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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from           to           
Commission File Number: 001-39303
PLIANT THERAPEUTICS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware47-4272481
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification No.)
260 Littlefield Avenue 
South San Francisco, CA
94080
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (650) 481-6770
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading
Symbol
Name of Each Exchange on which Registered
Common Stock, par value $0.0001 per sharePLRXThe Nasdaq Stock Market LLC
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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of May 6, 2022, the registrant had 36,169,468 shares of common stock, $0.0001 par value per share, outstanding.



Table of Contents
  
 
 
 
 
 
  
  

2


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (the "Report") contains forward-looking statements that involve risks, uncertainties, and assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The statements contained in this Report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or the negative of those terms, and similar expressions that convey uncertainty of future events or outcomes. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. Forward-looking statements in this Report include, but are not limited to, statements about:
•    Our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
•    The success, cost and timing of our product development activities and clinical trials of our lead product candidate, PLN-74809, as well as PLN-1474 and our other product candidates;
•    Our estimates regarding the impact of the COVID-19, pandemic on our business and operations, and our ability to manage such impacts;
•    Ours or our current or future collaborators plans to initiate, recruit and enroll patients in, and conduct our clinical trials at the pace that we project;
•    Our plans and strategy to obtain and maintain regulatory approvals of our product candidates;
•    Our plans and strategy to obtain funding for our operations, including funding necessary to complete further development and, upon successful development, if approved, commercialize any of our product candidates;
Our ability to borrow additional term loans under our term loan facility (the “Oxford Loan Agreement”) with Oxford Finance LLC, as collateral agent and lender (“Oxford”);
•    The potential benefits of orphan drug and fast track designations for PLN-74809;
•    Our ability to compete with companies currently marketing or engaged in the development of treatments for fibrosis;
•    Our plans and strategy regarding obtaining and maintaining intellectual property protection for our product candidates and the duration of such protection;
•    Our plans and strategy regarding the manufacture of our product candidates for clinical trials and for commercial use, if approved;
•    Our dependence on current and future collaborators for developing, obtaining regulatory approval for and commercializing product candidates in the collaboration;
•    Our receipt and timing of any milestone payments or royalties under any current of future research collaboration or license agreements or arrangements;
•    Our plans and strategy regarding the commercialization of any products that are approved for marketing and our ability to establish adequate pricing in the U.S. and international markets;
•    The size and growth potential of the markets for our product candidates, and our ability to serve those markets, either alone or in combination with others;
•    Our ability to attract and retain qualified employees and key personnel; and
•    Our expectations regarding government and third-party payor coverage and reimbursement.
These statements are based on the beliefs and assumptions of our management, which are in turn based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results and timing expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section entitled “Risk Factors” included under Part II, Item 1A in this Report. Furthermore, such forward-looking statements speak only as of the date of this Report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
3




4


SUMMARY OF RISKS ASSOCIATED WITH OUR BUSINESS
Our business involves significant risks, some of which are summarized below. The summary risk factors listed below should be read together with the text of the full risk factors discussed in "Part II, Item 1A. Risk Factors" in this Report. You should carefully consider the risks described below, as well as the other information in this Report, including our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as in other documents that we file with the Securities and Exchange Commission, or the SEC. The occurrence of any of the events or developments described in this Report could have a material adverse effect on our business, financial condition, results of operations, growth prospects and stock price. In such an event, the market price of our common stock could decline. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations and the market price of our common stock.

Risks Related to Our Financial Position and Need for Additional Capital
•    We have incurred significant net losses since inception, and we expect to continue to incur significant net losses for the foreseeable future.
•    We will require substantial additional capital to finance our operations. If we are unable to raise such capital when needed, or on acceptable terms, we may be forced to delay, reduce and/or eliminate one or more of our research and drug development programs, future commercialization efforts or other operations.
Covenants and other provisions in the Oxford Loan Agreement restrict our business and operations in many ways, and if we do not effectively manage our covenants, our financial conditions and results of operations could be adversely affected. In addition, our operations may not provide sufficient cash to meet the repayment obligations of our debt incurred under the Oxford Loan Agreement.
Risks Related to Research and Development and the Biopharmaceutical Industry
•    We have a limited operating history, which may make it difficult to evaluate our prospects and likelihood of success.
•    Our business is highly dependent on the success of our lead product candidate, PLN-74809, as well as PLN-1474 and any other product candidates that we advance into the clinic. All of our product candidates will require significant additional preclinical and clinical development before we may be able to seek regulatory approval for and launch a product commercially.
Our approach to drug discovery and development in the area of fibrotic diseases is unproven and may not result in marketable products
•    Clinical development involves a lengthy, complex, and expensive process, with an uncertain outcome.
•    We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of PLN-74809 or any other product candidates.
•    We may fail to obtain and maintain orphan drug designations in some jurisdictions and therefore fail to secure orphan exclusivity in those jurisdictions.
Our ongoing and future clinical trials may reveal significant adverse events or unexpected drug-drug interactions not seen in our preclinical studies and may result in a safety profile that could delay or prevent regulatory approval or market acceptance of any of our product candidates.
•    If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.
•    We face substantial competition, which may result in others discovering, developing, or commercializing products before or more successfully than us.
Risks Related to Our Intellectual Property
•    Our success depends in part on our ability to obtain patent term extensions and protect our intellectual property. It is difficult and costly to protect our proprietary rights and technology, and we may not be able to ensure their protection.
5


•    Our collaborators may assert ownership or commercial rights to inventions they develop from research we support or that we develop from our use of the tissue samples or other biological materials, which they provide to us, or otherwise arising from the collaboration.
Risks Related to Our Reliance on Third Parties
•    We have entered into a collaboration agreement with Novartis Institutes for Biomedical Research, Inc., or Novartis, for the development of PLN-1474 and may in the future seek to enter into collaborations with third parties for the development and commercialization of other product candidates. If we fail to enter into such collaborations, or our collaborations are not successful, we may be unable to continue development of such product candidates, we would not receive any contemplated milestone payments or royalties, and we could fail to capitalize on the market potential of such product candidates
•    We rely on third parties to conduct certain aspects of our preclinical studies and clinical trials and for tissue samples and other materials required for our research and development activities.

Risks Related to Managing Our Business and Operations
•    The ongoing COVID-19 pandemic could adversely impact our business, including our preclinical studies and clinical trials.
•    Our loss of key management personnel, or if we fail to recruit additional highly skilled personnel, will impair our ability to develop current product candidates or identify and develop new product candidates, could result in loss of markets or market share and could make us less competitive.

6


PART I—FINANCIAL INFORMATION
Item 1. Condensed Financial Statements.
Pliant Therapeutics, Inc.
Condensed Balance Sheets
(Unaudited)
(In thousands, except number of shares and per share amounts)
 March 31,
2022
*December 31,
2021
Assets
Current assets
Cash and cash equivalents$32,545 $51,665 
Short-term investments145,735 148,931 
Accounts receivable1,249 1,998 
Tax credit receivable83 83 
Prepaid expenses and other current assets (Note 5)5,751 6,764 
Total current assets185,363 209,441 
Property and equipment, net4,738 4,606 
Operating lease right-of-use assets6,086 6,330 
Other non-current assets835 838 
Total assets$197,022 $221,215 
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable$4,684 $2,971 
Accrued liabilities (Note 6)11,626 11,991 
Lease liabilities, current$1,999 1,869 
Total current liabilities18,309 16,831 
Lease liabilities, non-current$4,920 5,325 
Total liabilities23,229 22,156 
Stockholders’ equity
Common stock, $0.0001 par value; 300,000,000 shares authorized at March 31, 2022 and December 31, 2021; and 36,162,459 and 36,083,301 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively;
3 3 
Additional paid-in capital417,931 414,348 
Accumulated deficit(243,191)(215,091)
Accumulated other comprehensive loss(950)(201)
Total stockholders’ equity173,793 199,059 
Total liabilities and stockholders’ equity$197,022 $221,215 
*The condensed balance sheet as of December 31, 2021 has been derived from the audited financial statements as of that date.
The accompanying notes are an integral part of these condensed financial statements
7


Pliant Therapeutics, Inc.
Condensed Statements of Operations and Comprehensive Loss
(Unaudited)
(In thousands, except number of shares and per share amounts)
Three Months Ended
March 31,
20222021
Revenue$1,249 $2,174 
Operating expenses:
Research and development(20,881)(18,527)
General and administrative(8,579)(6,566)
Total operating expenses(29,460)(25,093)
Loss from operations(28,211)(22,919)
Interest and other income (expense), net111 63 
Net loss$(28,100)$(22,856)
Net loss per share:
Basic$(0.78)$(0.64)
Diluted$(0.78)$(0.64)
Shares used in computing net loss per share:
Basic36,116,440 35,645,205 
Diluted36,116,440 35,645,205 
Comprehensive loss:
Net loss$(28,100)$(22,856)
Net unrealized (loss) gain on short-term investments$(749)$14 
Total other comprehensive (loss) income (749)14 
Comprehensive loss$(28,849)$(22,842)
The accompanying notes are an integral part of these condensed financial statements.
8


Pliant Therapeutics, Inc.
Condensed Statements of Stockholders’ Equity
(Unaudited)
(In thousands, except number of shares and per share amounts)
    Additional
Paid-In
Capital
Accumulated
Other
Comprehensive Loss
Accumulated
Deficit
Total
Stockholders’
Equity
 Common Stock
 SharesAmount
Balance at December 31, 202136,083,301 $3 $414,348 $(201)$(215,091)$199,059 
Vesting of restricted stock awards15,606 — 1 — — 1 
Option exercises63,552 — 51 — — 51 
Stock-based compensation expense— — 3,531 — — 3,531 
Net unrealized loss on short-term investments— — — (749)— (749)
Net loss— — — — (28,100)(28,100)
Balance at March 31, 202236,162,459 $3 $417,931 $(950)$(243,191)$173,793 

The accompanying notes are an integral part of these condensed financial statements.
9


Pliant Therapeutics, Inc.
Condensed Statements of Stockholders’ Equity
(Unaudited)
(In thousands, except number of shares and per share amounts)
   Additional
Paid-In
Capital
Accumulated
Other
Comprehensive Loss
Accumulated
Deficit
Total
Stockholders’
Equity
 Common Stock
 SharesAmount
Balance at December 31, 202035,552,795 $3 $400,918 $(32)$(117,828)$283,061 
Vesting of restricted stock awards30,277 — 2 — — 2 
Option exercises165,264 — 1,370 — — 1,370 
Stock-based compensation expense— — 2,578 — — 2,578 
Net unrealized gain on short- term investments— — — 14 — 14 
Net income— — — — (22,856)(22,856)
Balance at March 31, 202135,748,336 $3 $404,868 $(18)$(140,684)$264,169 
The accompanying notes are an integral part of these condensed financial statements.
10


Pliant Therapeutics, Inc.
Condensed Statements of Cash Flows
(Unaudited)
  Three Months Ended
March 31,
(In thousands)20222021
Cash flows from operating activities  
Net loss$(28,100)$(22,856)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense455 359 
Stock-based compensation expense3,531 2,578 
Non-cash operating lease expense244 348 
Other 272 271 
Changes in operating assets and liabilities:
Accounts receivable749 7,105 
Prepaid expenses and other current assets1,013 318 
Other non-current assets207  
Accounts payable1,770 665 
Accrued liabilities(364)(2,092)
Operating lease liabilities(275)(361)
Net cash used in operating activities(20,498)(13,665)
Cash flows from investing activities
Purchase of short-term investments(39,228)(64,806)
Maturity of short-term investments41,403 77,280 
Purchase of property and equipment(644)(242)
Net cash provided by investing activities1,531 12,232 
Cash flows from financing activities
Proceeds from exercise of stock options51 1,370 
Payment of deferred offering costs(204) 
Net cash (used in) provided by financing activities(153)1,370 
Net decrease in cash and cash equivalents(19,120)(63)
Cash and cash equivalents at beginning of period51,665 50,882 
Cash and cash equivalents at end of period$32,545 $50,819 
Supplemental disclosures of noncash investing and financing activities:
Purchase of property and equipment in accounts payable and accrued liabilities$ $251 
Reclassification of restricted stock awards from liabilities to common stock upon vesting
$1 $2 
Net unrealized (loss) gain on short-term investments$(749)$14 
The accompanying notes are an integral part of these condensed financial statements.
11


Pliant Therapeutics, Inc.
Notes to Condensed Financial Statements
(Unaudited)
1. Organization and Description of Business
Pliant Therapeutics, Inc. (the “Company” or "Pliant" or “we” or “our” or “us”) is a clinical stage biopharmaceutical company focused on discovering and developing novel therapies for the treatment of fibrosis with an initial focus on treating fibrosis by inhibiting integrin-mediated activation of TGF-ß. Fibrosis refers to the abnormal thickening and scarring of connective tissue due to the production and deposition of excess collagen in the extra-cellular matrix. Fibrosis can occur in many different tissues including lung, liver, kidney, muscle, skin and the GI tract, and often causes severe and debilitating disease leading to organ failure. The Company is located in South San Francisco, California, and was incorporated in the state of Delaware in June 2015.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain prior year reported amounts have been reclassified to conform with the current period presentation.
The accompanying condensed balance sheet as of March 31, 2022, condensed statements of operations and comprehensive loss, condensed statements of cash flows, and the condensed statements of stockholders’ equity for the three months ended March 31, 2022 and 2021, are unaudited. The balance sheet as of December 31, 2021 was derived from audited financial statements as of and for the year ended December 31, 2021. The unaudited interim financial statements have been prepared on the same basis as the audited annual financial statements as of and for the year ended December 31, 2021, and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of March 31, 2022, and the results of its operations and its cash flows for the three months ended March 31, 2022 and 2021. The financial data and other information disclosed in these notes related to the three months ended March 31, 2022 and 2021, are also unaudited.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and expenses as well as the disclosure of contingent assets and liabilities as of and during the reporting period. The Company bases its estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. Significant estimates and assumptions reflected in these financial statements include, but are not limited to stock-based compensation expense and accruals for research and development costs. The Company assesses estimates on an ongoing basis, however, actual results could materially differ from those estimates.
Significant Accounting Policies
There have been no significant changes to the accounting policies during the three months ended March 31, 2022, as compared to the significant accounting policies described in Note 2 of the "Notes to the Financial Statements" in the Company's audited financial statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
3. Financial Instruments
The Company’s short-term investments consist of U.S. Treasury securities, U.S. Government agency securities and highly rated, investment-grade corporate debt securities with original maturities beyond three months at the date of purchase. The Company has classified and accounted for its short-term investments as available-for-sale securities as the Company may sell these securities at any time even prior to maturity and such investments represent cash available for current operations. As a result, short-term investments may include securities with maturities beyond twelve months that are classified within current assets in the Balance Sheets. The Company’s short-term investments classified as available-for-sale are carried at fair market value with unrealized losses or income recognized in other comprehensive income (loss).
12


The Company’s cash equivalent Money Market Funds are classified as Level 1 because they are valued using quoted market prices. The fair value of the Company’s U.S. Treasury securities, U.S. government agency securities and corporate debt securities are classified as Level 2 because they are valued using observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency and include U.S. government agency securities, U.S. Treasury securities and corporate debt securities.
There were no Level 3 assets or liabilities as of March 31, 2022 and as of December 31, 2021.
The following tables show the Company’s Money Market Funds, U.S. government agency securities and corporate debt securities by significant investment category as of March 31, 2022 and December 31, 2021 (in thousands):
 As of March 31, 2022
 Adjusted
Cost
Unrealized
Gains
Unrealized
Losses
Market
Value
Level 1:    
Money Market Funds$16,064 $ $ $16,064 
Level 2:
U.S. government agency securities included in cash and cash equivalents and short-term investments    
Corporate debt securities included in cash and cash equivalents and short-term investments
147,935  (950)146,985 
Total financial assets$163,999 $ $(950)$163,049 
 As of December 31, 2021
 Adjusted
Cost
Unrealized
Gains
Unrealized
Losses
Market
Value
Level 1:    
Money Market Funds$15,329 $ $ $15,329 
Level 2:
U.S. government agency securities included in short-term investments5,003   5,003 
Corporate debt securities included in cash and cash equivalents and short-term investments163,626 1 (202)163,425 
Total financial assets$183,958 $1 $(202)$183,757 
The Company may sell certain of its short-term securities prior to their stated maturities for reasons including, but not limited to, managing liquidity, credit risk, duration and asset allocation.
There were no liabilities measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021. There have been no transfers between fair value measurement levels during the three months ended March 31, 2022. In addition, there were no assets or liabilities measured at fair value on a non-recurring basis as of March 31, 2022 and December 31, 2021.
As of March 31, 2022, the Company had not recorded any impairment related to other-than-temporary declines in the fair value of short-term investments. Short-term investments are considered impaired when a decline in fair value is judged to be other-than-temporary. The Company consults with its investment managers and considers available quantitative and qualitative evidence in evaluating potential impairment of its short-term investments on a quarterly basis. If the cost of an individual investment exceeds its fair value, the Company evaluates, among other factors, general market conditions, the duration and extent to which the fair value is less than cost and its intent and ability to hold the investment.
The Company records interest income and accretion income earned on Money Market Funds and U.S. Treasury, U.S. government agency and corporate debt securities to interest and other income (expense), net in its condensed statement of operations and comprehensive loss.
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4. Property and Equipment, net
Property and equipment, net consisted of the following (in thousands):
  As of
March 31,
2022
As of
December 31,
2021
Computer equipment and software$22 $22 
Laboratory equipment8,539 7,947 
Leasehold improvements1,618 1,618 
Construction-in-progress33 38 
Total property and equipment, gross10,212 9,625 
Less: Accumulated depreciation(5,474)(5,019)
Total property and equipment, net$4,738 $4,606 
Depreciation expense for the three months ended March 31, 2022 was $0.5 million. Depreciation expense for the three months ended March 31, 2021 was $0.4 million.
5. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
As of
March 31,
2022
As of
December 31,
2021
Prepaid research and development2,220 2,819 
Prepaid insurance1,707 2,585 
Prepaid licenses1,135 819 
Interest receivable443 385 
Other246 156 
Total prepaid expenses and other current assets5,751 6,764 
6. Accrued Liabilities and Other Long-Term Liabilities
Accrued Liabilities
Accrued liabilities consisted of the following (in thousands):
As of
March 31,
2022
As of
December 31,
2021
Accrued compensation and benefits$2,634 $5,216 
Accrued research and development expenses7,846 5,868 
Other accrued liabilities1,146 907 
Total accrued liabilities$11,626 $11,991 
Accrued compensation and benefits consist primarily of accrued bonuses and accrued vacation.

7. Novartis Collaboration and License Agreement (the "Novartis Agreement")
In 2019, we entered into the Novartis Agreement for the development and commercialization of our preclinical product candidate, PLN-1474 and up to three additional integrin research targets. PLN-1474 is an internally discovered small molecule selective inhibitor of integrin αvß1, currently being developed for the treatment of liver fibrosis associated with nonalcoholic steatohepatitis (“NASH”). Pursuant to the agreement, we received an upfront, non-refundable license fee of $50.0 million and were eligible to receive additional payments of $416.0 million contingent upon achievement of specified research, development, regulatory and commercial events and royalties on world-wide net sales thereafter. Additionally, Novartis is funding up to $20.0 million associated with research and development services for PLN-1474 and up to $13.8 million for research and development services on the integrin research targets. As of March 31, 2022, aggregate unrecognized transaction price of $1.2 million is associated with performance obligations we expect to satisfy in 2022.
14


To date, we have received $25.0 million in contingent payments and $391.0 million remain eligible for achievement. No contingent payments were recognized during the first quarter of 2022 and 2021. Revenues for research and development services for the three months ended March 31, 2022 and 2021 were $1.2 million and $2.2 million, respectively.

8. Regents of the University of California License Agreement (the "UC Agreement")
In 2015, we entered into the UC Agreement to obtain an exclusive, worldwide license relating to the use of certain patents and technology relating to αvß1 compound in fibrosis indications. Pursuant to the UC Agreement, we made a $2.4 million milestone payment upon the close of our initial public offering in June 2020. Subsequently, we determined the licensed technology was no longer relevant to the development of our product candidates and, therefore, we exercised our right to terminate the UC Agreement which became effective in the first quarter of 2021. No further obligations or financial commitments survive the termination.

9. Adimab Development and Option Agreement (the "Adimab Agreement")
In 2018, we entered into a development and option agreement with Adimab, LLC (“Adimab”) for the discovery and optimization of proprietary antibodies as potential therapeutic product candidates. Under the Adimab Agreement, we will select biological targets against which Adimab will use its proprietary platform technology to research and develop antibody proteins using a mutually agreed upon research plan. We are required to pay Adimab an agreed upon rate for its full-time employees during the discovery period while Adimab performs research on each target under the applicable research plan. We have an exclusive option to obtain a worldwide, royalty-bearing, sublicensable license under Adimab platform patents and other Adimab technology to research, develop and commercialize up to 24 antibodies of our selection.
As of March 31, 2022, we have not exercised our option to further develop any antibody proteins. During the three months ended March 31, 2022, no research and development expenses under the Adimab Agreement were recognized relating to full-time employee costs. During the three months ended March 31, 2021, $28,000 was recognized.

10. Redeemable Convertible Preferred Stock
Under the Company’s Amended and Restated Certificate of Incorporation (“Certificate of Incorporation”), the Company is authorized to issue two classes of shares: preferred and common stock. The preferred stock may be issued in series, and the Company’s board of directors is authorized to determine the rights, preferences, and terms of each series. These rights preferences and terms could include dividend rights, conversion rights, voting rights, terms of redemptions, liquidation preferences and sinking fund terms. As of March 31, 2022 and December 31, 2021, the Company was authorized to issue 10,000,000 shares of preferred stock and there was no outstanding preferred stock as of March 31, 2022 and December 31, 2021.
11. Common Stock
As of March 31, 2022 and December 31, 2021, the Company was authorized to issue 300,000,000 shares of common stock at a par value of $0.0001 per share. The common stock has the following rights and privileges:
Voting
The holders of shares of common stock are entitled to one vote for each share of common stock held at any meeting of stockholders and at the time of any written action in lieu of a meeting.
Dividends
The holders of shares of common stock are entitled to receive dividends, when declared by the Company’s board of directors. Cash dividends may not be declared or paid to holders of shares of common stock until all unpaid dividends on preferred stock have been paid in accordance with their terms. No dividends have been declared or paid by the Company since its inception.
Liquidation
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Subject to the preferential rights of holders of preferred stock then outstanding, the holders of shares of common stock are entitled to share ratably in the Company’s remaining assets available for distribution to its stockholders in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company.
Shares reserved for future issuance
As of
March 31,
2022
As of
December 31,
2021
Exercises of outstanding stock option awards5,196,869 3,620,180 
Shares of common stock available for future grants under the 2020 Equity Incentive Plan4,437,890 4,234,213 
Shares of common stock available for future issuance under the 2020 ESPP922,725 613,098 
Total shares reserved for future issuance10,557,484 8,467,491 
12. Equity Incentive Plans and Stock-Based Compensation
In August 2015, the Company's board of directors adopted the 2015 Equity Incentive Plan (as amended, the “2015 Plan”), which provides for the grant of incentive stock options, nonqualified stock options or other awards including stock appreciation rights and restricted stock awards to the Company’s employees, officers, directors, advisors, and consultants for the purchase of up to 1.5 million shares of the Company’s common stock. In July 2018 and January 2019, the 2015 Plan was amended to increase the number of shares reserved thereunder by 1.0 million and 0.4 million shares, respectively. In March 2020, the Company’s board of directors and stockholders voted to increase the number of shares reserved for issuance under the 2015 Plan by 1.4 million shares. In May 2020, the board of directors adopted the 2020 Stock Options and Incentive Plan (the “2020 Plan”). The 2015 Plan was suspended and no further grants may be issued under the 2015 Plan.
The 2020 Plan provides for the grant of incentive stock options, nonqualified stock options or other awards including stock appreciation rights, restricted stock awards and restricted stock units to the Company’s employees, officers, directors, advisors, and consultants for the purchase of up to 4.2 million shares of the Company’s common stock. In addition, to the extent that awards outstanding under the 2020 Plan or the 2015 Plan are cancelled, forfeited or held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, reacquired by the Company prior to vesting, satisfied without any issuance of stock, expire or are otherwise terminated (other than by exercise) subsequent to May 2020, the shares of common stock reserved for issuance pursuant to such awards will become available for issuance as shares of common stock under the 2020 Plan. The 2020 Plan provides that an additional number of shares will automatically be added to the shares authorized for issuance under the 2020 Plan on January 1 of each year beginning January 1, 2021. The number of shares added each January 1 will be equal to the lesser of: (i) 5% of the outstanding shares on the immediately preceding December 31 or (ii) such amount as determined by the administrator of the 2020 Plan, which is the compensation committee of the board of directors of the Company. As of March 31, 2022, 4.4 million shares remained available for issuance under the 2020 Plan.
Prior to the adoption of the 2020 Plan, options under the 2015 Plan could be granted for periods of up to 10 years and at prices no less than 100% of the estimated fair value of the shares on the date of grant as determined by our board of directors, provided, however, that the exercise price of an incentive stock option granted to a person owning (or deemed to own) stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company or any affiliate of the Company (a "10% shareholder") could not be less than 110% of the estimated fair value of the shares on the date of grant and the option was not exercisable after the expiration of five years from the date of grant.
Options under the 2020 Plan may be granted for periods of up to 10 years and at prices no less than the market price of the Company’s common stock on the date of grant, provided, however, that the exercise price of an incentive stock option granted to a 10.0% shareholder shall not be less than 110.0% of the estimated fair value of the shares on the date of grant and the option is not exercisable after the expiration of five years from the date of grant.
Restricted Common Stock Awards
The Company granted restricted stock awards under the 2015 Plan. The purchase price of the restricted common stock awards was the estimated fair value as determined by the Company's board of directors at the issuance date. The shares vest from one to four years and vesting could be accelerated upon a change in control. A holder of an award may pay a total purchase price or a part of the purchase price for granted shares at any time during the vesting periods. Upon termination of employment, the Company has the right to repurchase any unvested restricted shares. The repurchase price for unvested shares of common stock will be the lower of (i) the fair market value on the date of repurchase or (ii) their original purchase price.
16


During the vesting term, holders of restricted stock awards are deemed to be common stock shareholders and have dividends and voting rights.
The Company accounted for restricted stock awards as early exercised options and recognized a liability in other liabilities when cash was received for the purchase of shares of restricted stock. As shares of restricted stock vested, the Company reclassified the liability to common stock and additional paid in capital. As of March 31, 2022 and December 31, 2021, the Company recorded a liability included in accrued expenses and other liabilities of $1,000 and $2,000, respectively.
There were no grants of restricted stock awards for the three months ended March 31, 2022 and 2021.
The following table summarizes restricted stock activity during the three months ended March 31, 2022:
  Number
of
Shares
Weighted-
Average
Grant Date
fair value
Outstanding and unvested, as of December 31, 202121,841 $2.16 
Issued $ 
Vested(15,606)$2.11 
Repurchases $ 
Outstanding and unvested, as of March 31, 20226,235 $2.29 
The aggregate fair value of restricted stock awards vested during the three months ended March 31, 2022 was $33,000. Total intrinsic value of outstanding unvested restricted stock awards as of March 31, 2022 was $43,000.
Incentive Stock Options and Nonqualified Stock Options
Stock options issued under either the 2015 Plan or the 2020 Plan generally vest over four years and expire ten years from the date of grant. Certain options provide for accelerated vesting if there is a change in control, as defined in the respective plans.
The Company used Black-Scholes option pricing model to estimate stock-based compensation expense for stock option awards with the following assumptions:
  Three Months Ended
March 31,
 20222021
Expected volatility
74.48% - 75.01%
74.95% - 75.72%
Risk-free interest rate
1.64% - 2.13%
0.61% - 1.06%
Expected dividend
Expected term (in years)
6.02 - 6.08
5.77 - 6.08
Underlying common stock fair value
7.56 - 12.68
26.13 - 38.23
The Company granted 1,691,370 stock options under the 2020 Plan during the three months ended March 31, 2022.
A summary of option activity under the 2015 Plan and the 2020 Plan is as follows:
17


  Number
of
Options
Weighted-
Average Exercise
Price per Share
Weighted-
Average
Remaining
Contractual
Term (in Years)
Aggregate
Intrinsic
Value
Outstanding as of December 31, 20213,620,180 $14.56 8.25$16,735 
Granted1,691,370 $11.88 
Exercised(12,124)$4.63 
Forfeited(102,557)$11.19 
Outstanding as of March 31, 20225,196,869 $13.62 8.42$4,445 
Exercisable as of March 31, 20221,660,467 $10.65 7.51$3,152 
Vested and expected to vest as of March 31, 20225,196,869 $13.62 8.42$4,445 

Aggregate intrinsic value represents the difference between the fair value of the underlying common stock and the exercise price as of March 31, 2022. The weighted-average grant date fair value of options granted during the three months ended March 31, 2022 was $7.84 per share.
Stock-Based Compensation Expense
The following table presents the components and classification of stock-based compensation expense for the Company’s stock-based awards for the three months ended March 31, 2022 and 2021 (in thousands):
Three Months Ended
March 31,
20222021
Restricted stock awards$29 $51 
Stock options and ESPP3,502 2,527 
Total stock-based compensation expense$3,531 $2,578 
Research and development expenses$1,914 $1,170 
General and administrative expenses$1,617 $1,408 
As of March 31, 2022, there was $7,000 of unrecognized compensation costs that is expected to be recognized over the weighted-average periods of 0.17 years related to restricted stock awards. As of March 31, 2022, there was $32.6 million of unrecognized compensation costs that is expected to be recognized over the weighted-average periods of 2.89 years related to stock options.
2020 Employee Stock Purchase Plan
In June 2020, the Company adopted the Company's 2020 Employee Stock Purchase Plan (the "2020 ESPP"). The Company reserved 700,000 shares of common stock for future issuance under the plan. The 2020 ESPP provides that the number of shares reserved and available for issuance will automatically increase on January 1 of each calendar year, beginning January 1, 2021, by the least of (1) 1.0% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, (2) 700,000 shares or (3) such lesser amount as determined by the administrator of the 2020 ESPP, which is the compensation committee of the board of directors of the Company.
Under the 2020 ESPP, eligible employees may purchase shares of our common stock through payroll deductions that cannot exceed 15% of each employee’s salary. The 2020 ESPP provides for a six-month offering period. At the end of the purchase period, eligible employees are permitted to purchase shares of common stock at the lower of 85% of the fair market value at the beginning of the offering period or 85% of the fair market value at the end of the purchase period, subject to tax limitations on the total value of the purchase. The 2020 ESPP is considered a compensatory plan, and the Company recorded $0.1 million in stock-based compensation expense for the three months ended March 31, 2022. There was $0.3 million stock-based compensation expense attributed to the 2020 ESPP for the three months ended March 31, 2021. During the three months ended March 31, 2022, 51,428 shares of common stock were issued under the 2020 ESPP with 922,725 shares remaining available for issuance under the 2020 ESPP. The Company used Black-Scholes option pricing model to estimate stock-based compensation expense for the 2020 ESPP with the following assumptions:
18


 Three Months Ended
March 31,
 20222021
Risk-free interest rate
0.60%
0.07%
Expected term of options (in years)
0.50
0.50
Expected stock price volatility
63.17%
89.51%
Expected dividends
13. Income Taxes
For the three months ended March 31, 2022 and 2021, the Company did not record an income tax provision. The Company will continue to maintain a 100% valuation allowance on total deferred tax assets. The Company believes it is more likely than not that the related deferred tax asset will not be realized. As a result, the Company’s effective tax rate will remain at 0% because there are no estimated or discrete items that would impact the tax provision.
14. Commitments and Contingencies
Purchase Commitments
The Company has contractual arrangements with research and development organizations and suppliers; however, these contracts are generally cancellable on 30 days’ notice and the obligations under these contracts are largely based on services performed.
License and Collaboration Agreements
Potential payments related to the Company’s license and research agreements, including milestone and royalty payments, are detailed in Notes 7 and 8.
15. Leases
In February 2018, the Company entered into a non-cancelable lease agreement (the “Lease”) for premises consisting of approximately 32,974 square feet located in South San Francisco, California (the “Premises”). The Company moved into the Premises in July 2018. The Premises is being used for the Company’s corporate headquarters and principal operating facility. The term of the Lease is eighty-four months, which commenced on July 1, 2018. Base rent was abated for the first two months of the lease term and thereafter is $0.2 million per month during the first year of the lease term, with specified annual increases thereafter. The Company paid a refundable security deposit of approximately $0.4 million, which is included in other non-current assets in the Balance Sheets at March 31, 2022 and 2021. The Company has the right to extend the lease term by seven years upon written notice not more than twelve months nor less than nine months prior to the expiration of the original lease term, with monthly payments equal to the “fair rental value” as defined in the Lease. The exercise of lease renewal options is at the sole discretion of the Company and is not included in the right-of-use (ROU) asset and lease liability as it is not reasonably certain of exercise. This lease does not contain material variable rent payments, residual value guarantees, covenants, or other restrictions. The Company also enters into leases for equipment.
For the quarters ended March 31, 2022 and 2021, the Company recognized expenses associated with the operating leases of $0.6 million. Additionally, the Company incurred variable lease costs of $0.1 million and $0.2 million for the three months ended March 31, 2022 and 2021, respectively, which is comprised primarily of the Company's proportionate share of operating expenses, property taxes, and insurance. Short-term lease expense and variable lease payments recorded in operating expenses were immaterial for the quarter ended March 31, 2022. Cash paid for amounts included in the measurement of operating lease liabilities was $0.6 million for the three months ended March 31, 2022 and 2021.
Maturities of the Company's operating lease liability as of March 31, 2022 were as follows:
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Quarter ending March 31, 2022:Operating Lease
2022 (remainder of the year)$1,837 
20232,413 
20242,365 
20251,203 
2026 
Total lease payments$7,818 
Less: Present value discount899 
Total operating lease liabilities$6,919 
The weighted-average remaining lease terms and discount rates related to the Company's operating leases were as follows:
As of March 31, 2022
Weighted-average remaining lease term (in years)3.20
Weighted-average discount rate7.9%
16. Related Party Transactions
In June 2021, the Company granted 26,572 stock options with a grant date fair value of $0.5 million to partners of Third Rock Ventures who are also serving as non-employee directors on the Company's board of directors. The shares of common stock subject to these options vest 25% on the first day of each calendar quarter for three quarters with the final vest date being the earlier of (i) the one-year anniversary of the grant date or (ii) the next Annual Meeting of Stockholders. In March 2020, the Company granted 26,573 stock options with a grant date fair value of $0.1 million to a partner at Third Rock Ventures, who is also serving as a non-employee director on the Company’s board of directors. The shares of common stock subject to these options vest 1/12th on the last day of each calendar quarter over a three-year period and commenced vesting upon completion of our IPO. In order to vest, the stockholders must be providing continuous service to the Company through such vesting date. See Note 12 for additional information.
17. Defined Contribution Plan
The Company sponsors a defined contribution plan under Section 401(k) of the Internal Revenue Code covering substantially all full-time U.S. employees. Employee contributions are voluntary and are determined on an individual basis subject to the maximum allowable under federal tax regulations. The Company made contributions to the plan of $0.2 million for the three months ended March 31, 2022 and 2021.
18. Net Loss Per Share Attributable to Common Stockholders
The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net (loss)/income per share attributable to common stockholders for the periods presented, because including them would have been antidilutive:
Three Months Ended March 31,
20222021
Options to purchase common stock5,196,869 3,928,287 
Restricted stock awards granted and not purchased 4,195 
Unvested restricted shares6,235 96,245 
Total5,203,104 4,028,727 
A reconciliation of the numerator and denominator used in the calculation of the basic and diluted net loss per share attributable to common stockholders is as follows (in thousands, except share and per share amounts):
20


Three Months Ended March 31,
20222021
Net loss per share:  
Numerator  
Net loss$(28,100)$(22,856)
Denominator
Weighted-average common shares outstanding used to calculate net loss per share attributable to common stockholders:
Basic36,116,440 35,645,205 
Diluted36,116,440 35,645,205 
Net loss per share attributable to common stockholders:
Basic$(0.78)$(0.64)
Diluted$(0.78)$(0.64)

19. Subsequent Events
In May 2022, the Company entered into a term loan facility (the “Oxford Loan Agreement”) with Oxford Finance LLC for up to $100.0 million. Pursuant to the Agreement, the Company received an initial term loan of $10.0 million of an initial $25.0 million tranche at closing, with the remaining $15.0 million available through the end of the year. The Company has access to an additional $75.0 million over three tranches, $50.0 million of which is at its option upon the satisfaction of certain conditions related to the development of PLN-74809 and one of the Company’s preclinical product candidates, and $25.0 million at the Lender’s discretion. Borrowings under the Oxford Loan Agreement bear interest at a rate per annum equal to 1-month term Secured Overnight Financing Rate (SOFR) plus 8.5%, subject to an agreed upon floor and cap. The Oxford Loan Agreement requires the Company to make monthly interest-only payments until July 1, 2026 (extendable to July 1, 2027) with monthly interest and principal payments thereafter until the maturity date of May 1, 2027 (extendable to May 1, 2028). There are no warrants or financial covenants in the Oxford Loan Agreement.


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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with our condensed financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q, or this Report, as well as our audited financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission, or SEC. This discussion and analysis contains forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intention, beliefs and projections. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth in the section titled “Risk Factors” under Part II, Item 1A of this Report and under Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “should,” “will” or the negative of these terms or other similar expressions.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate we have conducted exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
Overview
We are a clinical stage biopharmaceutical company focused on discovering and developing novel therapies for the treatment of fibrosis and related diseases. Our initial focus is on treating fibrosis by inhibiting integrin-mediated activation of TGF-β. We have applied our deep understanding of fibrosis biology, along with our medicinal chemistry and translational medicine expertise to develop a set of proprietary tools designed to discover and de-risk product candidates quickly and efficiently. Our wholly owned lead product candidate, PLN-74809, is an oral, small-molecule, dual selective inhibitor of αvß6 and αvß1 integrins that we are developing for the treatment of idiopathic pulmonary fibrosis, or IPF, and primary sclerosing cholangitis, or PSC. We have completed several Phase 1 trials of PLN-74809 in IPF and are currently recruiting three Phase 2a trials in our lead indications: two in IPF and one in PSC.
Our second product candidate, PLN-1474, is a small-molecule selective inhibitor of αvß1 for the treatment of liver fibrosis associated with nonalcoholic steatohepatitis, or NASH, which we have partnered with Novartis. PLN-1474 successfully completed a Phase 1 SAD/MAD trial in March 2021, and the Investigational New Drug, or IND, application was transferred to Novartis in the first quarter of 2021. Novartis is responsible for all PLN-1474 development, manufacturing and commercialization activities and we earn research and development services revenue in supporting certain aspects of the development plan.
In addition to our clinical programs, we currently have preclinical integrin-based programs targeting oncology and muscular dystrophies.
First Quarter and Recent Highlights
PLN-74809 Highlights
INTEGRIS-IPF Phase 2a trial data readout anticipated in mid-2022. All patients enrolled in the trial have completed treatment. This is a 12-week, randomized, double-blind, placebo-controlled trial evaluating PLN-74809 in patients with idiopathic pulmonary fibrosis (IPF) at once daily doses of 40, 80 and 160 mg. Data will include the primary and secondary endpoints of safety, tolerability, and pharmacokinetics. Exploratory efficacy endpoints will include quantitative lung fibrosis (QLF) imaging as well as pulmonary function tests and biomarkers.
Positive independent Data Safety Monitoring Board (DSMB) review provides additional support for tolerability profile for PLN-74809. The DSMB recommended the INTEGRIS-IPF trial continue without modification. This review occurred after completion of enrollment and included all patients enrolled in all dose cohorts of the trial. To date, no safety concerns have been identified by the DSMB. The INTEGRIS-IPF trial completed enrollment in December 2021.
Phase 2a trial evaluating PLN-74809 at 320 mg for 6 months currently enrolling patients with IPF. This randomized, double-blind, placebo-controlled trial will evaluate PLN-74809 at a once daily dose of 320 mg administered for at least six months and up to 48 weeks in
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approximately 28 patients with IPF. The trial will evaluate primary and secondary endpoints of safety, tolerability and pharmacokinetics. Exploratory efficacy endpoints will include QLF imaging as well as pulmonary function tests and biomarkers over 6 months of treatment.
FDA Fast Track designation received for PLN-74809 for the treatment of idiopathic pulmonary fibrosis (IPF). FDA’s Fast Track designation is intended to facilitate and expedite the development and review of new drugs to treat serious or life-threatening conditions. The benefits of Fast Track designation include opportunities for frequent meetings with the FDA to discuss trial design, development plans and data needed to support drug approval, as well as the ability to submit a New Drug Application (NDA) on a rolling basis, and eligibility for priority review, if relevant criteria are met.
Expanded PLN-74809 Phase 1b proof-of-mechanism trial demonstrated durable inhibition of TGF-β signaling in the lungs of healthy participants. Results from an expanded Phase 1b proof-of-mechanism trial of PLN-74809 demonstrated on-target biological activity in the lungs of 36 healthy participants with inhibition of TGF-β activation by up to 92% and 76% at 6- and 24-hours, respectively, following seven days of once-daily dosing. TGF-β activation strongly contributes to fibrotic disorders including IPF.
EMA Orphan Drug designation received for PLN-74809 for the treatment of primary sclerosing cholangitis (PSC). Benefits of the European Medicines Association (EMA) Orphan Drug designation include trial design assistance, a centralized EU approval process, and 10 years of market exclusivity. To qualify, an investigational medicine must target a seriously debilitating or life-threatening condition affecting fewer than five in 10,000 people in the EU and must show sufficient non-clinical or clinical data to suggest it may produce clinically relevant outcomes. PLN-74809 received Orphan Drug designation from the United States Food and Drug Administration (FDA) in 2018. Topline data from the ongoing Phase 2a INTEGRIS-PSC 12-week, randomized, double-blind, placebo-controlled trial is expected in the first half of 2023.
Early-Stage Development Programs
Oncology and muscular dystrophy programs progressing through Investigational New Drug enabling studies. IND application submissions for both programs is expected by the end of 2022.
Corporate Highlights
Cash runway extended to mid-2024 with $100 million loan facility from Oxford Finance. Under the terms of the loan agreement, Pliant drew $10 million of an initial $25 million tranche at closing, with the remaining $15 million available through the end of the year. The Company has access to an additional $75 million over three tranches, $50 million of which is based on pre-determined milestones, and $25 million at Oxford’s discretion. The loan carries an interest-only period of 48 months (extendable to 60 months) and total term of 60 months (extendable to 72 months). Interest is based on a floating rate which is subject to both a floor and a cap. There are no warrants or financial covenants in the agreement.

Since inception, we have had significant operating losses. Our net loss was $28.1 million for the three months ended March 31, 2022. As of March 31, 2022, we had an accumulated deficit of $243.2 million and cash, cash equivalents and short-term investments of $178.3 million. We expect to continue to incur net losses for the foreseeable future, and we expect our research and development expenses, general and administrative expenses, and capital expenditures will increase in connection with our ongoing activities, as we:
perform research and development activities to identify and develop product candidates;
advance product candidates into and through clinical development;
require the manufacture of supplies to support research and development, preclinical studies and clinical trials;
seek regulatory approvals for any product candidates that successfully complete clinical trials;
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expand our operational, financial and management systems and increase personnel to support our clinical development, manufacturing and commercialization efforts and our operations as a public company;
maintain, expand and protect our intellectual property portfolio; and
invest in or in-license other technologies or product candidates.
Components of Operations
Revenue
We have not generated any revenue from product sales and do not expect to do so in the near future. Our revenue to date is derived from a Collaboration and License Agreement with Novartis (the "Novartis Agreement") that was executed in 2019. The Novartis Agreement is for the development and commercialization of PLN-1474 and up to three additional integrin research targets. Under the terms of the Novartis Agreement, we received an upfront license fee payment of $50.0 million for the worldwide, exclusive license to PLN-1474 and an additional $25.0 million upon first-patient dosed in our Phase 1 trial of PLN-1474 in the first quarter of 2020. We are eligible to receive additional milestone payments of up to $391.0 million in total, if defined developmental, regulatory and commercialization milestones are achieved, and tiered royalties on a product-by-product basis based on annual nets sales of products. Additionally, Novartis is providing up to $20.0 million and up to $13.8 million in funding for the initial research and development activities associated with PLN-1474 and integrin research targets, respectively. As of March 31, 2022, approximately $1.2 million of aggregate research and development funding remains available for use under the arrangement.
Operating Expenses
Research and Development
Our research and development expenses consist of expenses incurred in connection with the development of our product candidates. Research and development expenses include:
employee-related expenses, which include salaries, benefits and stock-based compensation for our research and development personnel;
expenses incurred under agreements with third-party contract organizations for pre-clinical studies, clinical trials and consultants that conduct research and development activities on our behalf;
costs associated with the manufacture of supplies to support research and development, preclinical studies and clinical trials;
depreciation of laboratory equipment and costs of equipment and supplies;
costs associated with technology and intellectual property licenses; and
facilities and other allocated expenses, which include expenses for rent and other facility related costs and other supplies.
General and Administrative
Our general and administrative expenses consist primarily of salaries, benefits and stock-based compensation for our general and administrative personnel, allocated facilities costs, insurance and other expenses for outside professional services, including legal, marketing, investor relations, human resource and accounting services.
Interest and Other Income (Expense), net
Our interest and other income (expense), net consists of interest income earned on cash and cash equivalents, money market funds and short-term investments and realized gains and losses on investments.
Financial Operations Overview
Comparison of the three months ended March 31, 2022 and 2021 (in thousands)
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Three Months Ended March 31, 
 20222021$ Change
Revenue$1,249 $2,174 $(925)
Operating expenses:
Research and development(20,881)(18,527)(2,354)
General and administrative(8,579)(6,566)(2,013)
Total operating expenses(29,460)(25,093)(4,367)
Loss from operations(28,211)(22,919)(5,292)
Interest and other income, net111 63 48 
Net loss$(28,100)$(22,856)$(5,244)

Revenue
Revenue was $1.2 million for the three months ended March 31, 2022 compared to $2.2 million for the three months ended March 31, 2021. The decrease of $0.9 million is primarily attributable to decreased research and development services revenues associated with PLN-1474, which were substantially complete in the first quarter of 2021.
Research and development expenses
The following table summarizes our research and development expenses for the three months ended March 31, 2022 and 2021 (in thousands):
  Three Months Ended March 31,
 
2022
2021
$ Change
Employee-related expenses$6,155 $5,504 $651 
Outside and consulting services for preclinical studies and research and development activities by third-party contract organizations6,376 2,691 3,685 
Clinical trials expenses5,515 7,259 (1,744)
Depreciation of lab equipment and costs of equipment and supplies
1,390 1,530 (140)
Facilities and other allocated expenses1,436 1,543 (107)
Technology and intellectual property licenses— 
Total research and development expenses$20,881 $18,527 $2,354 
Research and development expenses for the three months ended March 31, 2022 was $20.9 million compared to $18.5 million for the three months ended March 31, 2021. The increase of $2.4 million is primarily attributable to third-party costs incurred for the advancement of preclinical programs, notably manufacturing related activities, and employee-related expenses, driven by headcount, salaries and stock-based compensation expense, partially offset by a decrease in clinical trial expenses due to the timing of manufacturing runs for PLN74809 in the first quarter of 2021.
We do not allocate our costs by product candidates or by preclinical programs as these are in early stages of clinical trials or development, and our internal expenses are not allocated between product candidates and programs. Although external third-party costs are allocable between product candidates and programs, we do not perform this allocation. We expect our research and development expenses to increase for the foreseeable future as we continue to invest in research and development activities related to developing our product candidates and our preclinical programs and as they advance into later stages of development.
General and Administrative Expenses
General and administrative expenses for the three months ended March 31, 2022 was $8.6 million compared to $6.6 million for the three months ended March 31, 2021. The increase of $2.0 million is primarily attributable to employee-related costs, driven by salaries and stock-based compensation expense.
We expect our general and administrative expenses to increase for the foreseeable future as we continue to build our administrative function to support our growth in operations and to meet the requirements of operating as a public company.
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Interest and Other Income (Expense), net
Interest and other income (expense), net for the three months ended March 31, 2022 was $111,000 compared to $63,000 for the three months ended March 31, 2021. The increase of $48,000 resulted from higher interest income in the current period.
Liquidity and Capital Resources
Overview
As of March 31, 2022, we had $178.3 million of cash, cash equivalents and short-term investments. Our short-term investments consist of U.S. Treasury securities, U.S. Government agency securities and highly rated, investment-grade corporate debt securities.
We believe that our existing capital resources, together with proceeds from the Oxford Loan Agreement, will be sufficient to meet our projected operating requirements to the middle of 2024. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. Further, our operating plan may change, and we may need additional funds to meet operational needs and capital requirements for product development and commercialization sooner than planned. If we do not achieve all the pre-determined development milestones in the Oxford Loan Agreement, our currently available capital resources will be sufficient to fund operations for at least 12 months from the date of this report.
Our operations have been financed primarily through the issuance and sale of convertible preferred stock, our collaboration with Novartis and issuance of common stock via our IPO. During the third quarter of 2021, we entered into a Controlled Equity OfferingSM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co., as sales agent, pursuant to which we may issue and sell up to $150.0 million of shares of common stock from time to time. The issuance and sale of these shares pursuant to the Sales Agreement are deemed an “at-the-market” offering and are registered under the Securities Act of 1933, as amended. We have not issued any shares pursuant to any at-the-market offerings but may do so at a future date. In May 2022 we entered into a Loan and Security Agreement (the “Oxford Loan Agreement”) with Oxford Finance LLC (or "Oxford"). Upon closing of the Oxford Loan Agreement, the Company drew $10.0 million of an initial $25.0 million tranche, with the remaining $15.0 million available through the end of the year. The Company has access to an additional $75.0 million over three tranches, $50.0 million of which is based on the achievement of pre-determined development milestones, and $25.0 million at Oxford's discretion.

Funding Requirements
Our primary use of cash is to fund operating expenses, primarily research and development expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable, accrued expenses and prepaid expenses.
Our future funding requirements will depend on many factors, including the following:
the initiation, progress, timing, costs and results of preclinical studies and clinical trials for our product candidates;
the clinical development plans we establish for these product candidates;
the timelines of our clinical trials and the overall costs to conduct and complete the clinical trials, which may be impacted by the COVID-19 pandemic;
the number and characteristics of product candidates that we develop;
the outcome, timing and cost of meeting regulatory requirements established by the U.S. Food and Drug Administration, or FDA, and other comparable foreign regulatory authorities;
whether we enter into any collaboration agreements and the terms of any such agreements;
the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights;
the cost of defending intellectual property disputes, including patent infringement actions brought by third parties against us or our product candidates;
the effect of competing technological and market developments;
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the cost and timing of completion of commercial-scale outsourced manufacturing activities;  
the cost of establishing sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval in regions where we choose to commercialize our products on our own; and
the cost of operating as a public company.
Further, our operating plan may change, and we may need additional funds to meet operational needs and capital requirements for clinical trials and other research and development expenditures. If we need to raise additional capital to fund our operations, funding may not be available to us on acceptable terms, or at all. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of or suspend one or more of our preclinical studies, clinical trials, research and development programs or commercialization efforts. We may seek to raise any necessary additional capital through a combination of public or private equity offerings, debt financings, collaborations and other licensing arrangements. If we raise capital through additional debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish certain valuable rights to our product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to us.
Cash Flows
Comparison of the three months ended March 31, 2022 and 2021
The following summarizes our cash flows for the periods indicated (in thousands):
Three Months Ended March 31,
20222021
Net cash used in operating activities$(20,498)$(13,665)
Net cash provided by investing activities1,531 12,232 
Net cash (used in) provided by financing activities(153)1,370 
Net decrease in cash and cash equivalents$(19,120)$(63)
Cash Used in Operating Activities
Net cash used in operating activities was $20.5 million for the three months ended March 31, 2022 compared to $13.7 million for the three months ended March 31, 2021. The increase in cash used in operating activities of $6.8 million over the prior year is primarily attributable to an increase in the net loss of $5.2 million primarily due to decreased revenue-related receipts from our collaboration partner, Novartis, during 2021 and the first quarter of 2022 coupled with an increase in operating expenses.
Cash Provided by Investing Activities
Net cash provided by investing activities was $1.5 million for the three months ended March 31, 2022 compared to net cash provided by investing activities of $12.2 million for the same period in 2021. The decrease of $10.7 million is attributable to a significant reduction in the amount of maturities relative to purchases of short-term investments during the period.
Cash Used in/Provided by Financing Activities
Net cash used in financing activities was $153 thousand for the three months ended March 31, 2022 compared to cash provided by financing activities of $1.4 million for the same period in 2021. The decrease of $1.6 million is mainly attributable to a decrease in the issuances of common stock under the Company's stock plans and an increase in the payment of deferred offering costs.
Contractual Obligations and Other Commitments
There have been no material changes to our contractual obligations and other commitments as of March 31, 2022, as compared to those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
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Subsequent to March 31, 2022, we entered into Loan and Security Agreement for a series of term loans up to an aggregate principal amount of $100.0 million as further described in Item 1, Note 19, Subsequent Events, in this Report.
Off-Balance Sheet Arrangements
During the periods presented, we did not have, nor do we currently have, any off-balance sheet arrangements or holdings in any variable interest entities.
Critical Accounting Polices and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
There have been no material changes to our critical accounting policies and estimates from those described in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC.
Recent Accounting Pronouncements
See Note 2 to our condensed financial statements appearing elsewhere in this Report for more information.
Emerging Growth Company Status and JOBS Act Accounting Election
Based on the market value of our common stock held by our non-affiliates as of June 30, 2021, we are considered a “large accelerated filer” on December 31, 2021 and thus lost our status as an emerging growth company as of such date. Accordingly, we can no longer rely upon exemptions and reduced reporting requirements provided by the JOBS Act.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The primary objectives of our investment activities are to ensure liquidity and to preserve capital. We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate sensitivities. We had cash, cash equivalents and short-term investments of $178.3 million as of March 31, 2022 which consisted of bank deposits, highly liquid money market funds and short-term investments in U.S. treasury securities, U.S. government agency securities and corporate debt securities. Historical fluctuations in interest rates have not been significant for us. We had no outstanding debt as of March 31, 2022. Due to the short-term maturities of our cash equivalents and short-term investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our cash equivalents or short-term investments. To minimize the risk, we maintain our portfolio of cash equivalents and short-term investments in institutional market funds that are composed of U.S. Treasury and U.S. Treasury-backed repurchase agreements or short-term U.S. Treasury securities, U.S. government agency securities and corporate debt securities. We do not believe that inflation, interest rate changes, or exchange rate fluctuations had a significant impact on our results of operations for any periods presented herein.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of March 31, 2022, management, with the participation of our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.
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Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2022, the design and operation of our disclosure controls and procedures were effective at a reasonable assurance level.
Changes in Internal Control over Financial Reporting
There was no change in our internal controls over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) under the Exchange Act that occurred during the quarter ended March 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We considered our internal controls over financial reporting in regards to the impact of COVID-19 and concluded that our controls continue to operate in a remote environment without material effect on our internal controls over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
As of the date of this filing, we are not party to any material legal matters or claims. We may become party to legal matters and claims arising in the ordinary course of business. We cannot predict the outcome of any such legal matters or claims, and despite the potential outcomes, the existence thereof may have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
Item 1A. Risk Factors.
Our business faces significant risks. If any of the events or circumstances described in the following risks actually occurs, our business may suffer, the trading price of our common stock could decline and our financial condition or results of operations could be harmed. These risks should be read in conjunction with the other information set forth in this quarterly report on Form 10-Q. The risks and uncertainties described below are not the only ones facing us. There may be additional risks faced by our business. Other events that we do not currently anticipate or that we currently deem immaterial also may adversely affect our financial condition or results of operations.
RISK FACTORS
Risks Related to Our Financial Position and Need for Additional Capital
We have incurred significant net losses since inception and we expect to continue to incur significant net losses for the foreseeable future.
We have incurred significant net losses since our inception and have financed our operations principally through equity and debt financing and our collaboration with Novartis. We continue to incur significant research and development and other expenses related to our ongoing operations. Our net loss was $97.3 million and $41.5 million for the years ended December 31, 2021 and 2020, respectively. As of March 31, 2022, we had an accumulated deficit of $243.2 million. We have devoted substantially all of our resources and efforts to research and development, and we expect that it will be at least several years, if ever, before we generate revenue from product sales. Even if we receive marketing approval for and commercialize one or more of our product candidates, we expect that we will continue to incur substantial research and development and other expenses in order to further develop and, if approved, market additional potential product candidates.
We expect to continue to incur significant losses for the foreseeable future, and we anticipate that our expenses will increase substantially if, and as, we:
advance our lead product candidate, PLN-74809, and our other product candidates through clinical development, and, if successful, later-stage clinical trials;
discover and develop new product candidates;
advance our preclinical development programs into clinical development;
further develop manufacturing processes and manufacture our product candidates;
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experience delays or interruptions to preclinical studies, clinical trials, our receipt of services from our third-party service providers on whom we rely, or our supply chain due to the COVID-19 pandemic;
seek regulatory approvals for any product candidates that successfully complete clinical trials;
commercialize PLN-74809, our other product candidates and any future product candidates, if approved;
increase the amount of research and development activities to identify and develop product candidates;
hire additional clinical development, quality control, scientific and management personnel;
expand our operational, financial and management systems and increase personnel, including personnel to support our clinical development and manufacturing efforts and our operations as a public company;
establish a sales, marketing, medical affairs and distribution infrastructure to commercialize any products for which we may obtain marketing approval and intend to commercialize on our own or jointly with third parties;
maintain, expand and protect our intellectual property portfolio;
invest in or in-license other technologies or product candidates; and
continue to build out our organization to engage in such activities.
To become and remain profitable, we must develop and eventually commercialize products with significant market potential. This will require us to be successful in a range of challenging activities, including completing preclinical studies and clinical trials, obtaining marketing approval for product candidates, manufacturing, marketing, and selling products for which we may obtain marketing approval and satisfying any post-marketing requirements. We may never succeed in any or all of these activities and, even if we do, we may never generate revenue that is significant enough to achieve profitability. If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, maintain our research and development efforts, expand our business, or continue our operations.
We will require substantial additional capital to finance our operations. If we are unable to raise such capital when needed, or on acceptable terms, we may be forced to delay, reduce and/or eliminate one or more of our research and drug development programs, future commercialization efforts or other operations.
Developing biopharmaceutical products, including conducting preclinical studies and clinical trials, is a very time-consuming, expensive, and uncertain process that takes years to complete. Our operations have consumed substantial amounts of cash since inception. We expect our expenses to increase in connection with our ongoing activities, particularly as we conduct our planned clinical trials of PLN-74809 and any future product candidates that we may develop, seek regulatory approvals for our product candidates and to launch and commercialize any products for which we receive regulatory approval. We also expect to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in order to maintain our continuing operations. If we are unable to raise capital when needed or on acceptable terms, we may be forced to delay, reduce, or eliminate one or more of our research and drug development programs or future commercialization efforts.
As of December 31, 2021, we had approximately $178.3 million in cash, cash equivalents and short-term investments. Based on our current operating plan, we believe that our existing cash, cash equivalents and short-term investments, together with proceeds from the Oxford Loan Agreement executed in the second quarter of 2022, will be sufficient to fund our operating expenses and capital expenditure requirements into the middle of 2024. However, our future capital requirements and the period for which our existing resources will support our operations may vary significantly from what we expect, and we will in any event require additional capital in order to complete clinical development of any of our current programs. Our monthly spending levels will vary based on new and ongoing development and corporate activities. Because the length of time and activities associated with development of our product candidates is highly uncertain, we are unable to estimate the actual funds we will require for development, marketing, and commercialization activities. Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to:
the initiation, progress, timing, costs and results of preclinical studies and clinical trials for our product candidates;
the clinical development plans we establish for these product candidates;
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the timelines of our clinical trials and the overall costs to conduct and complete the clinical trials due to the COVID-19 pandemic;
the cost and capital commitments required for developing manufacturing processes for our product candidates and manufacturing our product candidates at clinical and commercial scales;
the number and characteristics of product candidates that we develop;
the outcome, timing and cost of meeting regulatory requirements established by the FDA and other comparable foreign regulatory authorities;
whether we are able to maintain our existing collaboration with Novartis and enter into additional collaboration agreements and the terms of any such agreements;
the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights;
the cost of defending intellectual property disputes, including patent infringement actions brought by third parties against us or our product candidates;
the effect of competing technological and market developments;
the cost and timing of completion of commercial-scale outsourced manufacturing activities; and
the cost of establishing sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval in regions where we choose to commercialize our products on our own.
We have borrowed and in the future may borrow additional capital from institutional and commercial banking sources to fund future growth, including pursuant to our Oxford Loan Agreement, or potentially pursuant to new arrangements with different lenders. In addition, we expect to continue to opportunistically seek access to the equity capital markets to support our development efforts and operations. However, we cannot be certain that additional funding will be available on acceptable terms, or at all. Until we can generate sufficient revenue to finance our cash requirements, which we may never do, we expect to finance our future cash needs through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing or distribution arrangements. If we raise additional funds through public or private equity offerings, the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Further, to the extent that we raise additional capital through the sale of common stock or securities convertible or exchangeable into common stock, your ownership interest will be diluted. In addition, any future debt financing may subject us to fixed payment obligations and covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. If we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish certain valuable intellectual property or other rights to our product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to us. We also may be required to seek collaborators for any of our product candidates at an earlier stage than otherwise would be desirable or relinquish our rights to product candidates or technologies that we otherwise would seek to develop or commercialize ourselves. Market volatility resulting from the COVID-19 pandemic or other financial markets factors could also adversely impact our ability to access capital as and when needed. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates or one or more of our other research and development initiatives. Any of the above events could significantly harm our business, prospects, financial condition and results of operations and cause the price of our common stock to decline.
Covenants and other provisions in the Oxford Loan Agreement restrict our business and operations in many ways, and if we do not effectively manage our covenants, our financial conditions and results of operations could be adversely affected. In addition, our operations may not provide sufficient cash to meet the repayment obligations of our debt incurred under the Oxford Loan Agreement.
Pursuant to the Oxford Loan Agreement, Oxford has been granted a security interest in substantially all of our assets, excluding intellectual property (but including the right to payments and proceeds of intellectual property), and a negative pledge on substantially all of our intellectual property, subject to customary exceptions. If an event of default occurs under the Oxford Loan Agreement, Oxford may foreclose on its security interest and liquidate some or all of these assets, which would harm our business, financial condition and results of operations.
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In the event of a default in connection with our bankruptcy, insolvency, liquidation, or reorganization, Oxford would have a prior right to substantially all of our assets to the exclusion of our general unsecured creditors. Only after satisfying the claims of Oxford and any unsecured creditors would any amount be available for our equity holders.
The pledge of these assets and other restrictions imposed in the Oxford Loan Agreement may limit our flexibility in raising capital for other purposes. Because substantially all of our assets are pledged to secure the Oxford Loan Agreement obligations, our ability to incur additional indebtedness or to sell or dispose of assets to raise capital may be impaired, which could have an adverse effect on our financial flexibility.
In addition, if we are unable to comply with certain financial and operating restrictions in the Oxford Loan Agreement, we may be limited in our business activities and access to credit or may default under the Oxford Loan Agreement. Provisions in the Oxford Loan Agreement impose restrictions or require prior approval on our ability, and the ability of certain of our subsidiaries to, among other things:
Incur additional debt;
Make certain investments and acquisitions;
Guarantee the indebtedness of others or our subsidiaries;
Create liens or encumbrances;
Engage in new lines of business;
Enter into transactions with affiliates;
Pay cash dividends and make distributions;
Redeem or repurchase capital shares;
Sell, lease or transfer certain parts of our business or property, including equity interests of our subsidiaries;
Prepay other indebtedness; and
Acquire new companies and merge or consolidate.
The Oxford Loan Agreement also contains other customary covenants. We may not be able to comply with these covenants in the future. Our failure to comply with these covenants may result in the declaration of an event of default, which, if not cured or waived, may result in the acceleration of the maturity of indebtedness outstanding under the Oxford Loan Agreement and would require us to pay all amounts outstanding. If the maturity of our indebtedness is accelerated, we may not have sufficient funds then available for repayment or we may not have the ability to borrow or obtain sufficient funds to replace the accelerated indebtedness on terms acceptable to us or at all. Our failure to repay our obligations under the Oxford Loan Agreement would result in Oxford foreclosing on all or a portion of our assets, which could force us to curtail or cease our operations.
The amount of our future losses is uncertain and our quarterly operating results may fluctuate significantly or may fall below the expectations of investors or securities analysts, each of which may cause our stock price to fluctuate or decline.
Our quarterly and annual operating results may fluctuate significantly in the future due to a variety of factors, many of which are outside of our control and may be difficult to predict, including the following:
the timing and success or failure of clinical trials for our product candidates or competing product candidates, or any other change in the competitive landscape of our industry, including consolidation among our competitors or partners;
our ability to successfully recruit and retain subjects for clinical trials, and any delays caused by difficulties in such efforts;
our ability to obtain marketing approval for our product candidates, and the timing and scope of any such approvals we may receive;
the timing and cost of, and level of investment in, research and development activities relating to our product candidates, which may change from time to time;
the cost of manufacturing our product candidates, which may vary depending on the difficulty of manufacture, quantity of production and the terms of our agreements with manufacturers;
our ability to attract, hire and retain qualified personnel;
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expenditures that we will or may incur to develop additional product candidates;
the level of demand for our product candidates should they receive approval, which may vary significantly;
the risk/benefit profile, cost and reimbursement policies with respect to our product candidates, if approved, and existing and potential future therapeutics that compete with our product candidates;
general market conditions or extraordinary external events, such as recessions or the COVID-19 pandemic;
the changing and volatile U.S. and global economic environments; and
future accounting pronouncements or changes in our accounting policies.
The cumulative effects of these factors could result in large fluctuations and unpredictability in our quarterly and annual operating results. As a result, comparing our operating results on a period-to-period basis may not be meaningful. This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period. If our revenue or operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market, or if the forecasts we provide to the market are below the expectations of analysts or investors, the price of our common stock could decline substantially. Such a stock price decline could occur even when we have met any previously publicly stated guidance we may provide.
Risks Related to Research and Development and the Biopharmaceutical Industry
We have a limited operating history, which may make it difficult to evaluate our prospects and likelihood of success.
We are a clinical-stage biopharmaceutical company with a limited operating history. We were incorporated in 2015, have no products approved for commercial sale and have not generated any revenue from product sales to date. Our operations to date have been limited to organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio and performing research and development of our product candidates and our technology related to transforming growth factor beta, or TGF-β, signaling and integrin biology, medicinal chemistry, translational screening technologies, and clinical insights to discover and develop novel therapies for the treatment of fibrosis. Our approach to the discovery and development of product candidates is unproven, and we do not know whether we will be able to develop any products of commercial value. In addition, our lead product candidate, PLN-74809, is in early clinical development for the treatment of IPF and PSC, and a second product candidate, PLN-1474, is in early clinical development. Both programs will require substantial additional development and clinical research time and resources, either from us or our collaborators, before we would be able to apply for or receive regulatory approvals and begin generating revenue from product sales. We have not yet demonstrated the ability to progress any product candidate through clinical trials. We are still in preclinical and early clinical development and may be unable to obtain regulatory approval, manufacture a commercial scale product, or arrange for a third-party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate adequate efficacy or an acceptable safety profile, gain regulatory approval and become commercially viable. In addition, as a business with a limited operating history, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors and risks frequently experienced by early-stage biopharmaceutical companies in rapidly evolving fields. Consequently, we have no meaningful history of operations upon which to evaluate our business, and predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing drug products.
Our business is highly dependent on the success of our lead product candidate, PLN-74809, as well as PLN-1474 and any other product candidates that we advance into the clinic. All of our product candidates will require significant additional preclinical and clinical development before we may be able to seek regulatory approval for and launch a product commercially.
We currently have no products that are approved for commercial sale and may never be able to develop marketable products. We are very early in our clinical development for both PLN-74809 and PLN-1474. Because PLN-74809 is our lead product candidate, if PLN-74809 encounters safety or efficacy problems, development delays, regulatory issues or other problems, our development plans and business would be significantly harmed. We have completed various Phase 1 trials of PLN-74809. We are enrolling two Phase 2a trials in IPF, including a PET imaging trial. We are also conducting a Phase 2a PSC trial which is currently enrolling patients. We are also collaborating with Novartis to develop PLN-1474 for liver fibrosis associated with NASH and have completed a Phase 1a SAD/MAD study evaluating PLN-1474 in healthy volunteers. The IND
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for this candidate was transferred to Novartis in the first quarter of 2021, and Novartis is responsible for all PLN-1474 development, manufacturing, and commercialization activities after the initial development period. All of the risks and uncertainties that apply to PLN-74809 or any candidates that we develop independently apply equally to our collaborator with respect to advancement of PLN-1474. In addition, we also face risks resulting from our reliance on Novartis for development of this candidate. See “Risks Related to Our Reliance on Third Parties.”
Before we can generate any revenue from sales of our lead product candidate, PLN-74809, or any of our other product candidates, we must undergo additional preclinical and clinical development, regulatory review, and approval in one or more jurisdictions. In addition, if one or more of our product candidates are approved, we must ensure access to sufficient commercial manufacturing capacity and conduct significant marketing efforts in connection with any commercial launch. These efforts will require substantial investment, and we may not have the financial resources to continue development of our product candidates.
We may experience setbacks that could delay or prevent regulatory approval of, or the extent of regulatory protection or our ability to commercialize, our product candidates, including:
negative or inconclusive results from our preclinical studies or clinical trials or the clinical trials of others for product candidates similar to ours, leading to a decision or requirement to conduct additional preclinical testing or clinical trials or abandon a program;
product-related side effects experienced by subjects in our clinical trials or by individuals using drugs or therapeutics similar to our product candidates;
delays in submitting INDs or comparable foreign applications or delays or failure in obtaining the necessary approvals from regulators to commence a clinical trial, or a suspension or termination of a clinical trial once commenced;
conditions imposed by the FDA or comparable foreign authorities regarding the scope or design of our clinical trials;
delays in enrolling subjects in clinical trials, including due to the COVID-19 pandemic;
high drop-out rates of subjects from clinical trials;
inadequate supply or quality of product candidates or other materials necessary for the conduct of our clinical trials;
challenges manufacturing our product candidates to regulatory requirements in a cost effective manner;
greater than anticipated clinical trial costs;
inability to compete with other therapies;
failure to secure or maintain orphan designation in some jurisdictions;
poor efficacy of our product candidates during clinical trials;
unfavorable FDA or other regulatory agency inspection and review of a clinical trial site;
failure of our third-party contractors or investigators to comply with regulatory requirements or otherwise meet their contractual obligations in a timely manner, or at all;
delays and changes in regulatory requirements, policy and guidelines, including the imposition of additional regulatory oversight around clinical testing generally or with respect to our technology in particular; or
varying interpretations of data by the FDA and similar foreign regulatory agencies.
We do not have complete control over many of these factors, including certain aspects of clinical development and the regulatory submission process, potential threats to our intellectual property rights and our manufacturing, marketing, distribution and sales efforts or that of any future collaborator.
Our approach to drug discovery and development in the area of fibrotic diseases, with an initial focus on tissue-specific integrin modulation and TGF-β signaling inhibition, is unproven and may not result in marketable products.
Our approach is designed to discover and develop targeted treatments for fibrosis with an initial focus on the antagonism of tissue-specific TGF-β signaling through the inhibition of integrins known to mediate the release of activated TGF-β in fibrotic tissue. However, although multiple studies are currently underway, to date, this mechanism has not been
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definitively proven to successfully treat fibrosis. Targeting integrins to treat fibrosis is a novel approach in a rapidly developing field, and there can be no assurance that we will not experience currently unknown problems or delays in developing our product candidates, that such problems or delays will not result in unanticipated costs, or that any such development problems can be solved. We have primarily tested our lead product candidate, PLN-74809, in healthy volunteers. Therefore, we may ultimately discover that our approach and any product candidates resulting therefrom do not possess properties required for therapeutic effectiveness. As a result, we may never succeed in developing a marketable product.
In addition, while we have developed an extensive panel of cell assays and precision cut tissue assays and have utilized animal models to uncover biological pathways, understood gene expression changes and optimized the potency and selectivity of our potential product candidates, there can be no assurance that our technology will yield their intended benefits. While we believe our assays represent a differentiator in our approach to drug development, our approach has not yet been clinically proven to yield results. Our practice of evaluating our product candidates in live human fibrotic tissue samples before advancing them into the clinic is intended to serve as a bridge between animal models and clinical proof-of-concept. However, there can be no assurance that positive results observed from preclinical animal testing and human fibrotic tissue models will be replicated when a program is advanced into clinical development. In addition, our practice of utilizing live human fibrotic tissue as part of our development efforts may become more widespread in the future, and this approach may be adopted and replicated by others, including our competitors.
Studies involving human tissue samples may also be subject to institutional and government human subject privacy policies that may vary by territory. We or our partners who provide us with human tissue samples or conduct tissue and/or animal studies on our behalf, may be found to be in violation of one or more of these regulations or policies and may be subject to closure, censure or other penalties. In some cases, these penalties could materially impact the performance, availability, or validity of studies conducted by us or on our behalf. Even in the absence of violations resulting in penalties, regulatory and other authorities may refuse to authorize the conduct or to accept the results of studies for regulatory or ethical reasons.
Clinical development involves a lengthy, complex, and expensive process, with an uncertain outcome.
To obtain the requisite regulatory approvals to commercialize any product candidates, we must demonstrate through extensive preclinical studies and clinical trials that our product candidates are safe and effective in humans. Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. In particular, the general approach for FDA approval of a new drug is dispositive data from two well-controlled, Phase 3 clinical trials of the relevant drug in the relevant patient population. Phase 3 clinical trials typically involve hundreds of patients, have significant costs and take years to complete. A product candidate can fail at any stage of testing, even after observing promising signals of activity in earlier preclinical studies or clinical trials. The results of preclinical studies and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials. In addition, initial success in clinical trials may not be indicative of results obtained when such trials are completed. There is typically an extremely high rate of attrition from the failure of product candidates proceeding through clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy profile despite having progressed through preclinical studies and initial clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or unacceptable safety issues, notwithstanding promising results in earlier trials. Most product candidates that commence clinical trials are never approved as products and there can be no assurance that any of our future clinical trials will ultimately be successful or support further clinical development of PLN-74809 or any of our other product candidates. Product candidates that appear promising in the early phases of development may fail to reach the market for several reasons, including:
preclinical studies or clinical trials may show the product candidates to be less effective than expected (e.g., a clinical trial could fail to meet its primary endpoint(s)) or to have unacceptable side effects or toxicities;
failure to establish clinical endpoints that applicable regulatory authorities would consider clinically meaningful;
failure to receive the necessary regulatory approvals;
development of competing products in the same disease state;
manufacturing costs, formulation issues, pricing or reimbursement issues, or other factors that make a product candidate uneconomical; and
the proprietary rights of others and their competing products and technologies that may prevent one of our product candidates from being commercialized.
In addition, differences in trial design between early-stage clinical trials and later-stage clinical trials make it difficult to extrapolate the results of earlier clinical trials to later clinical trials. Further, as we rely on novel technologies
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including sophisticated imaging technologies to generate data relating to our clinical endpoints, there is an increased risk that we may not properly measure, analyze or interpret this data. Moreover, clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in clinical trials have nonetheless failed to obtain marketing approval of their products. Additionally, some of our trials are open-label studies, where both the patient and investigator know whether the patient is receiving the investigational product candidate or either an existing approved drug or placebo. Most typically, open-label clinical trials test only the investigational product candidate and sometimes do so at different dose levels. Open-label clinical trials are subject to various limitations that may exaggerate any therapeutic effect as patients in open-label clinical trials are aware when they are receiving treatment. In addition, open-label clinical trials may be subject to an “investigator bias” where those assessing and reviewing the physiological outcomes of the clinical trials are aware of which patients have received treatment and may interpret the information of the treated group more favorably given this knowledge. Therefore, it is possible that positive results observed in open-label trials will not be replicated in later placebo-controlled trials.
In addition, the standards that the FDA and comparable foreign regulatory authorities use when regulating us require judgment and can change, which makes it difficult to predict with certainty how they will be applied. Although we are initially focusing our efforts on development of small molecule drug products, we are also considering the development of biological products, including a potential candidate for muscular dystrophies, which could make us subject to additional regulatory requirements. Any analysis we perform of data from preclinical and clinical activities is subject to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval. We may also encounter unexpected delays or increased costs due to new government regulations. Examples of such regulations include future legislation or administrative action, or changes in FDA policy during the period of product development and FDA regulatory review. It is impossible to predict whether legislative changes will be enacted, or whether FDA or foreign regulations, guidance or interpretations will be changed, or what the impact of such changes, if any, may be. 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 approval. The opinion of the Advisory Committee, although not binding, may have a significant impact on our ability to obtain approval of any product candidates that we develop.
If we seek to conduct clinical trials in foreign countries or pursue marketing approvals in foreign jurisdictions, we must comply with numerous foreign regulatory requirements governing, among other things, the conduct of clinical trials, manufacturing and marketing authorization, pricing and third-party reimbursement. The foreign regulatory approval process varies among countries and may include all of the risks associated with FDA approval described above as well as risks attributable to the satisfaction of local regulations in foreign jurisdictions. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval. Approval by the FDA does not ensure approval by regulatory authorities outside the United States and vice versa.
Successful completion of clinical trials is a prerequisite to submitting a marketing application to the FDA and similar marketing applications to comparable foreign regulatory authorities, for each product candidate and, consequently, the ultimate approval and commercial marketing of any product candidates. We may experience negative or inconclusive results, which may result in our deciding, or our being required by regulators, to conduct additional clinical studies or trials or abandon some or all of our product development programs, which could have a material adverse effect on our business.
We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of PLN-74809 or any other product candidates.
We may experience delays in initiating or completing clinical trials. We also may experience numerous unforeseen events during, or as a result of, any future clinical trials that could delay or prevent our ability to receive marketing approval or commercialize PLN-74809 or any other product candidates, including:
regulators or institutional review boards, or IRBs, or ethics committees may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;
the FDA or other comparable regulatory authorities may disagree with our clinical trial design, including with respect to dosing levels administered in our planned clinical trials, which may delay or prevent us from initiating our clinical trials with our originally intended trial design;
we may experience delays in reaching, or fail to reach, agreement on acceptable terms with prospective trial sites and prospective CROs, which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
the number of subjects required for clinical trials of any product candidates may be larger than we anticipate or subjects may drop out of these clinical trials or fail to return for post-treatment follow-up at a higher rate than we anticipate;
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our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all, or may deviate from the clinical trial protocol or drop out of the trial, which may require that we add new clinical trial sites or investigators;
due to the impact of the COVID-19 pandemic, we have experienced, and may continue to experience, delays and interruptions to our preclinical studies and clinical trials, we may experience delays or interruptions to our manufacturing supply chain, or we could suffer delays in reaching, or we may fail to reach, agreement on acceptable terms with third-party service providers on whom we rely;
additional delays and interruptions to our clinical trials could extend the duration of the trials and increase the overall costs to finish the trials as our fixed costs are not substantially reduced during delays;
we may elect to, or regulators, IRBs, Data Safety Monitoring Boards, or DSMBs, or ethics committees may require that we or our investigators, suspend or terminate clinical research or trials for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks;
we may not have the financial resources available to begin and complete the planned trials, or the cost of clinical trials of any product candidates may be greater than we anticipate;
the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate to initiate or complete a given clinical trial; and
the FDA or other comparable foreign regulatory authorities may require us to submit additional data such as long-term toxicology studies, or impose other requirements before permitting us to initiate a clinical trial.
Our product development costs will increase if we experience additional delays in clinical testing or in obtaining marketing approvals. We do not know whether any of our clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. If we do not achieve our product development goals in the timeframes we announce and expect, the approval and commercialization of our product candidates may be delayed or prevented entirely. Significant clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates and may allow our competitors to bring products to market before we do, potentially impairing our ability to successfully commercialize our product candidates and harming our business and results of operations. Any delays in our clinical development programs may harm our business, financial condition, and results of operations significantly.
Our ongoing and future clinical trials may reveal significant adverse events or unexpected drug-drug interactions not seen in our preclinical studies and may result in a safety profile that could delay or prevent regulatory approval or market acceptance of any of our product candidates.
We completed our Phase 1a clinical trial of our lead product candidate PLN-74809 in healthy volunteers, and, with the exception of a number of reported minor adverse events, the product candidate was observed to be generally well-tolerated across all doses in 71 trial participants. However, if significant adverse events or other side effects are observed in any of our ongoing or future clinical trials, we may have difficulty recruiting patients to our clinical trials, patients may drop out of our trials, or we may be required to abandon the trials or our development efforts altogether. In addition, in our ongoing Phase 2a clinical trials, we are evaluating PLN-74809 administered with approved IPF agents. As a result, we may encounter unexpected drug-drug interactions in our planned trials, and may be required to further test these candidates, including in drug-drug interaction studies, which may be expensive, time-consuming and result in delays to our programs.
Some potential therapeutics developed in the biopharmaceutical industry that initially showed therapeutic promise in early-stage trials have later been found to cause side effects that prevented their further development. Even if the side effects do not preclude the product candidate from obtaining or maintaining marketing approval, undesirable side effects may inhibit market acceptance of the approved product due to its tolerability versus other therapies.
If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.
We may experience difficulties in patient enrollment in our clinical trials for a variety of reasons. The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the trial until its conclusion. The enrollment of patients depends on many factors, including:
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the patient eligibility and exclusion criteria defined in the protocol;
the size of the patient population required for analysis of the trial’s primary endpoints and the process for identifying patients;
the willingness or availability (including legality under any future or reinstated COVID-19 shelter-in-place regulations) of patients to participate in our trials (including due to fears of contracting COVID-19);
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;
clinicians’ and patients’ perceptions as to the potential advantages and risks of the product candidate being studied in relation to other available therapies, including any new products that may be approved for the indications we are investigating;
the availability of competing commercially available therapies and other competing product candidates’ clinical trials;
our ability to obtain and maintain patient informed consents; and
the risk that patients enrolled in clinical trials will drop out of the trials before completion.
For example, we are initially developing PLN-74809 for the treatment of IPF and PSC, each of which is an orphan indication. In the United States, IPF is estimated to affect approximately 140,000 patients, while PSC is estimated to affect approximately 30,000 to 45,000 patients. As a result, we may encounter difficulties enrolling subjects in our clinical trials of PLN-74809 due, in part, to the small size of these patient populations. Moreover, our Phase 2a PET imaging IPF trial is being conducted at a single site, which could limit the availability of IPF patients at the site and may slow enrollment in that specific trial. In addition, our clinical trials will compete with other clinical trials for product candidates that are in the same therapeutic areas as our product candidates, and this competition will reduce the number and types of patients available to us, because some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors. Since the number of qualified clinical investigators is limited, 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 in such clinical trial site.
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. For example, our clinical trial sites have been affected by the COVID-19 pandemic. Commencement of enrollment of our clinical trials of PLN-74809 in IPF and PSC was delayed. While these trials have resumed patient enrollment, we believe we are experiencing slower than expected enrollment due to the pandemic. Also, while the Phase 1 trial of PLN-1474 has completed, this trial experienced delays due to COVID-19. In addition, after enrollment in these trials, if patients contract COVID-19 during participation in our trials or are subject to isolation or shelter-in-place restrictions, this may cause them to drop out of our trials, miss scheduled doses or follow-up visits or otherwise fail to follow trial protocols. If patients are unable to follow the trial protocols or if our trial results are otherwise disputed due to the effects of the COVID-19 pandemic or actions taken to mitigate its spread, the integrity of data from our trials may be compromised or not accepted by the FDA or other regulatory authorities, which would represent a significant setback for the applicable program.
Some factors from the COVID-19 pandemic that we believe may adversely affect enrollment in our trials include:
the diversion of healthcare resources away from the conduct of clinical trial matters to focus on pandemic concerns, including the attention of infectious disease physicians serving as our clinical trial investigators, hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;
given that our clinical trials target respiratory indications, patients who would otherwise be candidates for enrollment in our clinical trials, may become infected with coronavirus, which may kill some patients and render others too ill to participate, limiting the available pool of participants for our trials;
the inability of patients to come to hospitals and universities to participate in our trial, which may force us to conduct our trials in patients’ homes, rendering the trials more difficult and costly to conduct;
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limitations on travel that interrupt key trial activities, such as clinical trial site initiations and monitoring;
interruption in global shipping affecting the transport of clinical trial materials, such as investigational drug product and comparator drugs used in our trials; and
employee furlough days that delay necessary interactions with local regulators, ethics committees and other important agencies and contractors.
The global outbreak of the COVID-19 pandemic continues to evolve and the conduct of our trials may continue to be adversely affected, despite efforts to mitigate this impact.
The design or execution of our ongoing and future clinical trials may not support marketing approval.
The design or execution of a clinical trial can determine whether its results will support marketing approval, and flaws in the design or execution of a clinical trial may not become apparent until the clinical trial is well advanced. We are currently recruiting two Phase 2a trials of PLN-74809 in IPF. In the first of these trials, the study is designed to enroll IPF patients and utilize a positron emission tomography, or PET, ligand to measure αvß6 target engagement by PLN-74809 in the lungs post-treatment. The second trial is a 12-week double-blind placebo-controlled trial to evaluate safety, tolerability and PK of up three doses of PLN-74809. It is possible that we may need to amend our clinical trial, which would require us to resubmit our clinical trial protocols to competent authorities and ethics committees for reexamination, and may impact the costs, timing, or successful completion of such clinical trial. In addition, we may desire to test PLN-74809 at doses exceeding those evaluated in an ongoing Phase 1a trial and may not be able to do so.
Additionally, in some instances, there can be significant variability in safety or efficacy results between different trials with the same product candidate due to numerous factors, including differences in trial protocols, size and type of the patient populations, variable adherence to the dosing regimen or other protocol requirements and the rate of dropout among clinical trial participants. We do not know whether any clinical trials we conduct will demonstrate consistent or adequate efficacy and safety to obtain marketing approval to market our product candidates.
Further, the FDA and comparable foreign regulatory authorities have substantial discretion in the approval process and in determining when or whether marketing approval will be obtained for any of our product candidates. Our product candidates may not be approved even if they achieve their primary endpoints in future Phase 3 clinical trials or registrational trials. The FDA or comparable foreign regulatory authorities may disagree with our trial designs and our interpretation of data from preclinical studies or clinical trials. In addition, any of these regulatory authorities may change requirements for the approval of a product candidate even after reviewing and providing comments or advice on a protocol for a pivotal Phase 3 or registrational clinical trial. In addition, any of these regulatory authorities may also approve a product candidate for fewer or more limited indications than we request or may grant approval contingent on the performance of costly post-marketing clinical trials. The FDA or comparable foreign regulatory authorities may not approve the labeling claims that we believe would be necessary or desirable for the successful commercialization of our product candidates, if approved.
Delays in patient enrollment may result in increased costs or may affect the timing or outcome of our future clinical trials, which could prevent completion of these trials and adversely affect our ability to advance the development of our product candidates.
Although we have received U.S. orphan drug designation for PLN-74809 for IPF and PSC indications and EEA orphan drug designation for PLN-74809 for PSC, we may be unable to obtain and maintain orphan drug designation for our other product candidates and, even if we obtain such designation, we may not be able to realize the benefits of such designation, including potential marketing exclusivity of our product candidates, if approved.
Regulatory authorities in some jurisdictions, including the United States and other major markets, may designate drugs intended to treat conditions or diseases affecting relatively small patient populations as orphan drugs. Under the Orphan Drug Act of 1983, the FDA may designate a product candidate as an orphan drug if it is intended to treat a rare disease or condition, which is generally defined as having a patient population of fewer than 200,000 individuals 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 drug will be recovered from sales in the United States. In order to obtain orphan designation in the European Economic Area, or EEA, the product must fulfill certain challenging criteria. Under Article 3 of Regulation (EC) 141/2000, a medicinal product may be designated as an orphan medicinal product if it meets the following criteria: (1) such product is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition; (2) either the prevalence of such condition must not be more than five in 10,000 persons in the EU when the application is made, or without the benefits derived from orphan status, it must be unlikely that the marketing of the medicine would generate sufficient return in the EU to justify the investment needed for its development; and (3) there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized for marketing in the EU or if such a method exists, the product will be of significant benefit to those affected by the condition, as defined in Regulation (EC) 847/2000.
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Although we have received U.S. orphan drug designation for PLN-74809 for IPF and PSC and EEA orphan drug designation for PLN-74809 for PSC, the designation of any of our product candidates as an orphan drug does not mean that any regulatory agency will accelerate regulatory review of, or ultimately approve, that product candidate, nor does it limit the ability of any regulatory agency to grant orphan drug designation to product candidates of other companies that treat the same indications as our product candidates.
Generally, if a product candidate with an orphan drug designation 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 FDA or foreign regulatory authorities from approving another marketing application for a product that constitutes a similar medicinal product treating the same indication for that marketing exclusivity period, except in limited circumstances. The applicable period is seven years in the United States and ten years (which can be extended a further two years if the product qualifies for a pediatric extension) in EEA. Orphan drug exclusivity may be revoked if any regulatory agency 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.
Even if we obtain orphan drug exclusivity for a product candidate, that exclusivity may not effectively protect the product candidate from competition because different drugs can be approved for the same condition in the United States or EEA. Even after an orphan drug is approved, the FDA or EMA may subsequently approve another drug for the same condition if the FDA or EMA, as applicable, concludes that the latter drug is not a similar medicinal product or is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care.
A Fast Track designation by the FDA, even if granted for other current or future product candidates, may not lead to a faster development or regulatory review, licensure process and does not increase the likelihood that our product candidates will receive marketing licensure.
We may seek Fast Track designation for one or more of our future product candidates. In April 2022, PLN-74809 received Fast Track designation for the treatment of IPF. If a drug product is intended for the treatment of a serious or life-threatening disease or condition and it demonstrates the potential to address unmet medical needs for such a disease or condition, the drug sponsor may apply for FDA Fast Track designation for a particular indication. We may seek Fast Track designation for our product candidates, but there is no assurance that the FDA will grant this designation to any of our proposed product candidates. Marketing applications submitted by sponsors of products in Fast Track development may qualify for priority review under the policies and procedures offered by the FDA, but the Fast Track designation does not assure any such qualification or ultimate marketing licensure by the FDA. The FDA has broad discretion whether or not to grant Fast Track designation, so even if we believe a particular product candidate is eligible for this designation, there can be no assurance 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 licensure compared to conventional FDA procedures or pathways and receiving a Fast Track designation does not provide assurance of ultimate FDA licensure. In addition, the FDA may withdraw Fast Track designation if it believes that the designation is no longer supported by data from our clinical development program. In addition, the FDA may withdraw any Fast Track designation at any time.
Changes in methods of product candidate manufacturing or formulation may result in additional costs or delay.
As product candidates progress through preclinical to late-stage clinical trials to marketing approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods and formulation, are altered along the way in an effort to optimize yield, manufacturing batch size, minimize costs and achieve consistent quality and results. Such changes carry the risk that they will not achieve these intended objectives. Any of these changes could cause our product candidates to perform differently and affect the results of planned clinical trials or other future clinical trials conducted with the altered materials. This could delay completion of clinical trials, require the conduct of bridging clinical trials or the repetition of one or more clinical trials, increase clinical trial costs, delay approval of our product candidates and jeopardize our ability to commercialize our product candidates and generate revenue.
In addition, there are risks associated with large scale manufacturing for clinical trials or commercial scale including, among others, cost overruns, potential problems with process scale-up, process reproducibility, stability issues, compliance with good manufacturing practices, lot consistency and timely availability of raw materials. Even if we obtain marketing approval for any of our product candidates, there is no assurance that our manufacturers will be able to manufacture the approved product to specifications acceptable to the FDA or other comparable foreign regulatory authorities, to produce it in sufficient quantities to meet the requirements for the potential commercial launch of the product or to meet potential future demand. Additionally, if we advance a biological candidate into IND-enabling studies, the manufacturing processes for biological products is more complex and expensive than with small molecule products and additional manufacturing suppliers may be needed to manufacture clinical supplies for these programs. If our manufacturers are unable to produce sufficient
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quantities for clinical trials or for commercialization, our development and commercialization efforts would be impaired, which would have an adverse effect on our business, financial condition, results of operations and growth prospects.
We may not be successful in our efforts to identify or discover additional product candidates in the future.
Our research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development for a number of reasons, including:
our inability to design such product candidates with the pharmacological properties that we desire or attractive pharmacokinetics; or
potential product candidates may, on further study, be shown to have harmful side effects or other characteristics that indicate that they are unlikely to be medicines that will receive marketing approval and achieve market acceptance.
Research programs to identify new product candidates require substantial technical, financial, and human resources. If we are unable to identify suitable compounds for preclinical and clinical development, we will not be able to obtain product revenue in future periods, which likely would result in significant harm to our financial position and adversely impact our stock price.
Due to our limited resources and access to capital, we must make decisions on the allocation of resources to certain programs and product candidates; these decisions may prove to be wrong and may adversely affect our business.
We have limited financial and human resources and intend to initially focus on research programs and product candidates for a limited set of indications. As a result, we may forgo or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential or a greater likelihood of success. In addition, we seek to accelerate our development timelines, including by initiating certain clinical trials of our product candidates before earlier-stage studies have been completed. This approach may cause us to commit significant resources to prepare for and conduct later-stage trials for one or more product candidates that subsequently fail earlier-stage clinical testing. Therefore, our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities or expend resources on product candidates that are not viable.
There can be no assurance that we will ever be able to identify additional therapeutic opportunities for our product candidates or to develop suitable potential product candidates through internal research programs, which could materially adversely affect our future growth and prospects. We may focus our efforts and resources on potential product candidates or other potential programs that ultimately prove to be unsuccessful.
If product liability lawsuits are brought against us, we may incur substantial financial or other liabilities and may be required to limit commercialization of our product candidates.
We face an inherent risk of product liability as a result of testing PLN-74809 and any of our other product candidates in clinical trials and will face an even greater risk if we commercialize any products. For example, we may be sued if our product candidates cause or are perceived to cause injury or are found to be otherwise unsuitable during clinical trials, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:
inability to bring a product candidate to the market;
decreased demand for our products;
injury to our reputation;
withdrawal of clinical trial participants and inability to continue clinical trials;
initiation of investigations by regulators;
fines, injunctions or criminal penalties;
costs to defend the related litigation;
diversion of management’s time and our resources;
substantial monetary awards to trial participants;
product recalls, withdrawals or labeling, marketing or promotional restrictions;
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loss of revenue;
exhaustion of any available insurance and our capital resources;
the inability to commercialize any product candidate, if approved; and
decline in our share price.
Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products we develop. We will need to obtain additional insurance for clinical trials as PLN-74809 continues clinical development and as additional product candidates enter the clinic. However, we may be unable to obtain, or may obtain on unfavorable terms, clinical trial insurance in amounts adequate to cover any liabilities from any of our clinical trials. Our insurance policies may also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We may have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts. Even if our agreements with any future corporate collaborators entitle us to indemnification against losses, such indemnification may not be available or adequate should any claim arise.
We face substantial competition, which may result in others discovering, developing, or commercializing products before or more successfully than us.
The development and commercialization of new drug products is highly competitive. We may face competition with respect to any product candidates that we seek to develop or commercialize in the future from major biopharmaceutical companies, specialty biopharmaceutical companies, and biotechnology companies worldwide. Potential competitors also include academic institutions, government agencies, and other public and private research organizations that conduct research, seek patent protection, and establish collaborative arrangements for research, development, manufacturing, and commercialization.
There are a number of biopharmaceutical and biotechnology companies that are currently pursuing the development of products for the treatment of fibrosis. Companies that we are aware of that are targeting the treatment of various fibrosis indications through inhibiting various parts of the TGF-β pathway include companies with significant financial resources such as AbbVie Inc., AstraZeneca plc, Bristol Myers Squibb Co., Corbus Pharmaceutical, DiCE Therapeutics, Inc., FibroGen, Inc., Gilead Sciences, Inc., Galapagos NV, Morphic Therapeutics, Inc., Novartis AG, and Takeda Pharmaceutical Company.
Many of our current or potential competitors, either alone or with their strategic partners, have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals, and marketing approved products than we do.
Mergers and acquisitions in the biopharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, more convenient or less expensive than any products that we may develop. Furthermore, products currently approved for other indications could be discovered to be effective treatments of fibrosis as well, which could give such products significant regulatory and market timing advantages over PLN-74809 or other product candidates that we may identify. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. Additionally, products or technologies developed by our competitors may render our potential product candidates uneconomical or obsolete and we may not be successful in marketing any product candidates we may develop against competitors. The availability of competitive products could limit the demand, and the price we are able to charge, for any products that we may develop and commercialize.
Risks Related to Marketing, Reimbursement, Healthcare Regulations and Ongoing Regulatory Compliance
Even if a product candidate we develop receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.
Even if PLN-74809 or any other product candidate we develop receives marketing approval, it may nonetheless fail to gain sufficient market acceptance by physicians, patients and third-party payors. In addition, the availability of coverage
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by third-party payors may be affected by existing and future health care reform measures designed to reduce the cost of health care. If the product candidates we develop do not achieve an adequate level of acceptance, we may not generate significant product revenues and we may not become profitable.
The degree of market acceptance of any product candidate, if approved for commercial sale, will depend on a number of factors, including:
efficacy and potential advantages compared to alternative treatments;
the ability to offer our products, if approved, for sale at competitive prices;
convenience and ease of administration compared to alternative treatments;
the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
the recommendations with respect to our product candidates in guidelines published by various scientific organizations applicable to us and our product candidates;
the strength of marketing and distribution support;
the ability to obtain sufficient third-party coverage and adequate reimbursement; and
the prevalence and severity of any side effects.
If government and other third-party payors do not provide coverage and adequate reimbursement levels for any products we commercialize, market acceptance and commercial success would be reduced.
Coverage and reimbursement may be limited or unavailable in certain market segments for our product candidates, if approved, which could make it difficult for us to sell any product candidates profitably.
Significant uncertainty exists as to the coverage and reimbursement status of any products for which we may obtain regulatory approval. In the United States, sales of any products for which we may receive regulatory marketing approval will depend, in part, on the availability of coverage and adequacy of reimbursement from third-party payors. Third-party payors include government authorities such as Medicare, Medicaid, TRICARE, and the Veterans Administration, managed care providers, private health insurers, and other organizations. Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Coverage and adequate reimbursement from governmental healthcare programs, such as Medicare and Medicaid, and commercial payors is critical to new product acceptance. Patients are unlikely to use our product candidates unless coverage is provided, and reimbursement is adequate to cover a significant portion of the cost. We cannot be sure that coverage and adequate reimbursement will be available for any product that we may develop and, if reimbursement is available, what the level of reimbursement will be.
Government authorities and other third-party payors decide which drugs and treatments they will cover and the amount of reimbursement. Coverage and reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that use of a product is:
a covered benefit under its health plan;
safe, effective and medically necessary;
appropriate for the specific patient;
cost-effective; and
neither experimental nor investigational.
In the United States, no uniform policy of coverage and reimbursement for products exists among third-party payors.
Coverage and reimbursement for products may vary depending on the payor, the insurance plan, and other factors. As a result, obtaining coverage and reimbursement approval of a product from a government or other third-party payor is a time-consuming and costly process that could require us to provide to each payor supporting scientific, clinical and cost-effectiveness data for the use of our products on a payor-by-payor basis, with no assurance that coverage and adequate reimbursement will be obtained. A primary trend in the healthcare industry is cost containment as government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement available for certain medications. Even if we obtain coverage for a given product, the resulting reimbursement payment rates might not be adequate for us to achieve or sustain profitability or may require co-payments that patients find unacceptably high. Additionally, third-party payors may not cover, or provide adequate reimbursement for, long-term follow-up evaluations required following the use
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of product candidates, once approved. It is difficult to predict at this time what third-party payors will decide with respect to the coverage and reimbursement for our product candidates, if approved.
A primary trend in the United States health care industry is toward cost containment, as government authorities, third-party payors, and others have attempted to control costs by limiting coverage and the amount of reimbursement available for certain treatments. Such third-party payers, including Medicare, may question the coverage of, and challenge the prices charged for medical products, and many third-party payers limit coverage and reimbursement for newly approved health care products. Moreover, reimbursement, if available, may vary according to the use of the product and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost products and may be incorporated into existing payments for other services. Net prices for products may be reduced by mandatory discounts or rebates required by government healthcare programs or private payers, by any future laws limiting drug prices. If we are unable to promptly obtain coverage and adequate reimbursement rates from both government-funded and private payers for any approved products that we develop there could be a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.
Changes to these current laws and state and federal healthcare reform measures that may be adopted in the future that impact coverage and reimbursement for drug or biologic products may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for any product candidates for which we may obtain regulatory approval or the frequency with which any such product candidate is prescribed or used.

Even if we obtain FDA approval of any of our product candidates, we may never obtain approval or commercialize such products outside of the United States, which would limit our ability to realize their full market potential.
In order to market any products outside of the United States, we must establish and comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. Approval procedures vary among countries and can involve additional product testing and validation and additional administrative review periods. Seeking foreign regulatory approvals could result in significant delays, difficulties, and costs for us and may require additional preclinical studies or clinical trials which would be costly and time consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of our products in those countries. Satisfying these and other regulatory requirements is costly, time consuming, uncertain and subject to unanticipated delays. In addition, our failure to obtain regulatory approval in any country may delay or have negative effects on the process for regulatory approval in other countries. We do not have any product candidates approved for sale in any jurisdiction, including international markets, and we do not have experience in obtaining regulatory approval in international markets. If we fail to comply with regulatory requirements in international markets or to obtain and maintain required approvals, our ability to realize the full market potential of our products will be harmed.
We currently have no marketing and sales organization and have no experience as a company in commercializing products, and we may have to invest significant resources to develop these capabilities. If we are unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell our products, we may not be able to generate product revenue.
We have no internal sales, marketing, or distribution capabilities, nor have we commercialized a product. If any of our product candidates ultimately receives regulatory approval, we expect to establish a marketing and sales organization with technical expertise and supporting distribution capabilities to commercialize each such product in major markets, which will be expensive and time consuming. We have no prior experience as a company in the marketing, sale and distribution of pharmaceutical products and there are significant risks involved in building and managing a sales organization, including our ability to hire, retain and incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel and effectively manage a geographically dispersed sales and marketing team. Any failure or delay in the development of our internal sales, marketing and distribution capabilities would adversely impact the commercialization of these products. We may also choose to collaborate with third parties that have direct sales forces and established distribution systems, either to augment our own sales force and distribution systems or in lieu of our own sales force and distribution systems. We may not be able to enter into collaborations or hire consultants or external service providers to assist us in sales, marketing and distribution functions on acceptable financial terms, or at all. In addition, our product revenues and our profitability, if any, may be lower if we rely on third parties for these functions than if we were to market, sell and distribute any products that we develop ourselves. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. If we are not successful in commercializing our products, either on our own or through arrangements with one or more third parties, we may not be able to generate any future product revenue and we would incur significant additional losses.
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Our relationships with healthcare providers and physicians and third-party payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.
Healthcare providers, physicians and third-party payors in the United States and elsewhere play a primary role in the recommendation and prescription of biopharmaceutical products. Arrangements with third-party payors and customers can expose biopharmaceutical manufacturers to broadly applicable fraud and abuse and other healthcare laws and regulations, as detailed in Part I, Item 1 - Business - Government Regulation - Other Healthcare Laws in our Annual Report on form 10-K for the year ended December 31, 2021. In particular, the research of our product candidates, as well as the promotion, sales and marketing of healthcare items and services, and certain business arrangements in the healthcare industry, are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring and commission(s), certain customer incentive programs, remuneration provided to health care professionals and their affiliates, charitable donations and other business arrangements generally. Activities subject to these laws also involve the improper use of information obtained in the course of patient recruitment for clinical trials.
The distribution of biopharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping, licensing, storage and security requirements intended to prevent the unauthorized sale of biopharmaceutical products.
The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform. Ensuring business arrangements comply with applicable healthcare laws, as well as responding to possible investigations by government authorities, can be time- and resource-consuming and can divert a company’s attention from the business.
It is possible that governmental and enforcement authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, reputational harm, possible exclusion from participation in federal and state funded healthcare programs, contractual damages and the curtailment or restricting of our operations, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws. Further, if any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to significant criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs. Any action for violation of these laws, even if successfully defended, could cause a biopharmaceutical manufacturer to incur significant legal expenses and divert management’s attention from the operation of the business. Prohibitions or restrictions on sales or withdrawal of future marketed products could materially affect business in an adverse way.
Even if we receive regulatory approval of any product candidates, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our product candidates.
If any of 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. In addition, we will be subject to continued compliance with current Good Manufacturing Practice, or cGMP, and Good Clinical Practice, or GCP, requirements for any clinical trials that we conduct post-approval.
Manufacturers and their facilities are required to comply with extensive FDA and comparable foreign regulatory authority requirements, including ensuring that quality control and manufacturing procedures conform to cGMP regulations. As such, we and our contract manufacturers will be subject to continual review and inspections to assess compliance with cGMP and adherence to commitments made in any 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 product candidate. The FDA may also require a risk evaluation and mitigation strategies, or 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
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