Celyad Oncology SA [CYAD] Filings

Large accelerated filer

Accelerated filer

Non-accelerated filer

Emerging growth company

20-F 1 d303978d20f.htm 20-F 20-F

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM

20-F

(Mark One)

☐	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

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

For the fiscal year ended December 31, 2021

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

For the transition period from

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

Date of event requiring this shell company report

Commission file number

001-37452

CELYAD ONCOLOGY S.A.

(Exact name of Registrant as specified in its charter and translation of Registrant’s name into English)

Belgium

(Jurisdiction of incorporation or organization)

Rue Edouard Belin 2

1435 Mont-Saint-Guibert, Belgium

(Address of principal executive offices)

Filippo Petti

Chief Executive Officer and Chief Financial Officer

Celyad Oncology SA

Rue Edouard Belin 2

1435 Mont-Saint-Guibert, Belgium

Tel: +32 10 394 100 Fax: +32 10 394 141

(Name, Telephone,

E-mail

and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.


Title of each class	Trading Symbol	Name of each exchange on which registered
American Depositary Shares, each representing one ordinary share, no nominal value per share	CYAD	The Nasdaq Stock Market LLC
Ordinary shares, no nominal value per share*		The Nasdaq Stock Market LLC*

Title of each class	Trading Symbol	Name of each exchange on which registered
American Depositary Shares, each representing one ordinary share, no nominal value per share	CYAD	The Nasdaq Stock Market LLC
Ordinary shares, no nominal value per share*		The Nasdaq Stock Market LLC*

*	Not for trading, but only in connection with the registration of the American Depositary Shares.

Securities registered or to be registered pursuant to Section 12(g) of the Act. None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the Annual Report.

Ordinary shares, no nominal value per share: 22,593,956 as of December 31, 2021

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ☐ 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, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule

12b-2

of the Exchange Act. (Check one):

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, 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. ☒

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:


U.S. GAAP ☐	International Financial Reporting Standards as issued		Other ☐
	by the International Accounting Standards Board	☒

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. ☐ Item 17 ☐ Item 18

If this is an Annual Report, indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act).

☐ Yes ☒ No

Table of Contents

TABLE OF CONTENTS


		Page
SUMMARY OF THE MATERIAL RISKS ASSOCIATED WITH OUR BUSINESS			1

INTRODUCTION			3

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS			4

PART I			6
Item 1.	Identity of Directors, Senior Management and Advisers		6
Item 2.	Offer Statistics and Expected Timetable		6
Item 3.	Key Information		6
	A. [Reserved]		6
	B. Capitalization and Indebtedness		6
	C. Reasons for the Offer and Use of Proceeds		6
	D. Risk Factors		6
Item 4.	Information on the Company		51
	A. History and Development of the Company		51
	B. Business Overview		52
	C. Organizational Structure		87
	D. Property, Plants and Equipment		87
Item 4A.	Unresolved Staff Comments.		87
Item 5.	Operating and Financial Review and Prospects		88
	A. Operating Results		90
	B. Liquidity and Capital Resources		99
	C. Research and Development		104
	D. Trend Information		104
	E. Critical Accounting Estimates		104
	F. Safe Harbor		104
Item 6.	Directors, Senior Management and Employees		104
	A. Directors and Senior Management		104
	B. Compensation		110
	C. Board Practices		118
	D. Employees		120
	E. Share Ownership		121
Item 7.	Major Shareholders and Related Party Transactions		121
	A. Major shareholders		121
	B. Related Party Transactions		122
	C. Interest of Experts and Counsel		125
Item 8.	Financial Information		125
	A. Consolidated Statements and Other Financial Information Consolidated Financial Statements		125
	B. Significant Changes		126
Item 9.	The Offer and Listing		126
	A. Offer and Listing Details		126
	B. Plan of Distribution		126
	C. Markets		126
	D. Selling Shareholders		126
	E. Dilution		127
	F. Expenses of the Issue		127
Item 10.	Additional Information		127
	A. Share Capital		127

Table of Contents


	B. Memorandum and Articles of Association	127
	C. Material Contracts	127
	D. Exchange Controls	128
	E. Taxation	128
	F. Dividends and Paying Agents	137
	G. Statement by Experts	137
	H. Documents on Display	137
	I. Subsidiary Information	138
Item 11.	Quantitative and Qualitative Disclosures About Market Risk	138
Item 12.	Description of Securities Other than Equity Securities	139
	A. Debt Securities	139
	B. Warrants and Rights	139
	C. Other Securities	139
	D. American Depositary Shares	139
PART II		141
Item 13.	Defaults, Dividend Arrearages And Delinquencies	141
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	141
Item 15.	CONTROLS AND PROCEDURES	141
Item 16.	Reserved	143
Item 16A.	Audit Committee Financial Expert	143
Item 16B.	Code of Ethics	143
Item 16C.	Principal Accountant Fees and Services	143
Item 16D.	Exemptions from the Listing Standards for Audit Committees	144
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	144
Item 16F.	Corporate Governance	144
Item 16G.	Change in Registrant’s Certifying Accountant	146
Item 16H.	Mine Safety Disclosure	146
Item 16I.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	146
PART III		147
Item 17.	Financial Statements	147
Item 18.	FINANCIAL STATEMENTS	147
Item 19.	Exhibits	147
Note 1: The Company		F-11
Note 2: General information and Statement of Compliance		F-11
Note 3: Accounting Principles		F-13
Foreign currency translation		F-13
Revenue		F-14
Other income		F-14
Intangible assets		F-16
Property, plant and equipment		F-18
Leases		F-18
Impairment of non-financial assets		F-19
Cash and cash equivalents		F-20
Financial assets		F-20
Financial liabilities		F-21
Provisions		F-22
Income taxes		F-24
Earnings (loss) per share		F-25
Equity		F-25
Note 4: Risk Management		F-26
Note 5: Critical accounting estimates and judgments		F-27
Note 6: Operating segment information		F-28
Note 7: Intangible assets		F-30
Note 8: Property, plant and equipment		F-34
Note 9: Other non-current assets		F-35
Note 10: Inventories and Work in Progress		F-36
Note 11: Trade, other receivables and other assets		F-36
Note 12: Short-term investment		F-37
Note 13: Cash and cash equivalents		F-37

Table of Contents


Note 14: Investment in Subsidiaries					F-37
Note 15: Share Capital					F-38
Note 16: Share-based payments					F-43
Note 17: Post-employment Benefits					F-46
Note 18: Other reserves					F-48
Note 19: Recoverable Cash advances					F-49
Note 20: Due dates of the Financial Liabilities					F-51
Note 21: Other non-current liabilities					F-51
Note 22: Trade payables and other current liabilities					F-52
Note 23: Financial instruments					F-53
Note 24: Changes in liabilities arising from financial activities					F-57
Note 25: Revenues					F-58
Note 26: Operating expenses					F-58
Note 27: Employee Benefit Expenses					F-60
Note 28: Change in fair value of contingent consideration, Other Income and Other Expenses					F-61
Note 29: Leases					F-63
Note 30: Financial income and expenses					F-64
Note 31: Income Tax					F-65
Note 32: Deferred taxes					F-65
Note 33: Commitments					F-67
Note 34: Relationships with related Parties					F-69
Note 35: Loss per share					F-70
Note 36: Events after the close of the fiscal Year					F-70
EXHIBIT INDEX					EX-1

iii

Table of Contents

SUMMARY OF THE MATERIAL RISKS ASSOCIATED WITH OUR BUSINESS

Our business is subject to numerous material and other risks and uncertainties, including those described in Item 3.D. “Risk Factors” in this Report. The principal risks and uncertainties affecting our business include the following:

•

We are heavily dependent on the regulatory approval of our

CAR-T

cell therapy product candidates, including

CYAD-101,

CYAD-211

and

CYAD-02

in the United States and Europe, and subsequent commercial success of our product candidates, both of which may never occur.

•

Our clinical programs are ongoing and not complete. Initial success in our ongoing clinical trials may not be indicative of results obtained when these trials are completed. Furthermore, success in early clinical trials may not be indicative of results obtained in later trials.

•

In previous clinical trials involving T cell-based immunotherapies, some patients experienced serious adverse events. Our product candidates may demonstrate a similar effect or have other properties that could halt our clinical development, prevent our regulatory approval, limit our commercial potential, or result in significant negative consequences.

•

Our product candidates are a new approach to cancer treatment that presents significant challenges.

•

We have obtained and will seek to obtain significant funding from the Walloon Region. The terms of the agreements signed with the Region may hamper our ability to partner part or all of our products.

•

We rely and will continue to rely on collaborative partners regarding the development of our research programs and product candidates.

•

We rely on third parties to conduct, supervise and monitor our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.

•

Cell-based therapies rely on the availability of specialty raw materials, which may not be available to us on acceptable terms or at all.

•

Our patents and other intellectual property rights portfolio are relatively young and may not adequately protect our research programs and product candidates, which may impede our ability to compete effectively.

•

We may infringe on the patents or intellectual property rights of others and may face patent litigation, which may be costly and time consuming.

•

We depend on intellectual property licensed from third parties and termination of any of these licenses could result in the loss of significant rights, which would harm our business.

•

We could be unsuccessful in obtaining or maintaining adequate patent protection for one or more of our product candidates.

•

We and our third-party suppliers are subject to high standards of manufacturing in accordance with current good manufacturing practices, or cGMPs, and other manufacturing regulations. Complying with these requirements will require us and our third-party suppliers to expend significant time, money and effort and any failure to comply could have an adverse effect on our business.

•

We rely on a single manufacturing facility and if operations at that manufacturing facility are disrupted, we could experience delays in our clinical trials or we would need to expend additional time and capital to identify and onboard another manufacturing facility.

Table of Contents

•

We will need increased manufacturing capacity, which will require additional time and capital. If we are not able to expand manufacturing capacity, we may experience delays in our clinical trials.

•

We are highly dependent on our key personnel, and if we are not successful in attracting, motivating and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.

•

We have incurred net losses in each period since our inception and anticipate that we will continue to incur net losses in the future.

•

We may need substantial additional funding, which may not be available on acceptable terms when needed, if at all.

•

Our net losses and significant cash used in operating activities have raised doubt regarding our ability continue as a going concern.

•

Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our product candidates or technologies.

•

If securities or industry analysts do not publish research or publish inaccurate research or unfavorable research about our business, the price of the ordinary shares and the ADSs and trading volume could decline.

•

The market price of the shares could be negatively impacted by actual or anticipated sales of substantial numbers of ordinary shares or ADSs.

•

A public market for our shares may not be sustained.

•

The market price of the shares may fluctuate widely in response to various factors.

Table of Contents

INTRODUCTION

Unless otherwise indicated, “Celyad,” “Celyad Oncology”, “the Company,” “our company,” “the Group,” “we,” “us” and “our” refer to Celyad Oncology S.A. and its consolidated subsidiaries.

We own various trademark registrations and applications, and unregistered trademarks and service marks, including “CELYAD”, “C-CATH

” and our corporate logo. All other trademarks or trade names referred to in this Annual Report on Form

20-F

are the property of their respective owners. Trade names, trademarks and service marks of other companies appearing in this Annual Report on Form

20-F

are the property of their respective holders. Solely for convenience, the trademarks and trade names in this Annual Report on Form

20-F

may be referred to without the

and

™

symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend to use or display other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us, any other companies.

Our audited consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. Our consolidated financial statements are presented in euros. All references in this Annual Report on Form

20-F

to “$,” “US$,” “U.S.$,” “U.S. dollars,” “dollars” and “USD” mean U.S. dollars and all references to “€”, “EUR”, and “euros” mean euros, unless otherwise noted. Throughout this Annual Report on Form

20-F,

references to ADSs mean ADSs or ordinary shares represented by ADSs, as the case may be.

Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form

20-F,

or Annual Report, contains forward-looking statements. All statements other than present and historical facts and conditions contained in this Annual Report, including statements regarding our future results of operations and financial positions, business strategy, plans and our objectives for future operations, are forward-looking statements. When used in this Annual Report, the words “anticipate,” “believe,” “can,” “could,” “estimate,” “expect,” “intend,” “is designed to,” “may,” “might,” “plan,” “potential,” “predict,” “objective,” “should,” or the negative of these and similar expressions identify forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

•

The initiation, timing, progress and results of our preclinical studies and clinical trials, and our research and development programs;

•

Our ability to advance product candidates into, and successfully complete, clinical trials;

•

Our ability to successfully manufacture drug product for our clinical trials, including drug product with the desired number of t cells under our clinical trial protocols, and our ability to improve and automate these manufacturing procedures in the future;

•

Our reliance on the success of our product candidates;

•

The timing or likelihood of regulatory filings and approvals;

•

The implementation of our business model, strategic plans for our business, product candidates and technology;

•

The scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and technology;

•

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

•

Cost associated with enforcing or defending intellectual property infringement, misappropriation or violation; product liability; and other claims;

•

Regulatory development in the United States, the European Union (“EU”), and other jurisdictions;

•

Our ability to develop sales and marketing capabilities if our product candidates are approved;

•

The commercialization of our product candidates, if approved;

•

The pricing and reimbursement of our product candidates, if approved;

•

Estimates of our expenses, future revenues, capital requirements and our needs for additional financing;

•

Our ability to obtain additional financing, if necessary, on attractive terms or at all;

•

The potential benefits of strategic collaboration agreements and our ability to enter into strategic arrangements;

•

Our ability to maintain and establish collaborations or obtain additional grant funding;

•

The rate and degree of market acceptance of our product candidates, if approved;

•

Our financial performance;

Table of Contents

•

Developments relating to our competitors and our industry, including competing therapies;

•

Our ability to effectively manage our anticipated growth;

•

Our ability to attract and retain qualified employees and key personnel;

•

Our ability to build our finance infrastructure, improve our accounting systems and controls and remedy the material weakness identified in our internal control over financial reporting;

•

Statements regarding future revenue, hiring plans, expenses, capital expenditures, capital requirements and share performance;

•

Our expectations regarding our passive foreign investment company (PFIC) status;

•

Continued impacts of the ongoing

COVID-19

pandemic such as delays, interruptions or other adverse effects to clinical trials, delays in regulatory review, manufacturing and supply chain interruptions, disruption of the global economy and the overall impact on our business, financial condition and results of operations; and

•

Other risks and uncertainties, including those listed in the section of this annual report titled “Item 3.D.—Risk Factors.”

You should refer to the section of this Annual Report titled “Item 3.D.—Risk Factors” for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Annual Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

You should read this Annual Report and the documents that we reference in this Annual Report with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

This Annual Report contains market data and industry forecasts that were obtained from industry publications. These data involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. While we believe the market position, market opportunity and market size information included in this Annual Report is generally reliable, such information is inherently imprecise.

Table of Contents

PART I

ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3.

KEY INFORMATION

A. [Reserved]

Not applicable.

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

Our business faces significant risks. You should carefully consider all of the information set forth in this Annual Report and in our other filings with the U.S. Securities and Exchange Commission, or the SEC, including the following risk factors which we face, and which are faced by our industry. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. This Annual Report also contains forward-looking statements that involve risks and uncertainties. Our results could materially differ from those anticipated in these forward-looking statements, as a result of certain factors including the risks described below and elsewhere in this report and our other SEC filings. See “Special Note Regarding Forward-Looking Statements” above.

Risks Related to Product Development, Regulatory Approval and Commercialization

We are heavily dependent on the regulatory approval of our product candidates in the United States and Europe, and subsequent commercial success of our product candidates, both of which may never occur.

We are a clinical-stage biopharmaceutical company with no products approved by regulatory authorities or available for commercial sale. We may be unable to develop or commercialize a product, product candidate or research program, or may cease some of our operations, which may have a material adverse effect on our business.

We have generated limited revenue to date and do not expect to generate any revenue from product sales for the foreseeable future. As a result, our future success is currently dependent upon the regulatory approval and commercial success of our

CAR-T

cell therapy product candidates, including

CYAD-101,

CYAD-211

and

CYAD-02

for which we intend to seek approval. Our ability to generate revenues in the near term will depend on our ability to obtain regulatory approval and successfully commercialize our product candidates in the United States, the first country in which we intend to seek approval for these candidates. We may experience delays in obtaining regulatory approval in the United States for these clinical candidates, if they are approved at all, and the price of our ordinary shares and/or ADSs may be negatively impacted. Even if we receive regulatory approval, the timing of the commercial launch of our product candidates in the United States is dependent upon a number of factors, including, but not limited to, hiring sales and marketing personnel, pricing and reimbursement timelines, the production of sufficient quantities of commercial drug product and implementation of marketing and distribution infrastructure.

Table of Contents

In addition, we have incurred and expect to continue to incur significant expenses as we continue to pursue the approval of our product candidates in the United States, Europe and elsewhere. We plan to devote a substantial portion of our effort and financial resources in order to continue to grow our operational capabilities. This represents a significant investment in the clinical and regulatory success of our product candidates, which is uncertain. The success of our clinical candidates, if approved, and revenue from commercial sales, will depend on several factors, including:

•

Execution of an effective sales and marketing strategy for the commercialization of our product candidates;

•

Acceptance by patients, the medical community and third-party payors;

•

Our success in educating physicians and patients about the benefits, administration and use of our product candidates;

•

The incidence and prevalence of the indications for which our product candidates are approved in those markets in which the candidate(s) are approved;

•

The incidence and severity of side effects, if any, experienced by patients treated with our product candidates;

•

The availability, perceived advantages, cost, safety and efficacy of alternative treatments, including potential alternate treatments that may currently be available or in development or may later be available or in development or approved by regulatory authorities;

•

Successful implementation of our manufacturing processes that we plan to include in a future biologics license application, or BLA, and production of sufficient quantities of commercial drug product;

•

Maintaining compliance with regulatory requirements, including current good manufacturing practices, or cGMPs, good laboratory practices, or GLPs and good clinical practices, or GCPs; and

•

Obtaining and maintaining patent, trademark and trade secret protection and regulatory exclusivity and otherwise protecting our rights in our intellectual property portfolio.

•

We may also fail in our efforts to develop and commercialize future product candidates, including

CYAD-203.

If this were to occur, we would continue to be heavily dependent on the regulatory approval and successful commercialization of our current clinical

CAR-T

product candidates, our development costs may increase and our ability to generate revenue or profits, or to raise additional capital, could be impaired.

The achievement of milestones (such as those related to research and development, scientific, clinical, regulatory and business) will trigger payment obligations towards Celdara, Dartmouth and Horizon Discovery, which will negatively impact our profitability.

Trial designs and results from previous or ongoing trials are not necessarily predictive of future clinical trial results, and initial or interim results may not continue or be confirmed upon completion of the trial. These data, or other positive data, may not continue or occur for these patients or for any future patients in our ongoing or future clinical trials, and may not be repeated or observed in ongoing or future trials involving our product candidates.

There are limited data concerning long-term safety and efficacy following treatment with

CYAD-101,

CYAD-211

and

CYAD-02.

Our product candidates may fail to show the desired safety and efficacy in later stages of clinical development despite having successfully advanced through initial clinical trials. There can be no assurance that any of these trials will ultimately be successful or support further clinical advancement or regulatory approval of

CYAD-101,

CYAD-211

and

CYAD-02

or other product candidates.

Table of Contents

In December 2017, we made the strategic decision to discontinue the development of our first-generation autologous NKG2D CAR T candidate

CYAD-01

for the treatment of relapsed / refractory acute myeloid leukemia (AML) and myelodysplastic syndromes (MDS) based on data from the Phase 1 THINK and DEPLETHINK trials which did not achieve the necessary internal clinical activity threshold set for the program.

There is a high failure rate for drugs and biologics proceeding through clinical trials. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in later stage clinical trials even after achieving promising results in earlier stage clinical trials. Data obtained from preclinical and clinical activities are subject to varying interpretations, which may delay, limit or prevent regulatory approval. In addition, regulatory delays or rejections may be encountered as a result of many factors, including changes in regulatory policy during the period of product development.

In previous clinical programs involving T cell-based immunotherapies, some patients experienced serious adverse events. Our product candidates may demonstrate a similar effect or have other properties that could halt our clinical development, prevent our regulatory approval, limit our commercial potential, or result in significant negative consequences.

In previous and ongoing clinical trials involving

CAR-T

cell products by other companies or academic researchers, many patients experienced side effects such as neurotoxicity and CRS, which have in some cases resulted in clinical holds in ongoing clinical trials of

CAR-T

product candidates. There have been life threatening events related to severe neurotoxicity and CRS, requiring intense medical intervention such as intubation or pressor support, and in several cases, resulted in death. Severe neurotoxicity is a condition that is currently defined clinically by cerebral edema, confusion, drowsiness, speech impairment, tremors, seizures, or other central nervous system side effects, when such side effects are serious enough to lead to intensive care. In some cases, severe neurotoxicity was thought to be associated with the use of certain lymphodepletion preconditioning regimens used prior to the administration of the

CAR-T

cell products. CRS is a condition that is currently defined clinically by certain symptoms related to the release of cytokines, which can include fever, chills, low blood pressure, when such side effects are serious enough to lead to intensive care with mechanical ventilation or significant vasopressor support. The exact cause or causes of CRS and severe neurotoxicity in connection with treatment of

CAR-T

cell products and product candidates is not fully understood at this time. In addition, patients have experienced other adverse events in these studies, such as a reduction in the number of blood cells (in the form of neutropenia, thrombocytopenia, anemia or other cytopenias), febrile neutropenia, chemical laboratory abnormalities (including elevated liver enzymes), and renal failure.

Undesirable side effects caused by our product candidates or other T cell-based immunotherapy product candidates, could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign regulatory authorities. For example, on February 28, 2022, we announced our decision to voluntarily pause our Phase 1b KEYNOTE-B79 trial evaluating CYAD-101 administered concurrently with FOLFOX chemotherapy followed by MSD’s anti-PD-1 therapy, KEYTRUDA

(pembrolizumab) in patients with refractory metastatic colorectal cancer following reports of two fatalities that presented with similar pulmonary findings. We are currently investigating these reports and evaluating any similar events in additional patients treated on study. Subsequently, on March 1, 2022, we were informed via e-mail communication from the FDA that the KEYNOTE-B79 trial has been placed on clinical hold due to insufficient information to assess risk to study subjects. Results of our trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. Treatment-related side effects could also affect patient recruitment or the ability of enrolled patients to complete the trials or result in potential product liability claims. In addition, these side effects may not be appropriately recognized or managed by the treating medical staff, as toxicities resulting from T cell-based immunotherapies are not normally encountered in the general patient population and by medical personnel. We expect to have to train medical personnel regarding our T cell-based immunotherapy product candidates to understand their side effects for both our planned clinical trials and upon any commercialization of any T cell-based immunotherapy product candidates. Inadequate training in recognizing or managing the potential side effects of T cell-based immunotherapy product candidates could result in patient deaths. Any of these occurrences could have a material adverse effect on our business, financial condition and prospects.

Our product candidates are a new approach to cancer treatment that presents significant challenges.

We have concentrated our research and development efforts on cell-based immunotherapy technology, and our future success is highly dependent on the successful development of cell-based immunotherapies in general and in particular our approach using TIM and shRNA technologies to inhibit or knock-down the

T-cell

receptor and create allogeneic CAR T cells. This is a novel technology for which no products are currently approved by any regulatory agencies. In

Table of Contents

addition, we are highly dependent on products expressing chimeric antigen receptors including the NKG2D receptor, an activating receptor of NK cells, to target stress ligands. Currently, two of our product candidates use the NKG2D receptor. No NKG2D targeting therapies are currently approved by any regulatory agency. We cannot be sure that our T cell immunotherapy technologies will yield satisfactory products that are safe and effective, scalable or profitable.

Our approach to cancer immunotherapy and cancer treatment generally poses a number of challenges, including:

•

Obtaining regulatory approval from the FDA and other regulatory authorities that have very limited experience with the commercial development of genetically modified T cell therapies for cancer;

•

Developing and deploying consistent and reliable processes for engineering a patient’s T cells

ex vivo

and infusing the engineered T cells back into the patient for autologous CAR T products;

•

Developing and deploying consistent and reliable processes for engineering healthy donor T cells

ex vivo

and infusing the engineered T cells back into unrelated patients for allogeneic CAR T products;

•

Preconditioning patients with chemotherapy or other product treatments in conjunction with delivering each of our product candidates, which may increase the risk of adverse side effects;

•

Educating medical personnel regarding the potential side effect profile of each of our product candidates, such as the potential adverse side effects related to cytokine release or neurotoxicity;

•

Developing processes for the safe administration of these product candidates, including long-term

follow-up

for all patients who receive our product candidates;

•

Sourcing clinical and, if approved, commercial supplies for the materials used to manufacture and process our product candidates;

•

Developing a manufacturing process and distribution network with a cost of goods that allows for an attractive return on investment;

•

Establishing sales and marketing capabilities after obtaining any regulatory approval to gain market acceptance, and obtaining adequate coverage, reimbursement, and pricing by third-party payors and government authorities; and

•

Developing therapies for types of cancers beyond those addressed by our current product candidates.

Additionally, because our technology involves the genetic modification of cells

ex vivo

using a virus, we are subject to many of the challenges and risks that gene therapies face, including:

•

Regulatory requirements governing gene and cell therapy products have changed frequently and may continue to change in the future.

•

In the event of improper insertion of a gene sequence into a patient’s chromosome, genetically modified products could lead to lymphoma, leukemia or other cancers, or other aberrantly functioning cells.

•

Although our viral vectors are not able to replicate, there is a risk with the use of retroviral or lentiviral vectors that they could lead to new or reactivated pathogenic strains of virus or other infectious diseases.

•

The FDA recommends a

15-year

follow-up

observation period for all patients who receive treatment using certain gene therapies, and we may need to adopt such an observation period for our product candidates.

Table of Contents

Moreover, public perception of therapy safety issues, including adoption of new therapeutics or novel approaches to treatment, may adversely influence the willingness of subjects to participate in clinical trials, or if approved, of physicians to subscribe to the novel treatments. Physicians, hospitals and third-party payors often are slow to adopt new products, technologies and treatment practices that require additional upfront costs and training. Physicians may not be willing to undergo training to adopt this novel and personalized therapy, may decide the therapy is too complex to adopt without appropriate training and may choose not to administer the therapy. Based on these and other factors, hospitals and payors may decide that the benefits of this new therapy do not or will not outweigh its costs.

We have been able to consistently produce the required number of T cells for our autologous

CYAD-02

product candidate for the treatment of relapsed / refractory AML and MDS as well as producing adequate number of allogeneic CAR T cells to support early clinical trials of

CYAD-101

for mCRC and

CYAD-211

for r/r MM but we may experience difficulties doing so in the future which would harm our business.

The manufacturing processes for our product candidates are complex. We continue to develop processes that support clinical cell manufacture for early phase clinical trials. Further development of these processes will require additional process changes in the future, as we seek to advance our product candidates through the clinic and prepare for a potential commercial launch. In some circumstances, changes in the manufacturing process may require us to perform additional comparability studies or to collect additional clinical data from patients prior to undertaking additional clinical studies or filing for regulatory approval. Similarly, changes in our contact manufacturers, or CMOs, may require us to conduct additional comparability studies. These requirements may lead to delays in our clinical development and commercialization plans as well as potential increased costs.

We have not yet finalized our clinical development program for

CYAD-02

for the treatment of patients with r/r AML and MDS or for

CYAD-101,

our allogeneic NKG2D

CAR-T

for the treatment of mCRC or

CYAD-211,

our allogeneic BCMA

CAR-T

for the treatment of r/r multiple myeloma (MM). The FDA and comparable foreign regulators may not agree with our proposed protocols for these clinical trials, which could result in delays.

We are still considering the clinical development program for

CYAD-02

in relapsed / refractory AML and MDS,

CYAD-101

for mCRC and

CYAD-211

for relapsed / refractory MM. Prior to initiating new clinical trials for our product candidates, we are required to submit clinical trial protocols for these trials to the FDA and comparable foreign regulators in other jurisdictions where we plan to undertake clinical trials. We may not reach agreement with these regulators, or there may be a delay in reaching agreement. These regulators may want to see additional clinical or preclinical data regarding our product candidates before we initiate new clinical trials. Any of these decisions could have a material adverse effect on our expected clinical and regulatory timelines, business, prospects, financial condition and results of operations.

We may encounter substantial delays in our clinical trials or may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities.

Before obtaining regulatory approval or marketing authorization from regulatory authorities for the sale of our product candidates, if at all, we must conduct extensive clinical trials to demonstrate the safety and efficacy of the product candidates in humans. Clinical testing is expensive, time-consuming and uncertain as to outcome. We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all. A failure of one or more clinical trials can occur at any stage of testing. Events that may prevent successful or timely completion of clinical development include:

•

Delays in raising, or inability to raise, sufficient capital to fund the planned clinical trials;

•

Delays in reaching a consensus with regulatory agencies on trial design;

•

Identifying, recruiting and training suitable clinical investigators;

•

Delays in reaching agreement on acceptable terms with prospective clinical research organizations, or CROs, and clinical trial sites;

•

Delays in obtaining required Investigational Review Board, or IRB, or ethics committee approval at each clinical trial site, or institutional biosafety committee, or IBC, approval, if applicable;

Table of Contents

•

Delays in recruiting suitable patients to participate in our clinical trials;

•

Delays due to changing standard of care for the diseases we are studying;

•

Adding new clinical trial sites;

•

Imposition of a clinical hold by regulatory agencies, including after an inspection of our clinical trial operations or trial sites;

•

Failure by our CROs, other third parties or us to adhere to clinical trial requirements;

•

Catastrophic loss of product candidates due to shipping delays or delays in customs in connection with delivery to foreign countries for use in clinical trials;

•

Failure to perform in accordance with the FDA’s GCPs or applicable regulatory guidelines in other countries;

•

Delays in the testing, validation, manufacturing and delivery of our product candidates to the clinical sites;

•

Delays in having patients complete participation in a trial or return for post-treatment

follow-up;

•

Clinical trial sites or patients dropping out of a trial;

•

Occurrence of serious adverse events associated with the drug product candidate that are viewed to outweigh its potential benefits; or

•

Changes in regulatory requirements and guidance that require amending or submitting new clinical protocols.

Any inability to successfully complete preclinical and clinical development could result in additional costs to us or impair our ability to generate revenues from product sales, regulatory and commercialization milestones and royalties. Clinical trial delays could also shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do, which could impair our ability to successfully commercialize our product candidates and may harm our business and results of operations.

If the results of our clinical trials are inconclusive or if there are safety concerns or adverse events associated with our product candidates, we may:

•

Be delayed in obtaining marketing approval for our product candidates, if at all;

•

Obtain approval for indications or patient populations that are not as broad as intended or desired;

•

Obtain approval with labelling that includes significant use or distribution restrictions or safety warnings;

•

Be subject to changes in the way the product is administered;

•

Be required to perform additional clinical trials to support approval or be subject to additional post-marketing testing requirements;

•

Have regulatory authorities withdraw their approval of the product or impose restrictions on our distribution in the form of a risk evaluation and mitigations strategy, or REMS, program;

•

Be subject to the addition of labelling statements, such as warnings or contraindications;

•

Be sued; or

•

Experience damage to our reputation.

Table of Contents

Our product candidates could potentially cause other adverse events that have not yet been predicted. As described above, any of these events could prevent us from achieving or maintaining market acceptance of our product candidates and impair our ability to commercialize our products if they are ultimately approved by applicable regulatory authorities.

Our product candidates may cause undesirable side effects or have other properties that could halt their clinical development, prevent their regulatory approval, limit their commercial potential, or result in significant negative consequences.

As with most biological drug products, use of our product candidates could be associated with side effects or adverse events which can vary in severity from minor reactions to death and in frequency from infrequent to prevalent. Undesirable side effects or unacceptable toxicities caused by our product candidates could cause us or regulatory authorities to interrupt, delay, or halt clinical trials. For example, on February 28, 2022, we announced our decision to voluntarily pause our Phase 1b

KEYNOTE-B79

trial evaluating

CYAD-101

administered concurrently with FOLFOX chemotherapy followed by MSD’s

anti-PD-1

therapy, KEYTRUDA

Treatment-related side effects could also affect patient recruitment or the ability of enrolled subjects to complete the trial, or could result in potential product liability claims. In addition, these side effects may not be appropriately or timely recognized or managed by the treating medical staff. Any of these occurrences may materially and adversely harm our business, financial condition and prospects.

Additionally, if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by such products, including during any long-term

follow-up

observation period recommended or required for patients who receive treatment using our products, a number of potentially significant negative consequences could result, including:

•

Regulatory authorities may withdraw approvals of or revoke licenses for such product;

•

Regulatory authorities may require additional warnings on the label;

•

We may be required to create a rems program which could include a medication guide outlining the risks of such side effects for distribution to patients, a communication plan for healthcare providers, and/or other elements to assure safe use;

•

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

•

Our reputation may suffer.

Any of the foregoing could prevent us from achieving or maintaining market acceptance of the particular drug product candidate, if approved, and could significantly harm our business, results of operations, and prospects.

If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.

Table of Contents

The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the trial until our conclusion. We have experienced and may experience difficulties in the future in patient enrollment in our clinical trials for a variety of reasons, including:

•

The size and nature of the patient population;

•

The patient eligibility criteria defined in the protocol;

•

The size of the study population required for analysis of the trial’s primary endpoints;

•

The proximity of patients to trial sites;

•

The design of the trial;

•

Our ability to recruit clinical trial investigators with the appropriate competencies and experience;

•

Competing clinical trials for similar therapies;

•

Clinicians’ and patients’ perceptions as to the potential advantages and side effects of the drug product candidate being studied in relation to other available therapies, including any new drugs or treatments that may be approved for the indications we are investigating;

•

Our ability to obtain and maintain patient consents; and

•

The risk that patients enrolled in clinical trials will not complete a clinical trial.

In addition, our clinical trials will compete with other clinical trials for product candidates that are in the same therapeutic areas as product candidates, and this competition will reduce the number and types of patients available us, because some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors. Because the number of qualified clinical investigators is limited, we expect to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who are available for our clinical trials at such clinical trial sites. Moreover, because our product candidates represent a departure from more commonly used methods for cancer treatment, potential patients and their doctors may be inclined to use conventional therapies, rather than enroll patients in our clinical trials.

Further, timely enrollment in clinical trials is reliant on clinical trial sites which may be adversely affected by global health matters, including, among other things, pandemics. With regards to our clinical programs, enrollment in our

CYAD-02

program was slightly impacted by the coronavirus pandemic throughout 2020. However, no major disruption in enrollment was experienced in the

CYAD-101,

CYAD-211

CYAD-02

programs in 2021 due to the

COVID-19

pandemic. Enrollment in the respective trials for

CYAD-101

and

CYAD-211

is ongoing without any major disruption due to the

COVID-19

pandemic, however future disruptions may occur. However, since 2020 certain clinical sites and institutions have not been able to receive visits from clinical trial monitors during the

COVID-19

pandemic, which has delayed our data monitoring activities, including for delays in cleaning and reporting data.

Even if we are able to enroll a sufficient number of patients in our clinical trials, delays in patient enrollment may result in increased costs or may affect the timing or outcome of our clinical trials, which could prevent completion of these trials and adversely affect our ability to advance the development of our product candidates.

Clinical development is a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials as well as data from any interim analysis of ongoing clinical trials may not be predictive of future trial results. Clinical failure can occur at any stage of clinical development.

Table of Contents

Clinical testing is expensive and can take many years to complete, and our outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. Although product candidates may demonstrate promising results in early clinical (human) trials and preclinical (animal) studies, they may not prove to be effective in subsequent clinical trials. For example, testing on animals may occur under different conditions than testing in humans and therefore the results of animal studies may not accurately predict human experience. Likewise, early clinical trials may not be predictive of eventual safety or effectiveness results in larger-scale pivotal clinical trials. The results of preclinical studies and previous clinical trials as well as data from any interim analysis of ongoing clinical trials of our product candidates, as well as studies and trials of other products with similar mechanisms of action to our product candidates, may not be predictive of the results of ongoing or future clinical trials. Drug product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and earlier clinical trials. In addition to the safety and efficacy traits of any drug product candidate, clinical trial failures may result from a multitude of factors including flaws in trial design, dose selection, placebo effect and patient enrollment criteria. Based upon negative or inconclusive results, we or our collaborators may decide, or regulators may require it, to conduct additional clinical trials or preclinical studies. In addition, data obtained from trials and studies are susceptible to varying interpretations, and regulators may not interpret our data as favorably as we do, which may delay, limit or prevent regulatory approval.

The regulatory approval processes of the FDA, EMA and other comparable regulatory authorities is lengthy, time-consuming, and inherently unpredictable, and we may experience significant delays in the clinical development and regulatory approval, if any, of our product candidates.

The research, testing, manufacturing, labelling, approval, selling, import, export, marketing, and distribution of drug products, including biologics, are subject to extensive regulation by the FDA, EMA and other comparable regulatory authorities. We are not permitted to market any biological drug product in the United States until we receive a license from the FDA for our BLA, or an approval of our marketing authorization application, or MAA, from the EMA. We have not previously submitted a BLA to the FDA, MAA to the EMA, or similar approval filings to comparable foreign authorities. A BLA must include extensive preclinical and clinical data and supporting information to establish that the drug product candidate is safe, pure, and potent for each desired indication. The BLA must also include significant information regarding the chemistry, manufacturing, and controls for the product, and the manufacturing facilities must complete a successful

pre-license

inspection. We expect the nature of our product candidates to create further challenges in obtaining regulatory approval. For example, the FDA and EMA have limited experience with commercial development of genetically modified

T-cell

therapies for cancer. The FDA may also require a panel of experts, referred to as an Advisory Committee, to deliberate on the adequacy of the safety and efficacy data to support licensure. The opinion of the Advisory Committee, although not binding, may have a significant impact on our ability to obtain licensure of the product candidates based on the completed clinical trials. Accordingly, the regulatory approval pathway for our product candidates may be uncertain, complex, expensive, and lengthy, and approval may not be obtained.

Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our product candidates in other jurisdictions.

If we obtain and maintain regulatory approval of our product candidates in one jurisdiction, such approval does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction, but a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. For example, even if the FDA or EMA grants marketing approval of a drug product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing and promotion of the drug product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from those in the EU or in the United States, including additional preclinical studies or clinical trials as clinical trials conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions, a drug product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.

Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our products in certain countries. If we fail to comply with the regulatory requirements in international markets and/or to receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed.

Table of Contents

A Breakthrough Therapy Designation by the FDA for our product candidates may not lead to a faster development or regulatory review or approval process, and it does not increase the likelihood that our product candidates will receive marketing approval.

We may seek a Breakthrough Therapy Designation for some of our product candidates. A breakthrough therapy is defined as a product that is intended, alone or in combination with one or more other products, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For 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. Drug product candidates designated as breakthrough therapies by the FDA may also be eligible for accelerated approval.

Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe 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 drug product candidate may not result in a faster development process, review or approval compared to drugs considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of our product candidates qualify as breakthrough therapies, the FDA may later decide that the product candidates no longer meet the conditions for designation.

A Fast Track designation by the FDA may not actually lead to a faster development or regulatory review or approval process.

We may seek Fast Track designation for some of our product candidates. If a product is intended for the treatment of a serious or life-threatening condition and the product demonstrates the potential to address unmet medical needs for this condition, the product sponsor may apply for Fast Track designation. The FDA has broad discretion whether or not to grant this designation, so even if we believe a particular drug product candidate is eligible for this designation, we cannot assure you that the FDA would decide to grant it. Even if we do receive Fast Track designation, we may not experience a faster development process, review or approval compared to conventional FDA procedures. The FDA may withdraw Fast Track designation if it believes that the designation is no longer supported by data from our clinical development program.

We may seek orphan drug designation for some of our product candidates, and we may be unsuccessful or may be unable to maintain the benefits associated with orphan drug designation, including the potential for market exclusivity.

As part of our business strategy, we may seek orphan drug designation for some of our product candidates, and we may be unsuccessful. Regulatory authorities in some jurisdictions, including the United States and the EU, may designate products for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a product intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals annually in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the product will be recovered from sales in the United States. In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and

user-fee

waivers.

Similarly, in the EU, after recommendation from the EMA’s Committee for Orphan Medicinal Products, the European Commission grants orphan medicinal product designation to promote the development of products that are intended for the diagnosis, prevention or treatment of life-threatening or chronically debilitating conditions affecting no more than five in 10,000 persons in the EU and for which no satisfactory method of diagnosis, prevention, or treatment has been authorized for marketing in the EU (or, if such a method has been authorized, the product in question would be a significant benefit to those affected by the condition). Additionally, designation is granted for products intended for the diagnosis, prevention, or treatment of a life-threatening, seriously debilitating or serious and chronic condition and when, without incentives, it is unlikely that sales of the product in the EU would generate sufficient return to justify the necessary investment in developing the product. In the EU, orphan medicinal product designation entitles a party to financial incentives such as reduction of fees or fee waivers.

Table of Contents

Generally, if a drug product candidate with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes the EMA or the FDA from approving another marketing application for the same product and indication for that time period, except in limited circumstances. The applicable period is seven years in the United States and ten years in the EU. The EU exclusivity period can be reduced to six years if a product no longer meets the criteria for orphan medicinal product designation, including if the product is sufficiently profitable so that market exclusivity is no longer justified.

Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different products can be approved for the same condition or the same products can be approved for different conditions. If one of our product candidates that receives an orphan drug designation is approved for a particular indication or use within the rare disease, the FDA may later approve the same product for additional indications or uses within that rare disease that are not protected by our exclusive approval. Even after an orphan drug is approved, the FDA can subsequently approve the same product for the same condition if the FDA concludes that the later product is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care. In addition, a designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. Moreover, orphan drug exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the product to meet the needs of patients with the rare disease or condition. Orphan drug designation neither shortens the development time or regulatory review time of a product nor gives the product any advantage in the regulatory review or approval process. While we intend to seek orphan drug designation for some of our product candidates, we may never receive such designations. Even if we do receive such designations, there is no guarantee that we will enjoy the benefits of those designations.

Even if we receive regulatory approval of our product candidates, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expenses and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our product candidates.

If our product candidates are approved, they 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, including both federal and state requirements in the United States and requirements of comparable foreign regulatory authorities.

Manufacturers and manufacturers’ facilities are required to comply with extensive FDA, and comparable foreign regulatory authority, requirements, including ensuring that quality control and manufacturing procedures conform to current Good Manufacturing Practices, or cGMP, and in certain cases current Good Tissue Practices, or cGTP, regulations. As such, we and our CMO will be subject to continual review and inspections to assess compliance, to the extent applicable, with cGMP and adherence to commitments made in any BLA, other marketing application, and previous responses to inspection observations. 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.

Any regulatory approvals that we receive for our product candidates may 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, including Phase 4 clinical trials and surveillance to monitor the safety and efficacy of the drug product candidate. The FDA may also require a REMS program as a condition of approval of our product candidates, which could entail requirements for long-term patient

follow-up,

a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. In addition, if the FDA or a comparable foreign regulatory authority approves our product candidates, we will have to comply with requirements including submissions of safety and other post-marketing information and reports, establishment registration, as well as continued compliance with cGMPs and GCPs for any clinical trials that we conduct post-approval.

Table of Contents

The FDA may seek consent decrees or withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with our product candidates, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:

•

Restrictions on the marketing or manufacturing of our products, withdrawal of the product from the market, or voluntary or mandatory product recalls;

•

Fines, untitled or warning letters, or holds on clinical trials;

•

Refusal by the FDA to approve pending applications or supplements to approved applications filed by us or suspension or revocation of license approvals;

•

Product seizure or detention, or refusal to permit the import or export of our product candidates; and

•

Injunctions or the imposition of civil or criminal penalties.

The FDA strictly regulates marketing, labeling, advertising, and promotion of products that are placed on the market. Products may be promoted only for the approved indications and in accordance with the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of

off-label

uses, and a company that is found to have improperly promoted

off-label

uses may be subject to significant liability. The policies of the FDA and of other 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 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.

Even if we obtain regulatory approval of our product candidates, the products may not gain market acceptance among physicians, patients, hospitals and others in the medical community.

Our autologous engineered-cell therapies may not become broadly accepted by physicians, patients, hospitals, and others in the medical community. Numerous factors will influence whether our product candidates are accepted in the market, including:

•

The clinical indications for which our product candidates are approved;

•

Physicians, hospitals, and patients considering our product candidates as a safe and effective treatment;

•

The potential and perceived advantages of our product candidates over alternative treatments;

•

The prevalence and severity of any side effects;

•

Product labelling or product insert requirements of the FDA, EMA, or other regulatory authorities;

•

Limitations or warnings contained in the labelling approved by the FDA or EMA;

•

The timing of market introduction of our product candidates as well as competitive products;

Table of Contents

•

The cost of treatment in relation to alternative treatments;

•

The availability of adequate coverage, reimbursement and pricing by third-party payors and government authorities;

•

The willingness of patients to pay

out-of-pocket

in the absence of coverage by third-party payors and government authorities;

•

Relative convenience and ease of administration, including as compared to alternative treatments and competitive therapies; and

•

The effectiveness of our sales and marketing efforts.

In addition, although we are not utilizing embryonic stem cells in our product candidates, adverse publicity due to the ethical and social controversies surrounding the therapeutic use of such technologies, and reported side effects from any clinical trials using these technologies or the failure of such trials to demonstrate that these therapies are safe and effective may limit market acceptance our product candidates due to the perceived similarity between our product candidates and these other therapies. If our product candidates are approved but fail to achieve market acceptance among physicians, patients, hospitals, or others in the medical community, we will not be able to generate significant revenue.

Even if our products achieve market acceptance, we may not be able to maintain that market acceptance over time if new products or technologies are introduced that are more favorably received than our products, are more cost effective or render our products obsolete.

Our product candidates are biologics, which are complex to manufacture, and we may encounter difficulties in production, particularly with respect to process development or

scaling-out

of our manufacturing capabilities. If we or any of our third-party manufacturers encounter such difficulties, our ability to provide supply of our product candidates for clinical trials or our products for patients, if approved, could be delayed or stopped, or we may be unable to maintain a commercially viable cost structure.

Our product candidates are biologics and the process of manufacturing our products is complex, highly-regulated and subject to multiple risks. The manufacture of our product candidates involves complex processes, including harvesting cells from patients, selecting and expanding certain cell types, engineering or reprogramming the cells in a certain manner to create CAR T cells, expanding the cell population to obtain the desired dose, and ultimately infusing the cells back into a patient’s body. As a result of the complexities, the cost to manufacture our product candidates is higher than traditional small molecule chemical compounds, and the manufacturing process is less reliable and is more difficult to reproduce. Our manufacturing process is susceptible to product loss or failure due to logistical issues associated with the collection of blood cells, or starting material, from the patient, shipping such material to the manufacturing site, shipping the final product back to the patient, and infusing the patient with the product, manufacturing issues associated with the differences in patient starting materials, interruptions in the manufacturing process, contamination, equipment or reagent failure, improper installation or operation of equipment, vendor or operator error, inconsistency in cell growth, and variability in product characteristics. Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects, and other supply disruptions. Because some of our product candidates are manufactured for each particular patient, we are required to maintain a chain of identity with respect to materials as they move from the patient to the manufacturing facility, through the manufacturing process, and back to the patient. Maintaining such a chain of identity is difficult and complex and failure to do so could result in adverse patient outcomes, loss of product, or regulatory action including withdrawal of our products from the market. Further, as product candidates are developed through preclinical to late stage clinical trials towards approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods, are altered along the way in an effort to optimize processes and results. Such changes carry the risk that they will not achieve these intended objectives, and any of these changes could cause our product candidates to perform differently and affect the results of ongoing clinical trials or other future clinical trials.

Table of Contents

Although we are working, or will be working, to develop commercially viable processes for the manufacture of our product candidates, doing so is a difficult and uncertain task, and there are risks associated with scaling to the level required for later-stage clinical trials and commercialization, including, among others, cost overruns, potential problems with process

scale-out,

process reproducibility, stability issues, lot consistency, and timely availability of reagents or raw materials. We may ultimately be unable to reduce the cost of goods for our product candidates to levels that will allow for an attractive return on investment if and when those product candidates are commercialized.

In addition, the manufacturing process that we develop for our product candidates is subject to regulatory authorities’ approval processes, and we will need to make sure that we or our CMOs if any, are able to meet all regulatory authorities’ requirements on an ongoing basis. If we or our CMOs are unable to reliably produce product candidates to specifications acceptable to the regulatory authorities, we may not obtain or maintain the approvals we need to commercialize such product candidates. Even if we obtain regulatory approval for any of our product candidates, there is no assurance that either we or our CMOs will be able to manufacture the approved product to specifications acceptable to the regulatory authorities, to produce it in sufficient quantities to meet the requirements for the potential launch of the product, or to meet potential future demand. Any of these challenges could have an adverse effect on our business, financial condition, results of operations and growth prospects.

We may face competition from biosimilars, which may have a material adverse impact on the future commercial prospects of our product candidates.

Even if we are successful in achieving regulatory approval to commercialize a drug product candidate faster than our competitors, we may face competition from biosimilars. The Biologics Price Competition and Innovation Act of 2009, or BPCI Act, created an abbreviated approval pathway for biological products that are demonstrated to be biosimilar to, or interchangeable with, an

FDA-approved

biological product. “Biosimilarity” means that the biological product is highly similar to the reference product notwithstanding minor differences in clinically inactive components and there are no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency of the product. To meet the higher standard of “interchangeability,” an applicant must provide sufficient information to show biosimilarity and demonstrate that the biological product can be expected to produce the same clinical result as the reference product in any given patient and, if the biological product is administrated more than once to an individual, the risk in terms of safety or diminished efficacy of alternating or switching between the use of the biological product and the reference product is not greater than the risk of using the reference product without such alternation or switch.

A reference biological product is granted 12 years of exclusivity from the time of first licensure of the product, and the FDA will not accept an application for a biosimilar or interchangeable product based on the reference biological product until four years after first licensure. First licensure typically means the initial date the particular product at issue was licensed in the United States. This does not include a supplement for the biological product or a subsequent application by the same sponsor or manufacturer of the biological product (or licensor, predecessor in interest, or other related entity) for a change that results in a new indication, route of administration, dosing schedule, dosage form, delivery system, delivery device, or strength, unless that change is a modification to the structure of the biological product and such modification changes our safety, purity, or potency. Whether a subsequent application, if approved, warrants exclusivity as the first licensure of a biological product is determined on a

case-by-case

basis with data.

This data exclusivity does not prevent another company from developing a product that is highly similar to the innovative product, generating its own data, and seeking approval. Data exclusivity only assures that another company cannot rely upon the data within the application for the reference biological product to support the biosimilar product’s approval.

In the EU, the European Commission has granted marketing authorizations for several biosimilars pursuant to a set of general and product class-specific guidelines for biosimilar approvals issued over the past few years. In the EU, a competitor may reference data supporting approval of an innovative biological product, but will not be able do so until eight years after the time of approval of the innovative product and will not be able to get its biosimilar on the market until ten years from the aforementioned approval. This

10-year

marketing exclusivity period will be extended to 11 years if, during the first eight of those ten years, the marketing authorization holder obtains an approval for one or more new therapeutic indications that bring significant clinical benefits compared with existing therapies. In addition, companies may be developing biosimilars in other countries that could compete with our products.

Table of Contents

If competitors are able to obtain marketing approval for biosimilars referencing our products, our products may become subject to competition from such biosimilars, with the attendant competitive pressure and consequences.

Nearly all aspects of our activities are subject to substantial regulation. No assurance can be given that any of our product candidates will fulfill regulatory compliance. Failure to comply with such regulations could result in delays, suspension, refusals, fines and withdrawal of approvals.

The international pharmaceutical and medical technology industry is highly regulated by government bodies (hereinafter the “Competent Authorities”) that impose substantial requirements covering nearly all aspects of our activities notably on research and development, manufacturing, preclinical tests, clinical trials, labelling, marketing, sales, storage, record keeping, promotion and pricing of our research programs and product candidates. Compliance with standards laid down by local Competent Authorities is required in each country where we, or any of our partners or licensees, conduct said activities in whole or in part. The Competent Authorities notably include the EMA in the EU and the FDA in the United States.

There can be no assurance that our product candidates will fulfill the criteria required to obtain necessary regulatory authorization to access the market. Also, at this time, we cannot guarantee or know the exact nature, precise timing and detailed costs of the efforts that will be necessary to complete the remainder of the development of our research programs and product candidates.

The specific regulations and laws, as well as the time required to obtain Competent Authorities approvals, may vary from country to country, but the general regulatory procedures are similar in the EU and the United States. Each Competent Authority may impose its own requirements, may discontinue an approval, may refuse to grant approval, or may require additional data before granting approval, notwithstanding that approval may have been granted by one or more other Competent Authorities. Competent Authority approval may be delayed, limited or denied for a number of reasons, most of which are beyond our control. Such reasons include the production process or site not meeting the applicable requirements for the manufacture of regulated products, or the products not meeting applicable requirements for safety or efficacy during the clinical development stage or after marketing. No assurance can be given that clinical trials will be approved by Competent Authorities or that products will be approved for marketing by Competent Authorities in any

pre-determined

indication or intended use. Competent Authorities may disagree with our interpretation of data submitted for their review. Even after obtaining approval for clinical trials or marketing, products will be subject to ongoing regulation and evaluation of their benefit/safety or risk/performance ratio; a negative evaluation of the benefit/safety or risk/performance ratio could result in a potential use restriction and/or withdrawal of approval for one or more products. At any time, Competent Authorities may require discontinuation or holding of clinical trials or require additional data prior to completing their review or may issue restricted authorization or authorize products for clinical trials or marketing for narrower indications than requested or require further data or studies be conducted and submitted for their review. There can be no guarantee that such additional data or studies, if required, will corroborate earlier data.

Research programs and our product candidates must undergo rigorous preclinical tests and clinical trials, the start, timing of completion, number and results of which are uncertain and could substantially delay or prevent the products from reaching the market.

Preclinical tests and clinical trials are expensive and time-consuming, and their results are uncertain. We, our collaborative partners or other third parties may not successfully complete the preclinical tests and clinical trials of the research programs and product candidates. Failure to do so may delay or prevent the commercialization of products. We cannot guarantee that our research programs and product candidates will demonstrate sufficient safety or efficacy or performance in our preclinical tests and clinical trials to obtain marketing authorization in any given territory or at all, and the results from earlier preclinical tests and clinical trials may not accurately predict the results of later-stage preclinical tests and clinical trials. At any stage of development, based on a review of available preclinical and clinical data, the estimated costs of continued development, market assessments and other factors, the development of any of our research programs and product candidates may be suspended or discontinued.

We and our collaborative partners are, or may become subject to, numerous ongoing regulatory obligations, such as data protection, environmental, health and safety laws and restrictions on the experimental use of animals and/or human beings. The costs of compliance with applicable regulations, requirements or guidelines could be substantial,

Table of Contents

and failure to comply could result in sanctions, including fines, injunctions, civil penalties, denial of applications for marketing authorization of our products, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of products, operating restrictions and criminal prosecutions, any of which could significantly increase our or our collaborative partners’ costs or delay the development and commercialization of our product candidates.

We may face significant competition and technological change which could limit or eliminate the market opportunity for our product candidates.

The market for pharmaceutical products is highly competitive. Our competitors include many established pharmaceutical, biotechnology, universities and other research or commercial institutions, many of which have substantially greater financial, research and development resources than us. The fields in which we operate are characterized by rapid technological change and innovation. There can be no assurance that our competitors are not currently developing, or will not in the future develop technologies and products that are equally or more effective and/or are more economical as any current or future technology or product of ours. Competing products may gain faster or greater market acceptance than our products and medical advances or rapid technological development by competitors may result in our product candidates becoming

non-competitive

or obsolete before we are able to recover our research and development and commercialization expenses. If we or our product candidates do not compete effectively, it may have a material adverse effect on our business.

The price setting, the availability and level of adequate reimbursement by third parties, such as insurance companies, governmental and other healthcare payers is uncertain and may impede on our ability to generate sufficient operating margins to offset operating expenses.

In the United States and markets in other countries, patients generally rely on third-party payors to reimburse all, or part of the costs associated with their treatment. Adequate coverage and reimbursement from governmental healthcare programs, such as Medicare and Medicaid, and commercial payors is critical to new product acceptance. Our commercial performance will depend in part on the conditions for setting the sales price of our products by the relevant public commissions and bodies and the conditions of their reimbursement by the health agencies or insurance companies in the countries where we intend to market our products. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize a sufficient return on our investment. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels.

There has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several U.S. Congressional inquiries and proposed, and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, and review the relationship between pricing and manufacturer patient programs. At a federal level, President Biden signed an Executive Order on July 9, 2021, affirming the administration’s policy to (i) support legislative reforms that would lower the prices of prescription drug and biologics, including by allowing Medicare to negotiate drug prices, by imposing inflation caps, and, by supporting the development and market entry of lower-cost generic drugs and biosimilars; and (ii) support the enactment of a public health insurance option. Among other things, the Executive Order also directs HHS to provide a report on actions to combat excessive pricing of prescription drugs, enhance the domestic drug supply chain, reduce the price that the Federal government pays for drugs, and address price gouging in the industry; and directs the FDA to work with states and Indian Tribes that propose to develop section 804 Importation Programs in accordance with the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, and the FDA’s implementing regulations. FDA released such implementing regulations on September 24, 2020, which went into effect on November 30, 2020, providing guidance for states to build and submit importation plans for drugs from Canada. On September 25, 2020, CMS stated drugs imported by states under this rule will not be eligible for federal rebates under Section 1927 of the Social Security Act and manufacturers would not report these drugs for “best price” or Average Manufacturer Price purposes. Since these drugs are not considered covered outpatient drugs, CMS further stated it will not publish a National Average Drug Acquisition Cost for these drugs. If implemented, importation of drugs from Canada may materially and adversely affect the price we receive for any of our product candidates. Further, on November 20, 2020, CMS issued an Interim Final Rule implementing the Most Favored Nation, or MFN, Model under which Medicare Part B reimbursement rates would have been calculated for certain drugs and biologicals based on the lowest price drug manufacturers receive in Organization for Economic Cooperation and Development countries with a similar gross domestic product

Table of Contents

per capita. However, on December 29, 2021, CMS rescinded the Most Favored Nations rule. Additionally, on November 30, 2020, HHS published a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The rule also creates a new safe harbor for price reductions reflected at the

point-of-sale,

as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers. Pursuant to court order, the removal and addition of the aforementioned safe harbors were delayed, and recent legislation imposed a moratorium on implementation of the rule until January 1, 2026. Although a number of these and other proposed measures may require authorization through additional legislation to become effective, and the Biden administration may reverse or otherwise change these measures, both the Biden administration and Congress have indicated that they will continue to seek new legislative measures to control drug costs.

We expect that additional U.S. federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that the U.S. Federal Government will pay for healthcare drugs and services, which could result in reduced demand for our product candidates or additional pricing pressures.

Individual states in the United States have also become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain drug access and marketing cost disclosure and transparency measures, and designed to encourage importation from other countries and bulk purchasing. Legally mandated price controls on payment amounts by third-party payors or other restrictions could harm our business, financial condition, results of operations and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. This could reduce the ultimate demand for our drugs or put pressure on our drug pricing, which could negatively affect our business, financial condition, results of operations and prospects.

The current context of healthcare cost control and economic and financial crisis that most countries are currently facing, coupled with the increase in health care budgets caused by the aging population creates extra pressure on health care spending in most if not all countries. Consequently, pressure on sales prices and reimbursement levels is intensifying owing in particular to:

•

Price controls imposed by many states;

•

The increasing reimbursement limitations of some products under budgetary policies;

•

The heightened difficulty in obtaining and maintaining a satisfactory reimbursement rate for medicines.

In addition, in some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing vary widely from country to country. For example, the EU provides options for its Member States to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare the cost effectiveness of a particular product candidate to currently available therapies. A Member State may approve a specific price for the medicinal product, or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our product candidates. Historically, products launched in the EU do not follow price structures of the U.S. and generally prices tend to be significantly lower.

Obtaining adequate pricing decisions that would generate return on the investment incurred for the development of the product candidates developed by us are therefore uncertain. Our ability to manage our expenses and cost structure to adapt to increased pricing pressure is untested and uncertain.

All of these factors will have a direct impact on our ability to make profits on the products in question. The partial/no reimbursement policy of medicines could have a material adverse effect on the business, prospects, financial situation, earnings and our growth.

Table of Contents

Changes in regulatory approval policies or enactment of additional regulatory approval requirements may delay or prevent our product candidates from being marketed.

The regulatory clearance process is expensive and time consuming and the timing of marketing is difficult to predict. Once marketed, products may be subject to post-authorization safety studies or other pharmacovigilance or vigilance activities or may be subject to limitations on their uses or may be withdrawn from the market for various reasons, including if they are shown to be unsafe or ineffective, or when used in a larger population that may be different from the trial population studied prior to market introduction of the product.

Our product candidates may become subject to changes in the regulatory framework or market conditions. Regulatory guidelines may change during the course of product development and review process, making the chosen development strategy suboptimal. Market conditions may change resulting in the emergence of new competitors or new treatment guidelines which may require alterations in the development strategy. These factors may result in significant delays, increased trial costs, significant changes in commercial assumptions or failure of the products to obtain marketing authorization.

Changes in funding for the FDA and other government agencies, including from government shutdowns or other disruptions to these agencies’ operations, could hinder their ability to hire and retain key leadership and other personnel, or otherwise prevent new products from being developed or commercialized in a timely manner, which could negatively impact our business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, the ability to hire and retain key personnel, the ability to accept the payment of user fees, and statutory, regulatory and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may slow the time necessary for new products to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. Our business depends upon the ability of the FDA to accept and review our potential regulatory filings. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our ability to advance clinical development of our product candidates. Further, future shutdowns of other government agencies, such as the SEC, may also impact our business through review of our public filings and our ability to access the public markets.

Since March 2020 when foreign and domestic inspections of facilities were largely placed on hold, the FDA has been working to resume routine surveillance, bioresearch monitoring and

pre-approval

inspections on a prioritized basis. Since April 2021, the FDA has conducted limited inspections and employed remote interactive evaluations, using risk management methods, to meet user fee commitments and goal dates. Ongoing travel restrictions and other uncertainties continue to impact oversight operations both domestic and abroad and it is unclear when standard operational levels will resume. The FDA is continuing to complete mission-critical work, prioritize other higher-tiered inspectional needs (e.g.,

for-cause

inspections), and carry out surveillance inspections using risk-based approaches for evaluating public health. Should FDA determine that an inspection is necessary for approval and an inspection cannot be completed during the review cycle due to restrictions on travel, and the FDA does not determine a remote interactive evaluation to be adequate, the agency has stated that it generally intends to issue, depending on the circumstances, a complete response letter or defer action on the application until an inspection can be completed. During the

COVID-19

public health emergency, a number of companies announced receipt of complete response letters due to the FDA’s inability to complete required inspections for their applications. Regulatory authorities outside the U.S. may adopt similar restrictions or other policy measures in response to the ongoing

COVID-19

pandemic and may experience delays in their regulatory activities.

We are subject to inspection and shall be subject to market surveillance by the FDA, EMA and other Competent Authorities for compliance with regulations that prohibit the promotion of our products for a purpose or indication other than those for which approval has been granted.

Table of Contents

While a product manufacturer may not promote a product for such “off label” use, doctors are allowed, in the exercise of their professional judgment in the practice of medicine, to use a product in ways not approved by Competent Authorities.

Off-label

marketing regulations are subject to varying evolving interpretations.

Post-approval manufacturing and marketing of our products may show different safety and efficacy profiles to those demonstrated in the data on which approval to test or market said products was based. Such circumstances could lead to the withdrawal or suspension of approval, which could have a material adverse effect on our business, financial condition, operating results or cash flows. In addition, Competent Authorities may not approve the labelling claims or advertisements that are necessary or desirable for the successful commercialization of our products.

Competent Authorities have broad enforcement power, and a failure by us or our collaboration partners to comply with applicable regulatory requirements can, among other things, result in recalls or seizures of products, operating and production restrictions, withdrawals of previously approved marketing applications, total or partial suspension of regulatory approvals, refusal to approve pending applications, warning letters, injunctions, penalties, fines, civil proceedings, criminal prosecutions and imprisonment.

We may fail to comply with evolving European and other privacy laws.

In Europe, Directive 95/46/EC of the European Parliament and of the Council of October 24, 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (the “Directive”), and Directive 2002/58/EC of the European Parliament and of the Council of July 12, 2002 concerning the processing of personal data and the protection of privacy in the electronic communications sector (as amended by Directive 2009/136/EC) (the

“e-Privacy-Directive”),

have over the past two decades required the EU Member States to implement data protection laws to meet strict privacy requirements. Violations of the resulting national law requirements can result in administrative measures, including fines, or criminal sanctions. The

e-Privacy

Directive will be replaced by a new

e-Privacy

Regulation (having direct legal effect without the need for transposition into national laws) which may impose additional obligations and risk for our business. The Draft new

e-Privacy

Regulation is still the subject of negotiations between the Council of the EU and the European Parliament. An update is expected in 2022. The aim is for the Draft Regulation to be in force some time in 2023.

Effective as of May 25, 2018, the Directive has been replaced by Regulation (EU) 2016/679 of the European Parliament and of the Council of April 27, 2016, on the protection of natural persons with regard to the processing of personal data and on the free movement of such data (the “GDPR”). Unlike the Directive, the GDPR resorts direct legal effect and (although it contains more than fifty provisions allowing for EU Member States to enact more precise measures) does not require transposition into national laws. As such, it imposes a broad range of strict requirements on companies subject to the GDPR, such as us, including requirements relating to having legal bases for processing personal information (i.e. information relating to identified or identifiable individuals) and transferring such information outside the European Economic Area (the “EEA”), including to the United States, providing details to those individuals regarding the processing of their personal information, keeping personal information secure, having data processing agreements with third parties who process personal information, responding to individuals’ requests to exercise their rights in respect of their personal information, reporting security breaches involving personal data to the competent national data protection authority and affected individuals, appointing data protection officers, conducting data protection impact assessments, and record-keeping. The GDPR focuses strongly on accountability of data controllers (such as us) and requires us to take all technical and organizational measures (privacy by design and by default) to ensure that we meet our obligations. It also increases substantially the penalties to which we could be subject in the event of any

non-compliance,

including fines of up to €10,000,000 or up to 2% of our total worldwide annual turnover for certain comparatively minor offenses, or up to €20,000,000 or up to 4% of our total worldwide annual turnover for more serious offenses. In addition, further to the UK’s exit from the EU on January 31, 2020, the GDPR ceased to apply in the UK at the end of the transition period on December 31, 2020. However, as of January 1, 2021, the UK’s European Union (Withdrawal) Act 2018 incorporated the GDPR (as it existed on December 31, 2020, but subject to certain UK specific amendments) into UK law, referred to as the UK GDPR. The UK GDPR and the UK Data Protection Act 2018 set out the UK’s data protection regime, which is independent from but aligned to the EU’s data protection regime.

Non-compliance

with the UK GDPR may result in monetary penalties of up to £17.5 million or 4% of worldwide revenue, whichever is higher. Although the UK is regarded as a third country under the EU’s GDPR, the European Commission has now issued a decision recognizing the UK as providing adequate protection under the EU GDPR and, therefore, transfers of personal data originating in the EU to the UK remain

Table of Contents

unrestricted. Like the EU GDPR, the UK GDPR restricts personal data transfers outside the UK to countries not regarded by the UK as providing adequate protection. The UK government has confirmed that personal data transfers from the UK to the EEA remain free flowing. Given this robust new legislative framework and the nascent jurisprudence developing in our wake, we face considerable uncertainty as to the correct interpretation and implementation of the GDPR requirements and may be unsuccessful in implementing all technical and organizational measures required by data protection authorities or courts.

In addition to the direct applicability of the GDPR per se, national laws of EU Member States are also in the process of being adapted to the requirements of the GDPR, notably in areas where the GDPR gives leeway to EU Member States to fill in the gaps—thereby implementing national laws which may partially deviate from the GDPR and impose different obligations from country to country, so that we cannot expect to operate in a uniform legal landscape in the EU. Thus, in the field of handling genetic data for instance, the GDPR specifically allows national laws to impose additional and more specific requirements or restrictions, and European laws have historically differed quite substantially in this field, leading to additional uncertainty.

We must also ensure that we maintain adequate safeguards to enable the transfer of personal data outside of the EEA in compliance with European data protection laws, in particular to the United States. The

EU-U.S.

and the

Swiss-U.S. Privacy Shield frameworks

allowed U.S. companies that self-certify to the U.S. Department of Commerce and publicly commit to comply with specified requirements to import personal data from the EU and Switzerland. In 2020, the Court of Justice of the EU ruled that the

EU-U.S. Privacy Shield is

an invalid transfer mechanism, which was one of the primary mechanisms used by U.S. companies to import personal information from Europe in compliance with the GDPR’s cross-border data transfer restrictions, and raised questions about whether the European Commission’s Standard Contractual Clauses, or SCCs, one of the primary alternatives to the Privacy Shield, can lawfully be used for personal information transfers from Europe to the United States or most other countries. Similarly, the Swiss Federal Data Protection and Information Commissioner has opined that the

Swiss-U.S.

Privacy Shield is inadequate for transfers of data from Switzerland to the U.S, and the UK Information Commissioner’s Office has stated that the Privacy Shield framework is inadequate for transfers from the UK to the U.S. Furthermore, on June 4, 2021, the European Commission issued new forms of standard contractual clauses for data transfers from controllers or processors in the EEA (or otherwise subject to the GDPR) to controllers or processors established outside the EEA. The new forms of standard contractual clauses have replaced the standard contractual clauses that were adopted previously under the Data Protection Directive. We will be required to transition to the new forms of standard contractual clauses and doing so may require significant effort and cost. The new standard contractual clauses may also impact our business as companies based in Europe and in the United States may be reluctant to utilize the new clauses to legitimize transfers of personal information to third countries given the burdensome requirements of transfer impact assessments and the substantial obligations that the new standard contractual clauses impose upon exporters. If we are investigated by a European data protection authority, we may face fines and other penalties. Any such investigation or charges by European data protection authorities could have a negative effect on our existing business and on our ability to attract and retain new clients or pharmaceutical partners. We may also experience hesitancy, reluctance, or refusal by European or multi-national clients or pharmaceutical partners to continue to use our products due to the potential risk exposure as a result of the current (and, in particular, future) data protection obligations imposed on them by certain data protection authorities in interpretation of current law, including the GDPR. Such clients or pharmaceutical partners may also view any alternative approaches to compliance as being too costly, too burdensome, too legally uncertain, or otherwise objectionable and therefore decide not to do business with us. Any of the foregoing could materially harm our business, prospects, financial condition, and results of operations.

Risks Related to Our Reliance on Third Parties

We have obtained and will seek to obtain significant funding from the Walloon Region. The terms of the agreements signed with the Region may hamper our ability to partner part or all of our products.

We contracted over the past year numerous funding agreements with the Walloon Region to partially finance our research and development programs. Under the terms of the agreements, we would need to obtain the consent of the Walloon Region for any

out-licensing

agreement or sale to a third party of any or all of our products, prototypes or installations which may reduce our ability to partner or sell part or all of our products.

Table of Contents

Furthermore, when the research and development programs partially financed by us enter in “exploitation phase”, we have to start reimbursing the funding received. We may not be able to reimburse such funding under the terms of the agreements or such reimbursement may jeopardize the funding of our clinical and scientific activities.

We rely and will continue to rely on collaborative partners regarding the development of our research programs and product candidates.

We are and expect to continue to be dependent on collaborations with partners relating to the development and commercialization of our existing and future research programs and product candidates. We had, have and will continue to have discussions on potential partnering opportunities with various pharmaceutical and medical device companies. If we fail to enter into or maintain collaborative agreements on reasonable terms or at all, our ability to develop our existing or future research programs and product candidates could be delayed, the commercial potential of our products could change, and our costs of development and commercialization could increase.

Our dependence on collaborative partners subjects it to a number of risks, including, but not limited to, the following:

•

We may not be able to control the amount or timing of resources that collaborative partners devote to our research programs and product candidates;

•

We may be required to relinquish significant rights, including intellectual property, marketing and distribution rights;

•

We rely on the information and data received from third parties regarding our research programs and product candidates and will not have control of the process conducted by the third party in gathering and composing such data and information. We may not have formal or appropriate guarantees from our contract parties with respect to the quality and the completeness of such data;

•

A collaborative partner may develop a competing product either by itself or in collaboration with others, including one or more of our competitors;

•

Our collaborative partners’ willingness or ability to complete their obligations under our collaboration arrangements may be adversely affected by business combinations or significant changes in a collaborative partner’s business strategy; and/or

•

We may experience delays in, or increases in the costs of, the development of our research programs and product candidates due to the termination or expiration of collaborative research and development arrangements.

We rely on clinical research organizations, or CROs, clinical investigators and clinical trial sites to ensure our clinical trials are conducted properly and on time. While we will have agreements governing their activities, we will have limited influence over their actual performance. We will control only certain aspects of our CROs’ activities. Nevertheless, we will be responsible for ensuring that each of our clinical trials is conducted in accordance with the applicable protocol, legal and regulatory requirements and scientific standards, and our reliance on these third parties does not relieve us of our regulatory responsibilities.

We and these third parties are required to comply with the FDA’s GCPs for conducting, recording and reporting the results of clinical trials to assure that the data and reported results are credible and accurate and that the rights, integrity and confidentiality of clinical trial participants are protected. The FDA, the Competent Authorities of the Member States of the EEA, and comparable foreign regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators and clinical trial sites. If we or these third parties fail to comply with applicable GCPs, the clinical data generated in our future clinical trials may be deemed unreliable and the FDA, the EMA, or

Table of Contents

other foreign regulatory authorities may require us to perform additional clinical trials before approving any marketing applications. Upon inspection, the FDA may determine that our clinical trials did not comply with GCPs. In addition, our future clinical trials will require a sufficient number of test subjects to evaluate the safety and effectiveness of our product candidates. Accordingly, if our CROs fail to comply with these regulations or fail to recruit a sufficient number of patients, we may be required to repeat such clinical trials, which would delay the regulatory approval process.

These third parties are not our employees, and we are therefore unable to directly monitor whether or not they devote sufficient time and resources to our clinical and preclinical programs. These third parties may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other product development activities that could harm our competitive position. If these third parties do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements, or for any 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. If any such event were to occur, our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase, and our ability to generate revenues could be delayed.

If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs or to do so on commercially reasonable terms. Further, switching or adding additional CROs involves additional costs and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which could materially impact our ability to meet our desired clinical development timelines. 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 and prospects.

Cell-based therapies rely on the availability of specialty raw materials, which may not be available to us on acceptable terms or at all.

Engineered-cell therapies require many specialty raw materials, some of which are manufactured by small companies with limited resources and experience to support a commercial product. The suppliers may be

ill-equipped

to support our needs, especially in

non-routine

circumstances like an FDA inspection or medical crisis, such as widespread contamination, or a pandemic such as

COVID-19.

We also do not have contracts with many of these suppliers, and may not be able to contract with them on acceptable terms or at all. Accordingly, we may experience delays in receiving key raw materials to support clinical or commercial manufacturing. The global impact on supply chains has been one such example seen during 2021 where many supplies were reduced in availability for a short period of time.

In addition, some raw materials are currently available from a single supplier, or a small number of suppliers. We cannot be sure that these suppliers will remain in business, or that they will not be purchased by one of our competitors or another company that is not interested in continuing to produce these materials for our intended purpose.

Since the beginning of the

COVID-19

pandemic, three vaccines for

COVID-19

were granted Emergency Use Authorization by the FDA and two of those later received marketing approval. The resultant demand for vaccines and potential for manufacturing facilities and materials to be commandeered under the Defense Production Act of 1950, or equivalent foreign legislation, may make it more difficult to obtain materials or manufacturing slots for the products needed for our clinical trials, which could lead to delays in these trials.

Risks Related to Our Intellectual Property

Our success will depend in part on our ability to obtain, maintain and enforce our patents and other intellectual property rights. Our research programs and product candidates are covered by several patent application families, which are either licensed to us or owned by us. Out of the numerous patent applications controlled by us, fifteen national patents have been granted in the US relating to the field of immuno-oncology. We cannot guarantee that it will be in a position

Table of Contents

in the future to develop new patentable inventions or that we or our licensors will be able to obtain or maintain these patent rights against challenges to their validity, scope and/or enforceability. We cannot guarantee that it is or has been the first to conceive an invention or to file a patent application on an invention, particularly given that patent applications are not published in most countries before

18-months

after the date of filing. Moreover, we may have little or no control over its licensors’ abilities to prevent the infringement of their patents or the misappropriation of their intellectual property. There can be no assurance that the technologies used in our research programs and product candidates are patentable, that pending or future applications will result in the grant to us or our licensors, that any patents will be of sufficient breadth to provide adequate and commercially meaningful protection against competitors with similar technologies or products, or that any patents granted to us or our licensors will not be successfully challenged, circumvented, invalidated or rendered unenforceable by third parties, enabling competitors to circumvent or use them and depriving us from the protection it would need against competitors. If we or our licensors do not obtain meaningful patents on their technologies or if the patents of us or our licensors are invalidated, third parties may use the technologies without payment to us. A third party’s ability to use unpatented technologies is enhanced by the fact that the published patent application contains a detailed description of the relevant technology.

We cannot guarantee that third parties, contract parties or employees will not claim ownership rights over the patents or other intellectual property rights owned or held by us.

We also rely on proprietary

know-how

to protect our research programs and product candidates.

Know-how

is difficult to maintain and protect. We use reasonable efforts to maintain our

know-how,

but it cannot assure that our partners, employees, consultants, advisors or other third parties will not willfully or unintentionally disclose proprietary information to competitors. Furthermore, our competitors may independently develop equivalent knowledge and

know-how,

which could diminish or eliminate our competitive advantage.

The enforcement of patents,

know-how

and other intellectual property is costly, time consuming and highly uncertain. We cannot guarantee that it will be successful in preventing the infringement of our patented inventions, or the misappropriation of our

know-how

and other intellectual property rights and those of our licensors, and failure to do so could significantly impair the ability of us to compete effectively.

We may infringe on the patents or intellectual property rights of others and may face patent litigation, which may be costly and time consuming.

Our success will depend in part on our ability to operate without infringing or misappropriating the intellectual property rights of others. We cannot guarantee that our activities will not infringe on the patents or other intellectual property rights owned by others. We may expend significant time and effort and may incur substantial costs in litigation if it is required to defend against patent or other intellectual property right suits brought against us regardless of whether the claims have any merit. Additionally, we cannot predict whether we will be successful in any litigation. If we are found to infringe the patents or other intellectual property rights of others, we may be subject to substantial claims for damages, which could materially impact our cash flow and financial position. We may also be required to cease development, use or sale of the relevant research program, product candidate or process or it may be required to obtain a license to the disputed rights, which may not be available on commercially reasonable terms, if at all.

There can be no assurance that we are even aware of third-party rights that may be alleged to be relevant to any particular product candidate, method, process or technology.

We may spend significant time and effort and may incur substantial costs if required to defend against any infringement claims or to assert our intellectual property rights against third parties. The risk of such a claim by a third party may be increased by our public announcement regarding our research programs and product candidates. We may not be successful in defending our rights against such claims and may incur as a consequence thereof significant losses, costs or delays in our intended commercialization plans as a result thereof.

We depend on intellectual property licensed from third parties and termination of any of these licenses could result in the loss of significant rights, which would harm our business.

Table of Contents

We are dependent on patents,

know-how,

and proprietary technology, both our own and licensed from others. We license technology from the Trustees of Dartmouth College, or Dartmouth College. Dartmouth College may terminate our license, if we fail to meet a milestone within the specified time period, unless we pay the corresponding milestone payment. Dartmouth College may terminate either the license in the event we default or breach any of the provisions of the applicable license, subject to 30 days’ prior notice and opportunity to cure. In addition, the license automatically terminates in the event we become insolvent, make an assignment for the benefit of creditors or file, or have filed against us, a petition in bankruptcy. Furthermore, Dartmouth College may terminate our license, after April 30, 2024, if we fail to meet the specified minimum net sales obligations for any year, unless we pay to Dartmouth College the royalty, we would otherwise be obligated to pay had we met such minimum net sales obligation. We also license technology from Horizon Discovery Limited, or Horizon Discovery. Horizon Discovery may terminate our license in case of insolvency, material breach or force majeure. Any termination of these licenses or any of our other licenses could result in the loss of significant rights and could harm our ability to commercialize our product candidates. 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;

•

The amount and timing of milestone and royalty payments;

•

Whether we are complying with our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization of our product candidates; and

•

The allocation of ownership of inventions and

know-how

resulting from the joint creation or use of intellectual property by us and our partners and by our licensors.

If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates. We are generally also subject to all of the same risks with respect to protection of intellectual property that we license as it is 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 commercialize our products could suffer.

Our licenses may be terminated if we are unable to meet the payment obligations under the agreements (notably if we are unable to obtain additional financing).

We could be unsuccessful in obtaining or maintaining adequate patent protection for one or more of product candidates.

The patent application process is expensive and time-consuming, and we and our current or future licensors and licensees may not be able to apply for or prosecute patents on certain aspects of our product candidates or deliver technologies at a reasonable cost, in a timely fashion, or at all. It is also possible that we or our current licensors, or any future licensors or licensees, will fail to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection on them. Therefore, our patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. It is possible that defects of form in the preparation or filing of our patents or patent applications may exist, or may arise in the future, such as with respect to proper priority claims, inventorship, claim scope or patent term adjustments. Under our existing license agreements with the Trustees of Dartmouth College, we have the right, but not the obligation, to enforce our licensed patents. If our current licensors, or any future licensors or licensees, are not fully cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised and we might not be able to prevent third parties from making, using, and selling competing products. If there are material defects in the form or preparation of our patents or patent applications, such

Table of Contents

patents or applications may be invalid and unenforceable. Moreover, our competitors may independently develop equivalent knowledge, methods, and

know-how.

Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business, financial condition and operating results.

We currently have issued patents and patent applications directed to our product candidates and medical devices, and we anticipate that we will file additional patent applications in several jurisdictions, including several EU countries and the United States, as appropriate.

However, we cannot predict:

•

If and when any patents will issue from patent applications;

•

The degree and range of protection any issued patents will afford us against competitors, including whether third parties will find ways to invalidate or otherwise circumvent our patents;

•

Whether others will apply for or obtain patents claiming aspects similar to those covered by our patents and patent applications; or

•

Whether we will need to initiate litigation or administrative proceedings to defend our patent rights, which may be costly whether we win or lose.

We cannot be certain, however, that the claims in our pending patent applications will be considered patentable by patent offices in various countries, or that the claims of any of our issued patents will be considered valid and enforceable by local courts.

The strength of patents in the biotechnology and pharmaceutical field can be uncertain, and evaluating the scope of such patents involves complex legal and scientific analyses. The patent applications that we own, or

in-licenses

may fail to result in issued patents with claims that cover our product candidates or uses thereof in the EU, in the United States or in other jurisdictions. Even if the patents do successfully issue, third parties may challenge the validity, enforceability, or scope thereof, which may result in such patents being narrowed, invalidated, or held unenforceable. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property or prevent others from designing their products to avoid being covered by our claims. If the breadth or strength of protection provided by the patent applications, we hold with respect to our product candidates is threatened, this could dissuade companies from collaborating with us to develop, and could threaten our ability to commercialize, our product candidates. Further, because patent applications in most countries are confidential for a period of time after filing, we cannot be certain that we were the first to file any patent application related to our product candidates.

Patents have a limited lifespan. Various extensions may be available; however, the life of a patent, and the protection it affords, is limited. Further, the extensive period of time between patent filing and regulatory approval for a drug product candidate limits the time during which we can market a drug product candidate under patent protection, which may particularly affect the profitability of our early-stage product candidates. If we encounter delays in our clinical trials, the period of time during which we could market our product candidates under patent protection would be reduced. Without patent protection for our product candidates, we may be open to competition from biosimilar versions of our product candidates.

Third-party claims of intellectual property infringement against us or our collaborators may prevent or delay our product discovery and development efforts.

Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. There is a substantial amount of litigation involving patents and other intellectual property rights in the biotechnology and pharmaceutical industries, as well as administrative proceedings for challenging patents, including interference, derivation, and reexamination proceedings before the USPTO or oppositions and other comparable proceedings in foreign jurisdictions. Recently, due to changes in U.S. law referred to as patent reform, new procedures including

inter partes

review and post-grant review have been implemented. This reform adds uncertainty to the possibility of challenge to our patents in the future.

Table of Contents

Numerous U.S. and foreign issued patents and pending patent applications owned by third parties exist in the fields in which we are developing our product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may give rise to claims of infringement of the patent rights of others.

Although we have conducted analyses of the patent landscape with respect to our product candidates, and based on these analyses, we believe that we will be able to commercialize our product candidates, third parties may nonetheless assert that we infringe their patents, or that we are otherwise employing their proprietary technology without authorization, and may sue us. There may be third-party patents of which we are currently unaware with claims to compositions, formulations, methods of manufacture, or methods of use or treatment that cover our product candidates. Because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our techno