 
our Charter authorizes our board of
 
directors, subject to the limitations imposed by
 
Delaware law or the Nasdaq’s
 
listing
rules, without any further vote
 
or action by our stockholders,
 
to issue preferred stock in one
 
or more series and to
 
fix the
designations, powers, preferences, limitations and rights of the shares of each series; and
•
 
advance notice
 
procedures apply
 
for stockholders
 
to nominate
 
candidates for
 
election as
 
directors or
 
to bring
 
matters before
an annual meeting of stockholders.
Such provisions or laws may prevent our stockholders from receiving the benefit from any premium to the market price of our Class A
common stock offered
 
by a bidder
 
in a takeover
 
context. Even in
 
the absence of
 
a takeover attempt,
 
the existence of
 
these provisions
may adversely affect the prevailing market price of our Class A common stock if they are viewed as discouraging takeover attempts in
the future.
Provisions
 
in
 
our
 
Charter
 
and
 
Bylaws,
 
including
 
the
 
dual-class
 
structure
 
of
 
our
 
common
 
stock,
 
might
 
discourage
 
or
 
prevent
institutional investors from purchasing or holding our Class A common stock, and,
 
therefore, depress the trading price of our Class
A common stock.
Our governance structure and
 
our Charter may negatively
 
affect the decision by certain
 
institutional investors to purchase
 
or hold shares
of
 
our
 
Class A
 
common
 
stock.
 
The holding
 
of
 
low-voting stock,
 
such
 
as our
 
Class A
 
common stock,
 
may
 
not
 
be
 
permitted by
 
the
investment policies of certain institutional investors
 
or may be less attractive to the portfolio
 
managers of certain institutional investors.
In addition, in July 2017, FTSE
 
Russell and Standard & Poor’s announced
 
that they would cease to allow
 
most newly public companies
utilizing dual- or
 
multi-class capital structures
 
to be included
 
in their indices.
 
Affected indices
 
include the Russell
 
2000 and the
 
S&P
500, S&P MidCap
 
400 and S&P
 
SmallCap 600, which
 
together make
 
up the S&P
 
Composite 1500.
 
Our dual-class common
 
stock capital
structure may make us ineligible for inclusion
 
in any of these and certain other
 
indices, and as a result, mutual funds,
 
exchange-traded
funds and
 
other investment
 
vehicles that
 
attempt to
 
passively track
 
these indices
 
would not
 
invest in
 
our stock.
 
These policies
 
may
depress our valuation compared to those of other similar companies that are included in such indices.
If securities or
 
industry analysts do
 
not publish research
 
or publish inaccurate
 
or unfavorable research
 
about us, our
 
business or
our market, or if
 
they change their recommendation regarding our
 
Class A common stock adversely,
 
the trading price and trading
volume of our Class A common stock could decline.
The trading
 
market for our
 
Class A
 
common stock will
 
depend in
 
part on
 
the research and
 
reports that securities
 
or industry
 
analysts
publish about us, our business, our market
 
or our competitors. If no or few securities
 
or industry analysts cover us, the price and
 
trading
volume of our
 
Class A
 
common stock likely
 
would be negatively
 
impacted. If one
 
or more
 
of the securities
 
or industry analysts
 
who
cover us downgrade our Class A common stock or publish
 
inaccurate or unfavorable research about us, the trading
 
price of our Class A
common stock
 
would likely
 
decline. If
 
analysts publish
 
target prices
 
for our
 
Class A
 
common stock
 
that are
 
below our
 
then-current
public price of
 
our Class A
 
common stock,
 
it could cause
 
the trading price
 
of our Class
 
A common stock
 
to decline significantly. Further,
if one
 
or more
 
of these
 
analysts cease
 
coverage of
 
the Company
 
or fail
 
to publish
 
reports on
 
us regularly,
 
demand for
 
our Class
 
A
common stock could decrease, which might cause our Class A common stock trading price and trading volume to decline.
General Risk Factors
We
 
incur increased costs as a
 
result of operating as
 
a public company,
 
and our management is
 
required to devote substantial
 
time
to new compliance initiatives.
As a public company, and particularly after we are no longer an “emerging
 
growth company” or “smaller reporting company,” we will
incur significant legal, accounting and other expenses that we
 
did not incur as a private company.
 
In addition, the Sarbanes-Oxley Act
and
 
rules
 
subsequently
 
implemented
 
by
 
the
 
SEC
 
and
 
the
 
Nasdaq
 
impose
 
various
 
requirements
 
on
 
public
 
companies,
 
including
establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our
 
management and
other personnel need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have
increased our legal and financial compliance costs and will make some activities more time- consuming and costly. For example, these
rules and regulations have made it more difficult and more expensive for us to obtain director and officer liability insurance.
Pursuant to
 
Section 404,
 
we are
 
required to
 
furnish a
 
report by
 
our management
 
on our
 
internal control
 
over financial
 
reporting, including
an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. However,
while we remain an
 
emerging growth company, we will not be
 
required to include an
 
attestation report on internal
 
control over financial
reporting issued by our
 
independent registered public accounting
 
firm. To
 
achieve compliance with Section
 
404 within the prescribed
90
period, we
 
are engaged
 
in a
 
process to
 
document and
 
evaluate our
 
internal control
 
over financial
 
reporting, which
 
is both
 
costly and
challenging. Further,
 
despite our
 
efforts, there
 
is a
 
risk that
 
neither we
 
nor our
 
independent registered public
 
accounting firm
 
will be
able to
 
conclude within
 
the prescribed
 
timeframe that
 
our internal
 
control over
 
financial reporting
 
is effective
 
as required
 
by Section
404.
 
This
 
could
 
result
 
in
 
an
 
adverse
 
reaction
 
in
 
the
 
financial
 
markets
 
due
 
to
 
a
 
loss
 
of
 
confidence
 
in
 
the
 
reliability
 
of
 
our
 
financial
statements. In addition, if we are not able to continue to meet these requirements, we may not be able to remain listed on the Nasdaq.
Our internal controls
 
over financial reporting
 
are not currently
 
effective and our independent
 
registered public accounting
 
firm may
not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.
Upon becoming
 
a public
 
company,
 
we are
 
now required
 
to comply
 
with the
 
SEC’s
 
rules implementing
 
Sections 302
 
and 404
 
of the
Sarbanes-Oxley Act, which will require management to certify financial
 
and other information in our quarterly and annual
 
reports and
provide an
 
annual management
 
report on
 
the effectiveness
 
of internal
 
control over
 
financial reporting.
 
Although we
 
are required
 
to
disclose changes that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting
on a quarterly basis,
 
we will not be
 
required to make our
 
first annual assessment of
 
our internal control over
 
financial reporting pursuant
to Section 404 until at least
 
our second annual report required to
 
be filed with the SEC, and
 
we are not required to have
 
our independent
registered public
 
accounting firm
 
formally assess
 
our internal
 
controls for
 
as long
 
as we
 
remain an
 
“emerging growth
 
company” as
defined in the JOBS Act.
When formally
 
evaluating our
 
internal controls
 
over financial
 
reporting, we
 
have identified
 
and may
 
identify further
 
material weaknesses
that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of
Section 404
 
of the
 
Sarbanes-Oxley Act. In
 
addition, if
 
we fail
 
to achieve
 
and maintain
 
the adequacy
 
of our
 
internal controls,
 
as such
standards are modified, supplemented or amended from time to time, we may
 
not be able to ensure that we can conclude on an ongoing
basis that we
 
have effective
 
internal controls over
 
financial reporting in
 
accordance with Section
 
404 of the
 
Sarbanes-Oxley Act. We
cannot be certain as to the timing of completion of our evaluation, testing and any
 
remediation actions or the impact of the same on our
operations. If
 
we are
 
not able
 
to implement
 
the requirements
 
of Section
 
404 of
 
the Sarbanes-Oxley
 
Act in
 
a timely
 
manner or
 
with
adequate compliance,
 
our independent
 
registered public
 
accounting firm
 
may issue
 
an adverse
 
opinion due
 
to ineffective
 
internal controls
over financial
 
reporting, and
 
we may
 
be subject
 
to sanctions
 
or investigation
 
by regulatory
 
authorities, such
 
as the
 
SEC. As
 
a result,
there could be
 
a negative reaction
 
in the financial
 
markets due to
 
a loss of
 
confidence in the
 
reliability of our
 
financial statements. In
addition, we may be required
 
to incur additional costs in
 
improving our internal control system and
 
the hiring of additional personnel.
Any such action could have a significant and adverse effect on our business and
 
reputation, which could negatively affect our results of
operations or cash flows.
Further, we believe that any disclosure controls and procedures or internal controls
 
and procedures, no matter how well-conceived and
operated,
 
can
 
provide
 
only
 
reasonable,
 
not
 
absolute,
 
assurance
 
that
 
the
 
objectives
 
of
 
the
 
control
 
system
 
are
 
met.
 
These
 
inherent
limitations include the facts that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or
mistake. Additionally,
 
controls can be circumvented by
 
the individual acts of
 
some persons, by collusion of
 
two or more people or
 
by
an unauthorized override of
 
the controls. Accordingly,
 
because of the inherent
 
limitations in our control
 
system, misstatements due to
error or fraud may occur and not be detected.
We have
 
identified material weaknesses in our internal control over financial
 
reporting. If we are unable to remediate our existing
material weaknesses
 
and otherwise
 
develop and
 
maintain an
 
effective system
 
of internal
 
control over
 
financial reporting,
 
we may
not be
 
able to
 
accurately report
 
our financial
 
results or
 
prevent fraud,
 
and as
 
a result,
 
shareholders could
 
lose confidence
 
in our
financial and other public reporting, which would harm our business and the trading price of our Class A common
 
stock.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate
disclosure
 
controls and
 
procedures,
 
are designed
 
to prevent
 
fraud. Any
 
failure
 
to
 
implement required
 
new
 
or
 
improved
 
controls, or
difficulties
 
encountered
 
in
 
their implementation,
 
could
 
cause
 
us
 
to
 
fail
 
to
 
meet
 
our
 
reporting obligations.
 
A
 
material weakness
 
is
 
a
deficiency or a combination of
 
deficiencies in internal control over
 
financial reporting such that there
 
is a reasonable possibility that
 
a
material misstatement of our financial statements will not be prevented or detected on a timely basis.
 
During the
 
preparation of
 
our audited
 
consolidated financial
 
statements for
 
the year
 
ended December
 
31, 2021,
 
we identified
 
certain
errors in
 
our previously
 
issued financial
 
statements that
 
were determined
 
not to
 
be material.
 
Further, as
 
disclosed in
 
Item 9A
 
of this
Report,
 
we
 
identified
 
material
 
weaknesses
 
in
 
the
 
design
 
and
 
operation
 
of
 
our
 
internal
 
control
 
over
 
financial
 
reporting
 
relating
 
to
maintaining and performing our financial close process, ensuring
 
that formal processes exist for identifying, analyzing and accounting
for complex, non-routine
 
transactions and proper
 
segregation of duties
 
and responsibilities within
 
our finance department.
 
We
 
are in
the process of
 
implementing measures designed
 
to improve internal
 
control over financial
 
reporting to remediate
 
the control deficiencies
that led to these material weaknesses.
 
We cannot assure you that we will be able to successfully
 
remediate these material weaknesses or
other material weaknesses that may be discovered in the future. If we are
 
unable to successfully remediate these issues or future issues
or if
 
we fail
 
to design
 
and operate
 
effective internal
 
controls, it
 
could result
 
in material
 
misstatements or
 
omissions in
 
our financial
statements and potentially require us to restate
 
our financial statements, which may result in
 
the trading value of our Class
 
A common
stock being materially adversely affected.
 
 
 
 
91
If
 
our
 
estimates
 
or
 
judgments
 
relating
 
to
 
our
 
critical
 
accounting
 
policies
 
are
 
based
 
on
 
assumptions
 
that
 
change
 
or
 
prove
 
to
 
be
incorrect, our
 
operating results
 
could fall
 
below our
 
publicly announced
 
guidance or
 
the expectations
 
of securities
 
analysts and
investors, resulting in a decline in the market price of our Class A common stock.
The
 
preparation
 
of
 
financial
 
statements
 
in
 
conformity
 
with
 
U.S.
 
generally
 
accepted
 
accounting
 
principles
 
(“GAAP”)
 
requires
management
 
to
 
make
 
estimates
 
and
 
assumptions
 
that
 
affect
 
the
 
amounts
 
reported
 
in
 
our
 
consolidated
 
financial
 
statements
 
and
accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe
 
to be reasonable
under the circumstances, the
 
results of which form
 
the basis for making
 
judgments about the carrying
 
values of assets, liabilities,
 
equity,
revenue and expenses that are not readily apparent from other sources. If our assumptions
 
change or if actual circumstances differ from
our
 
assumptions,
 
our
 
operating
 
results
 
may
 
be
 
adversely
 
affected
 
and
 
could
 
fall
 
below
 
our
 
publicly
 
announced
 
guidance
 
or
 
the
expectations of securities analysts and investors, resulting in a decline in the market price of our Class A common
 
stock.
 
Item 1B. Unresolved Staff Comments.
None.
 
Item 2. Properties.
Facilities
Our principal executive offices are located
 
in Dallas, Texas, where we sublease 3,631 square
 
feet of office space from UBI. UBI’s lease
for the premises is currently
 
scheduled to terminate in January 2023.
 
In addition to our principal executive
 
offices, we have additional
offices in
 
Florida and Taiwan.
 
We
 
do not currently
 
own any real
 
property.
 
We
 
believe that our
 
current facilities are
 
adequate to meet
our immediate needs
 
and believe that
 
we should be
 
able to renew
 
each of our
 
leases and subleases
 
without an adverse
 
impact on
 
our
operations.
 
In
 
addition,
 
we
 
believe
 
that
 
if
 
we
 
require
 
additional
 
office
 
space
 
or
 
manufacturing
 
facilities,
 
we
 
will
 
be
 
able
 
to
 
obtain
additional facilities on commercially reasonable terms.
 
Item 3. Legal Proceedings.
From time to
 
time we are
 
a party to
 
various litigation matters
 
incidental to the
 
conduct of our
 
business. We
 
are not presently
 
party to
any legal
 
proceedings the
 
resolution of
 
which we
 
believe would
 
have a
 
material adverse
 
effect on
 
our business,
 
prospects, financial
condition, liquidity, results of operation, cash flows or capital levels.
 
Item 4. Mine Safety Disclosures.
The disclosure required by this item is not applicable.
 
 
 
 
92
PART
 
II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Price for the Common Stock
Our Class A
 
common stock is
 
listed on the
 
Nasdaq Global Market
 
under the symbol
 
“VAXX
 
.” As of
 
March 24, 2022, the
 
number of
shares of
 
our Class
 
A common
 
stock outstanding
 
was 111
 
,966,892 held
 
by approximately
 
135 shareholders
 
of record,
 
not including
shareholders whose shares are held in securities position listings.
 
Our Class B common stock is not listed on any exchange nor traded on any public market.
 
As of March 24, 2022, the number of shares
of our Class B common stock outstanding was 13,874,132 held by approximately 4 shareholders of record.
Dividends
We
 
have never declared or paid,
 
and do not anticipate declaring
 
or paying in the foreseeable
 
future, any cash dividends on
 
our capital
stock. Any future determination to declare and pay cash dividends will be at the discretion of our board of directors in accordance with
applicable laws and
 
will depend on,
 
among other things,
 
our financial condition,
 
results of operations,
 
cash requirements, contractual
restrictions and
 
such other
 
factors as
 
our board
 
of directors
 
deems relevant.
 
Our ability
 
to pay
 
dividends may
 
also be
 
limited by
 
covenants
of any future outstanding indebtedness we or our subsidiaries incur.
Issuer Purchases of Equity Securities
 
We did not repurchase any shares during the years ended December 31, 2021, 2020, or 2019.
Unregistered Sales of Equity Securities
There were no unregistered sales of equity securities during the fourth quarter of 2021.
Use of Proceeds
On November 15, 2021, the Company closed
 
its IPO, as discussed in Note 1 of
 
our consolidated financial statements for the
 
year ended
December 31, 2021. The
 
aggregate net proceeds to us
 
from the offering, after
 
deducting underwriting discounts and commissions
 
and
other offering expenses
 
payable by us,
 
was approximately $71.1
 
million. The proceeds
 
from our IPO
 
have been invested
 
primarily in
money market accounts.
 
There has been
 
no material change
 
in the expected
 
use of the
 
net proceeds from
 
our IPO as
 
described in our
prospectus filed pursuant to Rule 424(b)(4) under the Securities Act with the SEC on November 12, 2021.
 
Item 6. [Reserved].
 
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read together with our
consolidated financial statements and related notes and other financial information appearing elsewhere in this Annual Report. We
intend for this discussion to provide you with information that will assist you in understanding our consolidated financial statements,
the changes in key items in those consolidated financial statements from year to year and the primary factors that accounted for those
changes.
Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including
information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that
involve risks, uncertainties and assumptions. See the section of this Annual Report titled “Special Note Regarding Forward-Looking
Statements” for a discussion of forward-looking statements. As a result of many factors, including those factors set forth in the “Risk
Factors” section of this Annual Report, our actual results could differ materially from management’s
 
expectations and the results
described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
Vaxxinity is engaged in the development and commercialization of
 
rationally designed prophylactic and
 
therapeutic vaccines to combat
chronic disorders
 
and infectious
 
diseases with
 
large patient
 
populations and
 
unmet medical
 
needs. While
 
vaccines have
 
traditionally
been unable
 
to effectively
 
and safely
 
combat such
 
disorders, we
 
believe our
 
platform could
 
overcome the
 
traditional hurdles
 
facing
vaccines in this area.
 
Our Vaxxine
 
Platform relies on a synthetic peptide vaccine technology first developed by UBI and subsequently
refined over the last two decades. We
 
believe our vaccines have the potential to combat
 
conditions that have not yet been successfully
93
treated, or
 
which have
 
primarily been
 
addressed with
 
monoclonal antibodies
 
(mAbs) which,
 
while generally
 
effective, are
 
extremely
costly and
 
cumbersome, and
 
thus have
 
limited accessibility.
 
Our pipeline
 
primarily consists
 
of five
 
programs focused
 
on chronic
 
disease,
particularly neurodegenerative
 
disorders, in
 
addition to
 
other neurology
 
and cardiovascular
 
indications. Given
 
the global
 
COVID-19
pandemic and
 
our Vaxxine
 
Platform’s
 
applicability to
 
infectious disease,
 
we are
 
also opportunistically
 
advancing product
 
candidates
that address SARS-CoV-2.
We separated our
 
business from
 
UBI through
 
two separate
 
transactions: a
 
spin-out from
 
UBI in
 
2014 of
 
operations focused
 
on developing
chronic
 
disease
 
product
 
candidates
 
that
 
resulted
 
in
 
UNS,
 
and
 
a
 
second
 
spin-out
 
from
 
UBI
 
in
 
2020
 
of
 
operations
 
focused
 
on
 
the
development of a COVID-19 vaccine that
 
resulted in COVAXX.
 
On February 2, 2021, Vaxxinity
 
was incorporated for the purpose of
reorganizing
 
and combining
 
UNS and
 
COVAXX
 
and did
 
so on
 
March 2,
 
2021 through
 
the Reorganization.
 
In connection
 
with the
Reorganization, (i) all outstanding shares of UNS and COVAXX preferred stock and common stock were contributed to Vaxxinity
 
and
exchanged for an aggregate
 
of 57,702,458 shares of
 
our Class A common
 
stock, 10,999,149 shares of
 
our Class B common
 
stock and
58,175,751
 
shares of our Series
 
A preferred stock, (ii) the
 
outstanding options to purchase
 
shares of UNS and COVAXX common stock
were terminated
 
and substituted
 
with options
 
to purchase
 
an aggregate
 
of 19,712,504
 
shares of
 
our Class
 
A common
 
stock, (iii)
 
the
outstanding warrant to purchase shares of
 
COVAXX
 
common stock was cancelled and exchanged for
 
a warrant that is exercisable for
112,373
 
shares of
 
our Class
 
A common
 
stock, and
 
(iv) the
 
outstanding Convertible
 
Notes and
 
the Related
 
Note were
 
contributed to
Vaxxinity and the former holders of such notes received an aggregate
 
of
4,047,344
 
shares of our Series A preferred
 
stock. As a result of
the Reorganization, COVAXX
 
and UNS became our wholly-owned
 
subsidiaries. All shares of our
 
Series A preferred stock converted
into shares of
 
our Class A
 
common stock concurrently
 
with the closing.
 
The Reorganization was
 
determined to be
 
a common control
transaction, so the
 
carrying values of
 
all contributed assets
 
and assumed liabilities
 
remained unchanged and
 
the financial information
for
 
all
 
periods in
 
this
 
section of
 
the
 
financial
 
statements presented
 
prior to
 
the
 
Reorganization
 
are presented
 
on
 
consolidated basis.
COVA
 
XX was
 
incorporated on
 
March 23,
 
2020, so
 
periods prior
 
to March
 
23, 2020
 
in this
 
section of
 
the financial
 
statements only
reflect the historical financial information of UNS. Unless the context requires otherwise, in this section we use the terms “Vaxxinity,”
“we,” “us” and “our” to refer to our operations (including through UNS and COVAXX) both prior to and after the Reorganization.
Since our spin-out transactions from UBI, we have focused on
 
organizing and staffing our business, business planning,
 
raising capital,
developing
 
our
 
Vaxxine
 
Platform,
 
identifying
 
and
 
testing
 
potential
 
product
 
candidates
 
and
 
conducting
 
clinical
 
trials.
 
We
 
have
 
also
developed a SARS CoV-2 antibody ELISA test, which received an EUA from the FDA in January 2021.
Our current pipeline consists
 
of six programs from early
 
to late-stage development, including
 
five programs focused on
 
chronic disease.
Our neurodegenerative chronic disease program has three primary programs: UB-311, our leading neurology product candidate, which
targets AD; UB-312, which
 
targets PD and other
 
synucleinopathies;
 
and an anti-tau product
 
candidate which has
 
the potential to address
multiple neurodegenerative conditions, including AD.
 
Additionally, we
 
have two other primary
 
programs focused on chronic
 
disease:
UB-313, which targets CGRP
 
to prevent migraines;
 
and our anti-PCSK9
 
program, which targets
 
hypercholesterolemia to reduce
 
the risk
of cardiac events.
 
Through our
 
Vaxxine Platform, we believe
 
we may
 
be able
 
to address a
 
wide range
 
of other
 
chronic diseases,
 
including
chronic diseases that are or could potentially be successfully treated by mAbs, which increasingly dominate the treatment
 
paradigm for
many chronic diseases.
In addition
 
to our
 
chronic disease
 
pipeline, given
 
our Vaxxine
 
Platform’s
 
applicability to
 
infectious disease
 
and the
 
global need
 
for
additional vaccines
 
to address
 
SARS-CoV-2, we are advancing
 
an infectious
 
disease product
 
candidate. We have reported
 
interim results
of our
 
UB-612 Phase
 
1, Phase
 
2, and
 
Phase 1
 
extension clinical
 
trials. An
 
EUA application
 
for UB-612
 
was denied
 
by the
 
TFDA in
August 2021. We are appealing
 
the TFDA’s decision in partnership with UBIA.
 
At the same
 
time, we are
 
pursuing accelerated pathways
to authorization with regulators in multiple jurisdictions, including high income countries and LMICs, based on a heterologous booster
trial of UB-612 in the first half of 2022.
To date,
 
our revenue has been
 
generated from the modest
 
sales of our ELISA
 
test and the sale
 
of an option to negotiate
 
a license with
UNS (which
 
option has
 
expired). As
 
a result,
 
our ability
 
to generate
 
revenue sufficient
 
to achieve
 
profitability will
 
depend on
 
the eventual
regulatory approval,
 
and commercialization
 
of one
 
or more
 
of our
 
product candidates.
 
We have not yet
 
obtained any
 
regulatory approvals
for our product candidates or conducted sales and marketing activities for our product candidates.
We have principally funded our operations through financing transactions. Through December 31, 2021,
 
we received gross proceeds of
$306.1 million
 
in
 
connection with
 
various financial
 
instruments, including
 
the sale
 
of preferred
 
and common
 
stock, the
 
issuance of
promissory notes (including
 
convertible promissory notes
 
(“Convertible Notes”)), and
 
the entry into
 
simple agreements for
 
future equity
(“SAFEs”).
 
Costs associated with research and development are the most significant
 
component of our expenses. These costs can vary greatly from
period to period depending
 
on the timing of
 
various trials for our
 
product candidates. We expect our allocated
 
research and development
costs and
 
general and
 
administrative expenses
 
to increase
 
over time
 
as we
 
expand the
 
number of
 
product candidates
 
that we
 
are advancing
and incur
 
increased costs as
 
a result of
 
operating as
 
a public company.
 
Further, we
 
anticipate incurring greater
 
selling and marketing
expenses if we
 
commercialize any of
 
our product candidates
 
in the future.
 
Our product candidates
 
are in clinical
 
stage or pre-clinical
stage development, and we
 
have generated limited revenue
 
to date and
 
have incurred significant
 
operating losses since inception.
 
Net
losses were $137.2 million and
 
$40.0 million for the years
 
ended December 31, 2021 and
 
2020, respectively. As of December 31, 2021,
94
we had an
 
accumulated deficit of
 
$229.5 million. We expec
t our expenses
 
and capital requirements
 
will increase over
 
time in connection
with our planned operations, which include:
•
continuing pre-clinical studies, existing clinical trials, or initiating new clinical trials for product candidates UB-311, UB-312,
UB-313, our COVID-19 product candidate and other product candidates;
•
advancing
 
the
 
development
 
of
 
our
 
product
 
candidate
 
pipeline
 
of
 
other
 
product
 
candidates,
 
including
 
through
 
business
development efforts to invest in or in-license other technologies or product candidates;
•
hiring additional clinical, quality control, medical, scientific and other technical personnel to support clinical and research and
development programs;
•
expanding operational, financial
 
and management systems
 
and infrastructure, expanding
 
our facilities and
 
increasing personnel
to support operations;
•
undertaking actions to meet the requirements and demands of being a public company;
•
maintaining, expanding and protecting our intellectual property portfolio;
•
seeking regulatory approvals for any product candidates that successfully complete clinical trials; and
•
undertaking pre-commercialization activities to establish sales, marketing and distribution capabilities for any product
candidates for which we may receive regulatory approval in regions where we elect to commercialize products on our own or
jointly with third parties.
As of
 
the date of
 
this Report, we
 
expect our existing
 
cash and
 
cash equivalents will
 
be sufficient
 
to fund
 
our operating
 
expenses and
capital expenditure requirements for at least the
 
next 12 months. We
 
also believe that cash and cash equivalents will
 
enable us to fund
our operating expenses
 
and capital expenditure
 
requirements into 2023.
 
Thereafter, our viability will
 
be dependent on
 
our ability to raise
additional capital to
 
finance operations, to
 
successfully commercialize our
 
product candidates and/or
 
to enter into
 
collaborations with
third parties for the
 
development of our product candidates.
 
If we are unable
 
to do any of
 
the foregoing, we would be
 
forced to delay,
limit, reduce or terminate our product candidate development or future commercialization efforts. Our estimates are based on
 
a variety
of assumptions
 
that may
 
prove to
 
be wrong,
 
and we
 
could exhaust
 
our available
 
capital resources
 
sooner than
 
expected. See
 
“— Liquidity
and Capital Resources.”
 
Business Update Regarding COVID-19 Pandemic
In March
 
2020, the
 
World
 
Health Organization
 
declared the
 
COVID-19 outbreak
 
a pandemic.
 
The onset
 
of the
 
pandemic led
 
to our
institutional
 
prioritization
 
of
 
COVID-19
 
vaccine
 
development
 
efforts,
 
which
 
correlated
 
to
 
a
 
decline
 
in
 
research
 
and
 
development
expenditures for our chronic disease product candidates. To
 
date, our operations have not been negatively impacted
 
by the COVID-19
pandemic in a material manner. However, at this time, we cannot predict the specific extent, duration or full impact that the COVID-19
pandemic will have
 
on our financial
 
condition and operations,
 
but the development
 
of clinical supply
 
materials could be
 
delayed and
enrollment of patients in our studies may be delayed or suspended, as hospitals and clinics in areas where we are conducting trials shift
resources
 
to
 
cope
 
with
 
the
 
COVID-19
 
pandemic
 
and
 
may
 
limit
 
access
 
or
 
close
 
clinical
 
facilities
 
due
 
to
 
the
 
COVID-19
 
pandemic.
Additionally, if our trial participants
 
are unable to
 
travel to our
 
clinical study sites
 
as a result
 
of quarantines or
 
other restrictions resulting
from the COVID-19 pandemic, we may experience
 
higher drop-out rates or delays in our clinical
 
studies. The impact of the COVID-19
pandemic on
 
our financial
 
performance will
 
depend on
 
future developments,
 
including the
 
duration and
 
spread of
 
the pandemic
 
and
related
 
governmental
 
advisories
 
and
 
restrictions.
 
These
 
developments
 
and
 
the
 
impact
 
of
 
the
 
COVID-19
 
pandemic
 
on
 
the
 
financial
markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or
 
the overall economy are
impacted for an extended period,
 
our results may be
 
materially adversely affected. See
 
“Risk Factors—Risks Related to Our
 
Business
and
 
Industry—The
 
ongoing
 
coronavirus
 
pandemic
 
has
 
caused
 
interruptions
 
or
 
delays
 
of
 
our
 
business
 
plan.
 
Delays
 
caused
 
by
 
the
coronavirus pandemic may have a significant adverse effect on our business.”
Components of Our Consolidated Results of Operations
Revenue
 
Revenue for the years
 
ended December 31, 2021
 
and 2020 was $0.1
 
million and $0.6 million,
 
respectively, and consisted of commercial
sales of our ELISA
 
tests. While we continue to
 
expect some revenue from sales
 
of our ELISA tests,
 
we do not expect
 
to generate any
meaningful revenue unless and until we obtain regulatory
 
approval of and commercialize our product candidates, and we
 
do not know
when, or
 
if, this
 
will occur.
 
If our
 
development efforts
 
for our
 
product candidates
 
are successful
 
and result
 
in commercialization,
 
we
may generate additional
 
revenue in the
 
future from a
 
combination of product
 
sales or payments
 
from collaboration or
 
license agreements
95
that we have entered
 
into or may enter
 
into with third parties.
 
See Risk Factors—Risks Related
 
to the Discovery and
 
Development of
Product Candidates.
 
We
 
have incurred significant
 
losses since our
 
inception. We
 
expect to incur
 
losses for the
 
foreseeable future and
may never achieve or maintain profitability.
 
Cost of Revenue
 
Cost of revenue
 
consists of kit
 
production costs consisting
 
of materials, labor
 
and overhead expenses
 
directly related to
 
ELISA tests sold
and the costs of expired ELISA tests, which are not available for commercial sale.
 
If our development efforts
 
in respect of our current pipeline
 
of product candidates are successful and
 
result in regulatory approval, we
expect our cost
 
of revenue will
 
increase in relative
 
proportion to the
 
level of our
 
revenue as we
 
commercialize the applicable product
candidate. We
 
expect that
 
cost of
 
revenue will
 
increase in
 
absolute dollars
 
as and
 
if our
 
revenue grows
 
and will
 
vary from
 
period to
period as a percentage of revenue.
 
Research and Development Expenses
 
The design, initiation and execution of
 
candidate discovery and development programs
 
of our future potential product candidates
 
is key
to our
 
success and
 
involves significant
 
expenses. Prior
 
to initiating
 
these programs,
 
project teams
 
incorporating individuals
 
from the
essential disciplines within
 
Vaxxinity scope out the activities, timing,
 
requirements, inclusion and
 
exclusion criteria and
 
the primary and
secondary endpoint. Once we have decided
 
to proceed, our Vaxxine
 
Platform enables the iteration of drug candidates
 
in the discovery
phase through rapid,
 
rational design and
 
formulation. After we
 
have identified drug
 
candidates, the costs
 
of scaling the
 
formulation from
research grade
 
to clinical
 
grade, then
 
to commercial
 
grade, typically
 
consumes significant
 
resources. In
 
addition, to
 
internal research
and development, we utilize service providers, including related parties, to complete activities we do not
 
have the internal resources to
handle.
Research and development expenses consist primarily of costs incurred for research activities, including drug discovery efforts and the
development of our product candidates. We expense research and development costs as incurred, which include:
•
expenses incurred to conduct the necessary preclinical studies and clinical trials required to obtain regulatory approval;
•
expenses incurred under agreements with CROs that are primarily engaged in the oversight and conduct of our clinical trials,
preclinical studies and drug discovery efforts and contract manufacturers that are primarily engaged to provide preclinical
and clinical drug substance and product for our research and development programs;
•
other costs related to acquiring and manufacturing materials in connection with our drug discovery efforts and preclinical
studies and clinical trial materials, including manufacturing validation batches, as well as investigative sites and consultants
that conduct our clinical trials, preclinical studies and other scientific development services;
•
payments made in cash or equity securities under third-party licensing, acquisition and option agreements;
•
employee-related expenses, including salaries and benefits, travel and stock-based compensation expense for employees
engaged in research and development functions;
•
costs related to compliance with regulatory requirements; and
•
facilities-related costs, depreciation and other expenses, which include rent and utilities.
We
 
recognize external
 
development
 
costs based
 
on
 
an evaluation
 
of
 
the progress
 
to
 
completion of
 
specific
 
tasks using
 
information
provided to us
 
by service providers.
 
This process involves
 
reviewing open contracts
 
and purchase orders,
 
communicating with personnel
to identify services
 
that have been
 
performed on
 
our behalf and
 
estimating the
 
level of service
 
performed and the
 
associated cost incurred
for the service when we have not yet been invoiced or otherwise notified of actual costs. Any
 
nonrefundable advance payments that we
make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses.
Such amounts are expensed as the
 
related goods are delivered or the
 
related services are performed, or until
 
it is no longer expected that
the goods will be delivered or the services rendered, at which point the net remainder is expensed.
We are heavily
 
reliant on related parties for the advancement of our research and development programs, including for manufacturing,
quality
 
control,
 
testing,
 
validation,
 
supply
 
services,
 
research
 
support,
 
development
 
and
 
clinical
 
functions.
 
During
 
the
 
years
 
ended
December 31, 2021
 
and 2020, related
 
party expenses were
 
approximately 29% and
 
56% of our
 
operating expenses, respectively.
 
We
expect this reliance on related parties to diminish significantly in the future.
Where appropriate,
 
we allocate
 
our third-party
 
research and
 
development expenses
 
on a
 
program-by-program basis.
 
These expenses
primarily
 
relate
 
to
 
outside
 
consultants,
 
CROs,
 
contract
 
manufacturers
 
and
 
research
 
laboratories
 
in
 
connection
 
with
 
pre-clinical
96
development, process development,
 
manufacturing and clinical
 
development activities. We
 
do not
 
allocate our internal
 
costs, such as
employee costs, costs
 
associated with our
 
discovery efforts, laboratory
 
supplies and facilities,
 
including depreciation or
 
other indirect
costs, to
 
specific programs
 
because these
 
costs often
 
relate to
 
platform development,
 
to multiple
 
programs simultaneously
 
or to
 
discovery
of new
 
programs, and
 
any such
 
allocation would necessarily
 
involve significant estimates
 
and judgments
 
and, accordingly,
 
would be
imprecise. When we refer
 
to the research and development
 
expenses associated with a specific
 
program, these refer exclusively
 
to the
allocated
 
third-party
 
expenses
 
associated
 
with
 
that
 
product
 
candidate.
 
All
 
other
 
research
 
and
 
development
 
costs
 
are
 
referred
 
to
 
as
unallocated costs.
Product candidates in
 
later stages of
 
clinical development generally
 
have higher development
 
costs than those
 
in earlier stages
 
of clinical
development,
 
primarily
 
due
 
to
 
the
 
increased
 
size
 
and
 
duration
 
of
 
later-stage
 
clinical
 
trials.
 
Additionally,
 
greater
 
research
 
and
development overhead is
 
required to support
 
broader and more
 
rapid development of
 
our Vaxxine Platform and new product
 
candidates.
As a result, we expect that our research and development expenses will increase as we
 
continue our existing and planned clinical trials
and conduct
 
increased pre-clinical and
 
clinical development activities,
 
including submitting regulatory
 
filings for product
 
candidates,
and focus more
 
generally on the
 
development of our
 
chronic disease product candidates.
 
A significant driver of
 
such increases would
be the initiation of our
 
Phase 2b trial for UB-311.
 
We
 
currently expect to initiate a
 
Phase 2b early AD efficacy
 
trial in the second half
of 2022. If we
 
decide to advance UB-311 through the
 
clinic without a strategic
 
partner, our costs would increase more
 
significantly than
if we engage a partner to fund the development of UB-311.
At this time,
 
we cannot reasonably
 
estimate or know
 
the nature, timing
 
and costs of
 
the efforts that
 
will be necessary
 
to complete the
pre-clinical and clinical development of any of our product candidates or when, if ever, material net cash inflows may commence from
any of our product candidates
General and Administrative Expenses
 
General
 
and
 
administrative
 
expenses
 
consist
 
primarily
 
of
 
salaries
 
and
 
benefits,
 
travel
 
and
 
stock-based
 
compensation
 
expense
 
for
personnel in
 
executive, business development,
 
finance, human
 
resources, legal,
 
information technology
 
and administrative functions.
General and administrative expenses also
 
include facility- related costs as
 
well as insurance costs and
 
professional fees for legal, patent,
consulting, investor and public relations, accounting
 
and audit services and other general operating
 
expenses not otherwise classified as
research and development expenses. We expense general and administrative costs as incurred.
We also anticipate that our general and administrative expenses will increase in the future as a result of increased costs associated with
being a public company. In each case these increases will likely
 
include increased costs related to the
 
hiring of additional personnel and
fees to outside consultants, personnel-related stock-based compensation costs, lawyers and accountants, among other expenses, and, in
the
 
case
 
of
 
public
 
company-related
 
expenses,
 
services
 
associated
 
with
 
maintaining
 
compliance
 
with
 
Nasdaq
 
listing
 
and
 
SEC
requirements, director and officer liability insurance costs and investor and public relations costs.
Other Expense (Income)
 
Interest Expense
 
Interest expense consists of (i) interest
 
expense recognized on the note payable
 
entered into during June 2020 for
 
the acquisition of an
airplane (the
 
“2025 Note”),
 
(ii) interest
 
expense recognized
 
on the
 
Convertible Notes
 
and (iii)
 
interest expense
 
recognized on
 
other
promissory
 
notes,
 
including
 
$0.1
 
million
 
borrowed
 
from
 
our
 
Chief
 
Executive
 
Officer
 
(the
 
“Executive
 
Note”)
 
and
 
a
 
related
 
party
Convertible Note payable
 
for $2.0 million
 
in aggregate proceeds
 
that was received
 
in three tranches
 
(the “2018 Related
 
Notes”). The
Executive Note was repaid
 
in full in August
 
2021 and the 2018
 
Related Notes were converted
 
into Series A preferred
 
stock concurrently
with the Reorganization.
Interest Income
Interest income consists of income earned on our cash and cash equivalents.
 
Change in Fair Value of Convertible Notes, SAFEs and Series A-1 Warrant
 
Liability
 
We
 
issued a series of Convertible
 
Notes during the years ended
 
December 31, 2018 through 2021,
 
a series of SAFEs during
 
the years
ended December 31, 2020 and 2021, and warrants to purchase shares of our Series A-1 preferred stock (“Series A-1 Warrants”) during
the year ended December 31, 2020, each of which
 
were measured and accounted for at fair value. We remeasured the fair value of each
of
 
the
 
Convertible
 
Notes,
 
SAFEs
 
and
 
Series
 
A-1
 
Warrants
 
at
 
each
 
reporting
 
date
 
and
 
recognize
 
changes
 
in
 
the
 
fair
 
value
 
in
 
our
 
consolidated statements of operations. Inputs to the calculation of fair value generally include market and acquisition comparable(s) as
well as other
 
variables. In connection
 
with the Reorganization,
 
all outstanding Convertible
 
Notes, SAFEs, and
 
Series A-1 Warrants were
exchanged for
 
shares of
 
Series
 
A preferred
 
stock, which
 
were
 
subsequently exchanged
 
into shares
 
of
 
Class A
 
common stock
 
upon
closing of the IPO in November 2021.
97
Loss on Foreign Currency Translation, Net
 
Our foreign subsidiaries, which
 
are wholly-owned by COVAXX and UNS, use the U.S.
 
dollar as their functional
 
currency and maintain
records in the local
 
currency. Nonmonetary assets and liabilities
 
are remeasured at historical
 
rates and monetary assets
 
and liabilities are
remeasured at exchange
 
rates in effect at
 
the end of
 
the reporting period.
 
Income statement accounts
 
are remeasured at
 
average exchange
rates for the reporting period. The resulting gains or
 
losses are included in foreign currency (losses) gains in
 
the consolidated financial
statements.
Provision for Income Taxes
 
We have not recorded any significant amounts related
 
to income tax but have
 
reserved $0.6 million of unrecognized
 
tax benefits against
NOLs. We have not recorded any income tax benefits for the majority of our net losses we incurred to date.
 
We
 
account for income
 
taxes using the
 
asset and liability
 
method, which requires
 
the recognition of
 
deferred tax assets
 
and liabilities
for the expected future tax consequences of events that have been included in the consolidated financial statements or our tax returns.
 
Deferred tax assets
 
and liabilities are
 
determined based on the
 
difference between the financial
 
statement carrying amounts
 
and tax basis
of existing assets and liabilities and for loss and credit carryforwards, which are measured
 
using the enacted tax rates and laws in effect
in the years in which the differences are expected
 
to reverse. The realization of our deferred
 
tax assets is dependent upon the
 
generation
of future taxable income, the amount
 
and timing of which are uncertain.
 
Valuation
 
allowances are provided, if, based upon
 
the weight
of available evidence, it is more
 
likely than not that some
 
or all of the deferred tax
 
assets will not be realized.
 
As of December 31, 2021,
we continue to maintain
 
a full valuation allowance
 
against all of our
 
deferred tax assets based
 
on evaluation of all
 
available evidence.
We
 
file income tax returns
 
in the U.S. federal
 
and state jurisdictions and
 
may become subject to
 
income tax audit and
 
adjustments by
related tax authorities. Our tax
 
return periods (for entities then
 
in existence) for U.S. federal income
 
taxes for the tax years
 
since 2017
remain open to examination under the statute of limitations by the Internal Revenue Service and state jurisdictions. We record reserves
for potential tax
 
payments to various
 
tax authorities related
 
to uncertain
 
tax positions, if
 
any.
 
The nature of
 
uncertain tax positions
 
is
subject
 
to
 
significant
 
judgment
 
by
 
management
 
and
 
subject
 
to
 
change,
 
which
 
may
 
be
 
substantial.
 
These
 
reserves
 
are
 
based
 
on
 
a
determination of whether
 
and how much
 
a tax benefit
 
taken by us
 
in our tax
 
filings or positions
 
is more likely
 
than not to
 
be realized
following the resolution of any potential contingencies related to the tax benefit. We develop our assessment of uncertain tax positions,
and the associated cumulative probabilities, using internal
 
expertise and assistance from third-party experts.
 
As additional information
becomes
 
available,
 
estimates
 
are
 
revised
 
and
 
refined.
 
Differences
 
between
 
estimates
 
and
 
final
 
settlement
 
may
 
occur
 
resulting
 
in
additional tax expense. Potential
 
interest and penalties
 
associated with such
 
uncertain tax positions is
 
recorded as a
 
component of our
provision for income taxes.
 
Factors Affecting the Comparability of Our Consolidated Results of Operations
 
On March 2,
 
2021, Vaxxinity entered into the Contribution
 
and Exchange Agreement,
 
pursuant to which
 
the outstanding equity
 
interests
of
 
UNS
 
and
 
COVAXX
 
were
 
contributed
 
to
 
Vaxxinity
 
in
 
return
 
for
 
equity
 
interests
 
in
 
Vaxxinity,
 
resulting
 
in
 
UNS
 
and
 
COVAXX
becoming wholly owned subsidiaries of Vaxxinity.
 
Accordingly, all share and per share amounts prior to the Reorganization have been
adjusted to reflect the Reorganization. In
 
addition, we formed COVAXX, and commenced our COVAXX business, on March 23, 2020.
As a result,
 
the historical financial information
 
between March 23, 2020
 
and March 2,
 
2021 described in
 
this Annual Report refers
 
to
the combined historical financial
 
information of UNS
 
and COVAXX
 
and the historical financial
 
information prior to March
 
23, 2020
described in this Annual Report refers only to the historical financial information
 
of UNS. Our operations for the year ended December
31, 2021 reflects the
 
operations of UNS and
 
COVAXX businesses on a consolidated basis for the period
 
from January 1, 2021
 
to March
1, 2021
 
and of
 
Vaxxinity
 
and its
 
subsidiaries for
 
the remainder
 
of that
 
twelve-month period.
 
Our business
 
operations for
 
year ended
December 31, 2020 reflects the operations of our UNS business from
 
January 1, 2020 to March 22, 2020 and our UNS and
 
COVAXX
businesses on a consolidated
 
basis for the remainder
 
of that twelve-month period.
 
See Note 1 to
 
our consolidated financial statements
included elsewhere in this Form 10-K filing.
 
Consolidated Results of Operations
Comparison of the Years Ended December 31, 2021 and 2020
The following table summarizes our consolidated results of operations for the years ended December 31, 2021 and 2020, together with
the dollar change in those items from year to year (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
98
Yea
 
rs Ended December 31,
Change
2021
2020
$
%
Revenue
$
66
$
557
(491)
(88)%
Costs of revenue
1,937
52
1,885
3624%
Gross (loss) profit
(1,871)
505
2,376
470%
Operating expenses:
Research and development
71,379
20,570
50,809
247%
General and administrative
51,825
12,217
39,608
324%
Total operating expenses
123,204
32,787
(90,417)
(276)%
Loss from operations
(125,075)
(32,282)
(92,793)
287%
Other (income) expense:
Interest expense
840
1,182
(342)
(29)%
Interest income
(9)
(1)
(8)
838%
Change in fair value of convertible notes
2,667
5,761
(3,094)
(54)%
Change in fair value of simple agreements for future equity
8,365
615
7,750
1260%
Change in fair value of warrant liability
214
41
173
422%
Loss on foreign currency translation, net
23
77
(54)
(70)%
Other (income) expense, net
12,100
7,675
(4,425)
(58)%
Net loss
$
(137,175)
$
(39,957)
(97,218)
243%
Revenue
 
Total
 
revenue
 
was
 
$0.1
 
million
 
and
 
$0.6
 
million
 
for
 
the
 
years
 
ended
 
December
 
31,
 
2021
 
and
 
2020,
 
respectively.
 
All
 
revenue
 
and
comparable decreases were due to sales of our ELISA tests. We
 
are not actively pursuing commercialization of our ELISA tests at this
time.
Gross Margin
The gross margin for
 
the year ended December
 
31, 2021 was negative
 
however the sales
 
volume was de minimis.
 
During the year ended
December 31,
 
2021, we
 
wrote off
 
,
 
to cost
 
of revenue,
 
$1.9 million
 
in expired
 
ELISA tests
 
that had
 
no commercial
 
value, driving
 
a
significant change in gross profit percentage.
Research and Development Expenses
Research
 
and
 
development
 
expenses
 
were
 
$71.4
 
million
 
and
 
$20.6
 
million
 
for
 
the
 
years
 
ended
 
December
 
31,
 
2021
 
and
 
2020,
respectively.
 
The
 
$50.8
 
million
 
increase
 
was
 
primarily
 
due
 
to
 
an
 
increase
 
of
 
$42.6
 
million
 
in
 
costs
 
related
 
to
 
UB-612,
 
primarily
consisting of materials
 
and manufacturing costs
 
and CRO costs associated
 
with our ongoing clinical
 
trial in Taiwan, which program
 
was
only
 
in
 
early
 
development
 
in
 
the
 
corresponding
 
2020
 
period.
 
The
 
remaining
 
$8.2
 
million
 
increase
 
was
 
driven
 
by
 
an
 
increase
 
in
unallocated costs of $6.2
 
million, resulting primarily from
 
increased salaries and personnel-related
 
costs in connection with
 
our UB-612
development efforts, as well as an increase in other allocated costs driven primarily by pre-clinical activities for our UB-313 program.
 
General and Administrative Expenses
General
 
and
 
administrative
 
expenses
 
were
 
$51.8
 
million
 
and
 
$12.2
 
million
 
for
 
the
 
years
 
ended
 
December
 
31,
 
2021
 
and
 
2020,
respectively. The $39.6 million increase was primarily due to a $28.3 million increase in stock-based compensation expense, including
$23.1 million related to performance-based grants
 
that vested upon the successful completion
 
of the Company’s
 
initial public offering
in November
 
2021.
 
The remaining $11.3
 
million increase was
 
due to
 
increased salaries and
 
personnel-related costs and
 
professional
services costs
 
related to
 
our continued
 
organizational growth
 
to support
 
our ramp-up
 
in research
 
and development
 
efforts, as
 
well as
increased costs for preparations for being a public company.
 
Interest Expense
Interest expense
 
was $0.8
 
million and
 
$1.2 million
 
for the
 
years ended
 
December 31,
 
2021 and
 
2020, respectively.
 
The $0.3
 
million
decrease was due to the exchange of Convertible Notes for Series A preferred stock in connection with the Reorganization.
 
Interest Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
99
Interest income on cash was less than $0.1 million for each of the years ended December 31, 2021 and 2020.
Change in Fair Value of Convertible Notes, SAFEs and Series A-1 Warrant
 
Liability
The decrease in the change in fair value
 
of the Convertible Notes of $3.1 million for
 
the year ended December 31, 2021 was primarily
related to the revaluation of the Convertible
 
Notes upon conversion to equity. The increase in the change in fair
 
value of SAFEs of $7.8
million for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily related to insight into the
pricing of Vaxxinity’s
 
next stock issuance at a higher valuation. The increase in the change in fair value of Series A-1
 
Warrants of $0.2
million for the year ended
 
December 31, 2021 compared to
 
the year ended December 31, 2020
 
was primarily related to an
 
increase in
value of the Series A-1 preferred
 
stock. In connection with the
 
Reorganization, all outstanding Convertible Notes,
 
SAFEs and Series A-
1 Warrants were exchanged into shares
 
of Series A preferred
 
stock, which were
 
subsequently exchanged into
 
shares of Class
 
A common
stock upon the closing of
 
the IPO in November 2021
 
as described in Note 8
 
to our consolidated financial statements
 
included elsewhere
in this Report.
Loss on Foreign Currency Translation, Net
 
The net loss
 
of foreign currency translation
 
reflected a de minimis
 
increase in the foreign
 
exchange rate for the
 
year ended December
31, 2021 compared to the year ended December 31, 2020.
 
 
Liquidity and Capital Resources
Sources of Liquidity
 
We have generated limited
 
revenue from sales
 
of our ELISA
 
tests and have
 
not yet commercialized
 
any of our
 
product candidates, which
are in
 
various phases
 
of pre-clinical
 
and clinical
 
development. We have financed
 
operations primarily
 
through the
 
issuance of
 
convertible
preferred stock, borrowings under promissory
 
notes (including Convertible Notes) and
 
the execution of SAFEs. Through
 
December 31,
2020, we received gross proceeds
 
of $99.3 million in connection
 
with the issuance of various
 
financial instruments, including the sale
of preferred stock,
 
the issuance of
 
promissory notes (including
 
Convertible Notes), and
 
the execution of
 
SAFEs. In addition,
 
we also
generated revenue from the sale
 
of an option to
 
negotiate a license with UNS
 
(which option has expired) and
 
the sales of ELISA tests
in 2020 and 2021. During
 
the year ended December 31,
 
2021, we raised a total
 
of $198.8 million, which consisted
 
of $71.1 million in
net proceeds from the issuance of
 
common stock in connection with the
 
IPO, $122.8 million in net proceeds
 
from the issuance of Series
B preferred shares,
 
$2.0 million in
 
net proceeds from
 
the issuance of
 
convertible debt, and
 
$2.9 million in
 
net proceeds from
 
the issuance
of SAFEs. At December 31, 2021, we had $144.9 million in cash and
 
cash equivalents, compared to $31.1 million as of December 31,
2020. The increase in cash
 
and cash equivalents balances
 
for the periods reported are
 
primarily due to the factors
 
described under “Cash
Flows” below.
Cash Flows
The following table provides information regarding our cash flows for the years ended December 31, 2021 and 2020 (in thousands):
 
Years
 
Ended December 31,
2021
2020
Balance Sheet Data:
Cash and cash equivalents
144,885
31,143
Restricted cash
172
55
Total assets
166,673
50,141
Total liabilities
38,054
75,041
Total stockholders' equity (deficit)
128,619
(87,375)
Statement of Cash Flow Data:
Net cash flows used in operating activities
$
(80,990)
$
(33,910)
Net cash flows used in investing activities
(1,318)
(1,477)
Net cash flows provided by financing activities
196,167
66,109
Net increase in cash, cash equivalents and restricted cash
$
113,859
$
30,722
Operating Activities
Net cash
 
used in
 
operating activities for
 
the year
 
ended December 31,
 
2021 was
 
$81.0 million,
 
primarily due
 
to a
 
$137.2 million
 
net
loss, offset by
 
a favorable $12.9
 
million change in
 
operating assets and
 
liabilities and total non-cash
 
items of $43.3
 
million. The cash
flow impact from changes in net
 
operating assets and liabilities were primarily
 
due to $11.4 million
 
in amounts due to related party as
well as $3.9
 
million related to
 
accrued expense, accounts
 
payable and other
 
liabilities.
 
These increases were
 
offset by
 
$4.7 million in
100
prepaid expenses
 
for UB-612
 
production. The
 
primary non-cash
 
adjustments to
 
net loss
 
included an
 
$11.2
 
million change
 
in the
 
fair
market value of financial instruments as well as $30.4 million of stock-based compensation and $1.1 million in depreciation.
 
Investing Activities
Net cash used
 
in investing activities
 
totaled $1.3 million
 
for the year
 
ended December 31,
 
2021. The cash
 
used in investing
 
activities
consisted primarily of the acquisition of equipment.
 
Financing Activities
Net cash provided by financing
 
activities totaled $196.2 million
 
for the year ended December
 
31, 2021. We raised capital to support our
operations through
 
the issuance
 
of Class
 
A Common
 
Stock upon
 
IPO, with
 
net proceeds
 
of $71.1
 
million, the
 
issuance prior
 
to the
Reorganization of SAFEs
 
and Convertible
 
Notes, with
 
net proceeds
 
of $2.9
 
million and
 
$2.0 million, respectively,
 
as well
 
as the issuance
of Series
 
B convertible preferred
 
stock, with net
 
proceeds of $122.8
 
million. We
 
also repaid $2.0
 
million in relation
 
to a
 
Convertible
Note, $0.1 million in relation
 
to a note payable with
 
related party, $0.3 million in repayment for
 
Paycheck Protection Program, and
 
$0.4
million in relation to a note payable entered into for the acquisition of an Airplane.
Funding Requirements
We
 
have generated approximately
 
$3.7 million in
 
revenue since inception
 
and have incurred
 
net losses in
 
each reporting period
 
since
inception. We
 
do not expect to generate
 
any meaningful revenue unless and until
 
we obtain regulatory approval of and
 
commercialize
our product
 
candidates. We
 
do not know
 
when, or if,
 
this will occur.
 
If we do
 
not receive regulatory
 
approval for any
 
of our
 
product
candidates, or
 
if we
 
receive approval
 
but our
 
commercialization results
 
fall short
 
of our
 
expectations, we
 
will continue
 
to incur
 
significant
losses for the foreseeable future, and we
 
expect the losses to increase as we
 
continue the development of, and seek regulatory
 
approvals
for, our product candidates and begin to commercialize any approved products.
As of the date of this Annual Report, we
 
expect our existing cash and cash equivalents
 
will be sufficient to fund our operating expenses
over the next 12 months. As of December 31, 2021, other than our 2025 Note, we have no material debt obligations.
We have based
 
our projections of operating capital requirements on assumptions that may prove to be incorrect, and we may use all of
our available capital resources sooner than we expect. Our future capital requirements will depend on many factors,
 
which include:
•
the number of discovery and pre-clinical programs that we pursue and the speed with which they are advanced;
•
the number, size, and nature of clinical trials that we conduct;
•
the length of time it takes for regulators to review and approve any product candidates that successfully complete clinical
trials;
•
the timing and manner in which we manufacture our pre-clinical and clinical drug material, the terms on which we can have
such manufacturing completed, and the extent to which we undertake commercialization of any drug products, if approved;
•
the extent to which we establish sales, marketing, medical affairs and distribution infrastructure to commercialize any product
candidates;
•
the timing and extent to which we expand our operational, financial and management systems and infrastructure, and
facilities;
 
•
the timing and extent to which we increase our personnel to support operations, including necessary increases in headcount to
conduct and expand our clinical trials, commercialize any approved products and support our operations as a public
company; and
•
the number of patent applications we must file and claims we must defend in order to maintain, expand and protect our
intellectual property portfolio, and the costs of preparing, filing and prosecuting patent applications, maintaining
 
and
protecting our intellectual property rights.
Until such time, if ever, as we can generate positive cash flows from operations, we expect to finance our cash needs through public or
private equity offerings, strategic collaborations
 
and debt financing. To the extent that
 
we raise additional capital
 
through the sale of our
Class A common stock, convertible securities
 
or other equity securities, shareholders’ ownership interest
 
will be diluted and the
 
terms
of these securities could include
 
liquidation or other preferences and
 
anti-dilution protections. In addition, debt financing,
 
if available,
101
may result
 
in fixed
 
payment obligations
 
and may
 
involve agreements
 
that include
 
restrictive covenants
 
that limit
 
our ability
 
to take
specific actions, such as incurring
 
additional debt, making capital
 
expenditures, creating liens, redeeming shares
 
or declaring dividends.
If we raise additional funds through strategic collaborations or
 
marketing, distribution or licensing arrangements with third parties,
 
we
may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or grant licenses on terms that
may
 
not
 
be favorable
 
to
 
us.
 
If
 
we are
 
unable to
 
raise
 
additional funds
 
when needed,
 
we
 
may
 
be
 
required to
 
delay,
 
limit, reduce
 
or
terminate our product candidate development or
 
future commercialization efforts or grant rights
 
to third parties to develop and
 
market
product candidates that we would otherwise prefer to develop and market ourselves.
 
Contract Research and Manufacturing Organizations
We
 
recorded accrued expenses
 
of $4.5 million
 
and $0.3 million
 
in our balance
 
sheet for expenditures
 
incurred by CROs
 
and contract
manufacturers as of December 31, 2021 and 2020, respectively.
 
Tax-Related Obligations
We
 
have reserved
 
$0.6 million
 
of unrecognized
 
tax benefits
 
against NOLs.
 
Additionally,
 
as of
 
December 31, 2021,
 
we accrued
 
$0.2
million in interest and penalties related to prior year tax filings.
Off-Balance Sheet Arrangements
We did not have during the periods
 
presented, and do not
 
currently have, any off-balance
 
sheet arrangements, as defined
 
in the rules and
regulations of the SEC.
 
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect
the amounts reported
 
in our consolidated
 
financial statements and
 
accompanying notes. Management
 
bases its estimates
 
on historical
experience, market and other conditions,
 
and various other assumptions it
 
believes to be reasonable. Although these
 
estimates are based
on management’s best knowledge of current events and actions
 
that may impact us in the
 
future, the estimation process is, by its
 
nature,
uncertain given that estimates depend
 
on events over which we
 
may not have control. In
 
addition, if our assumptions change,
 
we may
need to
 
revise our
 
estimates, or
 
take other
 
corrective actions,
 
either of
 
which may
 
also have
 
a material
 
effect on our
 
consolidated financial
statements. Significant estimates contained within these consolidated financial statements include, but
 
are not limited to, the estimated
fair
 
value
 
of
 
our
 
common
 
stock,
 
convertible
 
notes
 
payable
 
and
 
SAFEs,
 
stock-based
 
compensation,
 
warrant
 
liabilities,
 
income
 
tax
valuation allowance
 
and the
 
accruals of
 
research and
 
development expenses.
 
We
 
base our
 
estimates on
 
historical experience,
 
known
trends and other
 
market-specific or other
 
relevant factors that
 
we believe to
 
be reasonable under
 
the circumstances. On
 
an ongoing basis,
management evaluates its estimates, as there are changes in facts and circumstances. If market and other conditions change
 
from those
that we anticipate, our consolidated financial statements may be materially affected.
While our
 
significant accounting policies
 
are described
 
in more detail
 
in the
 
notes to our
 
consolidated financial statements
 
appearing
elsewhere in this
 
Annual Report,
 
we believe that
 
the following
 
critical accounting
 
policies and estimates
 
have a higher
 
degree of inherent
uncertainty and require our most significant judgments.
Accrued Research and Development Expenses
As part of the process
 
of preparing our consolidated financial
 
statements, we are required to
 
estimate accrued research and
 
development
expenses. As
 
we
 
advance our
 
programs, we
 
anticipate more
 
complex clinical
 
studies resulting
 
in greater
 
research and
 
development
expenses, which will place even greater emphasis on
 
the accrual. This process involves reviewing open contracts
 
and purchase orders,
communicating with our
 
applicable personnel to
 
identify services that
 
have been performed
 
on our behalf
 
and estimating the
 
level of
service performed and the
 
associated cost incurred for
 
the service when we
 
have not yet been
 
invoiced or otherwise notified
 
of actual
costs. The majority of
 
our service providers invoice
 
in arrears for services
 
performed, on a pre-determined
 
schedule or when contractual
milestones are met; however, some require advance payments. We make estimates of accrued expenses as of each balance sheet date in
the consolidated financial statements based on facts and circumstances known to us at that
 
time. We periodically
 
confirm the accuracy
of the estimates
 
with the service
 
providers and make
 
adjustments if necessary. Examples
 
of estimated accrued
 
research and development
expenses include fees paid to:
•
vendors, including research laboratories, in connection with pre-clinical development activities;
•
CROs and investigative sites in connection with pre-clinical studies and clinical trials; and
•
contract manufacturers in connection with drug substance and drug product formulation of pre-clinical studies and clinical
trial materials.
102
We
 
base our
 
expenses related to
 
pre-clinical studies and
 
clinical trials on
 
our estimates of
 
the services received
 
and efforts
 
expended
pursuant to quotes and contracts with multiple research institutions and CROs that supply, conduct and manage pre-clinical studies and
clinical trials on our behalf. The financial terms of
 
these agreements are subject to negotiation, vary from contract to
 
contract and may
result
 
in uneven
 
payment
 
flows. There
 
may
 
be
 
instances in
 
which
 
payments
 
made to
 
our
 
vendors will
 
exceed
 
the
 
level of
 
services
provided and result in
 
a prepayment of the
 
expense. Payments under some
 
of these contracts depend
 
on factors such as
 
the successful
enrollment of patients and the completion of
 
clinical trial milestones. In accruing service fees,
 
we estimate the time period over which
services will be performed and
 
the level of effort
 
to be expended in each period.
 
If the actual timing of
 
the performance of services or
the level
 
of effort
 
varies from
 
the estimate,
 
it adjusts
 
the accrual
 
or the
 
prepaid expense
 
accordingly.
 
Although we
 
do not
 
expect our
estimates to be
 
materially different from
 
amounts actually incurred,
 
our understanding of
 
the status and
 
timing of services
 
performed
relative to the actual status and timing of services performed may vary and may result in reporting amounts that
 
are too high or too low
in any particular period. To date, our estimated accruals have not differed materially from actual costs incurred.
Stock-Based Compensation
We measure all stock-based awards granted to
 
employees, directors and non-employees
 
based on their fair
 
value on the date
 
of the grant
and recognize the corresponding compensation
 
expense of those awards over
 
the requisite service period,
 
which is generally the vesting
period of the respective award. Forfeitures are accounted for as they occur.
 
We grant stock
 
options and restricted stock awards that are
subject to service vesting conditions.
We
 
classify stock-based
 
compensation expense
 
in our
 
consolidated statements
 
of operations
 
in the
 
same manner
 
in which
 
the award
recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.
We estimate the fair value of
 
each stock option
 
grant using the Black-Scholes
 
option-pricing model, which
 
requires the use
 
of subjective
assumptions
 
that
 
could
 
materially
 
impact
 
the
 
estimation
 
of
 
fair
 
value
 
and
 
related
 
compensation
 
expense
 
to
 
be
 
recognized.
 
These
assumptions include (i) the
 
expected volatility of our
 
stock price, (ii) the
 
periods of time over
 
which recipients are expected
 
to hold their
options prior to exercise (expected lives), (iii) expected dividend yield on our common stock, and (iv) risk-free interest rates, which are
based
 
on
 
quoted
 
U.S.Treasury
 
rates
 
for
 
securities
 
with
 
maturities
 
approximating
 
the
 
options’
 
expected
 
lives.
 
Developing
 
these
assumptions requires the use of judgment. Both prior to and after the IPO, we lacked company-specific historical and implied volatility
information.
 
Therefore,
 
we
 
estimate
 
our
 
expected
 
stock
 
volatility
 
based
 
on
 
the
 
historical
 
volatility
 
of
 
a
 
publicly
 
traded
 
set
 
of
 
peer
companies. The expected term of the Company’s options has been determined utilizing the “simplified” method for awards that
 
qualify
as “plain-vanilla” options. The expected term of options granted to non-employees is equal to the contractual term of the option award.
The expected dividend
 
yield is zero
 
as we have
 
never paid dividends
 
and do not
 
currently anticipate paying
 
any in the
 
foreseeable future.
Determination of the Fair Value
 
of Common Stock
Before there was a public market for our common stock, the estimated fair value of common stock was determined by its most recently
available third-party
 
valuations of
 
common stock.
 
These third-
 
party valuations
 
were performed
 
in accordance
 
with the
 
guidance outlined
in the
 
American Institute
 
of Certified
 
Public Accountants’
 
Accounting and
 
Valuation
 
Guide, Valuation
 
of Privately-Held-Company
Equity Securities Issued as Compensation. Our common stock valuations were prepared using an option pricing method (“OPM”).
 
The
OPM treats common stock and preferred stock as call options on the total equity value of a company, with exercise prices based on the
value thresholds at which the allocation among the various holders of a company’s securities changes. Under this method, the common
stock
 
has
 
value
 
only
 
if
 
the
 
funds
 
available
 
for
 
distribution
 
to
 
stockholders
 
exceeded
 
the
 
value
 
of
 
the
 
preferred
 
stock
 
liquidation
preferences at the time
 
of the liquidity event,
 
such as a strategic
 
sale or a merger.
 
A discount for lack
 
of marketability of the
 
common
stock is then applied to arrive at an indication of value for the common stock.
 
In addition to considering the results of these third-party valuations, our board of directors considered various
 
objective and subjective
factors to determine the fair value of our common stock as of each grant date, including:
•
the prices at which we sold shares of preferred stock and the superior rights and preferences of the preferred stock relative to
our common stock at the time of each grant;
•
the progress of our research and development programs, including the status and results of pre-clinical studies and clinical
trials for our product candidates;
•
our stage of development and commercialization and our business strategy;
•
external market conditions affecting the biopharmaceutical industry and trends within the biopharmaceutical industry;
•
our financial position, including cash on hand, and our historical and forecasted performance and results of operations;
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
103
•
the lack of an active public market for our common stock and our preferred stock;
•
the likelihood of achieving a liquidity event, such as an initial public offering or our sale in light of prevailing market
conditions; and
•
the analysis of initial public offerings and the market performance of similar companies in the biopharmaceutical industry.
The assumptions
 
underlying these
 
valuations represented management’s
 
best estimate,
 
which involved
 
inherent uncertainties
 
and the
application of management’s judgment. As a result,
 
if we had used significantly
 
different assumptions or estimates, the fair
 
value of our
common stock and our stock-based compensation expense could have been materially different.
Once a public trading market for
 
our common stock has been established
 
for a sufficient period of
 
time, it will no longer be
 
necessary
to estimate the
 
fair value of
 
our common stock
 
in connection with
 
its accounting for
 
granted stock options
 
and other such
 
awards we
may grant, as the fair value of our common stock will be determined based on the quoted market price of our common stock.
Awards Granted
The following table sets forth information on stock options awarded to employees since January 1, 2019:
Grant Date
Number of
shares subject
to award
Per share
exercise price
of options
Per share fair value
of common stock on
grant date
Per share estimated
fair value of award
on grant date
December 30, 2019
1,139,717
$0.57
$0.64
$0.40
August 22, 2020
1,984,553
$1.21
$1.65
$0.75
August 24, 2020
521,406
$1.21
$1.65
$0.75
September 2, 2020
160,161
$0.57
$1.43
$1.18
January 26, 2021
9,043,916
$4.12
$4.12
$2.26
February 11, 2021
1,404,291
$4.01
$4.01
$2.53
June 16, 2021
690,266
$4.81
$4.81
$3.59
July 16, 2021
282,776
$4.81
$4.81
$3.63
July 28, 2021
562,605
$10.07
$10.07
$7.47
November 11, 2021
1,499,085
$13.00
$13.00
$9.77
Simple Agreement for Future Equity
During the years
 
ended December 31, 2021
 
and 2020, we entered
 
into SAFEs. The SAFEs
 
were not mandatorily redeemable,
 
nor did
they
 
require
 
us
 
to
 
repurchase
 
a
 
fixed
 
number
 
of
 
shares.
 
We
 
determined
 
that
 
the
 
SAFEs
 
contained
 
a
 
liquidity
 
event
 
provision
 
that
embodied an obligation indexed to the fair value of the equity shares and could require us to settle the SAFE obligation by transferring
assets or cash. Our SAFEs represented a recurring measurement that is
 
classified within Level 3, disclosed and defined in Note 3 to
 
our
consolidated financial
 
statements included
 
elsewhere in
 
this Report,
 
of the
 
fair value
 
hierarchy wherein
 
fair value
 
is estimated
 
using
significant unobservable inputs, including
 
an estimate of the
 
number of months
 
to a liquidity
 
event, volatility rates and
 
the estimation
of the most likely conversion feature for converting the SAFE.
The fair value of the SAFEs on the date of issuance was determined to equal the proceeds we received. The
 
value of the SAFEs on the
date of conversion into
 
Series A preferred stock
 
was determined to be
 
equal to the fair
 
value of the
 
Series A preferred stock
 
issued in
connection with the Reorganization.
Convertible Notes
Beginning in 2018, we
 
issued Convertible Notes
 
that bore simple interest
 
at annual rates ranging
 
from 4.8% to 6%.
 
All unpaid principal,
together with the
 
accrued interest thereon,
 
for the
 
Convertible Notes were
 
payable upon the
 
event of default
 
or upon maturity,
 
which
ranged from one to three
 
years. The Convertible Notes contained
 
a number of provisions addressing
 
automatic and optional conversion,
events
 
of
 
default
 
and
 
prepayment
 
provisions.
 
We
 
determined
 
that
 
a
 
portion
 
of
 
the
 
Convertible
 
Notes
 
contained
 
a
 
liquidity
 
event
provision, requiring them to be
 
measured and accounted for at
 
fair value at each reporting
 
date. We
 
determined the Convertible Notes
requiring a measurement to fair value represented a recurring measurement that was classified within Level 3, disclosed and defined in
Note 3 to our consolidated financial statements included elsewhere in this Annual Report, of the fair value hierarchy wherein fair value
is estimated using significant unobservable inputs.
 
104
Taiwan Centers for Disease Control Grant
UBIA, which is responsible
 
for applying for and
 
managing grants on
 
our behalf, was awarded
 
a grant by the
 
Taiwan Centers for Disease
Control (“TCDC”)
 
for COVID-19
 
vaccine development.
 
The grant
 
provides that
 
costs incurred to
 
complete the
 
two phases of
 
the clinical
trial will be reimbursed based on the
 
achievement of certain milestones as defined in the
 
agreement. We
 
are entitled to reimbursement
under the TCDC grant.
 
At each reporting
 
date, we assess
 
the status of
 
all of the
 
activities involved in completing
 
the clinical study
 
in
relation to
 
the milestones.
 
We
 
account for
 
the amounts
 
that have
 
been received
 
from the
 
TCDC to
 
reimburse costs
 
incurred on
 
the
clinical study and
 
not expected
 
to be
 
refunded back to
 
the TCDC as
 
contra research and
 
development expenses in
 
the accompanying
consolidated statement of operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We
 
are exposed to
 
market risk in
 
the ordinary course
 
of our business.
 
These risks primarily
 
relate to foreign
 
currency and changes
 
in
interest rates.
 
Foreign Currency Exchange Risk
 
We
 
have
 
limited
 
exposure
 
to
 
foreign
 
currency
 
exchange risk
 
as
 
most
 
of
 
our
 
operating
 
activities are
 
primarily
 
denominated
 
in
 
U.S.
dollars. We believe actual
 
foreign exchange
 
gains and
 
losses did
 
not have
 
a significant
 
impact on
 
our results
 
of operations
 
for any periods
presented herein. The results of the
 
analysis based on our financial position
 
as of December 31, 2021, indicated that
 
a hypothetical 10%
increase or decrease in applicable foreign currency exchange rates would not have a material effect on our financial results.
Interest Rate Risk
 
We
 
are exposed to market risk
 
related to changes in
 
interest rates. As of December 31,
 
2020 and 2021, our
 
cash equivalents consisted
of
 
interest-bearing
 
checking
 
accounts
 
and
 
money
 
market
 
accounts.
 
We
 
issued
 
Convertible
 
Notes,
 
which
 
Convertible
 
Notes
 
were
exchanged for Series A preferred stock
 
in connection with the Reorganization. The Convertible
 
Notes bore simple interest at the annual
rates ranging from 4.8% to
 
6%, with redemption terms payable
 
at the earlier of one
 
year, or upon
 
the event of default. In
 
addition, the
Convertible Notes contained provisions addressing automatic and optional conversion. Given the redemption of the Convertible
 
Notes,
and the
 
short-term nature and
 
fixed interest rate,
 
we believe there
 
is no
 
material exposure to
 
interest rate risk.
 
Additionally,
 
the 2025
Note we entered into for the year ended December 31, 2020 bears
 
an annual interest rate of 3.4% and matures in June 2025.
 
Given the
fixed interest rate
 
of the 2025
 
Note, we believe
 
there is no
 
material exposure to
 
interest rate risk.
 
The results of
 
the analysis based on
our financial position
 
as of December 31, 2021,
 
indicated that
 
a hypothetical 100
 
basis point increase
 
or decrease in
 
risk-free rates would
not have a material effect on our financial results.
Our measurement of interest rate
 
risk involves assumptions that are
 
inherently uncertain and, as a
 
result, cannot precisely estimate the
impact of changes
 
in interest rates on
 
net interest revenues. Actual
 
results may differ
 
from simulated results due
 
to balance growth or
decline and
 
the timing,
 
magnitude, and
 
frequency of
 
interest rate
 
changes, as
 
well as
 
changes in
 
market conditions
 
and management
strategies, including changes in asset and liability mix.
 
 
105
Item 8. Financial Statements and Supplementary Data
VAXXINITY,
 
INC.
INDEX TO FINANCIAL STATEMENTS
Audited Consolidated Financial Statements as of and for the years ended December 31, 2021 and 2020
 
 
(PCAOB ID:
32
)
106
107
108
109
111
113
 
106
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Vaxxinity,
 
Inc. Dallas, Texas
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Vaxxinity,
 
Inc. and Subsidiaries (collectively the “Company”) as of
December 31, 2021
 
and 2020,
 
and the
 
related consolidated
 
statements of
 
operations, convertible
 
preferred stock
 
and stockholders’
 
equity
(deficit),
 
and
 
cash flows
 
for each
 
of
 
the years
 
in
 
the two-year
 
period ended
 
December 31, 2021,
 
and the
 
related notes
 
(collectively
referred to as the “consolidated financial statements”).
In our
 
opinion, the
 
consolidated financial
 
statements present
 
fairly,
 
in all
 
material respects,
 
the consolidated
 
financial position
 
of the
Company as of December 31, 2021 and 2020, and the
 
results of their operations and cash flows for each
 
of the two years in the period
ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
The Company’s
 
management is responsible for
 
these consolidated financial statements. Our
 
responsibility is to express
 
an opinion on
the
 
Company’s
 
consolidated
 
financial
 
statements
 
based
 
on
 
our
 
audits.
 
We
 
are
 
a
 
public
 
accounting
 
firm
 
registered
 
with
 
the
 
Public
Company Accounting Oversight Board
 
(United States) (the “PCAOB”)
 
and are required to
 
be independent with respect
 
to the Company
in accordance with the U.S. federal securities
 
laws and the applicable rules and
 
regulations of the Securities and Exchange
 
Commission
and the PCAOB.
We
 
conducted our audits in accordance with
 
the standards of the PCAOB.
 
Those standards require that we plan
 
and perform the audit
to obtain
 
reasonable assurance about
 
whether the
 
consolidated financial statements
 
are free
 
of material
 
misstatement, whether due
 
to
error or
 
fraud. The
 
Company is
 
not required
 
to have,
 
nor were
 
we engaged
 
to perform,
 
an audit
 
of its
 
internal control
 
over financial
reporting. As part
 
of our
 
audits we are
 
required to obtain
 
an understanding of
 
internal control over
 
financial reporting but
 
not for
 
the
purpose
 
of
 
expressing an
 
opinion
 
on
 
the
 
effectiveness
 
of
 
the
 
Company’s
 
internal
 
control
 
over
 
financial
 
reporting.
 
Accordingly,
 
we
express no such opinion.
Our audits included
 
performing procedures to
 
assess the risks
 
of material misstatement
 
of the consolidated
 
financial statements, whether
due
 
to
 
error
 
or
 
fraud,
 
and
 
performing
 
procedures
 
that
 
respond
 
to
 
those
 
risks.
 
Such
 
procedures
 
included
 
examining, on
 
a
 
test
 
basis,
evidence
 
regarding
 
the
 
amounts
 
and
 
disclosures
 
in
 
the
 
consolidated
 
financial
 
statements.
 
Our
 
audits
 
also
 
included
 
evaluating
 
the
accounting
 
principles
 
used
 
and
 
significant
 
estimates
 
made
 
by
 
management,
 
as
 
well
 
as
 
evaluating
 
the
 
overall
 
presentation
 
of
 
the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company’s
 
auditor since 2018.
/s/
Armanino LLP
San Ramon, California
March 24, 2022
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
107
VAXXINITY,
 
INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
December 31,
2021
2020
Assets
Current assets:
Cash and cash equivalents
$
144,885
$
31,143
Accounts receivable
—
26
Amounts due from related parties
393
361
Prepaid expenses and other current assets
8,851
4,144
Total current assets
154,129
35,674
Deferred offering costs
—
2,254
Property and equipment, net
12,173
12,158
Long-term prepaid fixed assets
199
—
Restricted cash
172
55
Total assets
$
166,673
$
50,141
Liabilities, convertible preferred stock, and stockholders’ equity (deficit)
Current liabilities:
Accounts payable
$
3,192
$
1,017
Amounts due to related parties
19,407
8,004
Accrued expenses and other current liabilities
4,519
2,744
Notes payable
376
619
Notes payable with related parties
—
2,294
Convertible notes payable
—
10,356
Convertible notes with related parties, net of discount
—
14,324
Total current liabilities
27,494
39,358
Other liabilities
Simple agreement for future equity
—
24,335
Notes payable, net of current portion
10,323
10,699
Warrant liability
—
400
Other long-term liabilities
237
249
Total liabilities
38,054
75,041
Commitments and contingencies (Note 16)
Preferred stock: $
0.0001
 
par value,
50,000,000
 
and
57,298,376
 
shares authorized at December 31, 2021 and 2020,
respectively
—
—
Convertible preferred stock:
Series seed stock, 0 and
7,831,528
 
shares designated, issued and outstanding at December 31, 2021 and 2020;
liquidation preference $0 and $
10,452
 
at December 31, 2021 and 2020, respectively
—
10,383
Series seed-1 stock,
0
 
and
23,021,458
 
shares designated, and
0
 
and
22,876,457
 
shares issued and outstanding at
December 31, 2021 and 2020, respectively; liquidation preference $0 and $
20,964
 
at December 31, 2021 and 2020,
respectively
—
20,903
Series seed-2 stock, 0 and
14,615,399
 
shares designated, issued and outstanding at December 31, 2021 and 2020,
respectively; liquidation preference $0 and $
11,360
 
at December 31, 2021 and 2020, respectively
—
11,315
Series A-1 stock, 0 and
5,522,300
 
shares designated, and 0 and
1,871,511
 
shares issued and outstanding at December
31, 2021 and 2020, respectively; liquidation preference $0 and $
5,210
 
at December 31, 2021 and 2020, respectively
—
4,640
Series A-2 stock, 0 and
6,307,690
 
shares designated, issued and outstanding at December 31, 2021 and 2020,
respectively; liquidation preference $0 and $
14,660
 
at December 31, 2021 and 2020, respectively
—
15,234
Series A stock, 0 shares designated, issued and outstanding at December 31, 2021 and 2020; liquidation
 
preference $0
at December 31, 2021 and 2020
—
—
Series B stock, 0 shares designated, issued and outstanding at December 31, 2021 and 2020; liquidation
 
preference $0
at December 31, 2021 and 2020
—
—
Total convertible preferred stock
—
62,475
Stockholders’ equity (deficit):
Class A common stock, $
0.0001
 
par value;
1,000,000,000
 
and
129,916,912
 
shares authorized,
111,518,094
 
and
60,360,523
shares issued and outstanding at December 31, 2021 and 2020, respectively
278
272
Class B common stock, $
0.0001
 
par value;
100,000,000
 
and
10,999,149
 
shares authorized,
13,874,132
 
and
10,999,149
shares issued and outstanding at December 31, 2021 and 2020, respectively
—
—
Class A treasury stock, par value of $
0.0001
; 0
0
 
and
 
shares at December 31, 2021 and 2020, respectively
—
(23)
Additional paid-in capital
357,822
4,682
Accumulated deficit
(229,481)
(92,306)
Total stockholders’ equity (deficit)
128,619
(87,375)
Total liabilities, convertible preferred stock, and
 
stockholders’ equity (deficit)
$
166,673
$
50,141
The accompanying notes are an integral part of the consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
108
VAXXINITY,
 
INC.
CONSOLIDATED STATEMENTS
 
OF OPERATIONS
(in thousands, except share and per share amounts)
Years
 
Ended December 31,
2021
2020
Revenue
$
66
$
557
Cost of revenue
1,937
52
Gross (loss) profit
(1,871)
505
Operating expenses:
Research and development
71,379
20,570
General and administrative
51,825
12,217
Total operating expenses
123,204
32,787
Loss from operations
(125,075)
(32,282)
Other (income) expense:
Interest expense
840
1,182
Interest income
(9)
(1)
Change in fair value of convertible notes
2,667
5,761
Change in fair value of simple agreement for future equity
8,365
615
Change in fair value of warrant liability
214
41
Loss on foreign currency translation, net
23
77
Other (income) expense
12,100
7,675
Loss before income taxes
(137,175)
(39,957)
Provision for income taxes
—
—
Net loss
$
(137,175)
$
(39,957)
Net loss per share, basic and diluted
$
(1.79)
$
(0.61)
Weighted average common shares outstanding, basic and diluted
76,586,842
65,638,946
The accompanying notes are an integral part of the consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
109
VAXXINITY,
 
INC.
CONSOLIDATED STATEMENTS
 
OF CONVERTIBLE PREFERRED STOCK
(in thousands, except share amounts)
Convertible Preferred Stock
Series Seed
Series Seed-1
Series Seed-2
Series A-1
Series A-2
Series A
Series B
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Total
Balance at December 31, 2019
7,831,528
$
10,383
8,017,771
$
16,436
—
$
—
—
$
—
—
$
—
—
$
—
—
$
—
$
26,819
Issuance of Series Seed-1 preferred stock, net of issuance costs
of $18
—
—
14,858,686
4,467
—
—
—
—
—
—
—
—
—
—
4,467
Issuance of Series Seed-2 preferred stock, net of issuance costs
of $45
—
—
—
—
14,152,237
10,955
—
—
—
—
—
—
—
—
10,955
Conversion of Simple Agreement for Future Equity to Series
Seed-2 preferred stock
—
—
—
—
463,162
360
—
—
—
—
—
—
—
—
360
Issuance of Series A-1 preferred stock, net of issuance costs of
$585
—
—
—
—
—
—
1,799,649
4,426
—
—
—
—
—
—
4,426
Exercise of warrants for Series A-1 preferred stock
—
—
—
—
—
—
71,862
214
—
—
—
—
—
—
214
Conversion of Simple Agreement for Future Equity to Series
A-2 preferred stock, net of issuance costs of $41
—
—
—
—
—
—
—
—
6,307,690
15,234
—
—
—
—
15,234
Balance at December 31, 2020
7,831,528
$
10,383
22,876,457
$
20,903
14,615,399
$
11,315
1,871,511
$
4,640
6,307,690
$
15,234
—
$
—
—
$
—
$
62,475
Exchange of Series Seed, Series Seed-1, Series Seed-2, Series
A-1 and Series A-2 for Series A
(7,831,528)
(10,383)
(22,876,457)
(20,903)
(14,615,399)
(11,315)
(1,871,511)
(4,640)
(6,307,690)
(15,234)
53,502,585
62,475
—
—
—
Conversion of convertible notes to Series A preferred stock,
net of debt issuance costs
—
—
—
—
—
—
—
—
—
—
3,624,114
27,545
—
—
27,545
Conversion of notes payable with related parties to Series A
convertible preferred
—
—
—
—
—
—
—
—
—
—
423,230
2,205
—
—
2,205
Conversion of Simple Agreement for Future Equity to Series A
convertible preferred
—
—
—
—
—
—
—
—
—
—
4,539,060
35,600
—
—
35,600
Conversion of warrant liability
 
to Series A convertible
preferred
—
—
—
—
—
—
—
—
—
—
134,106
614
—
—
614
Issuance of Series B convertible preferred stock, net of
issuance costs of $133
—
—
—
—
—
—
—
—
—
—
—
—
15,365,574
122,791
122,791
Conversion of Series A and Series B to Class A common stock
concurrently with initial public offering
—
—
—
—
—
—
—
—
—
—
(62,223,095)
(128,439)
(15,365,574)
(122,791)
(251,230)
Balance at December 31, 2021
—
$
—
—
$
—
—
$
—
—
$
—
—
$
—
—
$
—
—
$
—
$
—
The accompanying notes are an integral part of the consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
110
VAXXINITY,
 
INC.
CONSOLIDATED STATEMENTS
 
OF STOCKHOLDERS’ EQUITY (DEFICIT)
(in thousands, except share amounts)
Stockholders’ Deficit
Common Stock
Common Stock-Class A
Common Stock-Class B
Treasury Stock
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Additional Paid-
in Capital
Accumulated
Deficit
Stockholders’
Equity (Deficit)
Balance at December 31, 2019
37,953,692
$
270
—
$
—
—
$
—
(3,169,093)
$
(23)
$
3,590
$
(52,349)
$
(48,512)
Issuance of common stock upon exercise of stock options
283,290
1
—
—
—
—
—
—
78
—
79
Vesting of restricted stock
121,282
1
—
—
—
—
—
—
—
—
1
Issuance of common stock
33,001,408
—
—
—
—
—
—
—
—
—
—
Stock-based compensation expense
—
—
—
—
—
—
—
—
1,014
—
1,014
Reclassification of common stock to Class A common stock
(60,360,523)
(272)
60,360,523
272
—
—
—
—
—
—
—
Reclassification of common stock to Class B common stock
(10,999,149)
—
—
—
10,999,149
—
—
—
—
—
—
Net loss
—
—
—
—
—
—
—
—
—
(39,957)
(39,957)
Balance at December 31, 2020
—
$
—
60,360,523
$
272
10,999,149
$
—
(3,169,093)
$
(23)
$
4,682
$
(92,306)
$
(87,375)
Issuance of common stock upon exercise of stock options
—
—
186,202
—
—
—
—
—
170
—
170
Vesting of restricted stock
—
—
15,405
—
—
—
—
—
—
—
—
Reclassification of Class A common stock to Class B common stock
—
—
(2,874,983)
—
2,874,983
—
—
—
—
—
—
Issuance of common stock upon stock grant
—
—
485,836
—
—
—
—
—
103
—
103
Retirement of treasury stock upon reorganization
—
—
(3,169,093)
—
—
—
3,169,093
23
(23)
—
—
Proceeds from initial public offering, net of offering expenses of $13,913
—
—
6,537,711
1
—
—
—
—
71,076
—
71,077
Exercise of warrants concurrently with initial public offering
—
—
112,373
—
—
—
—
—
177
—
177
Conversion of Series A and Series B to Class A common stock concurrently with initial public
offering
—
—
49,864,120
5
—
—
—
—
251,225
—
251,230
Stock-based compensation expense
—
—
—
—
—
—
—
—
30,412
—
30,412
Net loss
—
—
—
—
—
—
—
—
—
(137,175)
(137,175)
Balance at December 31, 2021
—
$
—
111,518,094
$
278
13,874,132
$
—
—
$
—
$
357,822
$
(229,481)
$
128,619
The accompanying notes are an integral part of the consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
111
VAXXINITY,
 
INC.
CONSOLIDATED STATEMENTS
 
OF CASH FLOWS
(in thousands)
Years Ended December
 
31,
2021
2020
Cash flows from operating activities:
Net loss
$
(137,175)
$
(39,957)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense
1,102
717
Amortization of debt issuance costs
261
108
Stock-based compensation expense
30,412
1,014
Non-cash consulting expense
280
—
Non-cash interest expense
—
582
Change in fair value of convertible notes
2,667
5,761
Change in fair value of warrant liability
214
41
Change in fair value of simple agreement for future equity
8,365
615
Changes in operating assets and liabilities:
Accounts receivable
26
(26)
Amounts due from related parties
(31)
(1,743)
Prepaid expenses and other current assets
(4,704)
(3,488)
Deferred offering costs
2,254
(2,254)
Accounts payable
2,174
(267)
Amounts due to related parties
11,402
4,608
Accrued expenses and other current liabilities
1,775
285
Other long-term liabilities
(12)
94
Net cash used in operating activities
(80,990)
(33,910)
Cash flows from investing activities:
Purchase of property and equipment
(1,318)
(1,477)
Net cash used in investing activities
(1,318)
(1,477)
Cash flows from financing activities:
Proceeds from initial public offering, net of offering expenses of $13,913
71,077
—
Proceeds from issuance of convertible notes payable
2,000
12,040
Repayment of convertible notes payable
(2,000)
(5,500)
Repayment of notes payable
(414)
(202)
Repayment of note payable with related party
(100)
—
Proceeds from issuance of Series B convertible preferred stock, net of issuance costs
122,791
—
Proceeds from issuance of simple agreement for future equity
2,900
39,355
Proceeds from issuance of Series Seed-1 convertible preferred stock, net of issuance costs
—
4,467
Proceeds from issuance of Series Seed-2 convertible preferred stock, net of issuance costs
—
10,955
Proceeds from issuance of Series A-1 convertible preferred stock, net of issuance costs
—
4,999
Payment for Series A-2 convertible preferred stock issuance costs
—
(41)
Debt issuance costs for related party convertible notes
—
(300)
Repayment of Paycheck Protection Program
(257)
—
Proceeds from Paycheck Protection Program
—
257
Proceeds from exercise of stock options
170
79
Net cash provided by financing activities
196,167
66,109
Increase in cash, cash equivalents, and restricted cash
113,859
30,722
Cash, cash equivalents, and restricted cash at beginning of period
31,198
476
Cash, cash equivalents, and restricted cash at end of period
$
145,057
$
31,198
Supplemental Disclosure
Cash paid for interest
$
581
$
425
Noncash Financing Activities
Conversion of Series A and Series B to Class A common stock concurrently with initial public offering
$
251,230
$
—
Exchange of Series Seed, Series Seed-1, Series Seed-2, Series A-1 and Series A-2 for Series A
$
62,475
$
—
Conversion of simple agreement for future equity into Series A preferred stock
$
35,600
$
—
Conversion of convertible notes payable into Series A preferred stock
$
27,545
$
—
Conversion of notes payable with related parties into Series A preferred stock
$
2,205
$
—
Conversion of warrant liability into Series A preferred stock
$
614
$
—
Cashless exercise of warrant into Class A common stock concurrently with initial public offering
$
177
—
Retirement of treasury stock upon reorganization
$
23
$
—
Conversion of simple agreement for future equity into Series A-2 preferred stock
$
—
$
15,275
Acquisition of airplane through issuance of note payable
$
—
$
11,500
Fair value of warrants issued in connection with preferred stock issuance
$
—
$
573
Conversion of simple agreement for future equity into Series Seed-2 preferred stock
$
—
$
360
Warrant liability reclassified to Series A-1
 
preferred stock upon warrant exercise
$
—
$
214
Fair value of restricted stock vesting during the period
$
—
$
1
112
The accompanying notes are an integral part of the consolidated financial statements.
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
113
1. Nature of the Business
Vaxxinity,
 
Inc.,
 
a
 
Delaware corporation
 
(“Vaxxinity
 
,”
 
and
 
together
 
with
 
its
 
subsidiaries,
 
the
 
“Company”), was
 
formed
 
through
 
the
combination of two
 
separate businesses that
 
originated from United
 
Biomedical, Inc. (“UBI”)
 
in two separate
 
transactions: a spin-out
from UBI
 
in 2014
 
of operations
 
focused on
 
developing chronic
 
disease product
 
candidates that
 
resulted in
 
United Neuroscience
 
(“UNS”),
and a second spin-out from UBI in
 
2020 of operations focused on the development
 
of a COVID-19 vaccine that resulted in
 
C19 Corp.
(“COVAXX”).
 
On February 2, 2021, Vaxxinity
 
was incorporated for the purpose of reorganizing
 
and combining UNS and COVAXX
and on March 2, 2021, did so by acquiring all of the outstanding equity interests of UNS and COVAXX
 
pursuant to a contribution and
exchange
 
agreement
 
(the
 
“Contribution
 
and
 
Exchange
 
Agreement”)
 
whereby
 
the
 
existing
 
equity
 
holders
 
of
 
UNS
 
and
 
COVAXX
contributed their equity interests in each of UNS and COVAXX in exchange for equity in Vaxxinity
 
(the “Reorganization”).
The Company is a
 
biotechnology company currently focused
 
on developing product candidates
 
for human use in
 
the fields of neurology
and coronaviruses utilizing
 
its “Vaxxine Platform”—a peptide vaccine
 
technology first developed
 
by UBI and
 
subsequently refined
 
over
the
 
last
 
two
 
decades.
 
The
 
Company
 
is
 
engaged
 
in
 
the
 
development
 
and
 
commercialization
 
of
 
rationally
 
designed
 
prophylactic
 
and
therapeutic vaccines to combat chronic disorders
 
and infectious diseases with large patient populations
 
and unmet medical need. UBI is
a significant shareholder of the Company and, therefore, considered a related party.
The Company is
 
subject to risks
 
and uncertainties common
 
to early-stage companies
 
in the biotechnology
 
industry including, but
 
not
limited
 
to,
 
uncertainty
 
of
 
product
 
development
 
and
 
commercialization,
 
lack
 
of
 
marketing
 
and
 
sales
 
history,
 
development
 
by
 
its
competitors of
 
new technological
 
innovations, dependence
 
on key
 
personnel, market
 
acceptance of
 
products, product
 
liability, protection
of proprietary technology,
 
ability to raise additional financing, and compliance
 
with government regulations. If the Company does
 
not
successfully commercialize any
 
of its product
 
candidates, it will
 
be unable to
 
generate recurring product
 
revenue or achieve
 
profitability.
The
 
Company’s
 
product
 
candidates
 
are
 
in
 
development
 
and
 
will
 
require
 
significant
 
additional
 
research
 
and
 
development
 
efforts,
including extensive pre-clinical
 
and clinical testing and
 
regulatory approval prior to
 
commercialization. These efforts require
 
significant
amounts of additional capital,
 
adequate personnel and infrastructure
 
and extensive compliance-reporting capabilities.
 
There can be
 
no
assurance that
 
the Company’s
 
research and
 
development will
 
be successfully
 
completed, that
 
adequate protection for
 
the Company’s
intellectual property
 
will be
 
obtained, that
 
any products
 
developed will
 
obtain necessary
 
government regulatory
 
approval or
 
that any
approved products will
 
be commercially viable.
 
Even if the
 
Company’s product development efforts are
 
successful, it is
 
uncertain when,
if ever, the Company will generate significant revenue
 
from product sales. The Company
 
operates in an environment of rapid
 
change in
technology and is dependent upon the services of its employees and consultants.
Contribution and Exchange Agreement
On March
 
2, 2021,
 
in accordance
 
with the
 
Contribution and
 
Exchange Agreement,
 
(i) all
 
outstanding shares
 
of UNS
 
and COVAXX
preferred stock
 
and common
 
stock were
 
contributed to
 
Vaxxinity and exchanged for
 
like shares
 
of stock
 
in Vaxxinity, (ii) the outstanding
options to purchase
 
shares of UNS
 
and COVAXX
 
common stock were
 
terminated and substituted
 
with options to
 
purchase shares of
common stock in Vaxxinity,
 
(iii) the outstanding warrant to purchase shares
 
of COVAXX common stock was cancelled and exchanged
for a warrant to acquire common stock in
 
Vaxxinity and (iv) each outstanding Reorganization Convertible Note (as defined below) was
contributed to Vaxxinity and the holders of such notes received Series A preferred stock in Vaxxinity.
 
In particular:
•
Each UNS common share and convertible preferred share was exchanged for 0.2191 shares of Vaxxinity common stock or
Series A preferred stock, as applicable;
•
Each share of COVAXX
 
common and convertible preferred stock was exchanged for
3.4233
 
shares of Vaxxinity common
stock or Series A preferred stock, as applicable (and prior to the closing of the Reorganization, all the holders of outstanding
COVAXX
 
SAFEs agreed to convert such SAFEs into shares of Series A-3 preferred stock of COVAXX, which shares were
then exchanged for shares of Vaxxinity’s
 
Series A preferred stock);
•
The Reorganization Convertible Notes were exchanged for an aggregate of
4,047,344
 
shares of Vaxxinity’s
 
Series A
preferred stock; and
•
Each outstanding option of both UNS and COVAXX to purchase common shares of UNS or COVAXX
 
was terminated and
substituted with an option to purchase shares of Class A common stock of Vaxxinity.
 
Each outstanding UNS option was
exchanged based on a conversion ratio of
0.2191
. Each outstanding COVAXX
 
option was exchanged based on a conversion
ratio of
3.4233
.
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
114
All parties
 
to the
 
Contribution and
 
Exchange Agreement
 
intend that
 
the contribution
 
of outstanding
 
equity interests
 
to Vaxxinity
 
in
exchange for
 
Vaxxinity’s
 
common stock
 
and preferred
 
stock will
 
be treated
 
as an
 
integrated transaction
 
for U.S.
 
federal income
 
tax
purposes that is governed by Section 351(a) of the Internal Revenue Code of 1986, as amended.
The Reorganization was
 
determined to be
 
a common control
 
transaction, so the
 
carrying values of
 
all contributed assets
 
and assumed
liabilities
 
remained
 
unchanged
 
and
 
the
 
financial
 
information
 
for
 
all
 
periods
 
in
 
the
 
financial
 
statements
 
presented
 
prior
 
to
 
the
Reorganization are presented on a consolidated basis.
Reverse Stock Split
 
On October 29, 2021,
 
the Company effectuated
 
a reverse stock split
 
of 1-for-
1.556
 
(the “Stock Split”) of
 
the Company’s
 
Class A and
Class B common stock
 
pursuant to an amendment
 
to the Company’s
 
Amended and Restated Certificate
 
of Incorporation approved by
the Company’s
 
board of directors
 
and stockholders. As a
 
result of the
 
Stock Split, the
 
Company also adjusted
 
the share and
 
per share
amounts
 
associated
 
with
 
its
 
options
 
and
 
warrants
 
to
 
purchase
 
shares
 
of
 
its
 
common
 
stock.
 
These
 
consolidated
 
financial
 
statements
including the notes have been retroactively adjusted
 
to reflect the Stock Split for all
 
periods presented. Any fractional shares that
 
would
have resulted from the Stock Split have been rounded down to the nearest whole share.
 
Initial Public Offering
On November 15, 2021, the Company closed its IPO of
6,000,000
 
shares of Class A common stock at a public offering price of $
13.00
per share. On November 18, 2021
 
the Company held a subsequent closing
 
for the issuance of an
 
additional
537,711
 
shares of Class A
common stock
 
pursuant to
 
a 30-day
 
option granted
 
to the
 
underwriters to
 
purchase up
 
to an
 
additional
900,000
 
shares of
 
Class A
 
common
stock at
 
the IPO
 
price, less
 
underwriting discounts
 
and commissions.
 
The aggregate
 
net proceeds
 
to the
 
Company from
 
the offering,
after deducting
 
underwriting discounts
 
and commissions
 
and other
 
offering expenses payable
 
by the Company, was
 
approximately $
71.1
million. Upon the closing of the IPO, all previously outstanding shares of the
 
Company’s redeemable convertible preferred stock were
automatically converted at the same ratio used for the Stock Split (1-for-
1.556
) into shares of its Class A common stock.
Liquidity
As of December 31, 2021, the Company
 
had $144.9 million of cash and cash
 
equivalents. To date, the Company has primarily financed
its operations
 
through the
 
sale of
 
convertible preferred
 
stock and
 
common stock
 
and borrowings
 
under promissory
 
notes (including
Convertible Notes), a portion
 
of which has been
 
raised from related party
 
entities. The Company has
 
experienced significant negative
cash flows from operations since
 
inception, and incurred a net
 
loss of $137.2 million for
 
the year ended December 31, 2021.
 
Net cash
used in
 
operating activities
 
for the
 
year ended
 
December 31,
 
2021 was
 
$81.0 million.
 
In addition,
 
as of
 
December 31, 2021,
 
the Company
has an accumulated deficit of $229.5 million. The Company expects to incur substantial operating losses and negative cash flows from
operations for
 
the foreseeable
 
future. As
 
of the
 
date these
 
financial statements
 
were available
 
to be
 
issued, the
 
Company expects
 
its
existing cash and
 
cash equivalents to
 
be sufficient to
 
fund its operating
 
expenses and capital
 
expenditure requirements for
 
at least the
next 12 months.
The Company will need to obtain additional funding beyond the period that is 12 months from the date these financial statements were
available to be issued
 
whether through collaboration
 
agreements, private or
 
public equity or debt
 
offerings or a combination
 
thereof, and
such
 
additional funding
 
may not
 
be
 
available on
 
terms the
 
Company finds
 
acceptable or
 
at
 
all. If
 
the
 
Company is
 
unable
 
to obtain
sufficient capital
 
to continue
 
to advance
 
its programs,
 
the Company
 
would be
 
forced to
 
delay,
 
limit, reduce
 
or terminate
 
its product
development
 
or
 
future
 
commercialization
 
efforts
 
or
 
grant
 
rights
 
to
 
third
 
parties
 
to
 
develop
 
and
 
market
 
product
 
candidates
 
that
 
the
Company would otherwise prefer to develop and market itself.
The accompanying consolidated financial statements have been prepared on a
 
going concern basis, which contemplates the realization
of
 
assets and
 
satisfaction of
 
liabilities in
 
the
 
ordinary
 
course of
 
business.
 
The
 
consolidated financial
 
statements
 
do
 
not
 
include
 
any
adjustments relating to the
 
recoverability and classification
 
of recorded asset amounts
 
or the amounts and
 
classification of liabilities
 
that
might result from the outcome of the uncertainties described above.
Impact of COVID-19 Pandemic
In March 2020, the World Health Organization declared the outbreak of a
 
COVID-19 pandemic. The COVID-19 pandemic is
 
evolving,
and to date, has
 
led to the implementation
 
of various responses,
 
including government-imposed quarantines,
 
travel restrictions and
 
other
public health safety measures.
The Company is closely monitoring the impact of
 
the COVID-19 pandemic on all aspects of its business,
 
including how it will impact
its operations and
 
the operations of
 
its customers, suppliers,
 
vendors and business
 
partners. The Company
 
does not yet
 
know the
 
full
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
115
extent of potential delays or impacts on its business, its clinical trials, its research programs, healthcare systems or
 
the global economy
and it cannot presently predict the scope and severity of any potential business shutdowns or disruptions. The extent to which
COVID-19
 
impacts its
 
business, results
 
of operation
 
and financial
 
condition will
 
depend on
 
future developments,
 
which
 
are highly
uncertain and cannot be predicted with confidence, such as
 
the duration of the outbreak, new information that may
 
emerge concerning
the severity of COVID-19 or
 
the effectiveness of actions to contain
 
COVID-19 or treat its impact,
 
among others. If the Company
 
or any
of the third parties with whom the Company engages, however,
 
were to experience shutdowns or other business disruptions, its ability
to conduct its business
 
in the manner and
 
on the timelines presently planned
 
could be materially and negatively
 
affected, which could
have a material adverse impact on its business, results of operation and financial condition.
The Company has not incurred impairment losses
 
in the carrying values of its assets
 
as a result of the COVID-19 pandemic
 
and it is not
aware of any specific related event or circumstance that would require it to revise its estimates reflected in these consolidated financial
statements.
2. Summary of Significant Accounting Policies
Basis of presentation
The accompanying consolidated financial statements have
 
been prepared using generally accepted
 
accounting principles in the United
States of America (GAAP)
 
and pursuant to the
 
rules and regulations of
 
the United States Securities
 
and Exchange Commission (“SEC”)
for financial reporting. The consolidated
 
financial statements for the periods
 
presented include the accounts of
 
UNS and COVAXX that
were parties to the Contribution and Exchange Agreement. All share and per share amounts, as
 
originally recorded by each entity, have
been converted
 
to a
 
number of
 
shares and
 
per share
 
amounts using
 
the conversion
 
ratios determined
 
under the
 
Contribution and
 
Exchange
Agreement and the Stock Split ratio.
 
Foreign currency translation
The
 
Company’s
 
consolidated
 
financial
 
statements
 
are
 
prepared
 
in
 
U.S.
 
dollars.
 
Its
 
foreign
 
subsidiaries
 
use
 
the
 
U.S.
 
dollar
 
as
 
their
functional currency
 
and maintain
 
their records
 
in the
 
local currency.
 
Nonmonetary assets
 
and liabilities
 
are re-measured
 
at historical
rates and monetary assets and liabilities are
 
re-measured at exchange rates in effect at the end
 
of the reporting period. Income statement
accounts are
 
re-measured at
 
average exchange
 
rates for
 
the reporting
 
period. The
 
resulting gains
 
or losses
 
are included
 
in foreign
 
currency
(losses) gains in the consolidated statements of operations.
Segment information
Operating segments are
 
defined as components
 
of an
 
entity for which
 
separate financial information
 
is available and
 
that is
 
regularly
reviewed by
 
the Chief
 
Operating Decision
 
Maker (“CODM”)
 
in deciding
 
how to
 
allocate resources
 
to an
 
individual segment
 
and in
assessing performance. The Company’s
 
CODM is its Chief Executive Officer
 
(“CEO”). The Company has determined that
 
it operates
as a single operating segment and has one reportable segment.
Use of estimates
The preparation of consolidated
 
financial statements in accordance
 
with GAAP requires the Company’s management to
 
make estimates
and assumptions that affect the reported amounts of assets and liabilities and
 
disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of expenses during
 
the reporting period. Significant estimates contained
within these consolidated financial statements include, but are not limited to, the estimated fair value of the Company’s common
 
stock
and convertible notes payable, simple agreements for future equity, warrant liabilities, stock-based compensation, income tax valuation
allowance and the
 
accruals of research
 
and development expenses.
 
The Company bases
 
its estimates on
 
historical experience, known
trends and other market-specific
 
or other relevant factors that
 
it believes to be reasonable
 
under the circumstances. On
 
an ongoing basis,
management evaluates
 
its estimates,
 
as there
 
are changes
 
in facts
 
and circumstances.
 
Actual results
 
may differ
 
materially from
 
those
estimates or assumptions.
Cash and cash equivalents
The Company considers all highly liquid investments with an original maturity of three months or less at the time of initial purchase to
be
 
cash equivalents,
 
including balances
 
held
 
in
 
the Company’s
 
money market
 
accounts. The
 
Company
 
maintains its
 
cash
 
and
 
cash
equivalents with financial institutions, in
 
which balances from time to
 
time may exceed the U.S.
 
federally insured limits. The
 
objectives
of the Company’s cash management policy
 
are to safeguard and preserve funds to maintain liquidity sufficient
 
to meet the Company’s
cash flow requirements, and to attain a market rate of return.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
116
Restricted cash
As
 
of
 
December
 
31,
 
2021
 
and
 
2020
 
a
 
deposit
 
of
 
$0.2
 
million
 
and
 
$0.1
 
million,
 
respectively,
 
was
 
restricted
 
from
 
withdrawal.
 
The
restriction
 
relates
 
to
 
securing
 
credit
 
card
 
obligations.
 
This
 
balance
 
is
 
included
 
in
 
restricted
 
cash
 
on
 
the
 
accompanying consolidated
balance sheets.
The Company’s consolidated statement
 
of cash flows
 
for the year
 
ended December 31,
 
2021 and 2020
 
included restricted cash
 
with cash
and
 
cash
 
equivalents
 
when
 
reconciling
 
the
 
beginning-of-period
 
and
 
end-of-period
 
total
 
amounts
 
shown
 
on
 
such
 
statements.
 
A
reconciliation of cash, cash
 
equivalents and restricted cash
 
reported within the consolidated
 
balance sheets that sum
 
to the total of
 
the
same amounts shown in the consolidated statements of cash flows is as follows (in thousands):
December 31,
2021
2020
Cash and cash equivalents
$
144,885
$
31,143
Restricted cash
172
55
Total cash, cash equivalents and restricted cash
$
145,057
$
31,198
Concentration of credit risk
Financial instruments
 
that potentially
 
expose the
 
Company to
 
concentrations of
 
credit risk
 
consist primarily
 
of cash
 
and cash
 
equivalents.
Cash equivalents are
 
occasionally invested in
 
certificates of deposit.
 
The Company maintains
 
each of its
 
cash balances with
 
high-quality
and accredited financial
 
institutions and
 
accordingly,
 
such funds
 
are not
 
exposed to unusual
 
credit risk
 
beyond the
 
normal credit
 
risk
associated with
 
commercial banking
 
relationships. The
 
Company maintains
 
a portion
 
of its
 
cash and
 
cash equivalent
 
balances in
 
the
form of a money market account with a financial institution that management believes to be creditworthy.
 
The Company is dependent on contract manufacturers, several of whom are considered to be related parties, for manufacturing, quality
control,
 
testing,
 
validation
 
and
 
supply
 
services,
 
including
 
production,
 
including
 
production
 
and
 
shipment
 
of
 
its
 
enzyme-linked
immunosorbent assay (“ELISA”) tests, and for research
 
and development and clinical activities. The Company’s future revenue as
 
well
as research and
 
development programs could
 
be adversely affected
 
by a significant
 
supply interruption by
 
one or more
 
of its contract
manufacturers.
Accounts receivable
The
 
Company’s
 
trade
 
accounts
 
receivable
 
consist
 
of
 
amounts
 
due
 
from
 
distributors.
 
The
 
Company
 
reserves
 
against
 
trade
 
accounts
receivable for estimated
 
losses that may
 
arise from a
 
customer’s inability to
 
pay,
 
and any amounts
 
determined to be
 
uncollectible are
written off
 
against the
 
reserve when
 
it is
 
probable that
 
the receivable
 
will not
 
be collected.
 
As of
 
December 31,
 
2021 and
 
2020, the
Company has not recorded any allowance for bad debts against the trade accounts receivable.
Property and equipment
Property and equipment are
 
stated at cost,
 
less accumulated depreciation. Depreciation
 
is computed on
 
the straight-line basis over
 
the
estimated useful life of the assets.
The estimated useful life of property and equipment is as follows:
Estimated
 
Useful
 
Life
Airplane
15 years
Facilities
15 years
Furniture and fixtures
5 years
Vehicles
5 years
Laboratory and computer equipment
3 years
Software
3 years
Upon retirement or sale, the cost of assets
 
disposed of and the related accumulated depreciation
 
are removed from the accounts and any
resulting gain or
 
loss is included
 
in gain or
 
loss from operations.
 
Expenditures for repairs
 
and maintenance are
 
charged to expense
 
as
incurred.
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
117
Impairment of long-lived assets
Long-lived
 
assets,
 
comprised
 
of
 
property
 
and
 
equipment,
 
are
 
tested
 
for
 
recoverability
 
whenever
 
events
 
or
 
changes
 
in
 
business
circumstances indicate
 
that
 
the
 
carrying
 
amount
 
of
 
the
 
assets
 
may
 
not
 
be
 
fully
 
recoverable.
 
Factors
 
that
 
the
 
Company
 
considers
 
in
deciding
 
when
 
to
 
perform
 
an
 
impairment
 
review
 
include
 
significant
 
underperformance
 
of
 
the
 
business
 
in
 
relation
 
to
 
expectations,
significant negative industry or
 
economic trends and significant
 
changes or planned changes
 
in the use of
 
the assets. If an
 
impairment
review
 
is
 
performed
 
to
 
evaluate
 
a
 
long-lived
 
asset
 
for
 
recoverability,
 
the
 
Company
 
compares
 
forecasts
 
of
 
undiscounted
 
cash
 
flows
expected to
 
result from
 
the use
 
and eventual
 
disposition of
 
the long-lived
 
asset to
 
its carrying
 
value. An
 
impairment loss
 
would be
recognized when estimated undiscounted future cash flows expected to result from the use of an asset
 
are less than its carrying amount.
The impairment loss would be
 
based on the excess of
 
the carrying value of the
 
impaired asset over its fair value,
 
determined based on
discounted cash flows. To date, the Company has not recorded any impairment losses or disposals on long-lived assets.
Deferred offering costs
The Company capitalizes certain
 
legal, audit, accounting and
 
other third-party fees that
 
are directly associated
 
with an in-process capital
financing effort
 
as deferred offering
 
costs until such
 
financing is consummated.
 
After consummation of
 
the financing, these
 
costs are
recorded
 
as
 
a reduction
 
of
 
additional paid-in
 
capital generated
 
as
 
a result
 
of
 
the financing.
 
Should
 
the financing
 
be abandoned,
 
the
deferred offering costs are expensed immediately as a charge to operating expenses in the statement of operations.
 
Fair value measurements
Certain assets and liabilities
 
are carried at fair value
 
under GAAP. Fair value is defined as the exchange
 
price that would be received
 
for
an asset or paid to transfer a liability (an
 
exit price) in the principal or most advantageous market for
 
the asset or liability in an orderly
transaction between market participants on the measurement date. Valuation
 
techniques used to measure fair value must maximize
 
the
use of observable inputs and minimize the
use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following
three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
Level 1—Quoted prices in active markets that are identical assets or liabilities.
Level 2—Observable inputs (other than Level 1
 
quoted prices), such as quoted prices
 
in active markets for similar assets
 
or liabilities,
quoted prices
 
in markets
 
that are
 
not active
 
for identical
 
or similar
 
assets or
 
liabilities, or
 
other inputs
 
that are
 
observable or
 
can be
corroborated by observable market data.
Level 3—Unobservable inputs that are supported by
 
little or no market activity that
 
are significant to determining the fair
 
value of the
assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.
Prior to the conversion in accordance
 
with the Contribution and Exchange Agreement,
 
the majority of the Company’s convertible notes
and all of the simple agreement
 
for future equity (“SAFE”) and
 
warrant liabilities were carried at
 
fair value and were classified
 
as Level
3 liabilities.
Convertible notes payable
The Company issued
 
convertible notes payable
 
at various times
 
from 2014 to
 
2021. The Company
 
accounts for the
 
convertible notes
payable at fair value in accordance with ASC 480, Distinguishing Liabilities from Equity (“ASC 480”). The notes payable with related
parties are
 
accounted for
 
as straight
 
debt under
 
ASC 470,
 
Debt (“ASC
 
470”). The
 
Company has
 
elected to
 
separate interest
 
expense
from the
 
full change
 
in fair
 
value of
 
the convertible
 
notes. Debt
 
issuance costs
 
incurred by
 
the Company
 
are amortized
 
to interest expense
over the term of the convertible notes using the effective interest method in the accompanying consolidated statements of operations.
On March 2, 2021, each convertible note that was outstanding was exchanged for shares of Series A preferred stock (see
 
Note 8).
Debt issuance costs
The Company records
 
debt issuance costs
 
as a reduction
 
to the
 
carrying value of
 
the debt. The
 
debt discounts are
 
amortized over the
term of the debt using
 
the effective interest method and recognized
 
as interest expense in the accompanying
 
consolidated statement of
operations.
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
118
Simple Agreement for Future Equity—SAFE
The Company accounts for SAFEs at
 
fair value in accordance with ASC
 
480. The SAFEs are subject to
 
revaluation at the end of each
reporting period, with changes in fair value recognized in the accompanying consolidated statements of operations.
On March 2, 2021,
 
each SAFE that
 
was outstanding was converted
 
into shares of the
 
Company’s Series A preferred stock
 
(see Note 11).
Classification of convertible preferred stock
The Company
 
records all
 
convertible preferred
 
stock at
 
its original
 
issuance price,
 
less direct
 
and incremental
 
issuance costs,
 
as stipulated
by its terms. The Company’s convertible preferred stock is classified
 
outside of stockholders’ deficit because the
 
holders of such shares
have liquidation rights in the event of a deemed liquidation that, in certain situations, are not solely within the control of the Company.
All shares
 
of the
 
Company’s
 
Series A
 
and Series
 
B preferred
 
stock converted
 
into shares
 
of the
 
Company’s
 
Class A
 
common stock
concurrently with the closing of the initial public offering (see Note 10).
Revenue recognition
The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts With Customers (“ASC 606”). Under
ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or
 
services, in an amount that reflects the
consideration that
 
the entity
 
expects to be
 
entitled to
 
in exchange
 
for those
 
goods or services.
 
The Company applies
 
ASC 606 to
 
contracts
with customers only when it is probable that the entity will collect the consideration to which it is entitled in exchange for the goods or
services it transfers to the customer.
The Company assesses the
 
goods or services promised
 
within each contract and
 
determines those that are
 
performance obligations by
evaluating
 
whether
 
each
 
promised
 
good
 
or
 
service
 
is
 
distinct.
 
This
 
assessment
 
involves
 
subjective
 
determinations
 
and
 
requires
management to make judgments about the individual promised goods or services, the intended benefit of
 
the contract and whether each
good or
 
service is
 
separately identifiable
 
from the
 
other aspects
 
of the
 
contractual relationship.
 
If a
 
promised good
 
or service
 
is not
distinct, an entity is required to combine that good or service with other promised goods or services
 
until it identifies a bundle of goods
or services that is distinct.
If the consideration promised in a contract includes a variable amount, the Company
 
estimates the amount of consideration to which it
will be
 
entitled in
 
exchange for
 
transferring the
 
promised goods
 
or services
 
to a
 
customer.
 
The Company
 
determines the
 
amount of
variable consideration by using the most likely amount method and applies the constraint on variable consideration, which requires the
amount included in the
 
transaction price to be
 
constrained to the amount
 
for which it is
 
probable that a significant
 
reversal of cumulative
revenue recognized
 
will not
 
occur.
 
At the
 
end of
 
each subsequent
 
reporting period,
 
the Company
 
re-evaluates the
 
estimated variable
consideration included in the transaction price
 
and any related constraint, and if necessary, adjusts its estimate
 
of the overall transaction
price.
The Company recognizes as revenue the
 
amount of the transaction price that
 
is allocated to the respective performance
 
obligation when
(or as) each performance obligation is satisfied, either at a
 
point in time or over time, and, if over
 
time, recognition is based on the use
of an output or input method. In the Company’s sole revenue contract, the performance obligation was satisfied at the point in time the
data and related samples were made available for the customer’s review.
For its sales of ELISA tests, the Company recognizes revenue once control is transferred upon delivery to the customer.
Taiwan Centers for Disease Control grant
United
 
Biomedical,
 
Inc.,
 
Asia
 
(“UBI-Asia”),
 
a
 
related
 
party
 
through
 
common
 
ownership
 
which
 
is
 
responsible
 
for
 
applying
 
for
 
and
managing
 
grants
 
on
 
the
 
Company’s
 
behalf,
 
was
 
awarded
 
a
 
grant
 
by
 
the
 
Taiwan
 
Centers
 
for
 
Disease
 
Control
 
(“Taiwan
 
CDC”)
 
for
COVID-19 vaccine development.
 
UBI-Asia contracted with
 
the Company to
 
conduct a two-phase
 
study of a
 
COVID-19 vaccine clinical
trial in Taiwan.
 
The grant provides that
 
costs incurred to complete
 
the two phases of
 
the clinical trial will
 
be reimbursed based on
 
the
achievement
 
of
 
certain
 
milestones
 
as
 
defined
 
in
 
the
 
agreement.
 
At
 
each
 
reporting
 
date,
 
the
 
Company
 
assesses
 
the
 
status
 
of
 
all
 
the
activities involved in completing the clinical trials in relation to the milestones. The Company accounts for the amounts that have been
received from the
 
Taiwan
 
CDC to reimburse
 
costs incurred on
 
the clinical trials
 
and not
 
expected to be
 
refunded back
 
to the Taiwan
CDC as contra research and development expenses in the accompanying consolidated statements of operations.
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
119
Research and development
Research
 
and
 
development
 
expenses
 
include
 
employee
 
related
 
costs,
 
consulting,
 
contract
 
research,
 
depreciation,
 
rent,
 
stock-based
compensation and other corporate costs attributable to research and development activities and are expensed as incurred.
The Company has entered into various research, development and manufacturing contracts, some of which are with related parties (see
Note 18). These
 
agreements are generally
 
cancelable by either
 
party,
 
and related payments
 
are recorded as
 
research and development
expenses as incurred.
 
The Company records
 
accruals for estimated
 
ongoing research costs.
 
When evaluating the
 
adequacy of the
 
accrued
liabilities, the Company
 
analyzes progress of
 
the studies or
 
trials, including the
 
phase or
 
completion of events,
 
invoices received and
contracted costs. The Company’s historical accrual estimates have not been materially different from the actual costs.
Patent costs
Patent-related costs
 
incurred in
 
connection with
 
filing and
 
prosecuting patent
 
applications are
 
expensed as
 
incurred due
 
to the
 
uncertainty
relating to the recovery of the expenditure. Amounts incurred are classified as general and administrative expenses.
Stock-based compensation
The Company measures all stock-based awards granted to employees, directors and non-employees based on the fair
 
value on the date
of grant and recognizes compensation
 
expense of those awards over
 
the requisite service period, which
 
is generally the vesting period
of the respective award. Forfeitures are accounted for as they occur.
The Company classifies
 
stock-based compensation expense
 
in its
 
consolidated statements of
 
operations in the
 
same manner in
 
which
the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.
Prior to
 
the Company's IPO
 
in November 2021,
 
there was no
 
public market for
 
the Company’s
 
common stock and
 
the estimated fair
value of its common stock was determined by its most recently available third-party valuations of common stock. There are significant
judgments
 
and
 
estimates
 
inherent
 
in
 
the
 
determination
 
of
 
the
 
fair
 
value
 
of
 
the
 
Company’s
 
common
 
stock.
 
These
 
estimates
 
and
assumptions include
 
a number
 
of objective
 
and subjective
 
factors, including
 
external market
 
conditions, the
 
prices at
 
which the
 
Company
sold shares of preferred
 
securities, the superior rights
 
and preferences of securities senior
 
to the common securities at
 
the time of, and
the likelihood
 
of, achieving
 
a liquidity
 
event, such
 
as an
 
initial public
 
offering (“IPO”)
 
or sale.
 
Significant changes
 
to the
 
key assumptions
used in the valuations could result in different fair values of common stock at each valuation date.
The fair value of each restricted stock award is estimated on
 
the date of grant based on the fair value
 
of the Company’s common stock
on that same
 
date. The fair
 
value of each
 
option grant is
 
estimated on the
 
date of grant
 
using the Black-Scholes
 
option pricing model
(“Black-Scholes”), which
 
requires inputs
 
based
 
on
 
certain subjective
 
assumptions, including
 
the
 
expected stock
 
price volatility,
 
the
expected term
 
of the award,
 
the risk-free
 
interest rate
 
and expected
 
dividends. The
 
Company, both prior
 
to and
 
after the
 
IPO in
 
November
2021, lacks sufficient company-specific
 
historical and implied volatility
 
information for its stock,
 
and therefore estimates its expected
stock volatility based on
 
the historical volatility of a
 
publicly traded set of
 
peer companies and expects
 
to continue to do
 
so until such
time as it has adequate
 
historical data regarding the
 
volatility of its own
 
traded stock price. The
 
expected term of the
 
Company’s options
has been determined utilizing the “simplified” method for awards that qualify as
 
“plain-vanilla” options. The expected term of options
granted to non-employees is equal to the
 
contractual term of the option award. The risk-free
 
interest rate is determined by reference to
the U.S. Treasury yield curve in effect at
 
the time of grant of
 
the award for time periods
 
approximately equal to the expected
 
term of the
award. Expected dividend
 
yield is
 
based on the
 
fact that
 
the Company has
 
never paid
 
cash dividends on
 
common stock and
 
does not
expect to pay any cash dividends in the foreseeable future.
Performance-based options
The Company accounts for performance-based options according to the ASC 718, Compensation – Stock Compensation ("ASC 718"),
which are subject to different accounting depending on whether they meet the definition of performance conditions, market conditions,
or other conditions. The
 
conditions present in the
 
Company's grants contain
 
both performance and market
 
conditions. The effect of each
condition
 
is
 
reflected
 
in
 
the
 
grant-date
 
fair
 
value
 
and
 
the
 
performance-based
 
options
 
are
 
measured
 
considering
 
the
 
probability
 
of
satisfying the performance and market conditions.
 
The Company has used a Monte
 
Carlo Simulation Model to calculate the
 
fair value
of the
 
performance condition
 
(the completion
 
of the
 
IPO) and
 
market condition
 
(the 25%
 
higher value
 
after the
 
IPO condition).
 
The
performance condition was determined
 
to not be
 
probable at the
 
time of the
 
grant date, and
 
the recognition of
 
compensation cost was
deferred until
 
the IPO
 
was consummated
 
in November
 
2021. The
 
recognition of
 
expense for
 
the portion
 
of the
 
grant-date fair
 
value
assigned to the market condition will be recognized as expense according to the derived service period in the
 
valuation model.
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
120
Income taxes
The Company accounts for
 
income taxes according to
 
the ASC 740, Income
 
Taxes
 
(“ASC 740”) using the
 
asset and liability method,
which requires the
 
recognition of deferred
 
tax assets and
 
liabilities for the
 
expected future tax
 
consequences of events
 
that have been
recognized
 
in
 
the
 
consolidated
 
financial
 
statements
 
or
 
in
 
the
 
Company’s
 
tax
 
returns.
 
Deferred
 
taxes
 
are
 
determined
 
based
 
on
 
the
difference between the
 
financial statement and tax
 
basis of assets
 
and liabilities using
 
enacted tax rates in
 
effect in the
 
years in which
the differences are expected to reverse.
 
Changes in deferred tax assets
 
and liabilities are recorded in the
 
provision for income taxes. The
Company assesses
 
the likelihood
 
that its
 
deferred tax
 
assets will
 
be realized
 
and, to
 
the extent
 
it believes,
 
based upon
 
the weight
 
of
available evidence, that
 
it is more likely
 
than not that all
 
or a portion of
 
the deferred tax
 
assets will not
 
be realized, a valuation
 
allowance
is established through a charge to income tax
 
expense. In evaluating its ability to recover
 
its deferred tax assets, the Company considers
all available positive and negative evidence, including
 
projected future taxable income, prudent and feasible
 
tax planning strategies and
recent financial operations.
The
 
Company accounts
 
for uncertainty
 
in income
 
taxes
 
recognized
 
in
 
the
 
consolidated financial
 
statements by
 
applying a
 
two-step
process to determine
 
the amount of
 
tax benefit to
 
be recognized. First,
 
the tax position
 
must be evaluated
 
to determine the
 
likelihood
that it
 
will be
 
sustained upon
 
external examination
 
by the
 
taxing authorities.
 
If the
 
tax position
 
is deemed
 
more-likely-than-not to
 
be
sustained, the tax position is then
 
assessed to determine the amount of
 
benefit to recognize in the consolidated
 
financial statements. The
amount of the
 
benefit that may
 
be recognized is
 
the largest amount
 
that has a
 
greater than 50%
 
likelihood of being
 
realized upon ultimate
settlement. To
 
the extent the
 
Company determines that
 
such tax positions will
 
not be sustained,
 
the provision for
 
income taxes would
include the
 
effects of
 
any resulting
 
income tax
 
reserves, or
 
unrecognized tax
 
benefits, that
 
are considered
 
appropriate as
 
well as
 
the
related net interest and penalties.
Net loss per share
The Company
 
follows the
 
two-class method
 
when computing
 
net loss
 
per share
 
as the
 
Company has
 
issued shares
 
that meet
 
the definition
of participating
 
securities. The
 
two-class method
 
determines net
 
loss per
 
share for
 
each class
 
of common
 
and participating
 
securities
according to dividends declared or accumulated, and participation rights
 
in undistributed earnings. The two-class method requires loss
available to
 
common stockholders
 
for the
 
period to
 
be allocated
 
between common
 
and participating
 
securities based
 
upon their
 
respective
rights to receive dividends as if all income for the period had been distributed.
Basic net
 
loss per
 
share is
 
computed by
 
dividing the
 
net loss by
 
the weighted average
 
number of
 
common shares outstanding
 
for the
period. Diluted net loss is computed by
 
adjusting net loss to reallocate undistributed earnings based
 
on the potential impact of dilutive
securities. Diluted net
 
loss per share
 
is computed by
 
dividing the diluted
 
net loss by
 
the weighted average
 
number of common
 
shares
outstanding for
 
the period,
 
including potential
 
dilutive common
 
stock. For
 
purpose of
 
this calculation,
 
outstanding options,
 
unvested
restricted stock and convertible preferred stock are considered potential dilutive common stock and are excluded from the computation
of net loss per share as their effect is anti-dilutive.
The Company’s
 
convertible preferred
 
stock contractually
 
entitles the
 
holders of
 
such shares
 
to participate
 
in dividends
 
but does
 
not
contractually require the holders of such shares to participate in losses of the Company. Accordingly, in periods in which the Company
reports a
 
net loss,
 
such losses
 
are not
 
allocated to
 
such participating
 
securities. In
 
periods in
 
which the
 
Company reports
 
a net
 
loss,
diluted net loss per share is the same as basic net loss per share attributable to common stockholders, since dilutive common shares are
not assumed to be outstanding if their effect is anti-dilutive.
Emerging growth company status
The Company is an “emerging growth company” (“EGC”), as defined in the Jumpstart Our Business Startups Act (“JOBS Act”) and is
permitted to and plans to
 
take advantage of certain exemptions from
 
various reporting requirements that are
 
applicable to other public
companies that are not EGCs. The Company
 
may take advantage of these exemptions until
 
it is no longer an EGC under Section 107
 
of
the JOBS
 
Act, which
 
provides that
 
an EGC
 
can take
 
advantage of
 
the extended
 
transition period
 
afforded
 
by the
 
JOBS Act
 
for the
implementation of new or revised accounting standards. The Company has
 
elected to avail itself of the extended transition period
 
and,
therefore, as long as the Company remains
 
an EGC, it will not be
 
subject to new or revised accounting standards at
 
the same time that
they become applicable to other public companies that are not EGCs.
 
Reclassifications
We reclassified certain accrued payroll and related liabilities for employee bonuses from
 
other long-term liabilities to accrued expenses
and other current liabilities
 
within the Consolidated Balance
 
Sheet. Prior year amounts
 
have been reclassified to
 
conform to current year
presentation. These changes have no impact on our previously reported consolidated net loss, financial position or net increase in cash,
cash equivalents, and restricted cash.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
121
Recently issued accounting pronouncements
 
In February
 
2016, the
 
FASB
 
issued ASU
 
2016-02, “Leases
 
(Topic
 
842), and
 
associated ASUs
 
related to
 
Topic
 
842, which
 
requires
organizations that lease assets to recognize on the balance sheet the
 
assets and liabilities for the rights and obligations created by those
leases. The new
 
guidance requires that
 
a lessee recognize
 
assets and liabilities
 
for leases, and
 
recognition, presentation and
 
measurement
in
 
the
 
financial
 
statements
 
will
 
depend
 
on
 
its
 
classification
 
as
 
a
 
finance
 
or
 
operating
 
lease.
 
In
 
addition,
 
the
 
new
 
guidance
 
requires
disclosures to
 
help investors
 
and other
 
financial statement
 
users better
 
understand the
 
amount, timing
 
and uncertainty
 
of cash
 
flows
arising from leases.
 
The
 
Company has
 
elected to
 
apply the
 
transition requirements
 
as of
 
January 1,
 
2022. This
 
approach allows
 
for a
 
cumulative effect
adjustment in the period of
 
adoption, and prior periods continue to
 
be reported in accordance with historic
 
accounting under ASC 840
“Leases.” Additionally, as
 
an accounting policy election, the Company has chosen
 
to not apply the standard to any existing
 
short-term
leases (term of
 
12 months or
 
less) as
 
this is optional
 
under U.S. GAAP.
 
This adoption of
 
the new standard
 
on January 1,
 
2022 is not
expected to have
 
a material impact
 
to the consolidated
 
balance sheets, consolidated
 
statements of operations
 
and consolidated statements
of cash flow.
3. Fair Value Measurements
The Company's money
 
market accounts are shown
 
at fair value based
 
on unadjusted quoted
 
market prices in active
 
markets for identical
assets.
The value for the Convertible Notes, SAFE and
 
warrant liability balances as of December 31, 2020 are
 
based on significant inputs not
observable in the market, which represents a Level 3 measurement within the fair value hierarchy. In accordance with the Contribution
and Exchange
 
Agreement, on
 
March 2,
 
2021 the
 
Convertible Notes,
 
SAFEs and
 
warrants were
 
all converted
 
into Series
 
A preferred
stock.
The following
 
table presents
 
information about
 
the Company’s
 
financial instruments
 
measured at
 
fair value
 
on a
 
recurring basis
 
and
indicate the level of the fair value hierarchy used to determine such fair values (in thousands):
December 31, 2021
Level 1
Level 2
Level 3
Total
Assets:
Money market account
$
139,794
$
—
$
—
$
139,794
Total assets
$
139,794
$
—
$
—
$
139,794
December 31, 2020
Level 1
Level 2
Level 3
Total
Assets:
Money market account
$
—
$
—
$
—
$
—
Total assets
$
—
$
—
$
—
$
—
Liabilities:
Convertible notes payable
$
—
$
—
$
10,356
$
10,356
Convertible notes with related parties
—
—
14,324
14,324
SAFEs
—
—
24,335
24,335
Warrant liability
—
—
400
400
Total liabilities
$
—
$
—
$
49,415
$
49,415
During the years ended December 31, 2021 and 2020, there were
no
 
transfers between Level 1, Level 2 and Level 3.
 
Convertible Notes
During the years ended December 31, 2021 and
 
2020, the Company issued Convertible Notes. In accordance with
 
ASC 480, a portion
of the Convertible Notes were required to
 
be measured and accounted for at fair value
 
at each reporting date. The Company determined
the Convertible Notes requiring a
 
measurement to fair value represent a
 
recurring measurement that is classified within
 
Level 3 of the
fair value hierarchy wherein fair value is estimated using significant unobservable inputs.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
122
Convertible Notes requiring a measurement to fair value are as follows (in thousands):
 
Convertible
Notes
Balance at December 31, 2019
$
12,121
Issuance of convertible notes
12,040
Repayments
(5,500)
Change in fair value
5,761
Issuance costs
(300)
Amortization of issuance costs
83
Accrued interest
475
Balance at December 31, 2020
24,680
Issuance of convertible notes
2,000
Repayments
(2,000)
Change in fair value
2,667
Amortization of issuance costs
217
Accrued interest
 
168
Interest paid
(187)
Conversion to Series A preferred stock
(27,545)
The
 
fair
 
value
 
of
 
the
 
Convertible
 
Notes
 
was
 
estimated
 
using
 
a
 
straight
 
debt
 
and
 
conversion
 
feature
 
valuation
 
model
 
consisting
 
of
probability assumptions on multiple conversion scenarios, discount rates and interest rates.
 
In accordance with the Contribution and Exchange Agreement, on March 2, 2021, the Convertible Notes were
 
converted into Series A
preferred stock.
 
Simple Agreement for Future Equity—SAFE
During the years ended December 31, 2021 and 2020, the Company executed SAFE arrangements. The fair value of the SAFEs on the
date of issuance
 
was determined to
 
equal the proceeds
 
received by the
 
Company.
 
The value of
 
the SAFEs on
 
the dates of
 
conversion
into preferred stock
 
was determined to
 
be equal to
 
the fair value
 
of the preferred
 
stock issued, or
 
$
35.6
 
million during the
 
year ended
December 31, 2021 and $
15.6
 
million during the year ended December 31, 2020.
 
The following table sets forth a summary of the activities of the SAFE arrangements, which represents a recurring measurement that is
classified within Level 3
 
of the fair value hierarchy
 
wherein fair value is estimated
 
using significant unobservable inputs
 
(in thousands):
 
SAFE
Liability
Balance at December 31, 2019
$
—
Issuance of SAFEs
39,355
Change in fair value
615
Conversion to Series Seed-2 convertible preferred stock
(360)
Conversion to Series A-2 convertible preferred stock
(15,275)
Balance at December 31, 2020
24,335
Change in fair value
8,365
Issuance of SAFEs
2,900
Conversion to Series A preferred stock
(35,600)
In accordance with
 
the Contribution and
 
Exchange Agreement, on March
 
2, 2021, the
 
SAFEs were converted
 
into Series A
 
preferred
stock.
 
Warrants to Purchase Series A-1 Convertible Preferred Stock & Common Stock
In connection with the
 
2020 Series A-1 convertible
 
preferred stock (“Series A-1
 
preferred”) financing transactions, the
 
Company issued
fully vested
 
warrants to
 
purchase
205,970
 
shares of
 
Series A-1
 
preferred. The
 
warrants were
 
issued to
 
advisors as
 
consideration for
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
123
assistance with the
 
sale and issuance
 
of the Series
 
A-1 preferred. The
 
warrants were determined
 
to represent issuance
 
costs and were
recorded as a reduction in the proceeds received from the sale.
 
The warrants were issued to advisors of the company and represented non-variable contingently redeemable instruments.
 
As such, the
warrants were accounted for as liabilities and adjusted to fair value at each reporting period.
 
The warrants are exercisable on the date of issuance and have an exercise price of $
0.003
 
per share and a contractual term of ten years.
In December 2020, warrants were exercised for
71,862
 
shares of Series A-1 at $
0.003
 
per share, resulting in cash proceeds of less than
$
1,000
.
 
As
 
of
 
December
 
31,
 
2020,
 
warrants
 
to
 
purchase
134,106
 
shares
 
of
 
Series
 
A-1
 
preferred
 
were
 
outstanding.
 
The
 
Company
continued to re-measure the fair value
 
of the liability associated with the
 
warrant to purchase shares of Series
 
A-1 preferred at the end
of
 
each
 
reporting
 
period
 
until
 
the
 
Reorganization,
 
when
 
the
 
warrant
 
converted
 
into
 
Series
 
A
 
preferred
 
stock
 
and
 
subsequently,
 
in
connection with the IPO, converted into Class A common stock.
The
 
following table
 
sets
 
forth a
 
summary of
 
the activity
 
of
 
the warrant
 
liability which
 
represented a
 
recurring measurement
 
that
 
is
classified within Level 3
 
of the fair value hierarchy
 
wherein fair value is estimated
 
using significant unobservable inputs
 
(in thousands):
Warrant
Liability
Balance at December 31, 2019
$
—
Issuance of Series A-1 preferred warrants
573
Exercise of warrants
(214)
Change in fair value
41
Balance at December 31, 2020
400
Change in fair value
214
Conversion to warrants for shares of Series A preferred stock
(614)
4. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following (in thousands):
December 31,
2021
2020
Deposits
$
4,379
$
10
Prepaid materials and supplies
4,131
3,302
Other
341
832
$
8,851
$
4,144
The Company’s
 
prepaid material and supplies
 
related to ELISA test
 
production, of which $
1.0
 
million was paid to
 
a related party and
$
2.5
 
million related to materials to be utilized during its Phase 2 clinical trial for COVID-19 vaccine development.
 
5. Property and Equipment
Property and equipment, net consisted of the following (in thousands):
December 31,
2021
2020
Airplane
$
11,983
$
11,983
Laboratory and computer equipment
1,831
969
Software
168
—
Vehicles
87
—
Facilities, furniture and fixtures
85
84
Total property and equipment
14,154
13,036
Less: accumulated depreciation
(1,981)
(878)
Property and equipment, net
$
12,173
$
12,158
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
124
Depreciation expense for the years ended December 31, 2021 and 2020 was $1.1 million and $0.7 million, respectively.
 
 
6. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
December 31,
2021
2020
Accrued bonuses
$
2,294
$
2,187
Accrued external research and development
1,501
296
Accrued professional fees and other
692
228
Accrued interest
32
33
$
4,519
$
2,744
7. Other Long-Term Liabilities
Other long-term liabilities consisted of the following (in thousands):
December 31,
2021
2020
Accrued tax provision
236
236
Accrued rent
1
13
$
237
$
249
As of
 
December 31,
 
2021 and
 
2020, approximately
 
$
0.2
 
million of
 
the accrued
 
tax provision
 
relates to
 
penalties and
 
interest the
 
Company
may be subject to paying for late filing fees related to a foreign subsidiary. The Company expects these amounts to be forgiven but has
accrued for them until the statute of limitations expires and it is appropriate to write them off.
 
8. Convertible Notes Payable
Beginning in April 2018, the
 
Company issued several Convertible Notes,
 
some of which were issued
 
to related parties. The Convertible
Notes bear simple interest at annual rates
 
ranging from
4.8
% to
6
%. All unpaid principal, together with
 
the accrued interest thereon, are
payable upon an event
 
of default or upon
 
maturity, which
 
ranges from one to
 
three years. The Convertible
 
Notes contain a number
 
of
provisions addressing automatic and optional conversion, events of default, and prepayment provisions.
The Company
 
accounts for
 
the
 
Convertible Notes
 
at
 
fair value,
 
in accordance
 
with ASC
 
480, with
 
any changes
 
in fair
 
value being
recognized through the consolidated statements of operations.
In
 
accordance
 
with
 
the
 
Contribution
 
and
 
Exchange
 
Agreement,
 
on
 
March
 
2,
 
2021
 
each
 
Reorganization
 
Convertible
 
Note
 
that
 
was
outstanding was exchanged
 
for shares of
 
Series A preferred
 
stock, as set
 
forth in the
 
applicable Convertible Note
 
agreements and the
Contribution and Exchange Agreement.
 
During
 
the
 
years
 
ended
 
December
 
31,
 
2021
 
and
 
2020,
 
the
 
Company
 
recognized
 
interest
 
expense
 
of
 
$
0.2
 
million
 
and
 
$
0.7
 
million,
respectively, related to the Convertible Notes. In addition, in the years ended December 31, 2021 and 2020, the Company recognized a
change
 
in
 
fair
 
value
 
of
 
$
2.7
 
million
 
and
 
$
5.7
 
million
 
in
 
the
 
accompanying
 
consolidated
 
statements
 
of
 
operations
 
related
 
to
 
the
Convertible Notes, respectively.
 
The following table shows the activity of the Convertible Notes (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
125
Convertible Notes
Principal Amount Payable
Change in Fair Value
Accrued Interest
Issuance
Conversion to
Standard
Related
Party
Standard
Related
Party
Standard
Related
Party
Costs
Series A
Balance
December 31, 2019
$
11,170
$
510
$
33
$
26
$
378
$
4
$
—
$
—
$
12,121
Additions
2,040
10,000
1,884
3,822
560
179
(300)
—
18,185
Settlements
(5,500)
—
55
—
(264)
—
—
—
(5,709)
Amortization
—
—
—
—
—
—
83
—
83
December 31, 2020
7,710
10,510
1,972
3,848
674
183
(217)
—
24,680
Additions
—
2,000
812
1,855
58
110
—
—
4,835
Settlements
(2,000)
—
—
—
(187)
—
—
—
(2,187)
Amortization
—
—
—
—
—
—
217
—
217
Conversion of Convertible
Notes to Series A preferred
stock
(5,710)
(12,510)
(2,784)
(5,703)
(545)
(293)
—
(27,545)
(27,545)
December 31, 2021
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
(27,545)
$
—
9. Notes Payable
Notes Payable with Related Parties
In December 2018, the Company entered into
 
related party convertible notes payable (the “2018
 
Related Notes” and together with the
Convertible Notes, the
 
“Reorganization Convertible Notes”)
 
for $
2.0
 
million in aggregate
 
proceeds, received
 
in three tranches.
 
The 2018
Related
 
Notes
 
bore
 
simple
 
interest
 
at
 
an
 
annual
 
rate
 
of
5
%
 
and
 
contain
 
a
 
number
 
of
 
provisions
 
addressing
 
events
 
of
 
default
 
and
prepayment. In accordance with the Contribution and Exchange Agreement, on March 2, 2021,
 
the 2018 Related Notes were converted
into Series A preferred stock.
 
During the years ended December
 
31, 2021 and 2020, the
 
Company recognized interest expense of
 
less than $
0.1
 
million on the 2018
Related Notes.
2019 Executive Note
In November 2019, the Company borrowed
 
$
0.1
 
million from its Chief Executive Officer (the “2019
 
Executive Note”). No formal loan
agreement was executed. However,
 
the Company has
 
elected to accrue interest
 
at an annual
 
rate of
5
%, consistent with
 
the terms and
conditions of the Convertible Notes and 2018 Related Notes, which was the closest benchmark the Company could evaluate. The 2019
Executive Note was repaid in August 2021.
 
The activity of the 2018 Related Notes and 2019 Executive Note is as follows (in thousands):
 
2018 Related Notes and 2019 Executive Note
Related Party
Principal
Accrued
Interest
Balance
December 31, 2019
$
2,100
$
88
$
2,188
Additions
—
106
106
December 31, 2020
2,100
194
2,294
Accrued interest
—
19
19
Repayment
(100)
—
(100)
Interest paid
—
(8)
(8)
Conversion
(2,000)
(205)
(2,205)
December 31, 2021
$
—
$
—
$
—
Note Payable—Airplane
In connection with the acquisition
 
of an airplane, the Company entered
 
into a note payable agreement (the
 
“2025 Note”) in June 2020
for $
11.5
 
million, with an annual interest rate of
3.4
% and a maturity date of June 9, 2025. Principal and interest payments are payable
monthly in the
 
amount of $
0.07
 
million with a
 
final payment of
 
$
9.4
 
million at maturity. The
 
2025 Note is
 
guaranteed by the
 
co-founders
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
126
of the Company. In addition, the Company incurred debt issuance costs of $
0.3
 
million, which are being amortized over the term of the
loan. There are no financial covenants associated with the 2025 Note.
 
The carrying value of the 2025 Note is as follows (in thousands):
 
2021
2020
Principal
$
 
10,883
 
$
11,298
Unamortized debt issuance cost
(184)
(237)
Carrying amount
10,699
11,061
Less: current portion
(376)
(362)
Note payable, net of current portion and debt issuance cost
$
10,323
$
10,699
As of December 31, 2021, the remaining principal payments for the 2025 Note, are as follows (in thousands):
 
Amount
2022
$
429
2023
444
2024
458
2025
9,552
$
10,883
Interest expense
 
associated with
 
the 2025
 
Note was
 
$
0.4
 
million and
 
$
0.2
 
million for
 
the years
 
ended December 31,
 
2021 and
 
2020,
respectively. As of December 31, 2021, accrued interest of less than $
0.1
 
million was included in accrued expenses and other liabilities
in the accompanying consolidated balance sheets.
Note Payable—Paycheck Protection Program
The Company
 
applied for
 
and received
 
a loan,
 
which is
 
in the
 
form of
 
a note
 
dated May
 
5, 2020,
 
from HSBC
 
Bank USA,
 
National
Association (“HSBC”) in the
 
aggregate amount of approximately
 
$
0.3
 
million (the “PPP Loan”),
 
pursuant to the Paycheck
 
Protection
Program (“PPP”). The
 
PPP,
 
established as part
 
of the
 
Coronavirus Aid, Relief
 
and Economic Security
 
Act (“CARES Act”),
 
provides
for loans to qualifying businesses for
 
amounts up to 2.5 times of
 
the average monthly payroll expenses
 
of the qualifying business. As of
December 31, 2021, there were no events of default under the PPP Loan.
 
The Company paid off the PPP Loan in full, including all accrued but unpaid interest to the repayment date, in August 2021.
10. Convertible Preferred Stock
In connection with the Reorganization, each
 
UNS convertible preferred share was exchanged for
0.2191
 
shares of Vaxxinity
 
preferred
stock and each
 
share of COVAXX
 
convertible preferred stock was
 
exchanged for
3.4233
 
shares of Vaxxinity
 
preferred stock. During
the first
 
and second quarters
 
of 2021,
 
the Company raised
 
gross proceeds of
 
$
122.8
 
million in connection
 
with its
 
Series B preferred
stock financing. The Company issued
 
a total of
15,365,574
 
shares at a price of
 
$
8.00
 
per share. All shares
 
of the Company’s
 
Series B
preferred stock
 
converted into
 
shares of
 
the Company’s Class
 
A common
 
stock concurrently
 
with the
 
closing of
 
the initial
 
public offering.
 
As of December 31,
 
2021, Vaxxinity’s
 
Amended and Restated
 
Certificate of Incorporation
 
authorized
50,000,000
 
shares of preferred
stock with a par value of $
0.0001
 
per share.
The table below
 
details the Company's
 
Class A common
 
stock which was
 
issued upon conversion
 
of Series A
 
and Series B
 
preferred
stock concurrently with the
 
closing of the IPO
 
in November 2021. The
 
common stock issued upon
 
conversion reflects the application
of the stock split described in Note 1.
As of December 31, 2021
Issuance Dates
Shares Issued and
Outstanding Prior to IPO
Common Stock Issued
Upon IPO Conversion
Series A preferred stock
March 2021
62,223,095
39,989,083
Series B preferred stock
March 2021
5,441,863
3,497,338
Series B preferred stock
June 2021
9,923,711
6,377,699
77,588,669
49,864,120
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
127
11.
 
Simple Agreement for Future Equity—SAFE
During the years
 
ended December 31, 2021
 
and 2020, the
 
Company executed SAFE
 
arrangements. The SAFEs were
 
not mandatorily
redeemable,
 
nor
 
did
 
they
 
require
 
the
 
Company
 
to
 
repurchase
 
a
 
fixed
 
number
 
of
 
shares.
 
The
 
Company
 
determined
 
that
 
the
 
SAFEs
contained a liquidity
 
event provision that
 
embodied an obligation
 
indexed to the
 
fair value of
 
the Company’s
 
equity shares and
 
could
require the Company to settle the SAFE obligation by transferring assets or cash. For this reason, the Company recorded the SAFEs as
a liability
 
under ASC
 
480 and
 
re-measured the
 
fair value
 
at the
 
end of
 
each reporting
 
period, with
 
changes in
 
fair value
 
reported in
earnings.
In
 
March
 
2020,
 
the
 
Company
 
issued
 
a
 
SAFE
 
(“SAFE
 
1”)
 
for
 
$
0.4
 
million,
 
which
 
converted
 
into
463,162
 
shares
 
of
 
Series
 
Seed-2
convertible preferred stock at
$
0.7773
 
per share in April 2020. In June, July,
 
and August 2020, the Company issued a series of SAFEs
(“SAFE 2”) for $
14.7
 
million, which converted into
6,307,690
 
shares of Series A-2 convertible
 
preferred stock (“Series A-2 preferred”)
at
$
2.3241
 
per share in August 2020.
The Company determined the fair value
 
of SAFE 2 investment on the
 
date of conversion and recognized the
 
difference between the fair
value on the date of conversion and the initial fair value of SAFE 2 investment in the consolidated statements of operations.
 
In December 2020, the Company
 
issued a series of SAFEs
 
(collectively, “SAFE
 
3”) for $
24.3
 
million. In January 2021, the
 
Company
issued additional SAFEs for $
2.9
 
million which had the same terms as SAFE 3. Key provisions of SAFE 3 are as follows:
Equity Financing
—Upon initial closing of a
 
qualified financing of at least
 
$
50.0
 
million, SAFE 3 will automatically
 
convert into the
greater of (1) the number of
 
shares of SAFE 3 preferred stock
 
equal to the purchase amount
 
divided by the SAFE 3 price,
 
defined as the
price per share equal
 
to the post-money valuation
 
divided by all
 
shares outstanding, all convertible
 
securities, all issued,
 
outstanding and
promised options, and
 
the unissued option
 
pool, or (2)
 
the number of
 
shares of SAFE
 
3 preferred stock
 
equal to the
 
purchase amount
divided by the discount
 
price, defined as the price
 
per share of the
 
standard preferred stock sold in
 
a qualified financing multiplied by
eighty percent (80%).
Liquidity Event
—If there is a liquidity
 
event, as defined, before the
 
termination of SAFE 3, SAFE 3
 
will automatically be entitled to
receive a
 
portion of
 
proceeds, subject
 
to the
 
liquidation priority
 
set forth
 
in the
 
agreement, due
 
and payable
 
immediately prior
 
to, or
concurrent with, the consummation of such
 
liquidity event, equal to the greater
 
of (i) the purchase amount or (ii)
 
the amount payable on
the number of shares of common stock equal to the purchase amount divided by the liquidity price, as outlined in the agreements.
Dissolution Event
—If there is a dissolution event, as described in the agreements, before the
 
termination of SAFE 3, the investor will
automatically be
 
entitled, subject
 
to the
 
liquidation priority
 
set forth
 
in the
 
agreement, to
 
receive a
 
portion of
 
proceeds equal
 
to the
purchase amount, due and payable to the investor immediately prior to the consummation of the dissolution event.
Termination
—SAFE 3 will automatically terminate immediately following the
 
earliest to occur of: (i) the issuance
 
of capital stock to
the investor pursuant
 
to the automatic
 
conversion provisions of
 
SAFE 3 or
 
(ii) the payment,
 
or setting aside
 
for payment, of
 
amounts
due the investor.
 
In connection with
 
the Contribution and
 
Exchange Agreement, the
 
holders of SAFEs agreed
 
to convert such
 
SAFEs
into shares of Series A-3 preferred stock of COVAXX,
 
which shares were then exchanged for shares of Vaxxinity’s
 
preferred stock.
The
 
SAFEs
 
were
 
converted
 
into
 
shares
 
of
 
the
 
Company’s
 
Series
 
A
 
preferred
 
stock
 
pursuant
 
to
 
the
 
Contribution
 
and
 
Exchange
Agreement. Prior to the Reorganization,
 
all the holders of outstanding COVAXX
 
SAFEs agreed to convert such SAFEs
 
into shares of
Series A-3 preferred stock of COVAXX,
 
which shares were then exchanged for shares of the Company’s Series A preferred stock.
 
12. Common Stock
As explained
 
in Note
 
1, in
 
accordance with
 
the Contribution
 
and Exchange
 
Agreement, on
 
March 2,
 
2021, all
 
outstanding shares
 
of
common
 
stock
 
of
 
UNS
 
and
 
COVAXX
 
were
 
contributed
 
to
 
Vaxxinity
 
and
 
exchanged
 
for
 
an
 
aggregate
 
of
60,360,523
 
shares
 
of
Vaxxinity’s
 
Class A common
 
stock and
10,999,149
 
shares of Vaxxinity’s
 
Class B common
 
stock. Each UNS
 
share of common
 
stock
was exchanged for
0.2191
 
shares of Vaxxinity
 
common stock and
 
each share of COVAXX
 
common stock was exchanged
 
for
3.4233
shares of Vaxxinity
 
common stock.
 
In June 2021, the Company converted
2,874,983
 
shares of Class A common stock held by the Company’s Chief Executive Officer and
Executive Chairman on a one-to-one basis for shares of Class B common stock.
 
As of December 31, 2021,
 
Vaxxinity’s
 
Amended and Restated Certificate
 
of Incorporation authorized
1,100,000,000
 
shares of common
stock
 
with
 
a
 
par
 
value
 
of
 
$
0.0001
 
per
 
share,
 
of
 
which
1,000,000,000
 
shares
 
have
 
been
 
designated
 
as
 
Class
 
A
 
common
 
stock
 
and
100,000,000
 
shares have been designated as Class B common stock.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
128
Holders of Class
 
A common stock
 
and Class B
 
common stock have
 
identical rights,
 
except with respect
 
to voting and
 
conversion. Except
as otherwise expressly provided
 
in Vaxxinity’s
 
Amended and Restated Certificate
 
of Incorporation or Bylaws,
 
or required by applicable
law,
 
holders of
 
Class A
 
common stock
 
will be
 
entitled to
 
one vote
 
per share
 
on all
 
matters submitted
 
to a
 
vote of
 
stockholders and
holders of our Class B common stock will be entitled to ten votes per share on all matters submitted to a vote of stockholders.
 
Holders of
 
Class A
 
common stock
 
and Class
 
B common
 
stock vote
 
together as
 
a single
 
class on
 
all matters
 
submitted to
 
a vote
 
of
stockholders, except (i) amendments to Vaxxinity’s
 
Amended and Restated
 
Certificate of Incorporation to increase or decrease the par value of a class of capital stock, in which case the applicable class would be
required to vote separately to approve the proposed amendment and (ii) amendments to Vaxxinity’s
 
Amended and Restated Certificate
of Incorporation
 
that alter
 
or change
 
the powers,
 
preferences or
 
special rights
 
of a
 
class of
 
capital stock
 
in a
 
manner that
 
affects its
holders adversely, in which case the applicable class would be required to vote separately to approve the proposed amendment.
 
Holders of common stock are
 
entitled to receive, ratably,
 
dividends as may be declared
 
by Vaxxinity’s
 
board of directors out of
 
funds
legally available therefor if the board of directors, in its discretion, determines to issue dividends.
 
The voting,
 
dividend, and
 
liquidation rights
 
of the
 
holders of
 
common stock
 
are subject
 
to and
 
qualified by
 
the rights,
 
powers, and
preferences of the holders of Vaxxinity’s
 
preferred stock.
 
The Company has reserved shares of common stock for issuance for the following purposes:
 
December 31,
2021
2020
Series Seed preferred
—
7,831,528
Series Seed-1 preferred
—
22,876,457
Series Seed-2 preferred
—
14,615,399
Series A-1 preferred
—
1,871,511
Series A-2 preferred
—
6,307,690
Options issued and outstanding
21,387,909
9,276,399
Options available for future grants
7,209,538
1,897,049
Warrants issued and outstanding
1,928,020
86,186
 
30,525,467
64,762,219
 
13. Equity Incentive Plan
Stock Options
In March 2021, the
 
Company replaced the 2017
 
and 2020 Stock Option
 
and Grant Plans with
 
the newly-adopted 2021 Stock
 
Option and
Grant
 
Plan
 
(the “Existing
 
2021
 
Plan”), which
 
provided for
 
the Company
 
to grant
 
qualified
 
incentive options,
 
nonqualified options,
restricted
 
stock
 
awards,
 
unrestricted
 
stock
 
awards,
 
and
 
restricted
 
stock
 
units
 
to
 
employees
 
and
 
non-employees
 
to
 
purchase
 
the
Company’s
 
Class A
 
common stock.
 
The Existing
 
2021 Plan
 
authorized the
 
issuance of
 
up to
21,593,830
 
shares of
 
Class A
 
common
stock pursuant to awards.
In
 
August
 
2021,
 
the
 
Company
 
canceled
 
existing
 
options
 
to
 
purchase,
 
in
 
aggregate,
6,362,455
 
shares
 
of
 
Class
 
A
 
common
 
stock
 
in
exchange for an equal number of options to purchase shares of Class B common stock. The Company accounted for this exchange as a
stock option modification.
 
In November 2021,
 
the Company replaced
 
the Existing 2021
 
Plan with the
 
2021 Omnibus Incentive
 
Compensation Plan (the
 
“New 2021
Plan”), which
 
provides for
 
the Company
 
to grant
 
nonqualified stock
 
options,
 
incentive (qualified)
 
stock options,
 
stock
 
appreciation
rights,
 
restricted
 
share
 
awards,
 
restricted
 
stock
 
units,
 
performance
 
awards,
 
cash
 
incentive
 
awards
 
and
 
other
 
equity-based
 
awards
(including fully
 
vested shares).
 
The New
 
2021 Plan
 
replaced the
 
Existing 2021
 
Plan and
 
no further
 
grants will
 
be made
 
under the
 
Existing
2021 Plan. The following is a summary of certain terms and conditions of the New 2021 Plan.
The maximum number of
 
shares of common stock
 
that can be issued under
 
the New 2021 Plan
 
is
8,700,000
 
shares of Class A
 
shares.
As
 
of
 
December
 
31,
 
2021,
7,209,538
 
shares
 
were
 
available
 
for
 
future
 
grant.
 
Shares
 
that
 
are
 
forfeited,
 
canceled,
 
reacquired
 
by
 
the
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
129
Company prior to vesting, satisfied without the issuance
 
of stock, withheld to cover the exercise
 
price or tax withholdings, or otherwise
terminated, other than by exercise, shall be added back to the Shares available for issuance under the New 2021 Plan.
The exercise
 
price for
 
grants made
 
pursuant to
 
the terms
 
of the
 
New 2021
 
Plan is
 
determined in
 
the applicable grant
 
by the
 
board of
directors. Any incentive options granted to persons possessing less than 10% of the total combined voting power of all classes of stock
may not have an exercise price
 
of less than 100% of the fair
 
market value of the common stock
 
on the grant date. Any incentive options
granted to persons possessing more than 10% of the total combined voting power of all classes of stock may not have an exercise price
of less than 110% of the fair market value of the common stock on the grant date.
 
The option term for incentive awards may not be greater than ten years from the date of the grant. Incentive options granted to persons
possessing more than 10% of
 
the total combined voting power
 
of all classes of stock
 
may not have an option
 
term of greater than five
years from the date of the grant. The vesting period for equity-based awards is determined at the discretion of the board of directors.
 
As of December
 
31, 2021 there
 
were options for
15,025,454
 
shares of Class
 
A stock outstanding
 
and options for
6,362,455
 
shares of
Class B stock outstanding,
 
of which
8,652,630
 
Class A and
4,786,936
 
Class B shares were
 
exercisable, respectively.
 
As of December
31, 2021, the maximum number of stock options awards available for future issuance under the Company’s plans is
7,209,538
.
Stock Option Activity
The following table summarizes stock option activity for the years ended December 31, 2021 and 2020:
 
Number of Stock
Options
Outstanding
Weighted Price
Per Share
Weighted
Contractual
Term (years)
Aggregate
Intrinsic Value
(in thousands)
Balance at December 31, 2019
7,610,289
$
0.33
8.6
$
2,357
Granted
2,672,152
1.17
Exercised
(283,290)
0.29
Forfeited
(722,752)
0.29
Balance at December 31, 2020
9,276,399
$
0.60
7.6
$
8,415
Granted
13,482,915
8.20
Exercised
(186,204)
0.91
Forfeited
(1,185,201)
2.98
Balance at December 31, 2021
21,387,909
$
5.25
7.4
$
49,684
Options vested and exercisable at December 31, 2021
13,439,566
$
4.40
6.8
$
37,969
The aggregate intrinsic value of options
 
is calculated as the difference between
 
the exercise price of the
 
options and the fair value of
 
the
common stock for those options that had exercise prices lower than the fair value of the common stock.
The intrinsic value of options exercised during each of the years ended December 31, 2021 and 2020 were less than $
0.1
 
million.
The weighted-average grant-date fair
 
value per share of options
 
granted during the years ended
 
December 31, 2021 and 2020
 
was $
4.21
and $
0.50
, respectively.
The
 
total
 
fair
 
value
 
of
 
options
 
vested
 
during
 
the
 
years
 
ended
 
December
 
31,
 
2021
 
and
 
2020
 
was
 
$
24.5
 
million
 
and
 
$
0.8
 
million,
respectively.
Valuation
 
of Stock Options Granted that Contain Service Conditions Only
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
130
The fair
 
value of
 
each option
 
award granted
 
with service-based
 
vesting is
 
estimated on
 
the date
 
of the
 
grant using
 
the Black-Scholes
option valuation model
 
based on the
 
assumptions noted in
 
the table below
 
for those options
 
granted in the
 
years ended December
 
31,
2021 and 2020:
December 31,
2021
2020
Risk-free interest rate
0.59% - 1.35%
0.34% - 0.38%
Expected term (in years)
5.00 - 6.30
5.60 - 6.08
Expected volatility
71.60% - 93.40%
70.90% - 86.84%
Expected dividend yield
0.00%
0.00%
In August 2021, the
 
Company canceled 378,786
 
existing Class A common
 
stock options with service-based
 
conditions held by Mei
 
Mei
Hu in exchange
 
for an equal number
 
of options to purchase
 
shares of Class B
 
common stock. The Company
 
accounted for this
 
exchange
as a stock option modification.
 
There was no incremental stock-based
 
compensation expense as a result
 
of this modification as the fair-
value-based measures
 
of the
 
modified award
 
immediately after
 
the modification
 
were less
 
than the
 
fair-value-based measures
 
of the
original award immediately before the modification.
Stock Options Granted to Employees that Contain Performance and Market Conditions
Included in
 
the stock
 
options granted
 
during the
 
year ended
 
December 31,
 
2021 were
 
stock options
 
to purchase
6,799,625
 
shares of
Class A
 
common stock that
 
contain performance- and
 
market-based vesting conditions
 
granted to
 
the Mei Mei
 
Hu, Louis Reese,
 
and
Peter Diamandis.
In August 2021, the stock option awards for the Mei Mei Hu and Louis Reese totaling
5,983,670
 
shares were cancelled in exchange for
an equal number of options to purchase shares
 
of Class B common stock. The Company accounted for
 
this exchange as a stock option
modification. The fair value of the
 
awards granted to Mei Mei Hu
 
and Louis Reese at the modification date
 
was $
23.8
 
million, valued
using the Monte-Carlo simulation model. The assumptions used in the Monte-Carlo simulation model were as follows:
Time to expiration (in years)
4.5
Volatility
75%
Risk-free interest rate
58%
Cost of equity
25%
Fair value of underlying common stock (as of valuation date)
$
10.07
The stock option awards for Peter Diamandis totaling
815,955
 
shares had a grant date fair value of $
0.3
 
million. The assumptions used
in the Monte-Carlo simulation model were as follows:
Time to expiration (in years)
1
Volatility
90%
Risk-free interest rate
0.09%
Cost of equity
25%
Fair value of underlying common stock (as of valuation date)
$
4.12
The compensation
 
expense for
 
these awards
 
is recognized
 
when the
 
vesting condition
 
is met
 
for the
 
performance-based criteria,
 
and
over the derived service period for the market-based criteria.
The
 
condition
 
for
 
the
 
performance-based
 
criteria
 
in
 
the
 
stock
 
options
 
was
 
based
 
on
 
the
 
Company's
 
completion
 
of
 
its
 
IPO,
 
and
 
the
condition for the market-based criteria in the stock options was based on the future price of the Company's common stock trading at or
above a
 
specified threshold.
 
During the
 
year ended
 
December 31,
 
2021, stock
 
options for
 
an aggregate
 
of
5,439,700
 
of the
 
total
6,799,625
shares containing performance-
 
and market-based vesting
 
conditions were vested
 
following the satisfaction
 
of the performance-based
condition achieved through the Company’s
 
completion of its IPO. As
 
of December 31, 2021, the market-based
 
vesting conditions had
not been achieved.
Restricted Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
131
The following table summarizes the Company’s restricted stock activity for the year ended December 31, 2021:
 
Number of
Shares
Weighted
Average
Grant Date
Fair Value
Per Share
Unvested at December 31, 2020
15,405
$
0.50
Vested
(15,405)
(0.50)
Unvested at December 31, 2021
—
$
—
The aggregate fair value of restricted stock that vested was less than $
0.1
 
million for the years ended December 31, 2021 and 2020.
Stock-based compensation expense
 
recognized on vested
 
restricted stock was
 
immaterial for the
 
years ended December
 
31, 2021 and
2020.
Stock-Based Compensation Expense
The
 
Company
 
recorded
 
stock-based
 
compensation
 
expense
 
in
 
the
 
following
 
expense
 
categories
 
in
 
the
 
accompanying
 
consolidated
statements of operations (in thousands):
Years
 
Ended December 31,
2021
2020
Research and development
$
1,343
$
243
General and administrative
29,069
771
Total stock-based compensation expense
$
30,412
$
1,014
As of December 31, 2021, total
 
unrecognized compensation cost related to the
 
unvested stock-based awards was $
26.8
 
million, which
is expected to be recognized over a weighted average period of
3.3
 
years.
 
14. Income Taxes
The sources of
 
losses from continuing
 
operations, before income
 
taxes, classified between
 
domestic entities and those
 
entities domiciled
outside of the U.S., are as follows (in thousands):
Years
 
Ended December 31,
Losses before taxes
2021
2020
Domestic entities
$
(128,538)
$
(31,053)
Entities outside the U.S.
(8,636)
(8,904)
(137,175)
$
(39,957)
Tax Expense (Benefit)
The components of the provision for income taxes are as follows for the years ended December 31, 2021 and 2020 (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
132
Years
 
Ended December 31,
2021
2020
Current:
Federal
$
—
$
—
State and local
—
—
Foreign
—
—
Total current tax expense
—
—
Deferred tax (benefit):
Federal
—
—
State and local
—
—
Foreign
—
—
Total deferred tax (benefit)
—
—
Tax Rate Reconciliation
The Company’s effective tax rate for the years ended December 31, 2021 and 2020 was
0.00
% and
0.00
%, respectively.
A reconciliation
 
of the
 
provision for
 
income taxes
 
at the
 
statutory rate
 
to the
 
amount reflected
 
in the
 
consolidated statements
 
of operations
is as follows (in thousands):
Years
 
Ended December 31,
2021
2020
Income taxes at statutory rate
21.00
%
21.00
%
State income taxes, net of federal benefit
0.50
%
0.29
%
Stock compensation
(3.65)
%
 
0.00
%
Foreign rate differential
(0.74)
%
(4.06)
%
Uncertain tax positions
0.00
%
0.00
%
Other
(1.90)
%
(0.36)
%
Change in valuation allowance
(15.21)
%
(16.87)
%
Provision for income taxes
0.00
%
0.00
%
Deferred Tax Assets (Liabilities)
 
The Company computes income taxes using
 
the liability method. This method requires
 
recognition of deferred tax assets and
 
liabilities,
measured by enacted rates, attributable
 
to temporary differences between the
 
financial statements and the income
 
tax basis of assets and
liabilities. In
 
assessing the
 
realizability of
 
deferred tax
 
assets, the
 
Company considers
 
whether it
 
is more
 
likely than
 
not that
 
certain
deferred tax
 
assets will be
 
realized. The
 
ultimate realization of
 
deferred tax
 
assets is dependent
 
upon the
 
generation of future
 
taxable
income
 
in those
 
specific jurisdictions
 
prior to
 
the dates
 
on
 
which such
 
net operating
 
losses expire.
 
The Company
 
maintained a
 
full
valuation allowance against its net deferred tax assets for December 31, 2021
 
and 2020 because the Company has determined that it is
more likely than not that these assets will not be fully realized based on a current evaluation of expected future
 
taxable income and the
Company is in a cumulative loss
 
position. The valuation allowance increased by
 
$
6.7
 
million during the year ended
 
December 31, 2020
and $
20.9
 
million during the year ended December 31, 2021, primarily as a result of net
 
operating losses generated during the periods.
The Company reevaluates the positive and negative evidence at each reporting period.
Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
133
As of December 31,
2021
2020
Deferred tax assets:
Net operating loss carryforwards
$
32,405
$
12,373
Compensation accruals
1,735
377
Other
27
627
Total deferred tax assets
34,167
13,377
Less: valuation allowance
(34,106)
(13,247)
Net deferred tax assets
$
61
$
130
Deferred tax liabilities:
Depreciation
$
(61)
$
(130)
Net deferred tax liabilities
(61)
(130)
Net deferred income taxes
$
—
$
—
Net Operating Losses
The Company had total net
 
operating loss carryforwards for U.S.
 
federal income tax purposes of
 
$
134.6
 
million, and $
44.5
 
million as
of December 31, 2021 and 2020, respectively, that have no expiration date. The Company has foreign net operating loss carryforwards
of $
24.0
 
million and $
20.2
 
million, respectively, that have no expiration date.
Utilization
 
of
 
the
 
NOL
 
carryforwards
 
and
 
credits
 
may
 
be
 
subject
 
to
 
a
 
substantial
 
annual
 
limitation
 
due
 
to
 
the
 
ownership
 
change
limitations provided by
 
the Internal Revenue
 
Code Sections 382
 
and 383 (the
 
“Code”), as amended,
 
and similar state
 
provisions. The
Company has not
 
completed a study
 
to assess whether
 
an ownership
 
change has occurred
 
or whether there
 
have been multiple
 
ownership
changes since
 
the Company’s
 
formation due
 
to the
 
complexity and
 
cost associated
 
with such
 
a study,
 
and the
 
fact that
 
there may
 
be
additional ownership changes
 
in the future. If
 
the Company experienced
 
an ownership change at
 
any time since its
 
formation, utilization
of the
 
NOL or
 
tax credit
 
carryforwards to
 
offset future
 
taxable income
 
and taxes,
 
respectively,
 
would be
 
subject to
 
annual limitation
under the Code. The annual limitation may result in the expiration of the
 
NOL and credits before utilization. If impaired, the NOL and
credit carryforwards would be removed from
 
the deferred tax asset schedule with
 
a corresponding reduction in the valuation
 
allowance.
On March 27, 2020, the President of the United States signed into law the CARES Act, which, along with earlier issued IRS guidance,
contains numerous provisions that may benefit the Company,
 
including the deferral of certain taxes. There is no material impact to the
Company. The CARES Act did not have a material impact on the Company’s tax provision for the year ended December 31, 2021.
The Consolidated Appropriations Act, 2021, which was enacted on December 27, 2020, has expanded, extended, and clarified selected
CARES Act provisions, specifically on Paycheck Protection Program loan
 
and Employee Retention Tax
 
Credit, 100% deductibility of
business meals as well as
 
other tax extenders. The Consolidated Appropriations Act
 
did not have a material
 
impact on the Company’s
tax provision for the year ended December 31, 2021.
The Company
 
is subject
 
to tax
 
in the
 
United States
 
and many
 
state and
 
local jurisdictions. The
 
Company,
 
with certain
 
exceptions, is
subject to income tax examinations by U.S. federal, state and local for tax years 2017 and future periods. The company is not currently
under audit for any US federal or state or foreign income tax audits.
Uncertain Tax Positions
A summary of the Company’s unrecognized tax benefits activity and related information is presented as follows (in thousands):
Years
 
Ended December 31,
2021
2020
Uncertain tax position liability at the beginning of the year
$
652
$
646
Increases (decreases) related to tax positions taken during current period
—
6
Uncertain tax position liability at the end of the year
$
652
$
652
The unrecognized tax benefits
 
for U.S. jurisdiction of
 
$
0.6
 
million, if recognized, would
 
not have an impact
 
on the Company’s effective
tax
 
rate
 
assuming
 
the
 
Company
 
continues
 
to
 
maintain
 
a
 
full
 
valuation
 
allowance
 
position
 
against
 
its
 
U.S.
 
deferred
 
tax
 
assets.
 
The
remaining unrecognized tax benefits
 
of less than $
0.1
 
million, if recognized, will
 
have an impact on
 
the effective tax rate. The
 
Company
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
134
recognizes accrued interest
 
and penalties related
 
to unrecognized tax
 
benefits in income
 
tax expense. We accrued $
0.2
 
million in interest
and penalties related to prior year’s tax filings, as of December 31, 2021.
 
The Company
 
is subject
 
to U.S.
 
federal income
 
tax as
 
well as
 
income
 
tax of
 
various foreign
 
jurisdictions. Generally,
 
the statute
 
of
limitations for examination
 
of the Company’s
 
U.S. federal and
 
foreign income tax
 
filings are open
 
for the years
 
ended December 31,
2017 and future periods.
 
15. Net Loss Per Share
The Company’s unvested restricted common shares have been excluded from the computation of basic net loss per share.
 
The
 
Company’s
 
potentially
 
dilutive
 
securities,
 
which
 
include
 
options,
 
unvested
 
restricted
 
stock,
 
convertible
 
notes
 
payable
 
and
convertible preferred stock, have been excluded from the computation of diluted net loss per share as the effect
 
would be to reduce the
net loss per share. Therefore, the weighted
 
average number of common shares outstanding used
 
to calculate both basic and diluted net
loss per share is the same. The Company
 
excluded the following potential common shares, presented based on amounts outstanding
 
at
each period end, from the
 
computation of diluted net loss per
 
share as of December 31, 2021
 
and 2020 because including them
 
would
have had an anti-dilutive effect:
 
December 31,
2021
2020
Series Seed preferred
—
7,831,528
Series Seed-1 preferred
—
22,876,457
Series Seed-2 preferred
—
14,615,399
Series A-1 preferred
—
1,871,511
Series A-2 preferred
—
6,307,690
Unvested restricted stock
—
23,970
Options and RSUs issued and outstanding
21,387,909
14,434,095
Warrants issued and outstanding stock
1,928,020
134,106
23,315,929
68,094,756
16. Commitments and Contingencies
Contractual Obligations
 
The Company
 
enters into
 
agreements with
 
contract research
 
organizations (“CROs”)
 
to conduct
 
clinical trials
 
and preclinical
 
studies
and contract manufacturing organizations (“CMOs”) to produce vaccines and other potential product candidates. Contracts with CROs
and CMOs are generally cancellable, with notice, at the Company’s option.
 
As of December 31, 2021, the Company had remaining prepayments to CROs of $
1.6
 
million and remaining prepayments to CMOs of
$
2.5
 
million for activities associated with the conduct of its
 
clinical trials and for the production of the Company’s
 
anticipated vaccine
product candidate.
 
Michael J. Fox Foundation Grant
 
On November 3, 2021, the
 
Company was awarded a grant from
 
the Michael J. Fox Foundation
 
for Parkinson’s Research
 
(“MJFF”) in
the amount of $
0.8
 
million to be used in a
 
project for the exploration of markers
 
for target engagement in individuals immunized
 
with
UB-312, an
 
active
a
-Synuclein immunotherapy.
 
The Company
 
will oversee
 
sample management,
 
sample preparation
 
(IgG fractions)
and
 
distribution,
 
as
 
well
 
as
 
characterize
 
the
 
binding
 
properties
 
of
 
the
 
antibodies
 
against
 
pathological
 
forms
 
of
 
aSyn.
 
As
 
funding
 
is
expected to
 
be utilized
 
over a
 
two-year period,
 
as cash
 
is received,
 
the amount
 
expected to
 
the utilized
 
within twelve
 
months is
 
recognized
to short-term
 
restricted cash/deposits, with
 
a corresponding
 
short-term accrued liability,
 
which is
 
released as
 
the related expenses
 
are
offset. The Company recognizes payments from MJFF as a reduction of research
 
and development expenses, in the same period as the
expenses that
 
the grant
 
is intended
 
to reimburse
 
are incurred.
 
The remaining
 
balance of
 
cash received
 
is recognized
 
to long-term
 
restricted
cash/deposits,
 
with
 
a
 
corresponding
 
long-term
 
accrued
 
liability.
 
As
 
of
 
December
 
31,
 
2021,
 
the
 
balance
 
of
 
short-term
 
restricted
cash/deposits and the
 
corresponding short-term accrued
 
liability was $
0
 
and the balance
 
of long-term restricted
 
cash/deposits and the
corresponding
 
long-term
 
accrued
 
liability
 
was
 
$
0
.
 
For
 
the
 
year
 
ended
 
December
 
31,
 
2021,
 
the
 
Company recognized
 
less
 
than
 
$
0.1
million as a reduction of research and development expenses for amounts reimbursed through the grant.
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
135
Lease Agreements
 
The Company has multiple operating lease agreements for office and laboratory space that extend through August 2022. The Company
records total expense on a straight-line basis over the term of the lease agreement. One of the Company’s
 
leases requires the Company
to provide a security deposit in the amount of less than $
0.1
 
million. The Company is also required to pay certain operating costs under
its leases.
 
Rent expense
 
for each
 
of the
 
years ended
 
December 31,
 
2021 and
 
2020 amounted
 
to less
 
than $
0.1
 
million, and
 
$
0.1
 
million, respectively.
In August 2021,
 
the Company entered
 
into a lease
 
for
5,012
 
square feet of
 
lab space with
 
Space Florida in
 
Exploration Park, Florida
commencing August
 
12, 2021. The
 
lease has
 
an initial one-year
 
term with an
 
annual lease
 
obligation of $
0.2
 
million, after Lessee
 
credits.
License Agreements
In October 2014, the Company
 
entered into a contribution
 
agreement with UBI, whereby
 
UBI contributed and assigned
 
to the Company
assets and
 
granted a non-exclusive
 
license to
 
certain technologies
 
deemed necessary
 
or reasonably
 
useful in
 
the utilization
 
of the licensed
intellectual property.
 
In consideration,
 
the Company
 
issued
32,505,306
 
shares of
 
common stock
 
to UBI.
 
The agreement
 
allowed for
exploitation of all
 
diagnostic, prophylactic, and therapeutic
 
uses and indications in
 
humans in the
 
field of neurology. The agreement
 
was
amended in
 
August 2019
 
to provide
 
the Company
 
with exclusivity
 
(except as
 
to UBI)
 
in the
 
field of
 
neurology and
 
the flexibility
 
to
pursue indications outside the initial field limitations.
 
In connection with the amendment,
 
the Company agreed to execute
 
an exclusive, worldwide license agreement for
 
any product that is
developed by the Company outside the original
 
field. The terms and conditions are
 
to be negotiated in good faith
 
and mutually agreed
upon. The Company
 
anticipates that if
 
it is required
 
to enter into
 
an exclusive license
 
agreement, it will
 
be able to
 
negotiate financial
terms for the license at prevailing
 
market rates within the pharmaceutical industry.
 
Accordingly, the
 
Company may be required to pay
UBI upfront fees, revenue royalties, development milestones, commercial milestones, sublicense fees, and other related
 
fees.
 
Vaxxinity’s
 
COVAXX
 
subsidiary was formed
 
in March 2020
 
through a transfer
 
of technology from
 
UBI, UBI IP
 
Holdings, and UBI
US Holdings, LLC, all
 
related parties of the
 
Company, whereby
 
the Company,
 
pursuant to an April
 
2020 license agreement, obtained
exclusive rights
 
to intellectual
 
property and
 
technology related
 
to the
 
discovery of
 
vaccines, diagnostic
 
assays, and
 
antigens for
 
use
against all coronaviruses
 
including, without
 
limitation, SARS,
 
MERS, and
 
COVID-19 in all
 
strains in humans.
 
The license
 
is worldwide,
perpetual, exclusive and fully paid-up.
 
There are no future royalty
 
or milestone payment obligations
 
associated with the agreement.
 
The
Company has the right to grant sublicenses.
 
The
 
Company
 
considered
 
ASC
 
805,
 
“Business
 
Combinations”
 
and
 
ASC
 
730,
 
“Research
 
and
 
Development”
 
in
 
determining
 
how
 
to
account for the issuance of common
 
stock. The license agreement is considered
 
to be a common control transfer;
 
however, the related
party did not have any basis in the assets licensed, so there was no accounting impact for the Company.
 
In August 2021, Vaxxinity
 
entered into a license
 
agreement (the “Platform License
 
Agreement”) with UBI and
 
certain of its affiliates
that
 
expanded
 
intellectual
 
property
 
rights
 
previously
 
licensed
 
under
 
previously
 
issued
 
license
 
agreements
 
with
 
UBI.
 
As
 
part
 
of
 
the
agreement, Vaxxinity
 
obtained a worldwide, sublicensable (subject to certain conditions), perpetual, fully paid-up, royalty-free
 
license
to
 
research,
 
develop,
 
make,
 
have
 
made,
 
utilize,
 
import,
 
export,
 
market,
 
distribute,
 
offer
 
for
 
sale,
 
sell,
 
have
 
sold,
 
commercialize
 
or
otherwise exploit peptide-based vaccines in the field
 
of all human prophylactic and therapeutic uses,
 
except for such vaccines related to
human immunodeficiency virus (HIV), herpes
 
simplex virus (HSE) and
 
Immunoglobulin E (IgE). The patents
 
and patent applications
licensed under the Platform License
 
Agreement include claims directed to
 
a CpG delivery system, artificial
 
T helper cell epitopes and
certain designer
 
peptides and
 
proteins utilized in
 
UB-612. As
 
described above,
 
in consideration for
 
the Platform
 
License Agreement,
the Company issued to UBI a warrant to purchase Class A common stock (the “UBI Warrant”).
 
The Company considered ASC 805, “Business Combinations” (“ASC 805”) and ASC 730, “Research and Development” (“ASC 730”)
in determining how
 
to account for
 
the issuance of
 
the Class A common
 
stock warrants. The
 
Class A common
 
stock warrants were
 
issued
to a related party in exchange for a license agreement. The majority of the voting interests in the related party and that of the Company
were held by
 
a group of
 
immediate family members,
 
at the time
 
of the transaction,
 
and as such
 
the transaction constitutes
 
a common
control transaction,
 
which requires
 
the license
 
to be
 
accounted for
 
at the
 
carrying value
 
in the
 
books of
 
the transferor.
 
As the
 
related
party did not have any basis in the assets licensed, there was no accounting impact for the Company.
In connection with
 
preparing its financial
 
statements for the
 
fiscal year ended
 
December 31, 2021,
 
the Company identified
 
an immaterial
error relating to the recording of the UBI Warrant
 
on its financial statements as of and for
 
the nine months ended September 30, 2021.
The UBI
 
Warrant
 
was recorded
 
on
 
the balance
 
sheet as
 
additional paid
 
in
 
capital and
 
recognized
 
as an
 
‘intangible asset
 
–
 
licensed
intellectual property’
 
in the
 
amount of
 
$
13.3
 
million, and
 
$
0.1
 
million was
 
amortized in
 
the nine
 
months ended
 
September 30, 2021.
However, as noted above, the UBI Warrant
 
was issued to a related party whose basis in the rights and licenses received pursuant to the
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
136
Platform License Agreement was zero. As a result, the
 
transaction should not have resulted in any accounting impact to
 
the Company.
 
The Company has concluded that the error is not material to any previously issued financial statements.
Indemnification Agreements
 
In the ordinary
 
course of business,
 
the Company may
 
provide indemnification of
 
varying scope and
 
terms to employees,
 
consultants,
vendors, lessors,
 
business partners and
 
other parties
 
with respect
 
to certain
 
matters including, but
 
not limited
 
to, losses
 
arising out
 
of
breach of such
 
agreements or from
 
intellectual property infringement
 
claims made by
 
third parties. In
 
addition, the Company
 
has entered
into indemnification agreements
 
with members of
 
its board of
 
directors and executive
 
officers that
 
will require
 
the Company,
 
among
other things, to indemnify them against certain liabilities that may arise by reason of their status or
 
service as directors or officers. The
maximum potential amount of future payments
 
the Company could be required to
 
make under these indemnification agreements is,
 
in
many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnifications. The Company is
not aware of any indemnification arrangements that could have
 
a material effect on its financial position,
 
results of operations, or cash
flows, and it has not accrued any liabilities related to such obligations as of December 31, 2021.
 
Legal Proceedings
 
From
 
time
 
to
 
time,
 
the
 
Company
 
may
 
become
 
involved
 
in
 
legal
 
proceedings
 
arising
 
in
 
the
 
ordinary
 
course
 
of
 
business.
 
As
 
of
December 31, 2021, the Company was not a party to any material legal matters or claims.
 
 
17. Benefit Plans
In
 
March
 
2018,
 
the
 
Company
 
established
 
a
 
defined
 
contribution
 
savings
 
plan
 
under
 
Section
 
401(k)
 
of
 
the
 
Code.
 
This
 
plan
 
covers
substantially all
 
U.S. employees
 
who meet
 
minimum age
 
and service
 
requirements and
 
allows participants
 
to defer
 
a portion
 
of their
annual compensation on a pre-tax basis. The Company does not make matching contributions to the Plan.
The Company offers its Ireland-based employees a
 
Personal Retirement Savings Account (“PRSA”) that allows participants to
 
defer a
portion of their
 
annual compensation. The
 
Company provides contributions
 
equal to
5
% of each
 
participant’s annual salary. During both
of the years ended December 31, 2021 and 2020, the Company contributed less than $
0.1
 
million to PRSA accounts.
 
18. Related Party Transactions
The Company has
 
a Related Party
 
policy which defines
 
related parties, and
 
assigns oversight responsibility
 
for related party transactions
to
 
the
 
Company's Audit
 
Committee.
 
The
 
Committee reviews
 
in
 
advance related
 
party
 
transactions, and
 
considers multiple
 
factors,
including the
 
proposed aggregate
 
value of the
 
transaction, or, in
 
the case
 
of indebtedness,
 
the amount
 
of principal that
 
would be
 
involved,
the benefits
 
to the
 
Company of
 
the proposed transaction,
 
the availability of
 
other sources of
 
comparable products or
 
services, and
 
an
assessment of whether
 
the proposed transaction is
 
on terms that
 
are comparable to
 
the terms available to
 
or from, as
 
the case may be,
unrelated third parties.
 
Under the policy,
 
related party transactions
 
are approved only
 
if the Committee
 
determines in good
 
faith that
the transaction is not inconsistent with the interests of the Company and its shareholders.
The Company has related
 
party arrangements with
 
UBI and a number
 
of its affiliated companies
 
listed namely, United Biomedical, Inc.,
Asia (“UBI-Asia”), UBI Pharma, Inc. (“UBI-P”), United BioPharma, Inc (“UBP”) and UBI IP Holding (“UBI-IP”).
As of
 
December 31, 2021
 
UBI owned
43
% of
 
the Company’s
 
stock on
 
an as
 
converted basis.
 
The majority
 
of the
 
voting interests
 
in
both UBI and the Company were held by a group of immediate family members, and as such the entities are under common control.
These related parties are governed by various Master Services Agreements (“MSA”) detailed below.
 
UBI MSA - UBI provides research,
 
development and clinical functions to
 
the Company. There is also a purchase arrangement
 
with
UBI for the production and shipment of the Company’s diagnostic test kits.
UBIA MSA - UBI-Asia for manufacturing, quality control, testing, validation, and supply services.
UBP MSA - United BioPharma, Inc provide the Company with manufacturing, testing and validation.
COVID MSA (“COVID MSA”)
 
- COVID MSA
 
provides that UBI acts
 
as COVAXX’s
 
agent with respect
 
to matters relating
 
the
Company’s COVID-19 program and provides research, development, manufacturing and back office administrative services to the
Company.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
137
COVID-19
 
Relief
 
MSA
 
-
 
A
 
four-company
 
MSA
 
with
 
UBI,
 
UBI-Asia
 
and
 
UBP.
 
The
 
Company
 
is
 
an
 
exclusive
 
licensee
 
of
technologies related to diagnostics, vaccines, and therapies for COVID-19. The MSA established the terms under which UBI-Asia
provides research, development, testing and manufacturing services to
 
the Company and UBP provides contract development
 
and
manufacturing services to the Company.
Total amounts due to
 
related parties were
 
$
19.4
 
million and $
8.0
 
million as of
 
December 31, 2021
 
and 2020, respectively. Total amounts
due from related
 
parties were
 
$
0.4
 
million and
 
$
0.4
 
million as
 
of December
 
31, 2021 and
 
December 31,
 
2020, respectively.
 
Total service
fees incurred were $
35.4
 
million and $
18.2
 
million for the years ended December 31, 2021 and 2020, respectively.
 
Taiwan Centers for Disease Control Grant (“Taiwan
 
CDC”)
 
UBI-Asia, which is responsible
 
for applying for and managing
 
grants on our behalf under
 
the COVID-19 program, was awarded
 
a grant
by the Taiwan
 
CDC for COVID-19 vaccine
 
development. The Company contracted with
 
UBI-Asia to conduct a
 
two-phase study of a
COVID-19 vaccine clinical trial
 
in Taiwan.
 
The grant provides that
 
costs incurred to complete
 
the two phases of
 
the clinical trial will
be reimbursed based on the achievement of certain milestones as provided in the agreement.
The Company provides administrative services to UBI-IP.
 
Under the arrangement, the Company issues vendor payments and provides
technical services mostly for legal services on behalf UBI-IP.
 
The Company bills UBI-IP for services based on the
 
costs incurred with
no markup.
Total
 
related party operating
 
activity,
 
including the activity
 
described above, for
 
the years ended
 
December 31, 2021
 
and 2020 are
 
as
follows (in thousands):
December 31,
2021
2020
Consolidated balance sheet
Assets
Prepaid expenses and other current assets
$
3,517
$
2,867
Property and equipment, net
337
725
Accrued expenses
—
285
Amounts due from related parties
393
361
Liabilities
Amounts due to related parties
19,407
8,004
Years
 
Ended December 31,
2021
2020
Consolidated statement of operations
Revenue
$
—
$
162
Cost of revenue
—
52
Operating expenses
Research and development
Services provided by related parties
41,430
17,987
Taiwan CDC grant reimbursement from related party
(7,199)
(2,948)
General and administrative
Services provided by related parties
1,173
3,147
 
19. Subsequent Events
The Company has evaluated subsequent events
 
through March 24, 2022 and has concluded
 
that no events or transactions have
 
occurred
that require disclosure in the accompanying consolidated financial statements.
 
 
138
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
 
Item 9A. Controls and Procedures.
Evaluation of disclosure controls and procedures
Our management, with the participation
 
of our principal executive officer
 
and principal accounting officer,
 
evaluated, as of the end
 
of
the period covered
 
by this Annual
 
Report on Form
 
10-K, the effectiveness
 
of our disclosure
 
controls and procedures
 
(as defined in
 
Rules
13a-15(e) and
 
15d-15(e) under
 
the Exchange
 
Act). In
 
designing and
 
evaluating our
 
disclosure controls
 
and procedures,
 
management
recognizes
 
that
 
any
 
controls
 
and
 
procedures,
 
no
 
matter
 
how
 
well
 
designed
 
and
 
operated,
 
can
 
provide
 
only
 
reasonable
 
assurance
 
of
achieving the desired control objectives. In addition,
 
the design of disclosure controls and procedures
 
must reflect the fact that there are
resource constraints, and that management is required to apply judgment in evaluating the benefits of possible
 
controls and procedures
relative to
 
their costs.
 
Based on
 
management’s
 
evaluation and
 
as a
 
result of
 
the material
 
weaknesses described
 
below,
 
our principal
executive officer and principal
 
accounting officer concluded that,
 
as of December
 
31, 2021, our
 
disclosure controls and
 
procedures were
not effective at the reasonable assurance level.
Report on Internal Control Over Financial Reporting
This Report does not include
 
a report of management’s
 
assessment regarding internal control over financial
 
reporting or an attestation
report of
 
our independent
 
registered public
 
accounting firm
 
due to
 
a transition
 
period established
 
by the
 
rules of
 
the SEC
 
for newly
public companies.
Material Weaknesses in Internal Control over Financial Reporting
A material
 
weakness is
 
a deficiency,
 
or combination
 
of deficiencies,
 
in internal
 
control over
 
financial reporting,
 
such that
 
there is
 
a
reasonable
 
possibility
 
that
 
a
 
material
 
misstatement
 
of
 
a
 
company’s
 
annual
 
and
 
interim
 
financial
 
statements
 
will
 
not
 
be
 
detected
 
or
prevented on a timely basis.
Management identified
 
material weaknesses
 
in the
 
design and
 
operation of
 
our internal
 
controls over
 
financial reporting
 
during the
preparation of our audited consolidated financial statements for the year ended December 31, 2021. These material weaknesses related
to:
 
•
 
performing our financial close
 
process, including account reconciliation
 
and analysis on a
 
timely basis, accruing for
 
related-party
transactions, recording stock-based
 
compensation expense and aggregating
 
and mapping amounts from
 
trial balances to
 
financial
statements;
 
•
 
ensuring
 
that
 
formal
 
processes
 
exist
 
for
 
identifying,
 
analyzing
 
and
 
accounting
 
for
 
key
 
contracts
 
and
 
complex,
 
non-routine
transactions; and
•
 
proper segregation of duties
 
and responsibilities within our
 
finance department, including authorization and
 
review of accounting
entries.
 
Remediation Measures
We
 
are
 
investing resources
 
to remediate
 
the material
 
weaknesses identified
 
in
 
the preparation
 
of
 
our audited
 
consolidated financial
statements for the year ended December 31, 2021 described above through a combination of hiring additional qualified accounting and
financial
 
reporting
 
personnel
 
and
 
further
 
evolving
 
and
 
refining
 
our
 
accounting
 
processes
 
and
 
policies.
 
These
 
remediation
 
activities
involve the following:
•
 
having hired, and continuing
 
to hire, additional accounting
 
personnel with the appropriate
 
level of skill and
 
experience for public
company financial reporting;
•
 
designing and implementing a formal financial close process that includes multiple levels of reviews of accounting entries; and
•
 
supplementing our
 
resources for
 
evaluating and
 
accounting for
 
complex transactions
 
and stock
 
options through
 
the use
 
of third-
party advisors.
While we
 
are working
 
to remediate
 
the
 
identified material
 
weaknesses as
 
timely and
 
efficiently
 
as possible,
 
at
 
this time
 
we cannot
provide an estimate
 
of costs expected
 
to be incurred
 
in connection with
 
our remediation efforts,
 
we cannot provide
 
an estimate of
 
the
time it will take
 
to complete remediation,
 
nor can we provide
 
assurance that our efforts
 
will successfully prevent
 
any errors or omissions
that may result because of these material weaknesses.
 
 
 
 
 
139
Changes in Internal Control over Financial Reporting
Other
 
than
 
the
 
measures
 
described
 
in
 
“Remediation Measures”
 
above,
 
there
 
were
 
no
 
changes
 
in
 
our
 
internal
 
control
 
over
 
financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2021 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
 
Item 9B. Other Information.
None.
 
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
The disclosure required by this item is not applicable.
PART
 
III
Items 10, 11, 12, 13 and 14.
Our independent registered public accounting firm is Armanino LLP, San Ramon, California, Auditor Firm ID: 32.
The information
 
required by
 
these items
 
is incorporated
 
by reference
 
to our
 
definitive proxy
 
statement relating
 
to our
 
2022 Annual
Meeting of Shareholders. We currently anticipate that our definitive proxy statement will be filed with the SEC not later
 
than 120 days
after December 31, 2021, pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended.
 
PART
 
IV
Item 15. Exhibits and Financial Statement Schedules.
(a) Documents filed as part of this Report:
(1)
 
Financial Statements. The
 
following consolidated
 
financial statements
 
and the
 
notes thereto,
 
and the
 
Reports of
 
Independent
Registered Public Accounting Firm are incorporated by reference as provided in Item 8 and Item 9A of this Report:
Audited Consolidated Financial Statements as of and for the years ended December 31, 2021 and 2020
 
(PCAOB ID: 32)
106
107
108
109
109
111
113
(2)
 
Financial Statement Schedules.
[IF ANY]
 
 
 
140
(b) Exhibits:
The following
 
exhibits required
 
by Item 601
 
of Regulation
 
S-K are
 
filed herewith
 
or have
 
been filed
 
previously with
 
the SEC
 
as indicated
below:
Exhibit
No.
 
Index to Exhibits
 
3.1
 
Amended and Restated Certificate of Incorporation of Vaxxinity,
 
Inc. to be in effect upon the completion of this
offering (incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K (File No. 001-41058) filed on
November 17, 2021).
 
3.2
 
Amended and Restated Bylaws of Vaxxinity,
 
Inc. to be in effect upon the completion of this offering (incorporated by
reference to Exhibit 3.2 of our Current Report on Form 8-K (File No. 001-41058) filed on November 17, 2021).
 
4.1
 
 
4.2
Description of Registered Securities*
 
10.1
 
 
10.2
 
Registration Rights Agreement (incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K (File No.
001-41058) filed on November 17, 2021).
 
10.3
 
 
10.4
 
 
10.5
 
 
10.6
 
 
10.7
 
 
10.8
 
 
10.9
 
 
10.10
 
 
10.11
 
 
10.12
 
 
10.13
 
 
10.14
 
 
10.15
 
 
21.1
 
 
23.1
 
 
24.1
 
 
 
141
 
31.1
 
31.2
 
32.1
101.INS
Inline XBRL Instance 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 (the cover page XBRL tags are embedded within the Inline XBRL document).*
__________________________
*
 
Filed herewith.
†
 
Indicates management contract or compensatory plan, contract or arrangement.
§
 
Portions of the
 
exhibit, marked by
 
brackets, have
 
been omitted
 
because the
 
omitted information
 
(i) is not
 
material and
 
(ii) would
likely cause competitive harm if publicly disclosed.
‡ The certifications attached as Exhibits 32.1 that accompany this Form 10-K are deemed furnished and not filed with the
Securities and Exchange Commission and are not to be incorporated by reference into any filing of Vaxxinity, Inc. under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this
Form 10-K, irrespective of any general incorporation language contained in such filing.
(c) Schedules:
None
Item 16. Form 10-K Summary.
None.
 
 
 
 
 
 
 
 
 
 
 
 
142
SIGNATURES
Pursuant to the requirements of the Securities
 
Exchange Act of 1934, the registrant has
 
duly caused this Annual Report on Form 10-K
to be signed on its behalf by the undersigned, thereunto duly authorized on March 24, 2022.
 
VAXXINITY,
 
INC.
By:
/s/ Mei Mei Hu
Mei Mei Hu, President and
Chief Executive Officer
ADDITIONAL SIGNATURES AND POWERS OF ATTORNEY
KNOW ALL PERSONS BY
 
THESE PRESENTS, that each
 
person whose signature appears
 
below constitutes and appoints
 
Mei Mei
Hu
 
and
 
René
 
Paula,
 
jointly
 
and
 
severally,
 
her
 
or
 
his
 
attorney-in-fact, with
 
the
 
power
 
of
 
substitution, for
 
her
 
or
 
him
 
in
 
any
 
and
 
all
capacities, to sign any amendments
 
to this Annual Report on
 
Form 10-K and to file
 
the same, with exhibits thereto
 
and other documents
in connection therewith, with the Securities and Exchange Commission,
 
hereby ratifying and confirming all that each of said attorneys-
in-fact, or her or his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements
 
of the Securities Exchange
 
Act of 1934, as
 
amended, this Annual Report
 
on Form 10-K has
 
been signed
below by the following persons in the capacities indicated on March 24, 2022.
Signature
 
Capacity in Which Signed
/s/: Mei Mei Hu
President, Chief Executive Officer and Director
Mei Mei Hu
(Principal executive officer)
/s/: Jason Pesile
Senior Vice President, Finance & Accounting
Jason Pesile
(Principal financial and accounting officer)
/s/: Louis Reese
Director
Louis Reese
/s/: George Hornig
Director
George Hornig
/s/: Greg Blatt
Director
Greg Blatt
/s/: Peter Diamandis
Director
Peter Diamandis
/s/: James Chui
Director
James Chui
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