Company Quick10K Filing
Viela Bio
S-1 2020-05-26 Public Filing
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10-K 2019-12-31 Filed 2020-03-25
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8-K 2020-06-18
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8-K 2020-01-10
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8-K 2019-10-08
8-K 2019-10-07

VIE 10K Annual Report

Part I
Item 1. Business.
Item 1A. Risk Factors.
Item 1B. Unresolved Staff Comments.
Item 2. Properties.
Item 3. Legal Proceedings.
Item 4. Mine Safety Disclosures.
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Item 6. Selected Financial Data.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Item 8. Financial Statements and Supplementary Data.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Item 9A. Controls and Procedures.
Item 9B. Other Information.
Part III
Item 10. Directors, Executive Officers and Corporate Governance.
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Item 14. Principal Accounting Fees and Services.
Part IV
Item 15. Exhibits, Financial Statement Schedules.
Item 16. Form 10 - K Summary
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EX-21.1 vie-ex211_188.htm
EX-23.1 vie-ex231_520.htm
EX-31.1 vie-ex311_9.htm
EX-31.2 vie-ex312_8.htm
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EX-32.2 vie-ex322_7.htm

Viela Bio Earnings 2019-12-31

Balance SheetIncome StatementCash Flow

10-K 1 vie-10k_20191231.htm 10-K vie-10k_20191231.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

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

For the fiscal year ended December 31, 2019

OR

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

FOR THE TRANSITION PERIOD FROM                      TO                     

Commission File Number 001-39067

 

VIELA BIO, INC.

(Exact name of Registrant as specified in its Charter)

 

 

Delaware

82-4187338

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

One MedImmune Way

First Floor, Area Two

Gaithersburg, MD

20878

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (240) 558-0038

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.001 par value per share

 

VIE

 

The Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES  NO 

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  YES  NO 

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES  NO 

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).  YES  NO 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 

The aggregate market value of the common stock held by non-affiliates of the registrant, based on the closing price of a share of common stock on October 3, 2019, as reported by The Nasdaq Global Select Market on such date was approximately $379.7 million. The registrant has elected to use October 3, 2019, which was the initial trading date on The Nasdaq Global Select Market, as the calculation date because on June 30, 2019 (the last business day of the registrant’s most recently completed second fiscal quarter) the registrant was a privately held company. This calculation does not reflect a determination that certain persons are affiliates of the registrant for any other purpose.

The number of shares of Registrant’s Common Stock outstanding as of March 25, 2020 was 50,990,750.

DOCUMENTS INCORPORATED BY REFERENCE

None.

 

 

 


Table of Contents

 

 

 

Page

PART I

 

 

 

 

 

Item 1.

Business

3

Item 1A.

Risk Factors

48

Item 1B.

Unresolved Staff Comments

89

Item 2.

Properties

89

Item 3.

Legal Proceedings

89

Item 4.

Mine Safety Disclosures

89

 

 

 

PART II

 

 

 

 

 

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

90

Item 6.

Selected Financial Data

90

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

92

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

102

Item 8.

Financial Statements and Supplementary Data

102

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

102

Item 9A.

Controls and Procedures

102

Item 9B.

Other Information

103

 

 

 

PART III

 

 

 

 

 

Item 10.

Directors, Executive Officers and Corporate Governance

104

Item 11.

Executive Compensation

110

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

118

Item 13.

Certain Relationships and Related Transactions, and Director Independence

120

Item 14.

Principal Accounting Fees and Services

123

 

 

 

PART IV

 

 

 

 

 

Item 15.

Exhibits, Financial Statement Schedules

125

Item 16

Form 10-K Summary

128

 

 

 

i


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts contained in this Annual Report on Form 10-K are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” or the negative of these words or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

 

our ability to successfully commercialize and market inebilizumab and/or our other product candidates, if approved;

 

our ability to contract with third-party suppliers, manufacturers and other service providers and their ability to perform adequately;

 

the potential market size, opportunity and growth potential for inebilizumab and/or our other product candidates, if approved;

 

our ability to build our own sales and marketing capabilities, or seek collaborative partners, to commercialize inebilizumab and/or our other product candidates, if approved;

 

our ability to obtain funding for our operations;

 

the initiation, timing, progress and results of our pre-clinical studies and clinical trials, and our research and development programs;

 

our ability to retain the continued service of our key professionals and to identify, hire and retain additional qualified professionals;

 

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

 

our ability to recruit and enroll suitable patients in our clinical trials;

 

the timing or likelihood of the accomplishment of various scientific, clinical, regulatory filings and approvals and other product development objectives;

 

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

 

the degree of market acceptance of inebilizumab and/or our other product candidates by physicians, patients, third-party payors and others in the medical community;

 

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

 

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

 

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

 

developments relating to our competitors and our industry;

 

the accuracy of our estimates regarding expenses, capital requirements and needs for additional financing;

 

the development of major public health concerns, including the novel coronavirus outbreak or other pandemics arising globally, and the current and future impact of it and COVID-19 on our clinical trials, business operations and funding requirements; and

 

our financial performance.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the “Risk Factors” section and elsewhere in this Annual Report on Form 10-K. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Annual Report on Form 10-K may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable as of the date of this Form 10-K, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Annual Report on Form 10-K to conform these statements to new information, actual results or to changes in our expectations, except as required by law.

You should read this Annual Report on Form 10-K and the documents that we reference in this Annual Report on Form 10-K and have filed with the Securities and Exchange Commission, or SEC, as exhibits to this Annual Report on

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Form 10-K with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.

This Annual Report on Form 10-K includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. Such data involves a number of assumptions and limitations and contains projections and estimates of the future performance of the markets in which we operate and intend to operate that are subject to a high degree of uncertainty. We caution you not to give undue weight to such projections, assumptions and estimates.

This Annual Report on Form 10-K contains references to our trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Annual Report, including logos, artwork and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

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PART I

Item 1. Business.

Overview

We are a clinical-stage biotechnology company pioneering treatments for autoimmune and severe inflammatory diseases, which we collectively refer to as autoimmune diseases. Our approach seeks to redefine the treatment of autoimmune diseases by focusing on critical biological pathways shared across multiple diseases. We believe that this approach, which targets the underlying molecular pathogenesis of the disease, allows us to develop more precise therapies, identify patients more likely to respond to treatment and pursue multiple indications for each of our product candidates. Our lead product candidate, inebilizumab, is a humanized monoclonal antibody, or mAb, designed to target CD19, a molecule expressed on the surface of a broad range of immune system B cells. In January 2019, we reported positive pivotal clinical trial data for inebilizumab in patients with neuromyelitis optica spectrum disorder, or NMOSD. NMOSD is a rare, devastating condition that attacks the optic nerve, spinal cord and brain stem, and often leads to irreversible blindness and paralysis. We received Breakthrough Therapy Designation for the treatment of this disease from the U.S. Food and Drug Administration, or the FDA, in April 2019 and in August 2019, the FDA accepted for review our Biologics License Application, or BLA for inebilizumab. The FDA set a Prescription Drug User Fee Act, or PDUFA date of June 11, 2020. In addition, we have a broad pipeline of two additional clinical and two pre-clinical stage product candidates focused on a number of other autoimmune diseases with high unmet medical needs, including myasthenia gravis, IgG4-related disease, Sjögren’s syndrome and lupus, as well as other conditions such as kidney transplant rejection. In December 2019, we initiated a Phase 2b trial of VIB4920, for the treatment of Sjögren’s syndrome.

Our pipeline is currently focused on the following shared critical biological pathways of autoimmune diseases:

 

Production of autoantibodies: the autoantibody pathway. A number of autoimmune diseases, including NMOSD, myasthenia gravis and IgG4-related disease, and other conditions such as kidney transplant desensitization, are associated with autoantibodies secreted by a subset of immune B cells known as plasmablasts and plasma cells. These autoantibodies attack native tissues as opposed to foreign pathogens. Our lead product candidate, inebilizumab, is designed to target and deplete CD19-expressing B cells, which may reduce autoantibodies that are implicated in these autoimmune diseases and other conditions.

 

Immune overactivation through co-stimulatory pathways: the CD40/CD40L co-stimulatory pathway. A number of autoimmune diseases, including Sjögren’s syndrome, and other conditions such as kidney transplant rejection, are associated with overactivation of immune cells through cell-cell, or co-stimulatory, interactions. CD40 ligand, or CD40L, is a soluble or surface-bound protein expressed on T cells that interacts with CD40, a receptor protein expressed on a variety of immune cells such as B cells, dendritic cells and macrophages. The overstimulation of these immune cells triggered by the interaction of CD40 and CD40L, or CD40/CD40L, leads to an immune response cascade and overproduction of molecules that mediate inflammation, resulting in the development of numerous autoimmune diseases. Our second product candidate, VIB4920, is a fusion protein designed to target CD40L, blocking CD40L’s interaction with CD40 and other binding partners, and thereby potentially decreasing autoimmune and inflammatory responses. VIB4920 has been designed to avoid thromboembolic side effects observed with an earlier generation CD40L mAb.

 

Overactivation of the innate immune system: the innate cytokine pathway. A number of autoimmune diseases, including systemic lupus erythematosus, or SLE, cutaneous lupus erythematosus, or CLE, Sjögren’s syndrome, systemic sclerosis, polymyositis and dermatomyositis, are associated with the overproduction of pro-inflammatory cytokines secreted by plasmacytoid dendritic cells, or pDCs. pDCs are a type of innate immune cell that can produce large amounts of cytokines, including type I interferons, IL-6 and TNF-a, in response to immune stimuli such as viral infection, immune complexes and cell debris. Our third product candidate, VIB7734, is designed to target and bind to an immunoglobulin-like transcript, or ILT7, which is a cell surface molecule specific to pDCs, leading to their depletion.

In addition to the three pathways listed above, we are continuing to explore other critical shared biological pathways that we believe are implicated in autoimmune disease pathogenesis.

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Our Pipeline

We are leveraging our critical biological pathway approach to develop a broad pipeline of product candidates across multiple diseases, which we refer to as indications. The following table summarizes our pipeline:

Inebilizumab. We are initially developing inebilizumab as a potential first-line monotherapy for NMOSD. In January 2019, we announced positive topline data from our N-MOmentum pivotal trial in a broad patient population that included AQP4 antibody positive, or AQP4+, and AQP4 antibody negative, or AQP4-, patients with various degrees of disease severity based on the number of previous attacks. AQP4+ patients, characterized by the presence of autoantibodies to a water channel protein called aquaporin-4, or AQP4, are thought to represent approximately 80% of the NMOSD patient population. Inebilizumab is designed to be dosed with two initial doses on days 1 and 15, followed by dosing every six months thereafter, which is a significantly less frequent dosing regimen compared to other therapies that have been approved or are in clinical development. The trial met its primary and a majority of secondary endpoints, and in May 2019, we presented detailed trial data at the plenary session of the Annual Meeting of the American Academy of Neurology. Based on the results of the N-MOmentum trial, we submitted a BLA to the FDA in June 2019, which the FDA accepted for review in August 2019. The FDA granted Orphan Drug Designation for inebilizumab for the treatment of patients with NMOSD in February 2016 and Breakthrough Therapy Designation in April 2019 and in August 2019, the FDA accepted for review our Biologics License Application, or BLA for inebilizumab. The FDA set a Prescription Drug User Fee Act, or PDUFA date of June 11, 2020. The European Medicines Agency, or EMA, granted orphan designation to inebilizumab for the treatment of NMOSD in March 2017.

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If we obtain approval from the FDA of inebilizumab as a monotherapy for NMOSD, we intend to focus our commercial efforts initially on the United States market, which we believe represents the largest market opportunity, as we estimate that there are approximately 10,000 patients with NMOSD. We are currently building our internal commercialization capabilities that we expect will initially be supplemented by fewer than 30 clinical sales representatives targeting a small number of medical centers of excellence, where approximately 70% of all patients with NMOSD in the United States are treated. For markets outside the United States, we intend to seek to enter into arrangements with third parties to pursue regulatory approval and commercialization of inebilizumab for the treatment of patients with NMOSD. In May 2019, we entered into a collaboration with Hansoh Pharmaceutical Group Company Limited, or Hansoh Pharma, for co-development and commercialization of inebilizumab in patients with NMOSD and other autoimmune diseases and hematological cancers in China, Hong Kong and Macau, and in October 2019, we entered into a license agreement with Mitsubishi Tanabe Pharma Corporation, or MTPC, for co-development and commercialization of inebilizumab in Japan, Thailand, South Korea, Indonesia, Vietnam, Malaysia, Philippines, Singapore, and Taiwan.

VIB4920. VIB4920 is a fusion protein designed to bind to CD40L on activated T cells, blocking their interaction with CD40-expressing B cells and potentially other binding partners. This is intended to prevent B cells from differentiating into plasma cells and memory B cells. Blocking CD40 and CD40L interaction can also inhibit stimulation of dendritic cells and monocytes by T cells, which reduces production of pro-inflammatory mediators. We believe that these combined effects have the potential to produce powerful immunomodulation for the targeting of both T and B cell-driven diseases.

Two Phase 1 clinical trials of VIB4920 have been completed to date: a Phase 1a single-ascending dose trial in healthy volunteers and a Phase 1b multiple-ascending dose trial in patients with rheumatoid arthritis. In both trials, VIB4920 was generally well-tolerated, with no evidence of platelet aggregation that resulted in thromboembolic side effects with an earlier generation CD40L mAb. In the Phase 1b trial, VIB4920 decreased disease activity in patients with active rheumatoid arthritis, and the majority of patients achieved low-level disease activity or remission at the two highest dose levels. We believe that the dose-dependent reduction in autoantibody levels coupled with the clinical activity observed in rheumatoid arthritis suggest that VIB4920 may effectively block the CD40/CD40L interaction. We have selected two diseases associated with immune overactivation through CD40L as the initial diseases to further evaluate in VIB4920 trials. A Phase 2b trial in Sjögren’s syndrome, which is designed as Phase 3-enabling, is now ongoing and in 2019, we initiated a separate Phase 2 trial in kidney transplant rejection. We also plan to initiate additional clinical trials in other diseases associated with the same pathway in 2020.

VIB7734. VIB7734 is a humanized mAb intended to be a novel treatment for autoimmune diseases where the pathology is driven principally by overproduction of type I interferons and other cytokines secreted by pDCs. VIB7734 is designed to target and bind to ILT7, a cell surface molecule specific to pDCs, leading to their depletion. pDCs generate large amounts of interferons in pathological states. The depletion of pDCs may also decrease other inflammatory cytokines such as TNF-a and IL-6, which are critical to the pathogenesis of a number of autoimmune diseases. We have completed a Phase 1a single-ascending dose trial in patients with any one of the following six autoimmune diseases: SLE, CLE, Sjögren’s syndrome, systemic sclerosis, polymyositis and dermatomyositis. The Phase 1a trial demonstrated that VIB7734 was generally well-tolerated and reduced pDC levels. Our ongoing Phase 1b multiple ascending dose trial includes a cohort of patients with the same diseases as well as separate cohorts of patients with CLE in the presence or absence of SLE. The CLE cohorts will be the basis of an interim data analysis planned for the second quarter of 2020. Assuming this trial is able to establish proof of concept, we intend, subject to regulatory feedback, to progress to Phase 2 clinical trials in other diseases that are also driven by interferons and other proinflammatory cytokines secreted by pDCs.

Pre-clinical Development. We are also conducting pre-clinical research and development on two product candidates. The first candidate, VIB1116, is a mAb designed to decrease the number and function of antigen-presenting dendritic cells. We expect to conduct pre-clinical toxicology studies in the first half of 2020 to enable a submission of an Investigational New Drug application, or IND. The second candidate is a mAb cytokine fusion protein designed to inhibit inflammatory responses. We are currently conducting pre-clinical efficacy studies of this candidate in animal models.

Our Team and Corporate History

We have an experienced internal research and development team focused on utilizing our deep understanding of autoimmune disease pathways to discover and develop novel therapies that more precisely target these pathways. Our founding management team, as well as a significant portion of our research and development team, joined us from MedImmune, the biologics division of AstraZeneca, where they played key roles in the autoimmune disease area and in the development of the product candidates in our existing portfolio. We believe this deep experience with and detailed technical knowledge of both the autoimmune disease area and our product candidates is a critical advantage for us.

Since our founding, we have expanded our team to incorporate additional expertise as needed to pursue our goal of becoming a fully-integrated biopharmaceutical company. We have assembled key management team members with

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expertise in autoimmune research, development, regulatory affairs, medical affairs, operations, manufacturing and commercialization. Our Chairman and Chief Executive Officer, Zhengbin (Bing) Yao, Ph.D., has more than 20 years’ experience in the biopharmaceutical industry, with a track record of leading the successful discovery and development of multiple approved biotherapeutics. Our Chief Medical Officer and Head of Research and Development, Jörn Drappa, M.D., Ph.D., has more than 20 years’ experience in clinical development of multiple approved biotherapeutics for autoimmune and other diseases. Dr. Yao and Dr. Drappa have worked together for over a decade at other companies and other members of our management team have worked together in key positions at public companies that develop and commercialize therapies for autoimmune and other diseases.

We were incorporated in December 2017 and, in February 2018, we acquired six molecules from MedImmune, of which five constitute our current product candidates, for a purchase price of approximately $142.3 million financed by AstraZeneca’s purchase of our Series A preferred stock. Following the asset purchase, we entered into several agreements with AstraZeneca and MedImmune, including a license agreement, sublicense agreements, a master supply and development services agreement, a transition services agreement, a clinical supply agreement and a commercial supply agreement. Under our commercial supply agreement with AstraZeneca, AstraZeneca has agreed to provide us with commercial supplies of drug product for inebilizumab. We believe that our existing stock of drug substance that has already been manufactured will be sufficient to supply us for approximately the first two years of commercialization of inebilizumab in the United States, if we obtain FDA approval. See “—Licenses and Strategic Agreements—Clinical Supply Agreement with AstraZeneca UK Limited” and “—Licenses and Strategic Agreements—Commercial Supply Agreement with AstraZeneca UK Limited.”

Concurrent with our acquisition of these MedImmune assets, we also closed a $250 million Series A preferred stock financing with five institutional investors (the “Series A Preferred Stock”). In June 2019, we closed a Series B preferred stock financing with five new institutional investors and one existing institutional investor for aggregate gross proceeds of $75 million (the “Series B Preferred Stock”). In October 2019, we completed an initial public offering, or the IPO of our common stock and issued and sold 9,085,000 shares of common stock at a public offering price of $19.00 per share, for aggregate gross proceeds of $172.6 million.

Our Strategy

Our vision is to become a fully integrated biopharmaceutical company pioneering treatments for autoimmune diseases by focusing on critical biological pathways shared across multiple indications. Key components of our business strategy include the following:

 

Obtain regulatory approval for and successfully commercialize inebilizumab as a first-line monotherapy treatment for patients with NMOSD. We received Breakthrough Therapy Designation for inebilizumab for the treatment of NMOSD in April 2019, and in August 2019, the FDA accepted for review our BLA for inebilizumab. The FDA set a PDUFA date of June 11, 2020. If approved, we believe that we can effectively commercialize inebilizumab in the United States with a focused commercial team targeting a small number of medical centers of excellence that treat approximately 70% of the estimated 10,000 patients with NMOSD. In addition to our collaboration with Hansoh Pharma and MTPC, we are evaluating potential additional partnerships to pursue regulatory approval and commercialization of inebilizumab in NMOSD in other geographic regions outside of the United States.

 

Expand the use of inebilizumab into additional diseases. With the positive data from our pivotal trial in NMOSD, which we believe validates inebilizumab’s mechanism of action of targeting the autoantibody pathway, we plan to expand the use of inebilizumab to other diseases where CD19-expressing B cells are believed to be key drivers of the disease pathogenesis. Based on our extensive understanding of the autoantibody pathway, we plan to initiate clinical trials in myasthenia gravis, IgG4-related disease and kidney transplant desensitization. We initiated the first of these clinical trials in kidney transplant desensitization in 2019.

 

Rapidly advance VIB4920 and VIB7734 through clinical development for multiple diseases with shared critical biological pathways. VIB4920 demonstrated proof of concept in rheumatoid arthritis in a Phase 1b trial. A Phase 2b trial in Sjögren’s syndrome, which is designed as Phase 3-enabling, is ongoing and in 2019, we initiated a separate Phase 2 trial in kidney transplant rejection. Both of these diseases are associated with immune overactivation through the CD40/CD40L co-stimulatory pathway. We also plan to initiate additional clinical trials in other diseases associated with the same pathway in 2020. VIB7734 is in an ongoing Phase 1b trial, with an interim dataanalysis in patients with CLE expected in the second quarter of 2020. Assuming this trial is able to establish proof of concept, we intend, subject to regulatory feedback, to move into Phase 2 clinical trials in diseases driven by interferons and other pro-inflammatory cytokines secreted by pDCs.

 

Expand our clinical portfolio by initiating clinical trials of two pre-clinical product candidates. We are currently advancing two candidates through pre-clinical studies. For the first candidate, VIB1116, we expect to

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conduct pre-clinical toxicology studies to enable a submission of an IND in the first half of 2020. The second candidate is currently in pre-clinical efficacy studies.

 

Discover and develop additional product candidates for the treatment of autoimmune diseases utilizing our critical biological pathway approach. Our team has extensive experience in discovery research, deep expertise in immunology and a strong record of publication in high-impact peer-reviewed journals. The team is focused on understanding additional disease pathways associated with autoimmune disease, identifying key targets for intervention within these pathways and generating drug candidates against those targets. We may also in-license from or collaborate with third parties to develop drug candidates that we believe are promising therapeutic candidates.

Autoimmune Disease Overview

Autoimmune diseases result from an immune response directed against the body’s own healthy cells and tissues. According to a 2012 report from the National Institutes of Environmental Health Sciences, approximately 23.5 million people in the United States suffer from autoimmune diseases. In a significant subset of severe autoimmune diseases there remain substantial unmet medical needs, as patients are generally treated with broadly prescribed steroids and nonspecific immunosuppressive regimens. Current therapies are rarely considered curative and, even with modern standards of care, patients may suffer from chronic disease progression. There is a need for more targeted treatments with increased efficacy and decreased toxicity.

Autoimmune diseases usually involve autoreactive T cells and B cells, which can communicate through shared pathways, resulting in damage to the body’s cells and tissues. In a healthy individual, as the immune system develops during childhood, these T cells and B cells are eliminated or suppressed by various mechanisms. When any of these mechanisms fails, autoimmunity can arise. The presence of autoantibodies, a product of autoreactive B cells, is a hallmark of many of these diseases. Many autoimmune diseases are characterized by disease flares, in which symptoms worsen, followed by a period of remission, in which symptoms improve. Many autoimmune diseases are characterized by progressively worsening health status and life-altering disability.

Certain autoimmune diseases are not only due to the direct effects of autoantibodies, but also other mechanisms that cause immune dysfunction. These include activation of inflammatory T cells and cytotoxic T cells, which can cause inflammation and tissue damage. Cytokines released as a result of immune overactivation can further increase inflammatory tissue damage. Dysregulation of the same pathway can lead to a variety of symptoms, and multiple pathways may be dysregulated in any given autoimmune disease.

In many autoimmune diseases, existing therapy consists of long-term treatment with a combination of immunosuppressive agents and high-dose corticosteroids. These treatment regimens may result in increased rates of infection, increased risk of malignancy, and other side effects, including hypertension, diabetes and osteoporosis. Further, these currently available treatments often do not achieve adequate clinical responses. Targeted agents, such as TNF-a antagonists, are used to treat certain autoimmune diseases, such as rheumatoid arthritis, after immunosuppressive agents have failed. However, these therapies are not effective in treating many autoimmune diseases and, consequently, there remains a substantial unmet medical need for more effective therapies.

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Our Approach: Developing Therapies by Focusing on Shared Critical Biological Pathways of Autoimmune Diseases

We seek to redefine the treatment of autoimmune diseases by focusing on critical biological pathways shared across multiple diseases. We believe this approach permits us to develop novel therapies that more precisely target these pathways. We have initially focused on three pathways: the autoantibody pathway, the CD40/CD40L co-stimulatory pathway and the innate cytokine pathway, each of which we believe presents distinct mechanisms that drive autoimmune disease and can be targeted by our existing portfolio of product candidates. The following graphic illustrates each of these pathways and the molecules within these pathways that we are currently targeting.

 

Autoantibody Pathway. In the autoantibody pathway, autoantibodies are secreted by a subset of immune system B cells known as plasmablasts and plasma cells. In certain cases, these autoantibodies are directly pathogenic. In addition, B cells may contribute to autoimmunity through other mechanisms such as antigen presentation or cytokine production. A number of autoimmune diseases are associated with the B cell-mediated autoantibody pathway, including NMOSD, myasthenia gravis and idiopathic thrombocytopenic purpura, or ITP. B cells also play an important role in kidney transplant desensitization and IgG4-related disease.

Our lead product candidate, inebilizumab, is designed to target these antibody-secreting cells by binding with high affinity to CD19 and depleting CD19-expressing B cells via antibody dependent cellular cytotoxicity, or ADCC, and antibody dependent cellular phagocytosis, or ADCP. CD19 is a molecule broadly expressed on B cells, including some antibody-secreting plasmablasts and plasma cells. In contrast, the expression of CD20, another cell surface molecule expressed on B cells, is lost as B cells differentiate into plasmablasts and plasma cells. Unlike existing CD20 targeting therapies, inebilizumab also directly depletes CD19-expressing plasmablasts and some plasma cells, most of which are not able to be directly targeted by anti-CD20 mAbs.

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CD40/CD40L Co-stimulatory Pathway. T cells interact with B cells, macrophages and endothelial cells through various co-stimulatory receptor-ligand interactions, including CD40/CD40L. CD40L is thought to be a component of immune responses involved in B cell activation, maturation and eventually antibody production. CD40L also mediates activation of macrophages, dendritic cells and stromal cells, including endothelial cells. A number of autoimmune diseases, such as Sjögren’s syndrome, ITP, SLE, type 1 diabetes and bullous pemphigoid, are associated with overactivation of the CD40/CD40L co-stimulatory pathway. This pathway may also be important in kidney transplant rejection and certain glomerular kidney diseases. Our second product candidate, VIB4920, is a fusion protein designed to target CD40L, blocking CD40L’s interaction with CD40 and potentially other binding partners, thereby potentially decreasing autoimmune and inflammatory responses. VIB4920 has been designed to avoid thromboembolic side effects observed with an earlier generation CD40L mAb.

Innate Cytokine Pathway. Specialized innate immune system cells called pDCs recognize and become activated by viral infection and immune complexes. Upon becoming activated, pDCs produce large amounts of innate cytokines such as type I interferons, IL-6 and TNFa and also help activate other arms of the immune system, including T cells and B cells. A number of autoimmune diseases, such as CLE, SLE, Sjögren’s syndrome, systemic sclerosis, polymyositis, and dermatomyositis, are associated with the overproduction of these innate cytokines. Our third product candidate, VIB7734, is a humanized mAb designed to target and bind to ILT7 on pDCs, leading to their depletion.

Our Product Candidates

Inebilizumab: Our Humanized Monoclonal Antibody for Patients with NMOSD and Additional Diseases that Share the Autoantibody Pathway

We are initially developing inebilizumab as a first-line monotherapy for NMOSD. NMOSD is a rare, severe, relapsing, neuroinflammatory autoimmune disease that attacks the optic nerve, spinal cord and brain stem, often leading to blindness and paralysis. We designed our N-MOmentum pivotal trial to evaluate inebilizumab as a monotherapy across a broad range of disease severity and patients, including both AQP4+ and AQP4- patients. Inebilizumab is designed to be dosed with two initial doses on days 1 and 15, followed by dosing every six months thereafter, which is a significantly less frequent dosing regimen compared to other therapies that have been approved or are currently in clinical development. The FDA granted Orphan Drug Designation for inebilizumab for the treatment of patients with NMOSD in February 2016 and Breakthrough Therapy Designation in April 2019. The EMA granted orphan designation to inebilizumab for the treatment of patients with NMOSD in March 2017.

In January 2019, we announced positive topline data from our N-MOmentum pivotal trial. The trial met its primary and a majority of secondary endpoints, and in May 2019, we presented detailed trial data at the plenary session of the Annual Meeting of the American Academy of Neurology. The N-MOmentum trial is a randomized, double-blinded, placebo-controlled, global registration trial that enrolled 231 patients with NMOSD, which is the largest controlled trial conducted in this indication. The primary analysis demonstrated a 77.3% reduction in the risk of developing an NMOSD attack in AQP4+ patients treated with inebilizumab monotherapy compared to placebo. Furthermore, secondary analyses demonstrated statistically significant reductions in worsening of disability, hospitalizations and new MRI lesions. Inebilizumab was generally well-tolerated, with an adverse event rate similar to placebo. Based on the results of the N-MOmentum trial, we submitted a BLA to the FDA in June 2019, which the FDA accepted for review in August 2019. The FDA set a PDUFA date of June 11, 2020.

In addition to NMOSD, we initiated, or plan to initiate, pending the development of clinical study protocols and subject to regulatory feedback, multiple clinical trials of inebilizumab in other indications associated with CD19-expressing B cells, including:

 

a Phase 2 trial in 2019 for kidney transplant desensitization, where high levels of alloantibodies in certain patients may preclude successful identification of a match and transplant commenced with screening of the first  patient;

 

a pivotal trial in mid-year 2020 for myasthenia gravis, a neuromuscular disorder caused by autoantibodies against acetylcholine receptors or muscle specific kinase and

 

a Phase 2b trial in mid-year 2020 for IgG4-related disease, a group of disorders marked by tumor-like swelling and fibrosis of affected organs, which may be caused by infiltration of CD19-expressing plasmablasts and plasma cells that generate IgG4 antibodies.

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Mechanism of Action

A number of autoimmune diseases, including NMOSD, are associated with autoantibodies secreted by plasmablasts and some plasma cells. B cells may contribute to autoimmunity through other mechanisms such as antigen presentation or cytokine production. CD19 is a cell surface molecule broadly expressed on B cells, including some antibody-secreting plasmablasts and plasma cells. Each of the graphics below illustrates a different role of CD19-expressing B cells in the pathogenesis of autoimmune disease and other inflammatory conditions. Graphic A shows the process by which B cells differentiate into antibody secreting cells, including plasmablasts and plasma cells. Graphic B reflects the process by which an antigen is presented by CD19-expressing B cells, which in turn activates T cells. Graphic C highlights the production of pro-inflammatory mediators, such as cytokines and chemokines, and the release of matrix metalloproteinases, or MMPs.

 

 

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In contrast, the expression of CD20, another cell surface molecule expressed on B cells, is lost as B cells differentiate into plasmablasts and plasma cells. As a result, existing therapies targeting CD20 do not directly target plasmablasts and plasma cells. The graphic below illustrates CD19’s broad expression as compared to CD20’s lack of expression as cells differentiate into plasmablasts and plasma cells.

 

Inebilizumab is a humanized, affinity-optimized, afucosylated immunoglobulin G1 kappa mAb that binds to CD19. The Fc portion of inebilizumab will recruit natural killer cells or macrophages, which deplete the CD19-expressing B cells through ADCC and ADCP. The depletion of CD19-expressing B cells may result in a reduction of autoantibodies, decreased antigen presentation and reduced pro- inflammatory mediators. In addition, the removal of fucose from the Fc results in approximately tenfold increased affinity to the Fc receptors and significantly enhances ADCC and ADCP. The antigen-binding properties of inebilizumab, including high affinity and slow internalization, are favorable for ADCC and ADCP-dependent mechanisms of action.

Background and Unmet Need

NMOSD

NMOSD is a unifying term for neuromyelitis optica, previously known as Devic’s disease, and related syndromes. NMOSD is a rare, severe, relapsing, neuroinflammatory autoimmune disease that attacks the optic nerve, spinal cord and brain stem, and often leads to irreversible blindness and paralysis. AQP4+ patients are thought to represent approximately 80% of the NMOSD patient population. These AQP4-IgG autoantibodies, produced by plasmablasts and plasma cells, bind primarily to astrocytes in the central nervous system. Binding of AQP4-IgG antibodies to central nervous system cells is believed to trigger attacks, which can damage the optic nerve, spinal cord and brain stem. Loss of vision, paralysis, loss of sensation, bladder and bowel dysfunction, nerve pain and respiratory failure can all be manifestations of the disease. Each NMOSD attack leads to further damage and disability. NMOSD occurs more commonly in women and it may be more common in individuals of African and Asian descent. Currently, patients are treated with immunosuppressants, steroids and off-label use of rituximab in an effort to prevent NMOSD attacks. Patients experiencing an attack are treated with steroids, intravenous immunoglobulin, or IVIG, and plasmapheresis. However, these treatments are known to cause adverse events that may lead to treatment discontinuation, and the benefits and risks of these off-label treatments in NMOSD remain uncertain. In June 2019, eculizumab from Alexion Pharmaceuticals, Inc. received FDA approval for the treatment of adults with NMOSD.

We estimate the prevalence of NMOSD to be approximately 1 to 5 per 100,000 in the United States, with an estimated 10,000 patients suffering from NMOSD as of 2016. In Japan, the prevalence of NMOSD was approximately 4.1 per 100,000, and we estimate that there were 5,000 patients suffering from the disease as of 2017. In several European countries, the prevalence of NMOSD was estimated to range from less than 1 to 7 per 100,000, and we estimate a patient population of approximately 8,000 as of 2013.

Other Potential Diseases

We are also pursuing the following additional diseases associated with CD19-expressing B cells for potential treatment with inebilizumab:

Desensitization of highly sensitized candidates for kidney transplant. Patients with high levels of alloantibodies waiting for a kidney transplant have a lower chance of getting a matching organ and overall worse clinical outcomes following transplant. Approximately 6.5% of the estimated 95,000 patients on the waiting list for a kidney transplant in the United States are considered “sensitized” with a calculated panel-reactive antibodies score of 98% to 100%. We plan to explore the potential of inebilizumab, used alone or in combination with VIB4920, to reduce levels of alloantibodies in kidney transplant candidates in a proof of concept study. In 2019, we initiated screening of patients for a Phase 2 trial.

Myasthenia gravis. Myasthenia gravis is a neuromuscular disorder caused by autoantibodies against the acetylcholine receptor, muscle specific kinase or other acetylcholine receptor-related proteins in the post-synaptic muscle membrane. Its prevalence is estimated to be 20 per 100,000 in the United States, and based on this prevalence, we

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estimate the patient population to be approximately 56,000. The underlying pathogenesis has a high degree of similarity to NMOSD in that autoantibodies secreted by plasmablasts and/or plasma cells play a key role and are thought to be directly pathogenic. Patients with myasthenia gravis are currently managed with off-label immunosuppressants or steroids, or with one recently approved treatment. We have submitted an IND for inebilizumab in myasthenia gravis, and plan to initiate a pivotal trial in mid-year 2020.

IgG4-related disease. This is a group of disorders marked by tumor-like swelling and fibrosis of affected organs, which may be caused by infiltration of CD19-expressing plasma cells that generate IgG4 antibodies. The clinical presentation is heterogeneous, and a variety of organs can be affected, including the pancreas, salivary glands, retroperitoneum and kidneys. Patients with this disorder have increased levels of IgG4, and IgG4 levels tend to correlate with disease activity. The prevalence is not well defined. A small trial of rituximab has suggested clinical benefits of B cell depletion in this disease. We are preparing to study the potential of inebilizumab in the treatment of IgG4-related disease. We have submitted an IND for inebilizumab in IgG4-related diseases in 2020, and aim to initiate a Phase 2b trial in mid-year 2020.

Clinical Development

In May 2019, we announced detailed results from the N-MOmentum trial, our pivotal clinical trial for inebilizumab and the largest controlled trial ever conducted in NMOSD. The N-MOmentum trial was a global, randomized, double-blind, placebo-controlled trial with an open-label extension period, evaluating the safety and efficacy of inebilizumab in adult patients with NMOSD. Key inclusion criteria were adult patients with NMOSD and an Expanded Disability Status Scale score of 7.5 (8.0 with medical monitor approval) having either a history of at least one NMOSD attack requiring rescue therapy during the past year, or at least two attacks requiring rescue therapy during the two years before screening. AQP4-IgG seropositive and seronegative, AQP4+ and AQP4- patients were eligible for inclusion, with stratification based on serostatus. Eligible patients were randomized in a 3:1 ratio to receive intravenous doses of inebilizumab 300 mg or placebo, respectively, administered on days 1 and 15. Patients received oral corticosteroid (prednisone 20 mg/day or equivalent) between days 1 and 14, tapered to day 21, to minimize risk of an attack while the pharmacological action of inebilizumab took effect. The randomized period for each patient was for a maximum of 197 days, or until occurrence of an adjudicated attack. The trial was designed to enroll patients until the earlier of the occurrence of 67 adjudicated NMOSD attacks or the randomization and dosing of 252 patients. Based on a recommendation of the Independent Data Monitoring Committee, or IDMC, for the trial, enrollment was stopped at 231 patients and 43 adjudicated NMOSD attacks. Based on the results observed, the IDMC determined that exposing patients to the risk of placebo was no longer justified. All patients continued in a safety follow-up period for 12 months after administration of their last dose of inebilizumab. Patients completing the randomized controlled period were given the option to enter into an open-label extension of the trial in which all patients received inebilizumab every six months. The open-label extension is ongoing.

The primary endpoint was time from treatment initiation to occurrence of an NMOSD attack during the randomized controlled period. NMOSD attack diagnosis was standardized using 18 clinically meaningful criteria that were developed for the trial in consultation with the FDA and leading experts. Each attack was adjudicated by an independent blinded panel of experts in the treatment of NMOSD. The trial met the primary endpoint, with a statistically significant difference in the time to NMOSD attack in favor of inebilizumab over placebo. In the AQP4+ population, 11.2% (18/161) of the patients receiving inebilizumab had an attack, compared to 42.3% (22/52) of patients receiving placebo, representing a 77.3% risk reduction. In the intent-to-treat, or ITT, population which also included AQP4- patients, 12.1% (21/174) of the patients receiving inebilizumab had an attack, compared to 39.3% (22/56) of patients receiving placebo, representing a 72.8% risk reduction, as shown in the table below.

The trial enrolled a small number of AQP4- patients (n = 17), and very few attacks were observed in this population. As a result, no clear conclusions can be drawn with respect to the AQP4- population.

 

 

 

AQP4+ Population

n = 213

 

Overall ITT Population

n = 230

Primary Endpoint

 

Placebo

N=52

 

Inebilizumab

N=161

 

Placebo

N=56

 

Inebilizumab

N=174

# of patients with an attack

 

22 (42.3%)

 

18 (11.2%)

 

22 (39.3%)

 

21 (12.1%)

# of patients without an attack

 

30 (57.7%)

 

143 (88.8%)

 

34 (60.7%)

 

153 (87.9%)

Hazard ratio (95% CI)

 

 

 

0.227

(0.121, 0.423)

 

 

 

0.272

(0.150, 0.496)

p-value

 

 

 

< 0.0001

 

 

 

< 0.0001

 

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The Kaplan-Mejer graphics below illustrate the probability of a patient being NMOSD attack-free during the course of the N-MOmentum randomized control period in AQP4-IgG seropositive patients and the ITT patient populations.

 

 

We also evaluated the following four secondary endpoints in the N-MOmentum randomized control period: worsening of the Expanded Disability Status Scale, or EDSS, score from baseline; change from baseline in low-contrast visual acuity binocular score (by low-contrast Landolt C Broken Ring Chart, or LCVNB); cumulative total number of new MRI lesions and the number of NMOSD-related inpatient hospitalizations (longer than an overnight stay). These endpoints were assessed at the last visit of each patient during the randomized controlled period. The trial met three of the four secondary endpoints with statistical significance, as illustrated in the table below.

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Secondary endpoint

 

AQP4+ Population; n=213

 

 

 

 

 

 

 

Overall ITT Population; n=230

 

 

 

Placebo

n=52

 

Inebilizumab

n=161

 

p-value*

 

 

Placebo

n=56

 

Inebilizumab

n=174

 

p-value*

 

Worsening from baseline in EDSS score at last

   visit(1)

 

n=52

 

n=161

 

 

 

 

 

n=56

 

n=174

 

 

 

 

n (%)

 

18 (34.6)

 

25 (15.5)

 

 

 

 

 

19 (33.9)

 

27 (15.5)

 

 

 

 

Odds Ratio (95% CI)

 

0.371 (0.181–0.763)

 

 

0.0070

 

 

0.370 (0.185–0.739)

 

 

0.0049

 

Change from baseline in LCVAB score(2)

 

n=52

 

n=158

 

 

 

 

 

n=56

 

n=171

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LSM (SE)

 

0.600 (0.999)

 

0.562 (0.572)

 

 

 

 

 

1.442 (1.217)

 

1.576 (0.935)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LSM difference (95% CI)

 

-0.038 (-2.312–2.236)

 

 

0.9736

 

 

0.134 (-2.025–2.294)

 

 

0.9026

 

Cumulative number of active MRI lesions(3)

 

n=31

 

n=74

 

 

 

 

 

n=32

 

n=79

 

 

 

 

Mean (SD)

 

2.3 (1.3)

 

1.7 (1.0)

 

 

 

 

 

2.3 (1.3)

 

1.6 (1.0)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RR (95% CI)(4)

 

0.568 (0.385–0.836)

 

 

0.0042

 

 

0.566 (0.387–0.828)

 

 

0.0034

 

Cumulative number of inpatient

   hospitalisations(5)

 

n=7

 

n=8

 

 

 

 

 

n=8

 

n=10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mean (SD)

 

1.4 (0.8)

 

1.0 (0.0)

 

 

 

 

 

1.4 (0.7)

 

1.0 (0.0)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RR (95% CI)(4)

 

0.258 (0.090–0.738)

 

 

0.0115

 

 

0.286 (0.111–0.741)

 

 

0.0100

 

 

*

Presented p-values are nominal; according to adjustments multiple comparison testing, differences were considered significant if p<0.0125.

(1)

Proportion of participants with worsening EDSS score from baseline, with Odds Ratio calculated using a logistic regression model with treatment, serostatus and baseline score as explanatory variables and non-responder imputation (with missing values considered as worsening).

(2)

LSM differences in the change in LCVAB score were assessed using an analysis of covariance model with treatment, serostatus and baseline Landolt C Broken Ring Chart binocular score as explanatory variables and last non-missing low-contrast visual acuity score. Unilateral vision testing was not performed. Units are the number of optotypes identified correctly.

(3)

Cumulative number of active MRI lesions from baseline (includes gadolinium-enhancing or new/enlarging T2 lesions), with RRs assessed using negative binomial regression, with treatment and serostatus as explanatory variables.

(4)

RR analysis is based on the entire population, not just those who had an event.

(5)

Cumulative number of neuromyelitis optica-related inpatient hospitalizations from baseline, with RRs assessed using negative binomial regression, with treatment and serostatus as explanatory variables.

AQP4-IgG, aquaporin-4-immunoglobulin G; CI, confidence interval; EDSS, Expanded Disability Status Scale; ITT, intent-to-treat; LCVAB, low-contrast visual acuity binocular; LSM, least-squares mean; MRI, magnetic resonance imaging; OR, odds ratio; RR, rate ratio; SD, standard deviation; SE, standard error.

Compared to patients who received placebo, we observed that a significantly smaller proportion of patients experienced a worsening from baseline of their EDSS score when treated with inebilizumab. Of patients treated with inebilizumab, 15.5% (27/174) experienced a worsening from baseline of their EDSS score, compared to 33.9% (19/56) of patients who received placebo. We also observed a significant reduction in the number of NMOSD-related inpatient hospitalizations for patients treated with inebilizumab compared to patients who received placebo (p = 0.01; rate ratio 0.286). In addition, the cumulative new MRI lesion count was significantly lower in patients treated with inebilizumab (79/174) compared to patients who received placebo (32/56) (p = 0.0034; rate ratio 0.566). We did not observe a significant difference in the change from baseline in low-contrast visual acuity binocular score between the inebilizumab and placebo groups.

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Inebilizumab effectively depleted peripheral B cells within four weeks to below 10% of the average baseline in the N-MOmentum randomized control period, as illustrated below. The mean B cell count did not rise above this threshold throughout the 197-day randomized controlled period of the trial.

 

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In September 2019, interim data from the ongoing open-label extension was presented at the Congress of the European Committee for Treatment and Research in Multiple Sclerosis (ECTRIMS). 216 patients entered the open-label extension of the N-MOmentum trial following the conclusion of the randomized-control period. As of June 6, 2019, 192 patients remained in the open-label extension, with the most common reason for withdrawal being “other”, a category that includes, among others, events such as decisions by physicians to discontinue treatment for any reason and patient pregnancies. The probability of a patient being NMOSD attack-free at one-year during the combined period of both the randomized control period and the open-label extension through the data cut-off of October 26, 2018 was 84.7% for patients treated with inebilizumab from the start of the trial and 50.1% for the patients who were treated with placebo during the randomized control period and switched to inebilizumab during the open-label extension.

Inebilizumab was generally well-tolerated in the randomized control period and the rates and types of treatment-emergent adverse events, or TEAEs, reported in patients receiving inebilizumab were broadly similar to TEAEs reported by patients receiving placebo, as illustrated below. Adverse events were reported in 71.8% (125/174) of the patients receiving inebilizumab and in 73.2% (41/56) of the patients receiving placebo in the randomized control period. Urinary tract infection, arthralgia, back pain, headache, fall, hypoesthesia, cystitis and eye pain were nominally more frequent in patients receiving inebilizumab. The incidence of serious adverse events, or SAEs, was 4.6% in patients receiving inebilizumab and 8.9% in patients receiving placebo during the randomized control period. No specific SAEs were reported in more than one patient and no deaths occurred throughout the randomized controlled period. Two deaths have been reported in the ongoing open-label period. One death occurred in a patient experiencing a myelitis attack and was considered unrelated to inebilizumab by the investigator. The second death was due to complications from mechanical ventilator-associated pneumonia in a patient who developed new neurological symptoms and seizures, the cause of which could not be definitively established. The possibility that the death was treatment-related could not be ruled out, and as a result, under the terms of the protocol for the trial, the death was assessed as treatment-related. The differential diagnosis of observed neurological symptoms and MRI lesions included atypical NMOSD attack, progressive multifocal leukoencephalopathy and acute disseminated encephalomyelitis.

 

AEs occurring in > 5% of patients in either group (RCP)

 

Inebilizumab

(n = 174)

 

 

Placebo

(n = 56)

 

UTI

 

 

11.5

%

 

 

8.9

%

Arthralgia

 

 

9.8

%

 

 

3.6

%

IRR

 

 

9.2

%

 

 

10.7

%

Back pain

 

 

7.5

%

 

 

3.6

%

Headache

 

 

7.5

%

 

 

7.1

%

Nasopharyngitis

 

 

7.5

%

 

 

10.7

%

Diarrhea

 

 

4.6

%

 

 

5.4

%

Nausea

 

 

3.4

%

 

 

5.4

%

URTI

 

 

2.9

%

 

 

5.4

%

Depression

 

 

2.3

%

 

 

8.9

%

Oral herpes

 

 

0.6

%

 

 

5.4

%

Pruritus

 

 

0.6

%

 

 

8.9

%

Vomiting

 

 

0.6

%

 

 

7.1

%

 

The ongoing open-label phase of the N-MOmentum is designed to evaluate the longer-term efficacy and safety of inebilizumab. In the interim open-label extension safety data presented in September 2019, with a safety data cut-off of June 6, 2019, inebilizumab remained generally well-tolerated with the types of TEAEs consistent with that observed during the randomized control period. For patients who received at least one dose of inebilizumab during the combined period of both the randomized control period and the open-label extension through June 6, 2019, the incidence of SAEs after receiving inebilizumab was 16.0%. As discussed above, two deaths have been reported in the open-label period. As of June 6, 2019, adverse events occurring in greater than 10% of patients who received at least one dose of inebilizumab during the combined period of both the randomized control period and the open-label extension were UTI (22.2%), nasopharyngitis (16.4%), back pain (12.4%), infusion related reaction, or IRR (12.4%), arthralgia (11.6%) and headache (11.1%) after receiving inebilizumab.

Based on the positive results of the N-MOmentum trial, we submitted a BLA to the FDA in June 2019, which the FDA accepted for review in August 2019. The FDA set a PDUFA date of June 11, 2020.

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VIB4920

VIB4920 is a fusion protein designed to bind to CD40L on activated T cells, blocking CD40L from interacting with CD40-expressing B cells and other binding partners. This is intended to prevent B cells from differentiating into plasma cells and memory B cells. Blocking CD40L can also inhibit stimulation of dendritic cells and monocytes by T cells, which reduces production of pro-inflammatory mediators. We believe that these combined effects produce powerful immunomodulation targeting of both T and B cell driven diseases.

Two Phase 1 clinical trials of VIB4920 have been completed to date: a Phase 1a single-ascending dose trial in healthy volunteers and a Phase 1b multiple-ascending dose trial in patients with rheumatoid arthritis, a disease with well understood clinical endpoints enabling proof of clinical activity in a relatively small clinical trial. In both trials, VIB4920 was generally well-tolerated, with no evidence of platelet aggregation that can lead to thromboembolic side effects observed with an earlier generation CD40L mAb. In the Phase 1b trial, VIB4920 decreased disease activity in patients with active rheumatoid arthritis, and the majority of patients achieved low level disease activity or remission at the two highest dose levels. We believe that the dose-dependent reduction in autoantibody levels coupled with the clinical activity observed in rheumatoid arthritis suggest that VIB4920 effectively blocks the CD40/CD40L interaction. A Phase 2b trial in Sjögren’s syndrome, which is designed as Phase 3-enabling, is ongoing and in 2019, we initiated a separate Phase 2 trial in kidney transplant rejection. Both of these diseases are associated with the CD40/CD40L co-stimulatory pathway, and we also plan to initiate additional studies in other diseases associated with the same pathway in 2020.

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Mechanism of Action

The CD40/CD40L interaction plays a critical role in driving humoral immune responses and has been implicated in the pathogenesis of several autoimmune diseases, including Sjögren’s syndrome, as well as other conditions such as kidney transplant rejection. CD40 is constitutively expressed on a variety of antigen presenting cells, including B cells, dendritic cells and macrophages. CD40L is highly regulated and predominately expressed on activated T cells. CD40/CD40L interactions between B cells and activated T cells are essential for mounting effective humoral responses to T cell dependent antigens. The binding of VIB4920 to both soluble CD40L and CD40L expressed on the surface of activated T cells is intended to block CD40L from interacting with CD40-expressing B cells and other binding partners, preventing B cells from differentiating into plasma cells and memory B cells. Each of the graphics below illustrates different elements of the CD40/CD40L co-stimulatory pathway that VIB4920 is designed to inhibit. CD40 signaling is required for germinal center formation, somatic hypermutation and the generation of memory B cells and long-lived plasma cells, as illustrated in graphic A below. Engagement of CD40 on macrophages and dendritic cells leads to activation of these cells with ensuing production of pro-inflammatory mediators, including cytokines, chemokines and MMPs, and upregulation of other co-stimulatory pathways, as illustrated in graphics B and C below.

 

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The potential benefits of targeting the CD40L/CD40 interaction in autoimmune diseases such as lupus nephritis and ITP have been suggested by previous clinical trials conducted by other companies using full antibodies directed at CD40L. However, the earlier generation CD40L mAb caused adverse thromboembolic side effects related to platelet aggregation due to crosslinking of anti-CD40L antibodies co-bound to platelet CD40L and FcgRIIa on adjacent platelets. To avoid complications associated with mAb-based targeting of CD40L, VIB4920 was designed as a novel CD40L binding protein comprised of two Tn3 proteins fused to human serum albumin. Tn3 is a small protein scaffold that does not possess an Fc domain and therefore is unlikely to induce adverse platelet responses.

Background and Unmet Medical Need for Sjögren’s Syndrome and Kidney Transplant Rejection

We are initially developing VIB4920 in parallel in two diseases: Sjögren’s syndrome and kidney transplant rejection. Sjögren’s syndrome is a chronic, systemic autoimmune disease characterized by lymphocytic infiltration of the exocrine glands such as the lacrimal and salivary glands. The disease frequently leads to keratoconjunctivitis sicca (dry eye) and xerostomia (dry mouth). Sjögren’s syndrome may occur with other autoimmune diseases, such as SLE or rheumatoid arthritis. Sjögren’s syndrome is estimated to affect 0.5% to 1.0% of the population, with an estimated one million people in the United States suffering from Sjögren’s syndrome. No treatments have been shown to alter the course of this disease. Supportive treatment is aimed at relieving dry mouth/dry eye symptoms.

Current regimens used to prevent rejection following kidney transplant commonly rely on a combination of CD28/B7 pathway blockade with belatacept and calcineurin inhibitors. While generally effective, these regimens are associated with slow deterioration of kidney function as a result of calcineurin inhibitor toxicity. Literature and data from animal models support the hypothesis that blockage of the CD40/CD40L pathway may be effective in the prevention of transplant rejection. We plan to conduct a proof of concept study to test the hypothesis that VIB4920, when combined with belatacept, will result in similar or reduced rates of kidney transplant rejection in comparison to current calcineurin based regimens while avoiding the renal toxicity associated with calineurin inhibitors.

Clinical Development

We initiated a Phase 2 trial in kidney transplant rejection in 2019 and a separate Phase 2b trial in Sjögren’s syndrome is ongoing, the latter of which is designed to be Phase 3-enabling. Both of these conditions are associated with immune overactivation through the CD40/CD40L co-stimulatory pathway, and we plan to initiate additional studies in other diseases associated with the same pathway in 2020.

Phase 1b Trial

In August 2018, we completed a Phase 1b, randomized, double-blinded, placebo-controlled trial conducted in patients with rheumatoid arthritis, a disease with well understood clinical endpoints enabling proof of clinical activity in a relatively small clinical trial. Fifty-seven patients enrolled in the trial and were randomized into four sequential VIB4920 dose cohorts, with doses ranging from 75 mg to 1500 mg, or treated with placebo, given by intravenous infusion every other week for 12 weeks, followed by 12 weeks of post-treatment observation. All patients received a systemic immunosuppressant, methotrexate, or a disease-modifying antirheumatic drug as background therapy.

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The primary endpoint of the Phase 1b trial was the safety and tolerability of VIB4920. Consistent with the Phase 1a trial, VIB4920 was generally well-tolerated in patients with rheumatoid arthritis, with diarrhea, hyperhidrosis, upper respiratory tract infection and urinary tract infection being the most common TEAEs reported. We observed a balanced distribution of TEAEs between placebo and the four treatment groups, as shown in the table below. No thromboembolic events or clinically significant coagulation lab abnormalities were observed. One life-threatening treatment-emergent serious adverse event occurred, which was determined to be unrelated to VIB4920.

 

Number (%) of Patients With

 

Placebo

n=15

 

 

VIB4920

75mg

n=8

 

 

VIB4920

500mg

n=10

 

 

VIB4920

1000mg

n=12

 

 

VIB4920

1500mg

n=12

 

 

VIB4920

Total

n=42

 

>1 event

 

13 (86.7)

 

 

3 (37.5)

 

 

7 (70.0)

 

 

6 (50.0)

 

 

10 (83.3)

 

 

26 (61.9)

 

>1 related event

 

5 (33.3)

 

 

1 (12.5)

 

 

5(50.0)

 

 

3 (25.0)

 

 

6 (50.0)

 

 

15 (35.7)

 

>1 event of > grade 3 severity

 

 

0

 

 

 

0

 

 

1 (10.0)

 

 

1 (8.3)

 

 

1(8.3)

 

 

3 (7.1)

 

Death (grade 5 Severity)

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

>1 serious event

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

1(8.3)

 

 

1(2.4)

 

>1 serious and/or > grade 3 severity event

 

 

0

 

 

 

0

 

 

1 (10.0)

 

 

1 (8.3)

 

 

1(8.3)

 

 

3 (7.1)

 

>1 related serious event

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

>1 event leading to discontinuation of investigational product

 

 

0

 

 

1 (12.5)

 

 

 

0

 

 

 

0

 

 

1 (8.3)

 

 

2 (4.8)

 

 

In addition to safety and tolerability, clinical benefit with VIB4920 in patients with rheumatoid arthritis was also evaluated. Key secondary and exploratory endpoints in the multiple ascending dose study in rheumatoid arthritis measured at week 12 included change in disease activity, as measured by changes from baseline in DAS28-CRP score, as well as biomarkers such as rheumatoid factor, or RF, autoantibodies, serum C-reactive protein, or CRP, and Vectra-DA score.

DAS28-CRP is a composite clinical disease activity scale used in assessing the disease activity score of rheumatoid arthritis which takes into account the number of swollen and tender joints, CRP levels and a patient global health assessment. In this trial, VIB4920 reduced disease activity quantified by DAS28-CRP score at the two highest doses, as shown in the graphic below. At week 12, the adjusted mean change from baseline of DAS28-CRP (standard error) was: -2.3 (0.3) in the VIB4920 1500 mg group, -2.2 (0.3) in the VIB4920 1000 mg group, -1.2 (0.3) in the VIB4920 500 mg group, 0.1 (0.4) in the VIB4920 75 mg group and -1.0 (0.3) in the placebo group. The effect of VIB4920 on DAS28-CRP was rapid, with reductions evident by day 15, after only a single dose of VIB4920. The reduction of disease activity as compared with placebo was both clinically and statistically meaningful in the groups receiving the highest two doses of VIB4920. Seventy-five percent of patients in the 1500 mg group and 50% of patients in the 1000 mg group achieved a DAS28-CRP score of 3.2 or less at week 12 indicating they achieved low disease activity or clinical remission in the trial, compared to 6.7% of the patients who received placebo.

 

RFs are a family of autoantibodies produced against the Fc portion of IgG which are elevated in rheumatoid arthritis and are associated with poor prognosis. VIB4920 reduced RF titers at the 500, 1000 and 1500 mg dose levels. Reductions in RF titers from baseline were evident in response to VIB4920 as early as day 29, with the 1500 mg dose reducing RF titers by approximately 50% by day 85.

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Vectra DA is a commercially available and validated biomarker panel which measures 12 biomarkers (adhesion molecules, growth factors, cytokines, matrix metalloproteinases, skeletal proteins, hormones, and acute phase proteins) and combines these parameters into a single score to assess the key mechanisms and pathways that drive rheumatoid arthritis disease activity. At day 85, Vectra DA multi-biomarker score was reduced in patients at the 1000 and 1500 mg VIB4920 dose levels (p = 0.018 and p = 0.001, respectively). The results of this clinical trial were published in a featured cover article in Science Translational Medicine.

In summary, VIB4920 decreased disease activity in patients with active rheumatoid arthritis, with at least 50% and 75% of patients, respectively, achieving low disease activity or clinical remission in the two highest dose groups at Day 85. We believe that the observed dose-dependent decrease in autoantibody levels, together with the inhibition of T cell dependent antibody responses in healthy volunteers, as reported in our Phase 1a trial of VIB4920, suggests that VIB4920 may effectively block the CD40/CD40L interaction.

Phase 1a Trial

In May 2016, a Phase 1a, randomized, double-blinded, placebo-controlled, single-ascending dose trial was completed to evaluate the safety and tolerability of VIB4920 in healthy adults. Fifty-nine patients enrolled in the trial and were randomized into seven active treatment cohorts, with doses ranging from 3 mg to 3000 mg, or treated with placebo. The primary endpoint of the Phase 1a trial was to measure the incidence of TEAEs and TESAEs. VIB4920 was generally well-tolerated, with the most common TEAEs being nasopharyngitis, headache and diarrhea, and no TESAEs were observed.

VIB4920 also demonstrated dose-dependent inhibition of T cell dependent antibody responses. In order to evaluate the ability of VIB4920 to influence humoral immune responses in healthy patients, the Phase 1a trial measured inhibition of an induced T cell dependent IgG antibody response to the neoantigen keyhole limpet hemocyanin, or KLH. We observed a 78% and 86% reduction in anti-KLH IgG antibody concentration in the VIB4920 1000 mg and 3000 mg cohorts, respectively, compared to placebo at day 43. In the highest VIB4920 dose group, 7 of 8 patients had undetectable titers of anti-KLH-IgG at day 43, suggesting near complete suppression of the humoral immune response by VIB4920. These data highlight the mechanism of action of VIB4920 and demonstrate its potential to suppress B cell activation and plasma cell differentiation.

VIB7734

VIB7734 is a humanized mAb intended to be a novel treatment for autoimmune diseases where the pathology is driven principally by overproduction of type I interferons and other cytokines secreted by pDCs. VIB7734 is designed to target and bind to ILT7, a cell surface molecule specific to pDCs, leading to pDC depletion. pDCs generate the majority of type I interferons in pathological states. The depletion of pDCs may also decrease other inflammatory cytokines such as TNF-a and IL-6, which are critical to the pathogenesis of a number of autoimmune diseases. We have completed a Phase 1a single-ascending dose trial in patients with any one of the following six different autoimmune diseases: CLE, SLE, Sjögren’s syndrome, systemic sclerosis, polymyositis and dermatomyositis. The Phase 1a trial demonstrated that VIB7734 was generally well-tolerated and reduced pDC numbers in peripheral blood. Our ongoing Phase 1b multiple ascending dose trial includes a cohort of patients with the same diseases as well as separate cohorts of patients with CLE in the presence or absence of SLE. The CLE cohorts will be the basis of an interim data analysis planned for the second quarter of 2020.

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Mechanism of Action

In certain autoimmune diseases, once pDCs are activated, they secrete large amounts of cytokines, including type I interferons, as illustrated in graphic A below. pDC infiltration and the resulting accumulation in tissues has been observed in a number of autoimmune diseases and appears to correlate with disease activity. Additionally, pDCs are involved in antigen presentation to T cells leading to the activation of autoreactive T cells, as illustrated in graphic B below. VIB7734 is a human IgG1 lambda afucosylated mAb specific for ILT7, a cell surface molecule expressed only on pDCs. VIB7734 binds to ILT7 on the surface of pDCs, which leads to recruitment of macrophages and natural killer cells, thus inducing apoptosis and depletion of pDCs in vivo. The afucosylation of VIB7734 is designed to enhance the potency of VIB7734 for antibody-dependent cell-mediated cytotoxicity against pDCs. We believe that depletion of pDCs will not only reduce type I interferons, but also other types of cytokines and mediators involved in a number of autoimmune diseases. Each of the graphics below illustrates different elements of the function of pDCs that VIB7734 is designed to deplete, with graphic A showing the production of pro-inflammatory cytokines and graphic B highlighting the antigen presenting process by pDCs to T cells.

 

Background and Market Opportunity in Selected Autoimmune Diseases

VIB7734 has potential utility across multiple autoimmune diseases that are characterized by elevated type I interferon signatures. These include CLE, SLE, Sjögren’s syndrome, systemic sclerosis, polymyositis, dermatomyositis and a subset of rheumatoid arthritis. The majority of these conditions can lead to significant morbidity and currently have no approved treatments.

Overexpression of type I interferons is consistently found in the majority of patients with SLE, a systemic autoimmune disease that is characterized by the presence of a variety of autoantibodies and can involve multiple organs, including the skin, joints, kidneys and central nervous system. The estimated number of people suffering from SLE in the United States was approximately 161,000 to 322,000 in 2011. Based on this, we estimate the prevalence of SLE in the United States to range between 49 to 100 per 100,000 individuals. Treatment of SLE still largely relies on corticosteroids and non-specific immunosuppressive drugs.

Infiltration of inflamed muscle tissue and overexpression of type I interferons have also been found in inflammatory myopathies, a group of conditions associated with inflammation of the muscles with resulting muscle weakness. We estimate that a subset of this group of myopathies, polymyositis and dermatomyositis, has a prevalence of approximately 5 to 22 per 100,000 individuals in the United States, and based on this prevalence, we estimate the patient population to be approximately 16,000 to 70,000. Treatment of inflammatory myopathies typically involves corticosteroids and nonspecific immunosuppressive drugs.

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Systemic sclerosis is a chronic autoimmune disease associated with thickening and fibrosis of the skin, frequently also involving other organ systems such as the lungs, heart and kidneys. The prevalence of systemic sclerosis is estimated to be between 13.5 and 44.3 per 100,000 individuals in Europe and North America, and based on this prevalence, we estimate the patient population to be approximately 300,000. No treatments that alter the course of this disease are currently available, and patients are managed with supportive treatment for the various organ manifestations of this disease.

Sjögren’s syndrome is an autoimmune condition involving inflammation and destruction of the salivary and lacrimal glands. Other organs such as joints, lungs and kidneys may be involved as well. Sjögren’s syndrome is estimated to have affected between 53,000 and 248,000 people in the United States in 2017. No treatments have been shown to alter the course of this disease.

Rheumatoid arthritis is a chronic autoimmune disease involving progressive inflammation and destruction of the joints. A subset of approximately 33% of patients with rheumatoid arthritis has been shown to have elevated expression of interferon regulated genes. This subgroup also appears to have a poorer response to rituximab treatment.

Clinical Development

Ongoing Phase 1b Trial

In December 2018, we initiated a multiple ascending dose Phase 1b trial to evaluate the safety and tolerability of multiple subcutaneous doses of VIB7734 in a cohort of patients with any one of the following six different autoimmune diseases: CLE, SLE, Sjögren’s syndrome, systemic sclerosis, polymyositis and dermatomyositis. We intend to enroll 32 patients in the Phase 1b trial in three cohorts with 8 patients in cohort 1, and 12 patients each in cohorts 2 and 3. In cohort 1, patients will be randomized in a 3:1 ratio to receive VIB7734 or matching placebo and in cohorts 2 and 3, patients diagnosed with CLE (with or without SLE) will be randomized in a 2:1 ratio to receive VIB7734 or matching placebo. The primary endpoint of the Phase 1b trial is the incidence of TEAEs and TESAEs and adverse events with special interest. The key secondary endpoint for cohorts 2 and 3 in the trial is a measurement of the change from baseline in the CLE disease area and severity index activity score. An interim data analysis in CLE in cohorts 2 is planned for the second quarter of 2020, and cohorts 3 is planned for the second half of 2020.

Phase 1a Trial

In a completed Phase 1a trial, the safety, PK, pharmacodynamics, or PD, and immunogenicity of single subcutaneous doses of VIB7734 were evaluated in patients with any one of the following six different autoimmune diseases: CLE, SLE, Sjögren’s syndrome, systemic sclerosis, polymyositis and dermatomyositis. A total of 36 patients were enrolled and randomized across five cohorts to receive a single subcutaneous dose of VIB7734 or matching placebo, of which ten patients received placebo treatment.

VIB7734 was generally well-tolerated. Sixty-nine percent (18/26) of the patients treated with VIB7734 experienced at least one TEAE, with a majority of such TEAEs characterized as non-serious and deemed not related to VIB7734. The most frequent TEAEs in the patients treated with VIB7734 were infections, musculoskeletal and connective tissue disorders, and gastrointestinal disorders. No VIB7734-related TESAEs were observed. The rates and types of TEAEs reported in patients receiving VIB7734 were broadly similar to TEAEs reported by patients receiving placebo.

After a single subcutaneous injection, drug exposure and pDC levels were measured periodically during the 85-day follow-up period. VIB7734 peak concentrations were observed 5 to 8 days post dose and levels increased in a dose-dependent manner. Increasing doses were associated with a non-linear reduction in pDCs. Median reduction of pDC levels by 57% was seen at the lowest dose of 1 mg, with median reductions of 90% observed in higher doses. Time to recovery of pDC levels appeared to be dose dependent.

Pre-clinical Programs

We are also conducting pre-clinical research and development on two other product candidates. The first candidate, VIB1116, is a mAb designed to decrease the number and function of antigen-presenting dendritic cells. We expect to conduct pre-clinical toxicology studies in the first half of 2020 to enable a submission of an IND application. The second candidate is a mAb cytokine fusion protein designed to inhibit inflammatory responses. We are currently conducting pre-clinical efficacy studies of this candidate in animal models.

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Licenses and Strategic Agreements

Asset Purchase Agreement with MedImmune

In February 2018, we entered into an asset purchase agreement, or the APA, with MedImmune pursuant to which we acquired from MedImmune, among other things, the intellectual property and the biological, regulatory and other materials associated with a portfolio of clinical and pre-clinical biological molecules for a purchase price of approximately $142.3 million. The APA provided for the assignment to us of certain license and other contractual rights from various third parties and for our entrance into certain service and supply agreements with AstraZeneca and MedImmune, in each case on an arms-length basis, in order to ensure our ability to use the acquired molecules in our business as a biotechnology company focused on autoimmune disease. Furthermore, we may be required to make milestone payments to MedImmune, or to third parties upon MedImmune’s instruction, of up to an aggregate of approximately $119 million related to the initiation and execution of clinical trials, submission and approval of regulatory drug applications, and sales milestones, of which approximately $44 million remains payable upon the achievement of such milestones for inebilizumab.

MedImmune License Agreement

In connection with the asset acquisition pursuant to the APA, in February 2018 we entered into a license agreement with MedImmune. Pursuant to the agreement, MedImmune granted us an exclusive, worldwide, royalty-free license to use protein scaffolds and methods for purifying albumin-fusion proteins covered by certain patent rights owned by MedImmune in order to exploit products aimed at treating inflammation and autoimmune disorders.

Pursuant to the agreement, we may grant sublicenses to affiliates and certain third parties, provided that all sublicensees are required to comply with the terms and conditions of the agreement. In addition, we will be liable for any acts and omissions of a sublicensee, including in respect of any third party claim made against MedImmune or any of its affiliates resulting from such acts or omissions.

MedImmune has the right to prepare, file, prosecute and maintain certain patents, including directing any related interference, re-issuance, re-examination and opposition proceedings. If MedImmune decides not to prepare, file, prosecute or maintain certain patents, MedImmune has agreed to provide us with written notice of such decision at least 90 days prior to any applicable filing deadline. Thereafter, we will have the right, but not the obligation to assume the control and direction of the preparation, filing, prosecution and maintenance of certain patents at our sole cost and expense. MedImmune also has the first right, but not the obligation, to enforce the licensed patents.

The term of the agreement expires upon the expiration, revocation, invalidation or abandonment of the last patent or patent application within the licensed patents. Either we or MedImmune can terminate the agreement in the event of an uncured material breach by the other party or in the event of the other party’s bankruptcy or insolvency. MedImmune may immediately terminate the agreement with respect to any patent within the licensed intellectual property immediately upon written notice to us if we or our affiliates or our sublicensees knowingly assist any third party in opposing the grant of such patent or assist any third party in disputing the validity or enforceability of such patent. We may also terminate the agreement in its entirety or with respect to any particular product for any reason upon 60 days’ prior written notice to MedImmune. The rights and obligations of the parties that survive termination of the agreement vary depending on the basis for the termination.

Clinical Supply Agreement with AstraZeneca UK Limited

In February 2018, and in connection with the APA, we entered into a clinical supply agreement with AstraZeneca for the manufacture and supply of products by AstraZeneca for our clinical use and the performance by AstraZeneca of certain services, including shipping, distribution and regulatory support. Pursuant to the agreement, we will purchase and AstraZeneca will supply product containing inebilizumab as its active ingredient for clinical purposes.

The term of the agreement expires on February 23, 2023 unless terminated earlier in accordance with the agreement. Either we or AstraZeneca can terminate the agreement upon 60 days’ prior written notice to the breaching party in the event either party breaches, and does not cure such breach during a specified period, any of its material obligations under the agreement or immediately upon written notice to the other party if a specified bankruptcy-related event with regard to the other party occurs. AstraZeneca may terminate the agreement at any time after February 23, 2019 upon 30 months’ prior written notice to us. In addition, we may terminate the agreement upon 30 days’ prior written notice to AstraZeneca upon receiving a remediation plan from AstraZeneca, which if implemented, will not enable AstraZeneca to fulfill its delivery obligations under the agreement within twelve months of a force majeure event.

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Commercial Supply Agreement with AstraZeneca UK Limited

In April 2019, and in connection with the APA, we entered into a commercial supply agreement with AstraZeneca for the manufacture and supply of products by AstraZeneca for our commercial supply use and the performance by AstraZeneca of certain services, including shipping, distribution and regulatory support. The agreement provides for the manufacture and supply for inebilizumab concentrates. Under the agreement, we will provide a forecast of orders for the quantities of bulk inebilizumab concentrates we believe we will require, and forecasted quantities will become binding at a certain point before the firm delivery date set forth in the forecast. We also have the right to request that AstraZeneca transfer manufacturing to a mutually agreed upon third party, subject to certain restrictions on technology transfer from third party licensors, in certain limited situations where AstraZeneca is unable or unwilling to supply inebilizumab in sufficient quantities to meet our orders. The agreement contains provisions relating to compliance by AstraZeneca with cGMP, indemnification, confidentiality, regulatory matters, dispute resolution, intellectual property and other customary matters for an agreement of this kind.

The term of the agreement expires on April 4, 2029, with automatic renewal for successive three-year terms, unless terminated earlier in accordance with the agreement. Either we or AstraZeneca can terminate the agreement upon 60 days’ prior written notice to the breaching party in the event either party breaches, and does not cure such breach during a specified period, any of its material obligations under the agreement or immediately in the event of the other party’s bankruptcy or insolvency. Either we or AstraZeneca may terminate the agreement at any time upon thirty six months’ prior written notice. In addition, we may terminate the agreement upon 30 days’ prior written notice to AstraZeneca upon receiving a remediation plan from AstraZeneca, which if implemented, will not enable AstraZeneca to fulfill its delivery obligations under the agreement within twelve months of a force majeure event.

Master Supply and Development Services Agreement with AstraZeneca UK Limited

In February 2018, and in connection with the APA, we entered into a master supply and development services agreement with AstraZeneca, or the MSDSA, pursuant to which AstraZeneca agreed to provide development services and supply clinical product for certain programs, including VIB7734. Our engagement with AstraZeneca under the MSDSA and any related product schedules are on a non-exclusive basis. We have the right, at our sole discretion, to engage other providers for VIB7734 development services and supply, subject to restrictions on the transfer of certain AstraZeneca manufacturing technology. Under the MSDSA, we have entered into a product schedule for AstraZeneca to provide clinical supply of VIB7734 and to develop a transferrable manufacturing process. The MSDSA contains provisions relating to compliance by AstraZeneca with cGMP, indemnification, confidentiality, regulatory matters, dispute resolution, intellectual property and other customary matters for an agreement of this kind.

The term of the MSDSA expires on February 23, 2028. Either we or AstraZeneca can terminate the agreement immediately if there are no product schedules in force for a continuous period of at least twelve months. We may terminate the agreement at any time upon six months’ prior written notice to AstraZeneca. Either we or AstraZeneca can terminate the agreement upon 60 days’ prior written notice to the breaching party in the event either party breaches any of its material obligations under the agreement or immediately in the event of the other party’s bankruptcy or insolvency.

Transition Services Agreement with MedImmune

In February 2018 and in connection with the APA, we entered into a transition services agreement with MedImmune, pursuant to which MedImmune has agreed to provide transitional services related to our use and operation of the acquired assets, including, but not limited to, financial services, procurement activities, information technology services, clinical data management and statistical programming, clinical operations and development and commercial activities. Pursuant to the agreement, we granted MedImmune a non-exclusive, royalty-free, non-transferable license and right of reference, with the right to grant further licenses and rights of reference to affiliates and subcontractors performing services under the agreement. The license and right of reference are to certain regulatory materials and all intellectual property rights owned or controlled by us that are necessary to perform the agreed upon services.

The term of the agreement expires upon the expiration of the last service period, unless terminated earlier in accordance with the agreement. We may terminate the agreement in its entirety or with respect to all or any services, at any time, upon 30 days’ prior written notice to MedImmune. Either we or MedImmune can terminate the agreement upon 30 days’ prior written notice to the breaching party in the event of an uncured breach and immediately if a specified bankruptcy-related event with regard to the other party occurs. In the event that a delay in connection with a force majeure event continues for a period of at least 30 days, the party affected by the other party’s delay may elect to (a) suspend performance and extend the time for performance for the duration of the force majeure event or (b) terminate the agreement without any liability to either party arising out of such termination.

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Hansoh License and Collaboration Agreement

In May 2019, we entered into a license and collaboration agreement with Hansoh Pharma, for co-development and commercialization of inebilizumab in China, Hong Kong, and Macau for NMOSD as well as other potential inflammation/autoimmune and hematologic malignancy diseases. Under the terms of the agreement, we received up-front licensing fees of an aggregate of $20 million in 2019 and may receive payments contingent on certain development, regulatory and commercial milestones, for up to an aggregate of $203 million, plus royalties on net sales ranging from low double-digits to high teens.

Pursuant to the agreement, we granted Hansoh Pharma an exclusive, royalty-bearing, license to import, sell, have sold, offer for sale, and otherwise commercialize inebilizumab in China, Hong Kong, and Macau, as covered by our patent rights. We also granted Hansoh Pharma an exclusive license with us to co-develop inebilizumab in additional diseases in China, Hong Kong and Macau. Hansoh Pharma will be responsible for leading development and commercialization of inebilizumab in China, Hong Kong and Macau. We will be responsible for supplying inebilizumab to Hansoh Pharma pursuant to a supply agreement that we expect to enter into.

The agreement continues until terminated by Hansoh Pharma or by us. Hansoh Pharma may terminate the agreement at any time upon 120 days’ notice to us. Either we or Hansoh Pharma can terminate the agreement in its entirety, or on a region-by-region or product-by-product basis, if the other party is in material breach that is uncured after 60 days from written notice. Either we or Hansoh Pharma can terminate the agreement upon bankruptcy or insolvency of the other party, except for a dissolution for the purposes of reorganization, and the other party is unable to fulfill its obligations under the agreement. Upon termination, all rights and licenses granted to Hansoh Pharma terminate and all rights revert back to us.

MTPC Agreement

On October 8, 2019, we entered into a license agreement, or the MTPC License Agreement, with Mitsubishi Tanabe Pharma Corporation, or MTPC, for co-development and commercialization of inebilizumab in Japan, Thailand, South Korea, Indonesia, Vietnam, Malaysia, Philippines, Singapore, and Taiwan, or the Territory, for NMOSD as well as other indications that we and MTPC mutually agree to add to the MTPC License Agreement. Under the terms of the MTPC License Agreement, we received an up-front licensing fee of $30 million and are eligible to receive development and commercialization milestones and payments based, in part, on sales revenue.

Pursuant to the MTPC License Agreement, we granted MTPC an (i) exclusive license under our intellectual property to develop, commercialize, and conduct final manufacturing of inebilizumab in the Territory, and (ii) a non-exclusive license under any patent we control solely to the extent useful or necessary to enable MTPC to develop, commercialize and finally manufacture products in the Territory, but excluding rights to any active pharmaceutical ingredient or compound other than inebilizumab. MTPC will be responsible for leading development, commercialization, and final manufacturing of inebilizumab in the Territory. We will be responsible for supplying inebilizumab to MTPC pursuant to a supply agreement that we expect to enter into. On a country-by-country and product-by-product basis, the licenses will become perpetual, non-exclusive and fully paid-up upon the later of (a) the expiration of the last valid claim of our patent covering the product; (b) the expiration of any regulatory exclusivity with respect to the product; or (c) 10 years after the first commercial sale of the product in such country.

The MTPC License Agreement continues for so long as MTPC is developing or commercializing inebilizumab in the Territory, unless terminated by MTPC or by us. MTPC may terminate the MTPC License Agreement at any time upon 180 days’ notice to us. We may terminate the MTPC License Agreement upon the occurrence of certain adverse events that are not cured by MTPC within the specified cure periods. Either party may terminate the MTPC License Agreement under specified circumstances relating to the other party’s insolvency.

Duke License Agreement

In September 2004, Cellective Therapeutics, Inc., or Cellective, entered into a license agreement with Duke University, or the Duke License Agreement. In September 2015, Cellective was acquired by MedImmune. In February 2018, MedImmune assigned the Duke License Agreement to us.

Pursuant to the Duke License Agreement, we have an exclusive, world-wide license to make, use, manufacture, market, sell, and generally commercialize certain antibodies, including anti-CD19 antibodies, anti-CD22 antibodies, anti-CD20 antibodies, and MS4a gene products, covered by certain patent rights owned by Duke University. The rights licensed to us are for all fields of use. We have the right to sublicense these rights under certain conditions. Duke University retains the right to use the rights for non-commercial, academic research, teaching, clinical, and educational purposes.

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Under the terms of the Duke License Agreement, we may be required to pay Duke University low single-digit royalties on net sales of products, including inebilizumab, by us or by our sublicensees that contain or incorporate, or are covered by, certain of the intellectual property licensed pursuant to the Duke License Agreement. Duke University may also be entitled to milestone payments of up to an aggregate of approximately $1 million, of which $212,500 are related to the initiation and execution of clinical trials and submission and approval of regulatory drug applications related to anti-CD19 antibodies. As of December 31, 2019, approximately $100,000 remains payable upon the achievement of such milestones. Pursuant to the Duke License Agreement, and subject to certain exceptions, we are required to indemnify Duke University against all third party claims related to or arising out of the Duke License Agreement. We are required to use commercially reasonable efforts to bring licensed products to market and to meet certain performance milestones.

Unless earlier terminated in accordance with the agreement, the Duke License Agreement will continue on a country-by-country basis for the life of the last-to-expire licensed patent. We may terminate the Duke License Agreement at any time upon at least three months’ prior notice. Duke University may terminate the license agreement in the event of our bankruptcy or insolvency. Either party may terminate the agreement in the event of an uncured material breach by the other party. The right to cure applies only to the first three material breaches properly noticed in a 24 month period. Upon termination of the agreement, we are required to cease manufacture, use, practice, lease, and sale, offering, distribution and other commercialization of licensed products.

SBI Biotech License Agreement

In September 2008, SBI Biotech Co. Ltd, or SBIBT, entered into a license agreement with MedImmune, which was subsequently assigned to us in February 2018 and further amended in August 2018. Pursuant to the agreement, we have an exclusive, world-wide license to make, have made, use, manufacture, have manufactured, market, import, export, offer for sale and sell, with the right to sublicense, anti-ILT7 antibodies and related methods covered by certain patent rights owned by SBIBT. The field of our license is therapeutic, prophylactic, and diagnostic uses in all possible indications, diseases and disorders.

Under the terms of the agreement, as assigned to us, we may be required to pay SBIBT mid-to-high single-digit royalties on net sales of products, including VIB7734, by us or our sublicensees covered by SBIBT’s patents or know-how licensed pursuant to this license agreement. We may also be required to pay SBIBT milestone payments of up to an aggregate of $137 million related to research and development, clinical trials, submission and approval of regulatory drug applications, and sales milestones.

The term of the agreement will continue until the earlier of (i) 50 years from the start of the license or (ii) expiration of all royalty and milestone payment obligations. Royalty and milestone payment obligations expire on a country-by-country and product-by-product basis on the later of (a) the tenth anniversary of the first commercial sale of a product in a country or (b) the last-to-expire of the licensed patents in the country where the product is sold. Upon expiration of the agreement, the licenses granted to us will become fully paid-up, non-exclusive, perpetual licenses.

We can terminate the agreement in its entirety or on a country-by-country and product-by-product basis by giving 60 days’ written notice to SBIBT.

If, in any calendar year, we fail to meet any diligence milestones related to research and development, clinical trials, regulatory filing, regulatory approval or commercial launch, SBIBT can terminate the license upon 90 days written notice, unless we cure the failure within 30 days after the written notice. SBIBT can terminate the license with respect to the European Union and Japan by providing 60 days’ written notice if we fail to use commercially reasonable efforts to develop a product in a member country of the European Union and in Japan after regulatory approval for a product in the United States, and we do not cure the failure within the notice period. SBIBT can terminate the license with respect to a country in which regulatory approval is obtained by providing 90 days’ written notice if we fail to use commercially reasonable efforts to market and sell a product in such country and we do not cure the failure within 30 days after the written notice.

Either we or SBIBT can terminate the license at any time if the other party is in breach of its payment obligations or other obligations and has not cured the breach within 45 days of written notice.

DFCI License Agreement

In September 2004, Cellective entered into an exclusive license agreement with the Dana-Farber Cancer Institute, Inc., or DFCI, which we refer to as the DFCI License Agreement. In September 2015, Cellective was acquired by MedImmune. In February 2018, MedImmune assigned the DFCI License Agreement to us.

Pursuant to the DFCI License Agreement, we have an exclusive, worldwide license, with the right to grant sublicenses under certain conditions, to make, use, manufacture, market, sell, and generally commercialize certain anti-

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CD19 biological material, including hybridomas producing anti-CD19 antibodies, CD19 transgenic mouse lines, and CD19 cDNA transfected cell lines, certain anti-CD22 biological materials and certain patent rights owned by DFCI related to anti-CD19 antibodies and anti-CD22 antibodies. The rights licensed to us are for all fields except research reagents.

Under the terms of the agreement, DFCI was entitled to a milestone payment of $250,000 for each of the first three corporate alliances or other agreements involving the licensed intellectual property from which we receive at least $2 million. DFCI is currently entitled to two more potential milestone payment of $250,000 each. In addition, we may be required to pay DFCI low single-digit royalties on net sales by us, our affiliates and sublicensees of products, including inebilizumab, covered by the patent rights or making use of the biological materials, and a share of any sublicensing income related to the licensed intellectual property. We are obligated to manufacture the licensed products sold or used in the United States substantially in the United States. Pursuant to the DFCI License Agreement, and subject to certain exceptions, we are required to indemnify DFCI against all third party claims related to or arising out of the DFCI License Agreement. We are required to use commercially reasonable efforts to bring one or more licensed products to market.

Unless terminated in accordance with the agreement, the DFCI License Agreement will continue on a country-by-country basis until the later of (i) the expiration date of the last-to-expire of the licensed patents in the applicable country which patents have all expired, or (ii) when we cease to sell or manufacture any products using the licensed biological materials.

DFCI may immediately terminate the agreement upon written notice if we cease to carry on business with respect to licensed products, fail to make any required payments on schedule without cure within 30 days’ written notice from DFCI, fail to comply with any due diligence obligations without cure within 90 days’ written notice from DFCI, fail to procure and maintain insurance, are convicted of a felony relating to the manufacture use, sale or importation of licensed products, or we materially breach any other provision of the agreement without cure within 90 days’ written notice from DFCI. We may terminate the DFCI License Agreement at any time by giving DFCI at least 180 days’ prior written notice.

BioWa Sublicense Agreement

Pursuant to a sublicense agreement dated February 23, 2018, with MedImmune, LLC, or the BioWa Sublicense Agreement, we have an exclusive sublicense (as between MedImmune and us) under the non-exclusive licenses granted to MedImmune pursuant to a license agreement by and between MedImmune and BioWa, Inc. dated November 16, 2005, or the BioWa License Agreement, to develop, commercialize, make, have made, use, import, sell, and offer for sale any product containing or comprising inebilizumab expressed using a specific cell line that was developed, in part, using BioWa’s Potelligent™ technology, which we refer to as the 551 Cell Line, in the field of all human diseases and disorders, including, but not limited to, treatment and prevention.

Under the terms of the BioWa Sublicense Agreement, we may be required to pay low to mid-single digit royalties on net sales of products that are owed to BioWa under the BioWa License Agreement. We may also be required to make milestone payments of up to an aggregate of $11 million related to the commencement of clinical trials, submission and approval of regulatory drug applications, of which $7 million remains payable upon achievement of certain milestones for inebilizumab.

The term of the BioWa Sublicense Agreement will continue until the expiration or termination of the BioWa License Agreement in its entirety or with respect to a CD19 target. If we are not in breach of the BioWa Sublicense Agreement, MedImmune shall, at our request, designate us as a sublicensee and use reasonable efforts to assist us in obtaining a direct license from BioWa. The term of the BioWa License Agreement will continue on a country-by-country basis until the later of (i) the expiration of the last valid claim within the patent rights covering the product in such country where the product is sold or (ii) if a product is not covered by a valid claim within the patent rights, 10 years following the date of first commercial sale in the country where sold.

We may terminate the sublicense for any reason upon 30 days’ written notice to MedImmune. Either we or MedImmune may terminate the sublicense immediately upon written notice if the other party materially breaches the agreement without cure within 60 days of receiving written notice of the material breach from the other party. Either we or MedImmune can terminate the sublicense agreement in the event of the other party’s bankruptcy or insolvency.

Lonza Sublicense Agreement

Pursuant to a sublicense agreement dated February 23, 2018 with MedImmune, LLC, or the Lonza Sublicense Agreement, we have an exclusive sublicense (as between MedImmune and us) under the worldwide, perpetual and non-exclusive licenses granted to MedImmune under a license agreement with Lonza Sales AG, or Lonza, dated January 21, 2005, or the Lonza License Agreement, to develop, commercialize, make, have made, use, import, sell, and offer for sale (i) any product containing or comprising inebilizumab expressed using the 551 Cell Line, which was developed, in part, using Lonza’s gene expression technology and (ii) any product containing or comprising VIB7734 expressed using

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another specific cell line that was developed, in part, using Lonza’s gene expression technology, which we refer to as the 7734 Cell Line.

Under the terms of the Lonza Sublicense Agreement and the Lonza License Agreement, we may be required to pay MedImmune for further payment to Lonza, or pay directly to Lonza if instructed to do so by MedImmune, low single-digit royalties on all net sales of products containing or comprising inebilizumab expressed using the 551 Cell Line or containing or comprising VIB7734 expressed using the 7734 Cell Line. We may also be required to make milestone payments of up to an aggregate of £60,000. We may also be required to pay fees of up to an aggregate of £330,000 per year related to license maintenance and manufacturing.

The term of the sublicense agreement will continue until the expiration or termination of MedImmune’s license agreement with Lonza in its entirety, or with respect to inebilizumab expressed using the 551 Cell Line and VIB7734 expressed using the 7734 Cell Line. The Lonza License Agreement will continue until terminated by MedImmune with six months’ notice. If we are not in breach of the sublicense, MedImmune shall, at our request, use reasonable efforts to assist us in obtaining a direct license from Lonza.

We may terminate the sublicense for any reason upon 30 days’ written notice to MedImmune. Either we or MedImmune may terminate the sublicense immediately upon written notice if the other party materially breaches the agreement without cure within 60 days of receiving written notice of the material breach from the other party. Either we or MedImmune can terminate the sublicense agreement in the event of the other party’s bankruptcy or insolvency.

BioWa/Lonza Sublicense Agreement

Pursuant to a sublicense agreement dated February 23, 2018, with MedImmune, LLC, we have an exclusive sublicense (as between MedImmune and us) under the non-exclusive licenses granted to MedImmune under a license agreement with BioWa, Inc. and Lonza Sales AG, or Lonza, dated November 4, 2013, the BioWa/Lonza license, to develop, commercialize, make, have made, use, import, have imported, export, have exported, sell, have sold, offer for sale and otherwise dispose any product containing or comprising VIB7734 expressed using the 7734 Cell Line in the field of the diagnosis, prophylaxis and treatment of all human diseases, conditions or disorders.

Under the terms of the sublicense agreement and license agreement, we may be required to pay low to mid single-digit royalties on net sales of products containing or comprising VIB7734 expressed using the 7734 Cell Line that are owed to BioWa/Lonza under the BioWa/Lonza License Agreement. We may also be required to make milestone payments of up to an aggregate of $11 million related to clinical trials and submission and approval of regulatory drug applications. We may also be required to pay fees of up to an aggregate of £340,000 per year related to manufacturing.

The term of the sublicense agreement will continue until the expiration or termination of the BioWa/Lonza license in its entirety or with respect to a product containing VIB7734 expressed using the 7734 Cell Line. If we are not in breach of the sublicense, MedImmune shall, at our request, use reasonable efforts to assist us in obtaining a direct license from BioWa and Lonza. The term of the BioWa/Lonza license will continue on a country-by-country basis until the later of (i) the expiration of the last valid claim within the patent rights covering the product in such country where the product is sold or (ii) if a product is not covered by a valid claim within the patent rights, 10 years following the date of first commercial sale in the country where sold.

We may terminate the sublicense for any reason upon 30 days’ written notice to MedImmune. MedImmune may terminate the sublicense immediately upon written notice if we (i) knowingly oppose or assist any third party in opposing the grant of letters patent or patent application that are part of the BioWa/Lonza license or (ii) dispute or knowingly assist any third party in disputing the validity of any patent or patent claims that are part of the BioWa/Lonza license. Either we or MedImmune may terminate the sublicense immediately upon written notice if the other party materially breaches the agreement without cure within 30 days of receiving written notice of the material breach from the other party, or in the event of the other party’s bankruptcy or insolvency.

MedImmune Payment Agreement

Pursuant to a payment agreement with MedImmune Limited dated February 23, 2018, we are responsible for certain royalty payments MedImmune may be required to make to Medical Research Council, or MRC, under a license agreement dated January 7, 1997. MedImmune obtained a license to patents and technology for library cloning and phage screening owned by MRC that was used in the identification of VIB7734. We may be required to reimburse MedImmune for payments to MRC, or pay MRC directly if instructed to do so by MedImmune, for low single-digit royalties on the net invoice price of products comprising or containing VIB7734.

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The reimbursement agreement expires when there can be no further actual or contingent payment obligations under the MRC license. The royalty term of the MRC license expires on a country-by-country basis ten years after the first commercial sale in that country.

Medical Affairs and Patient Advocacy

We are building a medical affairs team that will be engaged in furthering awareness of autoimmune disease and education of clinicians with respect to the clinical knowledge we have gained from our clinical trials. Our medical affairs team will also support investigator sponsored trials and research collaborations. Our patient advocacy team will focus on expanding our relationships with the patient advocacy community for NMOSD and for other autoimmune diseases.

Commercial Opportunity and Commercialization Plan for Inebilizumab

The commercial opportunity for inebilizumab, as potentially the first FDA-approved monotherapy for the treatment of patients with NMOSD with one or more attacks, stems from its distinctive value proposition. We believe inebilizumab has the potential for disease modification by preventing the next NMOSD attack through depletion of B cells and plasma cells. In addition, pivotal clinical trial data suggests that inebilizumab reduces the worsening of disability, hospitalizations and new MRI lesions.

NMOSD is a rare, devastating condition that attacks the optic nerve, spinal cord and brain stem and often leads to irreversible blindness and paralysis. Patients with NMOSD are diagnosed by multiple physician specialties including ophthalmologists or neurologists once they suffer their first attack.

Highly specific serum autoantibodies, AQP4-IgG, are thought to be present in about 80% of patients and are likely pathogenic. AQP4 autoantibodies induce central nervous system damage through complement activation and antibody-mediated cytotoxicity. Since 2006, the presence of AQP4-IgG has been included as part of the NMOSD diagnostic criteria. However, it is noteworthy, that a patient can still be deemed a NMOSD patient even if no AQP4-IgG is present as long as other NMOSD definition criteria are met.

We have identified first-line newly diagnosed patients with NMOSD and patients with NMOSD that are unstable as our initial target population for inebilizumab, if approved by the FDA and assuming these patient populations are within the approved patient population. Patients with NMOSD are considered unstable if they are on an unapproved therapy and are at risk of suffering another attack based on physician assessment of severity and frequency of recent attacks. The majority of our initial target population are treated by NMOSD specialists, multiple sclerosis specialists and community neurologists. We estimate that NMOSD affects approximately 10,000 patients in the United States with approximately 70% of patients treated in a small number of medical centers of excellence. We plan to initially commercialize inebilizumab in the United States with a specialty clinical sales force of fewer than 30 individuals focused on the highest prescribers, which we believe is fewer than 300 physicians.

Our pre-launch commercial activities are focused on delivering comprehensive disease awareness and education to NMOSD specialists, multiple sclerosis specialists and community neurologists. These disease education efforts will communicate the importance of CD19-expressing B cells and plasma cells in producing autoantibodies, which leads to NMOSD. We believe the broad understanding of this evidence will help to establish inebilizumab as a first-line treatment in patients with NMOSD and support our launch uptake following FDA approval, if achieved. Over time we intend to address the stable NMOSD patient population who have not suffered a recent attack and are treated with an unapproved therapy, given the disease modification potential of inebilizumab. We believe the improved EDSS score, reduction in MRI lesions and reduction in hospitalization will be meaningful to patients. Furthermore, we believe the potential semi-annual maintenance dosing after the two initial doses on days 1 and 15 can improve patient quality of life.

We have conducted market research with physicians and payors to forecast the potential commercial opportunity for inebilizumab in the United States. We have also completed preliminary health economic analyses of the potential direct cost savings that inebilizumab may be able to provide to the healthcare system and have completed multiple surveys with payors to evaluate the potential coverage for inebilizumab by health insurers. Health insurers surveyed have indicated that their perception of the likelihood of inebilizumab coverage is influenced by the lack of FDA-approved first-line monotherapy treatments and the potential for inebilizumab to provide significant direct cost savings based on its potential to prevent the next attack for patients with NMOSD. Based on these analyses, we believe that the pricing for inebilizumab can be supported above the current pricing for other unapproved therapies for treating NMOSD. We estimate that approximately 50% to 65% of our target patient population is commercially-insured and may be eligible for co-pay assistance programs to help them access inebilizumab.

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To address markets outside of the United States, we plan to seek one or more partners with international sales expertise who can sell inebilizumab in target markets. We anticipate that in certain markets additional clinical trials of inebilizumab may be required to obtain regulatory approval and/or ensure market access. We have formed a collaboration partnership with Hansoh Pharma for co-development and commercialization of inebilizumab in patients with NMOSD and other autoimmune diseases and hematological cancers in China, Hong Kong and Macau and we are continuing to evaluate potential partnerships to pursue regulatory approval and commercialization of inebilizumab in NMOSD in other geographic regions. See “—Licenses and Strategic Agreements—Hansoh License and Collaboration Agreement”. In addition, we have formed a collaboration partnership with MTPC for co-development and commercialization of inebilizumab in Japan, Thailand, South Korea, Indonesia, Vietnam, Malaysia, Philippines, Singapore, and Taiwan for NMOSD as well as other indications that we and MTPC mutually agree to add to the MTPC License Agreement. See “—Licenses and Strategic Agreements—MTPC Agreement”.

Competition

The biotechnology and pharmaceutical industries are characterized by rapid technological advancement, significant competition and an emphasis on intellectual property. We face potential competition from many different sources, including major and specialty pharmaceutical and biotechnology companies, academic research institutions, governmental agencies and public and private research institutions. Any product candidates that we successfully develop and commercialize will compete with current therapies and new therapies that may become available in the future. We believe that the key competitive factors affecting the success of any of our product candidates will include efficacy, safety profile, dosing, cost, effectiveness of promotional support and intellectual property protection. With respect specifically to inebilizumab for patients with NMOSD, we expect the key competitive factors affecting the success of inebilizumab, if approved, will include the intended patient population (AQP4+ and AQP4- patients), the ability to use as a first-line therapy and as a monotherapy, the low frequency of dosing and administration and efficacy.

Inebilizumab for NMOSD

If inebilizumab is approved for the treatment of NMOSD, it will likely compete with two products that have achieved successful pivotal studies in NMOSD: Eculizumab from Alexion Pharmaceuticals, Inc., or Alexion, to be marketed as Soliris®, and satralizumab from Chugai Pharmaceutical Co., Ltd., or Chugai:

 

In September 2018, Alexion reported positive pivotal data for Soliris® as an add-on therapy in patients with severe AQP4+ NMOSD. The trial, which was conducted in 143 patients, met its primary endpoint of time to first adjudicated on-trial relapse, demonstrating that treatment with Soliris® reduced the risk of NMOSD relapse by 94.2% compared to placebo (p < 0.0001). At 48 weeks, 97.9% of patients receiving Soliris® were free of relapse compared to 63.2% of patients receiving placebo. In addition, treatment with Soliris® reduced the adjudicated on-trial annualized relapse rate compared to placebo, a key secondary endpoint, by 95.5% (p<0.0001). With respect to its other secondary endpoints, including disability and quality of life measures, while the trial results favored Soliris®, the observed differences were small. Soliris® requires dosing every seven days for the first five weeks followed by dosing every 14 days thereafter. In June 2019, Alexion received FDA approval of Soliris® for the treatment of adults with NMOSD. Soliris has a boxed warning to alert health care professionals and patients that life-threatening and fatal meningococcal infections have occurred in patients treated with Soliris, and that such infections may become rapidly life-threatening or fatal if not recognized and treated early.

 

In October 2018, Chugai reported positive pivotal data for satralizumab as an add-on therapy in patients with AQP4+ and AQP4- NMOSD. The trial was conducted outside of the United States and met its primary endpoint of time to first protocol-defined relapse in the double-blind period, demonstrating that treatment with satralizumab reduced the risk of NMOSD relapse by 62% compared to placebo (p = 0.0184; n = 83). The proportion of relapse free patients at weeks 48 and 96 was 88.9% and 77.6% with satralizumab and 66.0% and 58.7% with placebo, respectively. In patients with AQP4+ NMOSD only, satralizumab showed a 79% reduction of NMOSD relapse compared to placebo (hazard ratio = 0.21; n = 55). In AQP4+ patients only, the proportion of relapse free patients at weeks 48 and 96 was 91.5% and 91.5% with satralizumab and 59.9% and 53.3% with placebo, respectively. In patients with AQP4- NMOSD only, satralizumab showed a 34% reduction of NMOSD relapse compared to placebo, and the proportion of relapse free patients at weeks 48 and 96 was 84.4% and 56.3% with satralizumab, and 75.5% and 67.1% with placebo, respectively. In the trial, satralizumab was dosed subcutaneously at baseline and then at weeks two and four, followed by monthly subcutaneous dosing for 20 months. In December 2018, Chugai reported that satralizumab has met its primary endpoint as a monotherapy.

In addition, inebilizumab will likely compete with rituxumab, a monoclonal anti-CD20 antibody marketed by Genentech USA, Inc., as Rituxan®. Rituximab is an approved therapy for the treatment of adults with Non-Hodgkin’s Lymphoma, Chronic Lymphocytic Leukemia, rheumatoid arthritis and Granulomatosis and Microscopic Polyangiitis. While

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not approved for the treatment of NMOSD, treatment of patients with NMOSD with rituximab has been found by clinicians to reduce the frequency of relapses of NMOSD.

VIB4920 and VIB7734

If VIB4920 is approved, it may compete with Belatacept (NULOJIX®), a selective T cell co-stimulation blocker indicated for prophylaxis of organ rejection in adult patients receiving a kidney transplant that has been developed by Bristol-Myers Squib, as well as potential mAb drug candidates in development by UCB, Biogen, Boehringer Ingelheim, AbbVie and Novartis. If VIB7734 is approved, it may compete with drug candidates in development by Biogen and Boehringer Ingelheim.

All of our product candidates, if approved, may also compete with current treatments used for autoimmune disease, including various immunosuppressants and steroids.

Many of our competitors, either alone or with their collaboration partners, have significantly greater financial resources and expertise in research and development, pre-clinical testing, clinical trials, manufacturing, and marketing than we do. Future collaborations and mergers and acquisitions may result in further resource concentration among a smaller number of competitors.

Our commercial potential could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than products that we may develop. 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 or make our development more complicated. These competitors may also vie for a similar pool of qualified scientific and management talent, sites and patient populations for clinical trials, as well as for technologies complementary to, or necessary for, our programs.

Supply and Manufacturing

We do not currently have the infrastructure or internal capability to manufacture our product candidates for use in clinical development and, if any product candidate is approved, commercialization. We rely, and expect to continue to rely, on third-party manufacturers for the production of our product candidates in compliance with cGMP requirements for use in clinical trials under the guidance of members of our organization. In the case of inebilizumab, we rely on AstraZeneca and we currently have no alternative manufacturer in place. Under our commercial supply agreement with AstraZeneca, AstraZeneca has agreed to provide us with a commercial supply of drug product for inebilizumab. We believe that our existing stock of drug substance that has already been manufactured will be sufficient to supply us for approximately the first two years of the commercialization of inebilizumab in the United States. See “—Licenses and Strategic Agreements—Clinical Supply Agreement with AstraZeneca UK Limited” and “—Licenses and Strategic Agreements—Commercial Supply Agreement with AstraZeneca UK Limited”.

We have built an internal team with significant technical, manufacturing, analytical, quality, regulatory, including cGMP, and project management experience to oversee our third-party manufacturers and to manage manufacturing and quality data and information for regulatory compliance purposes. We plan to continue to invest in process science, product characterization and supply chain improvements over time.

Intellectual Property

Our success depends in part on our ability to obtain and maintain proprietary protection for our product candidates, technology and know-how, to operate without infringing the proprietary rights of others and to prevent others from infringing our proprietary rights. Our policy is to seek to protect our proprietary position by, among other methods, pursuing and obtaining patent protection in the United States and in jurisdictions outside of the United States related to our proprietary technology, inventions, improvements and product candidates that are important to the development and implementation of our business. For example, we or our licensors have or are pursuing patents covering the composition of matter for each of our product candidates and we generally pursue patent protection covering methods-of-use for each clinical program. We also rely on trade secrets, know-how, continuing technological innovation and potential in-licensing opportunities to develop and maintain our proprietary position. Additionally, we expect to benefit, where appropriate, from statutory frameworks in the United States, Europe and other countries that provide a period of clinical data exclusivity to compensate for the time required for regulatory approval of our drug products.

We continually assess and refine our intellectual property strategy as we develop new technologies and product candidates. We plan to file additional patent applications based on our intellectual property strategies where appropriate, including where we seek to adapt to competition or to improve business opportunities. Further, we plan to file patent applications, as we consider appropriate under the circumstances, to protect new technologies that we develop.

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Our owned and in-licensed patent estate as of December 31, 2019, on a worldwide basis, includes over 300 granted or pending patent applications world-wide, spread over more than a dozen patent families, with 10 granted U.S. patents. The term of individual patents depends upon the laws of the countries in which they are obtained. In the countries in which we currently file, the patent term is 20 years from the earliest date of filing of the first non-provisional patent application in a patent family, which may also serve as a priority application. However, the term of a U.S. patent, and certain ex-U.S. patents may be lengthened to compensate for the time required to obtain regulatory approval to sell a drug (a Patent Term Extension (PTE) in the U.S. award of a Supplementary Patent Certificate (SPC) ex-U.S.). In the U.S. by delays encountered during patent prosecution that are caused by the USPTO may also result in lengthened patent term (referred to as Patent Term Adjustment (PTA)). For example, the U.S. Hatch-Waxman Act permits a patent term extension for FDA-approved drugs of up to five years beyond the expiration of the patent. The length of the patent term extension is related to the length of time the drug is under regulatory review and diligence during the review process. Patent term extensions cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval and only one patent covering an approved drug, its method of use or its methods of manufacture may be extended. A similar kind of patent extension, referred to as a Supplementary Protection Certificate, is available in Europe and certain other countries including Japan. Legal frameworks are also available in certain other jurisdictions to extend the term of a patent. We currently intend to seek patent term extensions on any of our issued patents in any jurisdiction where we have a qualifying patent and the extension is available; however there is no guarantee that the applicable regulatory authorities, including the FDA in the United States, will agree with our assessment of whether such extensions should be granted, and even if granted, the length of such extensions. Further, even if our patent is extended, the patent, including the extended portion of the patent, may be held invalid or unenforceable by a court in the United States or a foreign country.  

As with other biotechnology and pharmaceutical companies, our ability to obtain and maintain a proprietary position on our drug candidates and technologies will depend on our success in obtaining effective patent claims on these pending patents and enforcing those claims if granted. However, our pending patent applications, and any patent applications that we may in the future file or license from third parties, may not result in the issuance of patents. We also cannot predict the breadth of claims that may be allowed or enforced in our patents. Furthermore, our competitors may be able to independently develop and commercialize drugs with similar mechanisms of action and duplicate our methods of treatments or strategies without infringing our patents. Because of the extensive time required for clinical development and regulatory review of a drug we may develop, it is possible that, before any of our drugs can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby reducing any advantage of any such patent. Moreover, even our issued patents do not guarantee us the right to practice our technology in relation to the commercialization of our clinical candidates. The area of patent and other intellectual property rights in pharmaceuticals is an evolving one with many risks and uncertainties, and third parties may have blocking patents that could be used to prevent us from commercializing our clinical candidates.

The biotechnology and pharmaceutical industries are characterized by extensive litigation regarding patents and other intellectual property rights. Our ability to obtain and maintain our proprietary position for our product candidates and technology will depend on our success in enforcing the claims that have been granted or may grant. However, any of our patents, including patents that we may rely on to protect our market for approved drugs, may be held invalid or unenforceable by a court. Alternatively, we may decide that it is in our interest to settle a litigation in a manner that affects the term or enforceability of our patent. Changes in either the patent laws or in interpretations of patent laws in the United States and other countries may diminish our ability to protect our inventions and enforce our intellectual property rights. Accordingly, we cannot predict the breadth or enforceability of claims that have been or may be granted in our patents or in third-party patents.

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Inebilizumab Patent Coverage

Inebilizumab is covered by Viela-owned and in-licensed pending and issued patents in multiple jurisdictions, including the U.S. Exclusive of any Patent Term Extension, our current, owned or exclusively licensed, issued patents and pending non-provisional applications covering inebilizumab will expire on dates ranging from 2026 to 2030, where issued, valid and enforceable. U.S. Patent 8,323,653, covering inebilizumab compositions of matter and pharmaceutical compositions, has been granted a Patent Term Adjustment from the Patent Office. As a result, if valid and enforceable, it is expected to expire in 2030, exclusive of any patent term extension.

We have exclusively licensed from Duke University three international applications filed under the Patent Cooperation Treaty and all corresponding family members thereof. One U.S. patent relevant to our activities has issued from the licensed Duke University applications; this U.S. patent generically covers inebilizumab and related compounds. The year of expiration for these patent families, where issued, valid and enforceable, is 2026, without regard to any extensions or adjustments of term that may be available under national law.  

VIB4920 Patent Coverage

VIB4920 is covered by Viela-owned and in-licensed pending and issued patents in multiple jurisdictions, including in the US. Exclusive of any Patent Term Extension, our current, owned or exclusively licensed, issued patents and pending non-provisional applications covering VIB4920 will expire on dates ranging from 2028 to 2039, where issued, valid and enforceable. U.S. Patent 10,000,553, covering VIB4920 compositions of matter and pharmaceutical compositions, has been granted a Patent Term Adjustment from the Patent Office. As a result, if valid and enforceable, it is expected to expire in 2034, exclusive of any patent term extension.

Further, we have licensed from MedImmune, LLC two international patent applications, and all corresponding family members thereof that cover (i) recombinant polypeptide scaffolds and (ii) methods of purifying an albumin-fusion protein. VIB4920 is comprised of a specific recombinant polypeptide scaffold fused to an albumin protein. The expected year of expiration for the first patent family, covering recombinant polypeptide scaffolds, where issued, valid and enforceable, is 2028, without regard to any extensions or adjustments of term that may be available under national law. The expected year of expiration for the second patent family, covering methods of purifying an albumin-fusion protein, where issued, valid and enforceable, is 2036, without regard to any extensions or restorations of term that may be available under national law.

VIB7734 Patent Coverage

VIB7734 is covered by Viela-owned and in-licensed pending and issued patents in multiple jurisdictions. Exclusive of any Patent Term Extension, our current, owned or exclusively licensed, issued patents and pending non-provisional applications covering VIB7734 will expire on dates ranging from 2026 to 2037, where issued, valid and enforceable

We have exclusively licensed from SBI Biotech Co. a patent family comprising issued patents and pending applications in various jurisdictions, including the U.S. The expected year of expiration for this patent family, where issued, valid and enforceable, is 2026, without regard to any extensions or adjustments of term that may be available under national law. This family relates to, for example, monoclonal antibodies, which bind to human ILT7, binds to none of human ILT1, ILT2 and human ILT3, and suppresses interferon-a (IFNa) production from ILT7-expressing cells, or a fragment comprising its antigen binding region.  

Trade secrets

In addition to patents, we rely upon unpatented trade secrets and know-how and continuing technological innovation to develop and maintain our competitive position. We seek to protect our proprietary information, in part, using confidentiality agreements with our commercial partners, collaborators, employees, and consultants, and invention assignment agreements with our employees. These agreements are designed to protect our proprietary information and, in the case of the invention assignment agreements, to grant us ownership of technologies that are developed through a relationship with a third party. These agreements may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our commercial partners, collaborators, employees, and consultants use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

Government Regulation

Government authorities in the United States at the federal, state and local level and in other countries and jurisdictions, including the European Union, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution,

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post-approval monitoring and reporting, marketing and export and import of drug products, including biologic products. Generally, before a new drug can be marketed, considerable data demonstrating its quality, safety and efficacy must be obtained, organized into a format specific for each regulatory authority, submitted for review and approved by the regulatory authority.

U.S. government regulation of biological products

In the United States, the FDA regulates biologics under the Federal Food, Drug, and Cosmetic Act, or FDCA, and the Public Health Service Act, or PHSA, and their implementing regulations. Products are also subject to other federal, state and local statutes and regulations. The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA’s refusal to approve pending biologic license applications, or BLAs, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement of profits or civil or criminal penalties.

The process required by the FDA before a biologic may be marketed in the United States generally involves the following:

 

Completion of extensive pre-clinical studies and tests in accordance with applicable regulations, including Good Laboratory Practice, or GLP, regulations and applicable requirements for the humane use of laboratory animals or other applicable regulations;

 

Submission to FDA of an IND which must become effective before human clinical trials may begin;

 

Approval by an independent institutional review board, or IRB, or ethics committee at each clinical trial site before each trial may be initiated;

 

Performance of adequate and well-controlled human clinical trials in accordance with applicable IND regulations, good clinical practices, or GCPs, and other clinical-trial related regulations to evaluate the safety and efficacy of the investigational product for each proposed indication;

 

Submission to FDA of a BLA for marketing approval that includes substantive evidence of safety, purity, and potency from results of pre-clinical testing and clinical trials;

 

A determination by FDA within 60 days of its receipt of a BLA to accept the filing for review;

 

Satisfactory completion of one or more FDA pre-approval inspections of the manufacturing facility or facilities where the biologic will be produced to assess compliance with cGMPs to assure that the facilities, methods and controls used in product manufacture are adequate to preserve the biologic’s identity, strength, quality and purity;

 

Potential FDA audit of the pre-clinical and/or clinical trial sites that generated the data in support of the BLA;

 

Payment of user fees for FDA review of the BLA; and

 

FDA review and approval of the BLA, including satisfactory completion of an FDA advisory committee review, if applicable, prior to any commercial marketing or sale of the product in the United States.

Pre-clinical studies

Before testing any biological product candidate, including our product candidates, in humans, the product candidate must undergo rigorous pre-clinical testing. The pre-clinical developmental stage generally involves laboratory evaluations of drug chemistry, formulation and stability, as well as studies to evaluate toxicity in animals, which support subsequent clinical testing. The sponsor must submit the results of the pre-clinical studies, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. An IND is a request for authorization from the FDA to administer an investigational product to humans, and must become effective before human clinical trials may begin.

Pre-clinical studies include laboratory evaluation of product chemistry and formulation, as well as in vitro and animal studies to assess the potential for adverse events and in some cases to establish a rationale for therapeutic use. The conduct of pre-clinical studies is subject to federal regulations and requirements, including GLP regulations for safety/toxicology studies. An IND sponsor must submit the results of the pre-clinical tests, together with manufacturing

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information, analytical data, any available clinical data or literature and plans for clinical studies, among other things, to the FDA as part of an IND. Some long-term pre-clinical testing, such as animal tests of reproductive adverse events and carcinogenicity, may continue after the IND is submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time, the FDA raises concerns or questions related to one or more proposed clinical trials and places the trial on clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to commence.

Clinical trials

The clinical stage of development involves the administration of the investigational product to healthy volunteers or patients under the supervision of qualified investigators, generally physicians not employed by, or under control of, the trial sponsor, in accordance with GCPs, which include the requirement that all research patients provide their informed consent for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria and the parameters to be used to monitor subject safety and assess efficacy. Each protocol, and any subsequent amendments to the protocol, must be submitted to the FDA as part of the IND. Furthermore, each clinical trial must be reviewed and approved by an IRB for each institution at which the clinical trial will be conducted to ensure that the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the informed consent form that must be provided to each clinical trial subject or his or her legal representative, and must monitor the clinical trial until completed. There also are requirements governing the reporting of ongoing clinical trials and completed clinical trial results to public registries. Information about most clinical trials must be submitted within specific timeframes for publication on the www.clinicaltrials.gov website. Information related to the product, patient population, phase of investigation, study sites and investigators and other aspects of the clinical trial is made public as part of the registration of the clinical trial. Sponsors are also obligated to disclose the results of their clinical trials after completion. Disclosure of the results of these trials can be delayed in some cases for up to two years after the date of completion of the trial. Competitors may use this publicly available information to gain knowledge regarding the progress of development programs.

Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined:

 

Phase 1 clinical trials generally involve a small number of healthy volunteers or disease-affected patients who are initially exposed to a single dose and then multiple doses of the product candidate. The primary purpose of these clinical trials is to assess the metabolism, pharmacologic action, side effect tolerability and safety of the drug.

 

Phase 2 clinical trials involve studies in disease-affected patients to determine the dose required to produce the desired benefits. At the same time, safety and further pharmacokinetic and pharmacodynamic information is collected, possible adverse effects and safety risks are identified and a preliminary evaluation of efficacy is conducted.

 

Phase 3 clinical trials generally involve a larger number of patients at multiple sites and are designed to provide the data necessary to demonstrate the effectiveness of the product for its intended use, its safety in use and to establish the overall benefit/risk relationship of the product and provide an adequate basis for product approval. These trials may include comparisons with placebo and/or other comparator treatments. The duration of treatment is often extended to mimic the actual use of a product during marketing.

Post-approval trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow up. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of a BLA.

Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur. The FDA or the sponsor may suspend or terminate a clinical trial at any time or the FDA may impose other sanctions on various grounds, including a finding that the research patients are being exposed to an unacceptable health risk. Similarly, an IRB can refuse, suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.

Concurrently with clinical trials, companies usually complete additional pre-clinical studies and must also develop additional information about the physical characteristics of the biological product as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. To help reduce the risk of the introduction of adventitious agents with use of biological products, the PHSA emphasizes the importance of manufacturing control for products whose attributes cannot be precisely defined. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the sponsor must develop methods for testing the identity, strength, quality, potency and purity of the final biological product. Additionally,

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appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the biological product candidate does not undergo unacceptable deterioration over its shelf life.

BLA review and approval

Assuming successful completion of the required clinical testing, the results of the pre-clinical studies and clinical trials, together with detailed information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of a BLA requesting approval to market the product for one or more indications. The BLA must contain proof of safety, purity, potency and efficacy and may include both negative and ambiguous results of pre-clinical studies and clinical trials as well as positive findings. Data may come from company-sponsored clinical trials intended to test the safety and efficacy of a product’s use or from a number of alternative sources, including studies initiated by investigators. To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and efficacy of the investigational product to the satisfaction of the FDA. FDA approval of a BLA must be obtained before a biologic may be marketed in the United States.

In most cases, the submission of a BLA is subject to a substantial application user fee. Under the goals and policies agreed to by the FDA under the Prescription Drug User Fee Act, or PDUFA, for original BLAs, the FDA has ten months from the filing date in which to complete its initial review of a standard application and respond to the applicant, and six months from the filing date for an application with priority review. The FDA does not always meet its PDUFA goal dates, and the review process is often significantly extended by FDA requests for additional information or clarification and a sponsor’s process to respond to such inquiries. This FDA review typically takes twelve months from the date the BLA is submitted to the FDA (for a standard review) and eight months from the date the BLA is submitted (for a priority review) because the FDA has approximately two months after BLA submission to make a “filing” decision.

Before approving a BLA, the FDA will typically conduct a pre-approval inspection of the manufacturing facilities for the new product to determine whether the manufacturing processes and facilities comply with cGMPs. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. The FDA also may inspect the sponsor and one or more clinical trial sites to assure compliance with GCP requirements and the integrity of the clinical data submitted to the FDA.

Additionally, the FDA may refer applications for novel biologic candidates which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions, if any. The FDA is not bound by recommendations of an advisory committee, but it considers such recommendations when making decisions on approval. The FDA likely will re-analyze the clinical trial data, which could result in extensive discussions between the FDA and the applicant during the review process. The FDA also may require submission of a risk evaluation and mitigation strategy or “REMS” plan if it determines that a REMS is necessary to ensure that the benefits of the drug outweigh its risks and to assure the safe use of the biological product. The REMS plan could include medication guides, physician communication plans, assessment plans and/or elements to assure safe use, such as restricted distribution methods, patient registries or other risk minimization tools. The FDA determines the requirement for a REMS, as well as the specific REMS provisions, on a case-by-case basis. If the FDA concludes a REMS plan is needed, the sponsor of the BLA must submit a proposed REMS. The FDA will not approve a BLA without a REMS, if required.

Under the Pediatric Research Equity Act, or PREA, a BLA or supplement to a BLA must contain data that are adequate to assess the safety and efficacy of the product candidate for the claimed indications in all relevant pediatric populations and to support dosing and administration for each pediatric population for which the product is safe and effective. The FDA may grant deferrals for submission of pediatric data or full or partial waivers. The Food and Drug Administration Safety and Innovation Act, or FDASIA, amended the FDCA to require that a sponsor who is planning to submit a marketing application for a product that includes a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration submit an initial Pediatric Study Plan, or PSP, within sixty days of an end-of-Phase 2 meeting or, if there is no such meeting, as early as practicable before the initiation of the Phase 3 or Phase 2/3 clinical trial. The initial PSP must include an outline of the pediatric study or studies that the sponsor plans to conduct, including trial objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not including such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric studies along with supporting information. The FDA and the sponsor must reach an agreement on the PSP. A sponsor can submit amendments to an agreed upon initial PSP at any time if changes to the pediatric plan need to be considered based on data collected from pre-clinical studies, early phase clinical trials or other clinical development programs.

After the FDA evaluates a BLA, it will issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete and the application will not be approved in its present form. A Complete Response Letter usually describes all of the specific deficiencies in the BLA identified by the

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FDA. The Complete Response Letter may require additional clinical or other data, additional pivotal Phase 3 clinical trial(s) and/or other significant and time-consuming requirements related to clinical trials, pre-clinical studies or manufacturing. If a Complete Response Letter is issued, the applicant may either resubmit the BLA, addressing all of the deficiencies identified in the letter, or withdraw the application. Even if such data and information are submitted, the FDA may decide that the re-submitted BLA does not satisfy the criteria for approval.

If a product receives regulatory approval, the approval is limited to the conditions of use (e.g., patient population, indication) described in the application. Further, depending on the specific risk(s) to be addressed, the FDA may require that contraindications, warnings or precautions be included in the product labeling, require that post-approval trials, including Phase 4 clinical trials, be conducted to further assess a product’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution and use restrictions or other risk management mechanisms under a REMS, which can materially affect the potential market and profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-marketing trials or surveillance programs. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval.

Orphan drug designation

Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic product intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making the product available in the United States for this type of disease or condition will be recovered from sales of the product in the United States. Orphan drug designation must be requested before submitting a BLA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. Orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers. If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same indication for seven years from the date of such approval, except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity by means of greater effectiveness, greater safety, by providing a major contribution to patient care or in instances of drug supply issues. Competitors, however, may receive approval of either a different product for the same indication or the same product for a different indication that could be used “off-label” by physicians in the orphan indication, even though the competitor’s product is not approved in the orphan indication. Orphan drug exclusivity also could block the approval of one of our products for seven years if a competitor obtains approval before we do of the same product, as defined by the FDA, for the same indication we are seeking, or if our product candidate is determined to be contained within the scope of the competitor’s product for the same indication or disease. If one of our products designated as an orphan drug receives marketing approval for an indication broader than that which is designated, it may not be entitled to orphan drug exclusivity. Orphan drug status in the European Union has similar, but not identical, requirements and benefits.

Expedited review and approval

The FDA has various programs, including fast track designation, breakthrough therapy designation, accelerated approval and priority review, which are intended to expedite or simplify the process for the development and FDA review of drugs and biologics that are intended for the treatment of serious or life-threatening diseases or conditions and demonstrate the potential to address unmet medical needs. The purpose of these programs is to provide important new drugs and biologics to patients earlier than under standard FDA review procedures.

To be eligible for a fast track designation, the FDA must determine, based on the request of a sponsor, that a product is intended to treat a serious or life-threatening disease or condition and demonstrates the potential to address an unmet medical need by providing a therapy where none exists or a therapy that may be potentially superior to existing therapy based on efficacy or safety factors. Fast track designation provides opportunities for more frequent interactions with the FDA review team to expedite development and review of the product. The FDA may also review sections of the BLA for a fast track product on a rolling basis before the complete application is submitted, if the sponsor and the FDA agree on a schedule for the submission of the application sections, and the sponsor pays any required user fees upon submission of the first section of the BLA.

In addition, under the provisions FDASIA, passed in July 2012, a sponsor can request designation of a product candidate as a “breakthrough therapy.” A breakthrough therapy is defined as a drug or biologic that is intended, alone or in combination with one or more other drugs or biologics, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug or biologic may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. Drugs or biologics designated as breakthrough therapies are also eligible for accelerated approval. The FDA must take certain actions with respect to breakthrough therapies, such as holding timely meetings with and providing

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advice to the product sponsor, intended to expedite the development and review of an application for approval of a breakthrough therapy.

Products studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may be eligible for accelerated approval and may be approved on the basis of adequate and well-controlled clinical trials establishing that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than an irreversible effect on morbidity or mortality, or IMM, that is reasonably likely to predict an effect on IMM or other clinical benefit, taking into account the severity, rarity or prevalence of the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA may require a sponsor of a product receiving accelerated approval to perform post-marketing trials to verify and describe the predicted effect on IMM or other clinical endpoint, and the product may be subject to expedited withdrawal procedures.

Once a BLA is submitted for a product intended to treat a serious condition, the FDA may assign a priority review designation if the FDA determines that the product, if approved, would provide a significant improvement in safety or effectiveness. Most products that are eligible for fast track or breakthrough therapy designation may also be considered appropriate to receive a priority review.

Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened. Furthermore, fast track designation, breakthrough therapy designation, accelerated approval and priority review do not change the standards for approval and may not ultimately expedite the development or approval process.

Post-approval requirements

Following approval of a new product, the manufacturer and the approved product are subject to pervasive and continuing regulation by the FDA, including, among other things, monitoring and recordkeeping activities, reporting of adverse experiences with the product, product sampling and distribution restrictions, complying with promotion and advertising requirements, which include restrictions on promoting drugs for unapproved uses or patient populations (i.e., “off-label use”) and limitations on industry-sponsored scientific and educational activities. Although physicians may prescribe legally available products for off-label uses, manufacturers may not market or promote such uses. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability. If there are any modifications to the product, including changes in indications, labeling or manufacturing processes or facilities, the applicant may be required to submit and obtain FDA approval of a new BLA or BLA supplement, which may require the applicant to develop additional data or conduct additional pre-clinical studies and clinical trials. The FDA may also place other conditions on approvals including the requirement for a REMS to assure the safe use of the product. A REMS could include medication guides, physician communication plans or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of products. Product approvals may be withdrawn for non-compliance with regulatory standards or if problems occur following initial marketing.

FDA regulations require that products be manufactured in specific approved facilities and in accordance with cGMPs. The cGMP regulations include requirements relating to organization of personnel, buildings and facilities, equipment, control of components and drug product containers and closures, production and process controls, packaging and labeling controls, holding and distribution, laboratory controls, records and reports and returned or salvaged products. The manufacturing facilities for our product candidates must meet cGMP requirements and satisfy the FDA or comparable foreign regulatory authorities’ satisfaction before any product is approved and our commercial products can be manufactured. We rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of our products in accordance with cGMP regulations. These manufacturers must comply with cGMP regulations that require, among other things, quality control and quality assurance, the maintenance of records and documentation and the obligation to investigate and correct any deviations from cGMP. Manufacturers and other entities involved in the manufacture and distribution of approved drugs or biologics are required to register their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance. The discovery of conditions that violate these rules, including failure to conform to cGMPs, could result in enforcement actions, and the discovery of problems with a product after approval may result in restrictions on a product, manufacturer or holder of an approved BLA, including voluntary recall and regulatory sanctions as described below.

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

 

restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;

 

fines, warning letters or other enforcement-related letters or clinical holds on post-approval clinical trials;

 

refusal of the FDA to approve pending BLAs or supplements to approved BLAs, or suspension or revocation of product approvals;

 

product seizure or detention, or refusal to permit the import or export of products;

 

injunctions or the imposition of civil or criminal penalties; and

 

consent decrees, corporate integrity agreements, debarment, or exclusion from federal healthcare programs; or mandated modification of promotional materials and labeling and the issuance of corrective information.

Biosimilars and exclusivity

An abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference biological product was created by the Biologics Price Competition and Innovation Act of 2009, or BPCIA, as part of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or the Affordable Care Act. This amendment to the PHSA, in part, attempts to minimize duplicative testing. A recent federal district court ruling in Texas struck down the Affordable Care Act in its entirety based on constitutionality. This decision means numerous reforms enacted as part of the Affordable Care Act, but not specifically related to health insurance, such as the BPCIA, would be invalid as well. While the presidential administration and CMS have both stated that the ruling will have no immediate effect, it is unclear how this decision, subsequent appeals, and other efforts to repeal and replace the Affordable Care Act will impact the Affordable Care Act and our business. To date, the FDA has approved a number of biosimilars, and numerous biosimilars have been approved in Europe. The FDA has issued several guidance documents outlining its approach to reviewing and approving biosimilars.

Biosimilarity, which requires that the biological product be highly similar to the reference product notwithstanding minor differences in clinically inactive components and that there be no clinically meaningful differences between the product and the reference product in terms of safety, purity and potency, must be shown through analytical studies, animal studies and a clinical trial or trials. Interchangeability requires that a biological product be biosimilar to the reference product and that the product can be expected to produce the same clinical results as the reference product in any given patient and, for products administered multiple times to an individual, that the product and the reference product may be alternated or switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biological product without such alternation or switch. Complexities associated with the larger, and often more complex, structure of biological products as compared to small molecule drugs, as well as the processes by which such products are manufactured, pose significant hurdles to implementation that are still being worked out by the FDA.

A reference biological product is granted 12 years of data exclusivity from the time of first licensure of the product, and the FDA will not accept an application for a biosimilar or interchangeable product based on the reference biological product until four years after the date of first licensure of the reference product. “First licensure” typically means the initial date the particular product at issue was licensed in the United States. Date of first licensure does not include the date of licensure of (and a new period of exclusivity is not available for) a supplement for the reference product for a subsequent application filed by the same sponsor or manufacturer of the reference product (or licensor, predecessor in interest or other related entity) for a change (not including a modification to the structure of the biological product) that results in a new indication, route of administration, dosing schedule, dosage form, delivery system, delivery device or strength or for a modification to the structure of the biological product that does not result in a change in safety, purity or potency. Therefore, one must determine whether a new product includes a modification to the structure of a previously licensed product that results in a change in safety, purity or potency to assess whether the licensure of the new product is a first licensure that triggers its own period of exclusivity. Whether a subsequent application, if approved, warrants exclusivity as the “first licensure” of a biological product is determined on a case-by-case basis with data submitted by the sponsor.

The BPCIA is complex and only beginning to be interpreted and implemented by the FDA. In addition, recent government proposals have sought to reduce the 12-year reference product exclusivity period. Other aspects of the

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BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. As a result, the ultimate impact, implementation and meaning of the BPCIA is subject to significant uncertainty.

U.S. patent term restoration

Depending upon the timing, duration and conditions of FDA marketing approval of our product candidates, one or more of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments, and similar legislation in the European Union. The Hatch-Waxman Amendments permit a patent term extension of up to five years for a patent covering an approved product as compensation for effective patent term lost during product development and the FDA regulatory review process. However, we may not receive an extension if we fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements. Moreover, the length of the extension could be less than we request. Only one patent per approved product can be extended, the extension must be based on the first approval for the product, and the extension cannot extend the total patent term beyond fourteen years from approval. If we are unable to obtain patent term extension or the term of any such extension is less than we request, the period during which we can enforce our patent rights for that product will be shortened and our competitors may obtain approval to market competing products sooner.

European Union drug development, review and approval

In the European Union, our product candidates also may be subject to extensive regulatory requirements. As in the United States, medicinal products can be marketed only if a marketing authorization from the competent regulatory agencies has been obtained.

Similar to the United States, the various phases of pre-clinical and clinical research in the European Union are subject to significant regulatory controls.

The Clinical Trials Directive 2001/20/EC, the Directive 2005/28/EC on GCP, and the related national implementing provisions of the individual EU Member States govern the system for the approval of clinical trials in the European Union. Under this system, an applicant must obtain prior approval from the competent national authority of the EU Member States in which the clinical trial is to be conducted. Furthermore, the applicant may only start a clinical trial at a specific study site after the competent ethics committee has issued a favorable opinion. The clinical trial application must be accompanied by, among other documents, an IMPD (the Common Technical Document) with supporting information prescribed by Directive 2001/20/EC, Directive 2005/28/EC, where relevant the implementing national provisions of the individual EU Member States and further detailed in applicable guidance documents. All suspected unexpected serious adverse reactions to the investigated drug that occur during the clinical trial have to be reported to the competent national authority and the Ethics Committee of the Member State where they occurred.

In April 2014, the new Clinical Trials Regulation, (EU) No 536/2014 (Clinical Trials Regulation) was adopted and it is anticipated to come into application in 2019. The Clinical Trials Regulation will be directly applicable in all the EU Member States, repealing the current Clinical Trials Directive 2001/20/EC. Conduct of all clinical trials performed in the European Union will continue to be bound by currently applicable provisions until the new Clinical Trials Regulation becomes applicable. The extent to which ongoing clinical trials will be governed by the Clinical Trials Regulation will depend on when the Clinical Trials Regulation becomes applicable and on the duration of the individual clinical trial. If a clinical trial continues for more than three years from the day on which the Clinical Trials Regulation becomes applicable the Clinical Trials Regulation will at that time begin to apply to the clinical trial.

The new Clinical Trials Regulation aims to simplify and streamline the approval of clinical trials in the European Union. The main characteristics of the regulation include: a streamlined application procedure via a single entry point, the “EU portal”; a single set of documents to be prepared and submitted for the application as well as simplified reporting procedures for clinical trial sponsors; and a harmonized procedure for the assessment of applications for clinical trials, which is divided in two parts. Part I is assessed by the competent authorities of all EU Member States in which an application for authorization of a clinical trial has been submitted (Member States concerned). Part II is assessed separately by each Member State concerned. Strict deadlines have been established for the assessment of clinical trial applications. The role of the relevant ethics committees in the assessment procedure will continue to be governed by the national law of the concerned EU Member State. However, overall related timelines will be defined by the Clinical Trials Regulation.

To obtain a marketing authorization of a drug in the European Union, we may submit marketing authorization applications, or MAA, either under the so-called centralized or national authorization procedures.

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Centralized procedure

The centralized procedure provides for the grant of a single marketing authorization following a favorable opinion by the EMA, that is valid in all EU member states, as well as Iceland, Liechtenstein and Norway. The centralized procedure is compulsory for medicines produced by specified biotechnological processes, products designated as orphan medicinal products, advanced-therapy medicines (such as gene-therapy, somatic cell-therapy or tissue-engineered medicines) and products with a new active substance indicated for the treatment of specified diseases, such as HIV/AIDS, cancer, diabetes, neurodegenerative disorders or autoimmune diseases and other immune dysfunctions and viral diseases. The centralized procedure is optional for products that represent a significant therapeutic, scientific or technical innovation, or whose authorization would be in the interest of public health. Under the centralized procedure the maximum timeframe for the evaluation of an MAA by the EMA is 210 days, excluding clock stops, when additional written or oral information is to be provided by the applicant in response to questions asked by the Committee for Medicinal Products for Human Use, or the CHMP. Accelerated assessment might be granted by the CHMP in exceptional cases, when a medicinal product is expected to be of a major public health interest, particularly from the point of view of therapeutic innovation. The timeframe for the evaluation of an MAA under the accelerated assessment procedure is of 150 days, excluding stop-clocks.

National authorization procedures

There are also two other possible routes to authorize medicinal products in several EU countries, which are available for investigational medicinal products that fall outside the scope of the centralized procedure:

 

Decentralized procedure. Using the decentralized procedure, an applicant may apply for simultaneous authorization in more than one EU country of medicinal products that have not yet been authorized in any EU country and that do not fall within the mandatory scope of the centralized procedure.

 

Mutual recognition procedure. In the mutual recognition procedure, a medicine is first authorized in one EU Member State, in accordance with the national procedures of that country. Following this, further marketing authorizations can be sought from other EU countries in a procedure whereby the countries concerned agree to recognize the validity of the original, national marketing authorization.

Under the above described procedures, before granting the MA, the EMA or the competent authorities of the Member States of the EEA make an assessment of the risk-benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy.

European Union regulatory exclusivity

In the European Union, new products authorized for marketing (i.e., reference products) qualify for eight years of data exclusivity and an additional two years of market exclusivity upon marketing authorization. The data exclusivity period prevents generic applicants from relying on the pre-clinical and clinical trial data contained in the dossier of the reference product when applying for a generic marketing authorization in the European Union during a period of eight years from the date on which the reference product was first authorized in the European Union. The market exclusivity period prevents a successful generic applicant from commercializing its product in the EU until ten years have elapsed from the initial authorization of the reference product in the EU. The ten-year market exclusivity period can be extended to a maximum of eleven years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies.

European Union orphan designation and exclusivity

The criteria for designating an orphan medicinal product in the European Union, are similar in principle to those in the United States. Under Article 3 of Regulation (EC) 141/2000, a medicinal product may be designated as orphan if (1) it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition; (2) either (a) such condition affects no more than five in 10,000 persons in the European Union when the application is made, or (b) the product, without the benefits derived from orphan status, would not generate sufficient return in the European Union to justify investment; and (3) there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized for marketing in the European Union, 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. Orphan medicinal products are eligible for financial incentives such as reduction of fees or fee waivers and are, upon grant of a marketing authorization, entitled to ten years of market exclusivity for the approved therapeutic indication. The application for orphan designation must be submitted before the application for marketing authorization. The applicant will receive a fee reduction for the marketing authorization application if the orphan designation has been granted, but not if the designation is still pending at the time

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the marketing authorization is submitted. Orphan designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.

The ten-year market exclusivity in the European Union may be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for orphan designation, for example, if the product is sufficiently profitable not to justify maintenance of market exclusivity. Additionally, marketing authorization may be granted to a similar product for the same indication at any time if:

 

the second applicant can establish that its product, although similar, is safer, more effective or otherwise clinically superior;

 

the applicant consents to a second orphan medicinal product application; or

 

the applicant cannot supply enough orphan medicinal product.

Rest of the world regulation

For other countries outside of the European Union and the United States, such as countries in Eastern Europe, Latin America or Asia, the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from jurisdiction to jurisdiction. Additionally, the clinical trials must be conducted in accordance with cGCP requirements and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.

If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.

Other U.S. healthcare laws

In addition to FDA restrictions on the marketing of pharmaceutical products, other U.S., federal and state healthcare regulatory laws restrict business practices in the pharmaceutical industry. Manufacturing, sales, promotion and other activities following product approval are also subject to regulation by numerous regulatory authorities in the United States in addition to the FDA, including the Centers for Medicare & Medicaid Services, or CMS, other divisions of the Department of Health and Human Services, or HHS, the Department of Justice, the Drug Enforcement Administration, the Consumer Product Safety Commission, the Federal Trade Commission, the Occupational Safety & Health Administration, the Environmental Protection Agency, and state and local governments. For example, in the United States, sales, marketing, scientific and educational activities also must comply with federal and state fraud and abuse laws (including, but not limited to, federal and state anti-kickback and false claims), drug pricing laws, transparency reporting laws, and data privacy laws.

The U.S. federal anti-kickback statute is a key federal fraud and abuse law. The U.S. federal anti-kickback statute prohibits, among other things, any person or entity from knowingly and willfully offering, paying, soliciting, receiving or providing any remuneration, directly or indirectly, overtly or covertly, to induce or in return for purchasing, leasing, ordering or arranging for or recommending the purchase, lease or order of any good, facility, item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federal healthcare programs. The term “remuneration” has been broadly interpreted to include anything of value. The anti-kickback statute has been interpreted to apply to arrangements between pharmaceutical and medical device manufacturers on the one hand and prescribers, purchasers, formulary managers and beneficiaries on the other hand. Recently, pharmaceutical manufacturers’ patient support activities have been increasingly scrutinized as potentially providing prohibited remuneration to patients (and where such services ease providers’ administrative burdens, to providers as well) where such activities are not appropriately structured to comply with the U.S. federal anti-kickback statute (and other applicable healthcare fraud and abuse laws and government guidance). Although there are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, the exceptions and safe harbors are drawn narrowly. Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not meet the requirements of a statutory or regulatory exception or safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the U.S. federal anti-kickback statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all its facts and circumstances. Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the statute has been violated. In addition, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. Moreover, a claim including items or services resulting from a violation of the U.S. federal anti-kickback statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act. The majority of states also have anti-kickback laws, which establish similar

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prohibitions and, in some cases, may apply to items or services reimbursed by any third-party payor, including commercial insurers, or to self-pay patients.

The federal false claims and civil monetary penalties laws, including the civil False Claims Act, prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, a false, fictitious or fraudulent claim for payment to, or approval by, the federal government, knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government, or knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the U.S. federal government. A claim includes “any request or demand” for money or property presented to the U.S. government. Actions under the civil False Claims Act may be brought by the Attorney General or as a qui tam action by a private individual in the name of the government. Violations of the civil False Claims Act can result in very significant monetary penalties and treble damages. As noted above, violations of the U.S. federal anti-kickback statute can give rise to False Claims Act violations. In addition, companies have been prosecuted for causing false claims to be submitted because of the companies’ marketing of products for unapproved (e.g., off-label), and thus non-covered, uses. In addition, the civil monetary penalties statute imposes penalties against any person who is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent. Many states also have similar fraud and abuse statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor.

Other U.S. healthcare laws and regulations may affect our current or future ability to operate. Federal laws require pharmaceutical manufacturers to report certain calculated product prices to the government or provide certain discounts or rebates to government authorities or private entities, often as a condition of reimbursement under federal healthcare programs. Some states also require reporting of certain drug prices or explanations for price increases.

The federal transparency requirements under the so-called federal “sunshine act” or Open Payments Act require certain manufacturers of drugs, devices, biologics and medical supplies reimbursed under Medicare, Medicaid, or the State Children’s Health Insurance Program to report to HHS information related to payments and other transfers of value provided to physicians and teaching hospitals and, beginning with transfers of value occurring in 2021, other healthcare practitioners, as well as ownership and investment interests held by physicians and their immediate family members. Analogous state laws and regulations require pharmaceutical companies to implement compliance programs including certain standards, to limit financial interactions with healthcare providers, or to track and report gifts, compensation and other remuneration provided to physicians and other health care providers.

In addition, products must meet applicable child-resistant packaging requirements under the U.S. Poison Prevention Packaging Act. Manufacturing, sales, promotion and other activities also are potentially subject to federal and state consumer protection and unfair competition laws. The distribution of biologic and pharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping, licensing, storage and security requirements intended to prevent the unauthorized sale of pharmaceutical products.

HIPAA and subsequent amendments establish certain requirements related to the privacy, security, and transmission of individually identifiable health information apply to many healthcare providers, physicians and third-party payors with whom we interact, as do state health information privacy and data breach notification laws, which govern the collection, use, disclosure, and protection of health-related and other personal information, many of which differ from each other in significant ways and often are not pre-empted by HIPAA, thus complicating compliance efforts.

Because of the breadth of these laws and the narrowness of available exceptions and safe harbors, our business activities could potentially be subject to challenge under one or more of such laws. The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. Federal and state enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Given the significant size of actual and potential settlements, we expect that the government authorities will continue to devote substantial resources to investigating healthcare providers’ and manufacturers’ compliance with applicable fraud and abuse laws.

Ensuring that business arrangements with third parties comply with applicable healthcare laws and regulations is costly and time consuming. If business operations are found to be in violation of any of the laws described above or any other applicable governmental regulations a pharmaceutical manufacturer may be subject to penalties, including civil, criminal and administrative penalties, damages, fines, disgorgement of profits, individual imprisonment, exclusion from governmental funded healthcare programs, such as Medicare and Medicaid, contractual damages, reputational harm, diminished profits and future earnings, additional reporting obligations and oversight if subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and curtailment or restructuring of operations, any of which could adversely affect a pharmaceutical manufacturer’s ability to operate its business and the results of its operations.

Similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, anti-fraud and abuse laws and implementation of corporate compliance programs and reporting of payments or other transfers

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of value to healthcare professionals, may apply to us to the extent that any of our product candidates, once approved, are sold in a country other than the United States.

Coverage, pricing and reimbursement

Significant uncertainty exists as to the coverage and reimbursement status of any biological products for which we obtain regulatory approval. The United States government, state legislatures and foreign governments have shown significant interest in implementing cost containment programs to limit the growth of government-paid healthcare costs, including price-controls, restrictions on reimbursement and requirements for substitution of generic products for branded drug and biologic products. In the United States and markets in other countries, patients who are prescribed products generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Providers and patients are unlikely to use our products unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products. As a result, if approved, sales of our product candidates will depend, in part, on the availability of coverage and adequate reimbursement from third-party payors. Third-party payors include government authorities, managed care plans, private health insurers and other organizations.

In the United States, the process for determining whether a third-party payor will provide coverage for a biological product typically is separate from the process for setting the price of such product or for establishing the reimbursement rate that the payor will pay for the product once coverage is approved. With respect to biologics, third-party payors may limit coverage to specific products on an approved list, also known as a formulary, which might not include all of the FDA-approved products for a particular indication, or place products at certain formulary levels that result in lower reimbursement levels and higher cost-sharing obligations imposed on patients. A decision by a third-party payor not to cover our product candidates could reduce physician utilization of a product. Moreover, a third-party payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Adequate third-party reimbursement may not be available to enable a manufacturer to maintain price levels sufficient to realize an appropriate return on its investment in product development. Additionally, coverage and reimbursement for products can differ significantly from payor to payor. One third-party payor’s decision to cover a particular medical product does not ensure that other payors will also provide coverage for the medical product, or will provide coverage at an adequate reimbursement rate. As a result, the coverage determination process usually requires manufacturers to provide scientific and clinical support for the use of their products to each payor separately and is a time-consuming process.

As noted above, the marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide coverage and adequate reimbursement. There is an emphasis on cost containment measures in the United States and we expect will continue to increase the pressure on pharmaceutical pricing. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future. Third-party payors are increasingly challenging the prices charged for medical products and services, examining the medical necessity and reviewing the cost-effectiveness of pharmaceutical products, in addition to questioning safety and efficacy. If third-party payors do not consider a product to be cost-effective compared to other available therapies, they may not cover that product after FDA approval or, if they do, the level of payment may not be sufficient to allow a manufacturer to sell its product at a profit.

Within the United States, if we obtain appropriate approval in the future to market any of our oral drug product candidates, those products could potentially be covered by various federal healthcare programs as well as purchased by government agencies. The participation in such programs or the sale of products to such agencies is subject to regulation. The marketability of any products for which we receive regulatory approval for commercial sale may suffer if such payors fail to provide adequate coverage and reimbursement.

Medicaid is a joint federal and state program that is administered by the states for low income and disabled beneficiaries. Under the Medicaid Drug Rebate Program, participating manufacturers are required to pay a rebate for each unit of product reimbursed by the state Medicaid programs. The amount of the rebate for each product is set by law and may be subject to an additional discount if certain pricing increases more than inflation.

Medicare is a federal program that is administered by the federal government that covers individuals age 65 and over as well as those with certain disabilities. Drugs that are not usually self-administered, such as infusion drugs, may be covered under Medicare Part B. Medicare Part B drugs are generally reimbursed at the “average sales price” of the drug plus 6%. Oral or other self-administered drugs may be covered under Medicare Part D. Medicare Part D provides coverage to enrolled Medicare patients for self-administered drugs (i.e., drugs that do not need to be injected or otherwise administered by a physician). Medicare Part D is administered by private prescription drug plans approved by the U.S. government and each drug plan establishes its own Medicare Part D formulary for prescription drug coverage and pricing, which the drug plan may modify from time-to-time. The prescription drug plans negotiate pricing with manufacturers and may condition formulary placement on the availability of manufacturer discounts. Since 2011, manufacturers with marketed brand name drugs have been required to provide a discount on brand name prescription drugs utilized by

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Medicare Part D beneficiaries when those beneficiaries reach the coverage gap in their drug benefits (initially 50% but increased to 70% in 2019).

Drug products are subject to discounted pricing when purchased by federal agencies via the Federal Supply Schedule, or FSS. FSS participation is required for a drug product to be covered and reimbursed by certain federal agencies and for coverage under Medicaid, Medicare Part B and the Public Health Service, or PHS pharmaceutical pricing program. FSS pricing is negotiated periodically with the Department of Veterans Affairs. FSS pricing is intended not to exceed the price that a manufacturer charges its most-favored non-federal customer for its product. In addition, prices for drugs purchased by the Veterans Administration, Department of Defense (including drugs purchased by military personnel and dependents through the TRICARE retail pharmacy program), Coast Guard, and PHS are subject to a cap on pricing (known as the “federal ceiling price”) and may be subject to an additional discount if pricing increases more than the rate of inflation.

To maintain coverage of drugs under the Medicaid Drug Rebate Program, manufacturers are required to extend discounts to certain purchasers under the PHS pharmaceutical pricing program. Purchasers eligible for discounts include hospitals that serve a disproportionate share of financially needy patients, community health clinics and other entities that receive health services grants from the PHS.

In addition, in many foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing and reimbursement vary widely from country to country. In the European Union, governments influence the price of products through their pricing and reimbursement rules and control of national healthcare systems that fund a large part of the cost of those products to consumers. Some jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement price has been agreed to by the government. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare the cost effectiveness of a particular product to currently available therapies. Other member states allow companies to fix their own prices for medicines, but monitor and control company profits. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products. The downward pressure on healthcare costs in general, particularly prescription products, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross border imports from low-priced markets exert a commercial pressure on pricing within a country.

Healthcare reform and potential changes to healthcare laws

The FDA’s and other regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. For example, in December 2016, the 21st Century Cures Act, or Cures Act, was signed into law. The Cures Act, among other things, is intended to modernize the regulation of drugs and devices and to spur innovation, but its ultimate implementation is uncertain. In addition, in August 2017, the FDA Reauthorization Act was signed into law, which reauthorized the FDAs user fee programs and included additional drug and device provisions that build on the Cures Act. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we otherwise may have obtained and we may not achieve or sustain profitability, which would adversely affect our business, prospects, financial condition and results of operations.

A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and other third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medical products and services, implementing reductions in Medicare and other healthcare funding and applying new payment methodologies. For example, in March 2010, the Affordable Care Act was enacted, which, among other things, increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program; introduced a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected; extended the Medicaid Drug Rebate Program to utilization of prescriptions of individuals enrolled in Medicaid managed care plans; imposed mandatory discounts for certain Medicare Part D beneficiaries as a condition for manufacturers’ outpatient drugs coverage under Medicare Part D; subjected drug manufacturers to new annual fees based on pharmaceutical companies’ share of sales to federal healthcare programs; imposed a new federal excise tax on the sale of certain medical devices; and established a Center for Medicare Innovation at the CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending.

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Since its enactment, there have been judicial and Congressional challenges to certain aspects of the Affordable Care Act, and we expect there will be additional challenges and amendments to the Affordable Care Act in the future. The current Presidential administration and members of the U.S. Congress have indicated that they may continue to seek to modify, repeal or otherwise invalidate all, or certain provisions of, the Affordable Care Act. Most recently, the Tax Cuts and Jobs Acts was enacted, which, among other things, removes penalties for not complying with the individual mandate to carry health insurance. A recent federal district court ruling struck down the Affordable Care Act in its entirety. While the presidential administration and CMS have both stated that the ruling will have no immediate effect, it is unclear how this decision, subsequent appeals, if any, and other efforts to repeal and replace the Affordable Care Act will impact the Affordable Care Act and our business.

In addition, other legislative changes have been proposed and adopted in the United States since the Affordable Care Act that affect healthcare expenditures. Recently, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for pharmaceutical and biologic products.

Other changes include the Budget Control Act of 2011, which, among other things, included aggregate reductions of Medicare payments to providers of 2% per fiscal year and that will remain in effect through 2027 unless additional action is taken by Congress. Individual states in the United States have become increasingly active in passing legislation and implementing regulations designed to control biotechnology and pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services.

Employees

As of December 31, 2019, we had 139 full-time employees, including 53 in research and development, 15 in manufacturing, operations, and quality assurance, 42 in commercialization and 29 in general and administrative functions. We have no collective bargaining agreements with our employees, and we have not experienced any work stoppages. We consider our relations with our employees to be good.

Corporate Information

We were incorporated in Delaware in 2017. Our principal executive offices are located at 1 Medimmune Way, Suite 100, Gaithersburg, MD 20878. Our website address is www.vielabio.com and the information contained in, or that can be accessed through, our website is not part of this annual report and should not be considered part of this annual report.

Available Information

We file annual, quarterly, and current reports, proxy statements, and other documents with the Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934 (Exchange Act). The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers, including us, that file electronically with the SEC.

We also make available free of charge on our Internet website at www.vielabio.com our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. These reports are available through the "Investor Relations—Financials and Filings—SEC Filings" section of our website.

Our code of ethics, other corporate policies and procedures, and the charters of our Audit Committee, Compensation Committee and Nominating and Governance Committee are available through our Internet website at www.vielabio.com.

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Item 1A. Risk Factors.

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, the section of this Annual Report Form 10-K entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operation” and our financial statements and related notes, before investing in our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that affect us. If any of the following risks occur, our business, operating results and prospects could be materially harmed. In that event, the price of our common stock could decline, and you could lose part or all of your investment. We have marked with an asterisk (*) those risk factors that reflect changes from the similarly titled risk factors included in the Prospectus for our IPO filed pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended, or the Securities Act, on October 4, 2019 (the “Prospectus”).

Risks Related to Our Financial Position and Need For Additional Capital

We have incurred significant operating losses since our inception. We expect to incur losses for the foreseeable future and may never achieve or maintain profitability.*

We have incurred significant operating losses since our inception, including an operating loss of $86.4 million and $190.3 million for the years ended December 31, 2019 and 2018, respectively. To date, we have financed our operations through private placements of our preferred stock and the IPO. We have not commercialized any products and have never generated any revenue from product sales. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. The operating losses we incur may fluctuate significantly from quarter-to-quarter and year-to-year. We anticipate that our expenses will increase substantially if and as we:

 

seek approval and pursue commercial activities for inebilizumab for treatment in patients with NMOSD;

 

continue development of our product candidates, including initiating additional clinical trials of inebilizumab, VIB4920 and VIB7734;

 

identify, acquire and develop new product candidates;

 

initiate nonclinical studies and clinical trials for any additional product candidates that we may pursue in the future;

 

seek marketing approvals for our product candidates that successfully complete clinical trials;

 

continue to establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;

 

achieve market acceptance of our product candidates in the medical community and with third-party payors;

 

maintain, expand and protect our intellectual property portfolio;

 

attract, hire and retain additional personnel;

 

enter into additional collaboration arrangements, if any, for the development of our product candidates or in-license other products and technologies;

 

make royalty, milestone or other payments under current and any future in-license or collaboration agreements;

 

add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts; and

 

incur increased costs as a result of operating as a public company.

Because of the numerous risks and uncertainties associated with developing pharmaceutical drugs, we are unable to predict the extent of any future losses or when we will become profitable, if at all. In addition, our expenses could increase beyond expectations if we are required by the FDA or foreign regulatory agencies, to perform nonclinical studies and clinical trials in addition to those that we currently anticipate, or if there are any delays in our or our partners completing clinical trials or the development of any of our product candidates.

To become and remain profitable, we must develop and eventually commercialize a product or products with significant product revenue. This will require us to be successful in a range of challenging activities, including the following:

 

completing clinical trials of our product candidates that meet their clinical endpoints;

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submitting applications for and obtaining marketing approval for our product candidates;

 

establishing a new sales and marketing presence for, or entering into a collaboration with respect to the sales and marketing of, our product candidates;

 

manufacturing, marketing and selling those products for which we may obtain marketing approval and satisfying any post-marketing regulatory requirements;

 

achieving market acceptance of our product candidates in the medical community and with third-party payors;

 

maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how; and

 

attracting, hiring and retaining additional personnel.

In cases where we are successful in obtaining marketing approval for one or more of our product candidates, our revenue will be dependent, in part, upon the size of the markets in the territories for which we gain marketing approval, the accepted price for the product, the ability to obtain coverage and adequate reimbursement, and ownership of commercial rights for that territory. If the number of our addressable patients is not as significant as we estimate, the indication approved by regulatory authorities is narrower than we expect or the treatment population is narrowed by competition, physician choice or treatment guidelines, we may not generate significant revenue of such products, even if approved.

Even if we do generate revenues, they may not be significant or large 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 and we will continue to incur substantial research and development and other expenditures to develop and market additional product candidates. Our failure to become and remain profitable would decrease our value and could impair our ability to raise capital, maintain our discovery and nonclinical development efforts, expand our business or continue our operations and may require us to raise additional capital that may dilute your ownership interest. A decline in our value could also cause you to lose all or part of your investment.

Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

We are a clinical-stage biopharmaceutical company. Biopharmaceutical drug development is a highly speculative undertaking and involves a substantial degree of risk. We were incorporated in December 2017, and our operations to date have been limited to organizing and staffing our company, business planning, raising capital, developing our technology, identifying potential product candidates, undertaking nonclinical studies and conducting clinical trials. Each of our five current product candidates was acquired from MedImmune in February 2018. Accordingly, prior to the February 2018 asset purchase, all nonclinical studies and clinical trials related to our current product candidates were conducted by MedImmune. We have not yet demonstrated our ability to successfully obtain marketing approvals, manufacture a commercial scale product or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. Typically, it takes several years to develop one new drug from the time it is discovered to when it is available for treating patients. In addition, as a new business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need to transition from a company with a research focus to a company capable of supporting commercial activities. We may not be successful in such a transition.

We will need substantial additional funding. If we are unable to raise capital when needed, we would be compelled to delay, reduce or eliminate our product development programs or commercialization efforts.*

The development of biological products is capital-intensive. We expect our expenses to increase in parallel with our ongoing activities, particularly as we seek marketing approval of inebilizumab for treatment in patients with NMOSD and conduct larger-scale clinical trials of, and seek marketing approval for, our other product candidates. If we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. In addition, our expenses could increase beyond expectations if the FDA or comparable foreign regulatory authorities require us to perform nonclinical studies and clinical trials in addition to those that we currently anticipate. We may also need to raise additional funds sooner if we choose to pursue additional indications and/or geographies for our product candidates or otherwise expand more rapidly than we presently anticipate. Furthermore, we expect to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. If we are unable to raise capital when needed or on attractive terms, we

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could be forced to delay, reduce or eliminate our clinical programs, development efforts or any future commercialization efforts.

As of December 31, 2019, we had $200.9 million in cash and cash equivalents. In October 2019, we completed the IPO for net proceeds of $156.9 million after deducting underwriting discounts and commissions and offering expenses. We believe that, based upon our current operating plan, our existing capital resources, will be sufficient to fund our anticipated operations through 2022. Our future capital requirements and the period for which we expect our existing resources to support our operations may vary significantly from what we expect. Our monthly spending levels vary based on new and ongoing research and development and other corporate activities. Because the length of time and activities associated with successful research and development of our product candidates is highly uncertain, we are unable to estimate the actual funds we will require for development and any approved marketing and commercialization activities. In addition, our future capital requirements will depend on many factors, and could increase significantly as a result of many factors, including:

 

the FDA’s approval of our BLA for inebilizumab for treatment in patients with NMOSD;

 

the costs of future commercialization activities, including product sales, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval;

 

the scope, progress, results and costs of nonclinical development, laboratory testing and clinical trials for our product candidates;

 

the scope, prioritization and number of our research and development programs;

 

the costs, timing and outcome of regulatory review of our product candidates;

 

the extent to which we enter into non-exclusive, jointly funded clinical research collaboration arrangements, if any, for the development of our product candidates in combination with other companies’ products;

 

our ability to establish collaboration arrangements for the development of our product candidates on favorable terms, if at all;

 

the achievement of milestones or occurrence of other developments that trigger payments under any collaboration agreements into which we enter, if any;

 

the extent to which we are obligated to reimburse, or entitled to reimbursement of, clinical trial costs under future collaboration agreements, if any;

 

the extent to which we acquire or in-license other product candidates and technologies;

 

revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval;

 

the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

 

our efforts to enhance operational systems and our ability to attract, hire and retain qualified personnel; and

 

the costs associated with being a public company.

Conducting nonclinical studies and clinical trials is a time-consuming, expensive and uncertain process that can take years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, may be derived from sales of products that may not be commercially available for several years, if ever. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives.

Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates. Volatility in the financial markets have generally made equity and debt financing more difficult to obtain and may have a material adverse effect on our ability to meet our fundraising needs. We cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline.

If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research or development programs or the commercialization of any product candidate or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition and results of operations.

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

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of private and public equity financings, debt financings, collaborations, strategic alliances and licensing arrangements. The sale of additional equity or convertible debt securities would dilute all of our stockholders and the terms of these securities may include liquidation or other preferences that adversely affect the rights of other stockholders. The incurrence of indebtedness would result in increased fixed payment obligations, and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights, limitations on declaring dividends, limitations on our ability to redeem our shares and other operating restrictions that could adversely impact our ability to conduct our business. We could also be required to seek funds through collaborations, strategic alliances or licensing arrangements with third parties, and we could be required to do so at an earlier stage than otherwise would be desirable. In connection with any such collaborations, strategic alliances or licensing arrangements, we may be required to relinquish valuable rights to our intellectual property, future revenue streams, research programs or product candidates, grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves, or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects.

Risks Related to Development of Our Product Candidates

We depend heavily on the success of inebilizumab, VIB4920 and VIB7734, which are in various stages of clinical development. If we are unable to advance our product candidates in clinical development, obtain regulatory approval and ultimately commercialize our product candidates, or experience significant delays in doing so, our business will be materially harmed.*

We do not currently generate any revenue from sales of any products, and we may never be able to develop or commercialize marketable products. We are not permitted to market or promote any of our product candidates before we receive regulatory approval from the FDA or comparable foreign regulatory authorities, and we may never receive such regulatory approval. We may not receive regulatory approval for inebilizumab for the treatment of patients with NMOSD, we may receive approval in a limited patient population or we may experience delays in receiving such regulatory approval. Even if we successfully commercialize inebilizumab for the treatment of patients with NMOSD, we may not be successful in developing and commercializing our other product candidates, and our commercial opportunities may be limited.

Commencing clinical trials in the United States is subject to acceptance by the FDA of an Investigational New Drug Application (“IND”), with respect to each product candidate in each indication, and finalizing the trial design based on discussions with the FDA. For example, we will need to obtain an IND prior to commencing our planned clinical trials of inebilizumab in myasthenia gravis and IgG4-related diseases. In the event that the FDA requires us to complete additional pre-clinical studies or we are required to satisfy other FDA requests, the start of our planned future clinical trials in the United States may be delayed. In particular, the FDA has not yet acknowledged IgG4-related diseases as an indication. Our ability to commence our planned clinical trial in this target indication is subject to the FDA acknowledging it as a recognized indication.

We have three product candidates in various stages of clinical development and two product candidates in the pre-clinical development stage. We may not be able to demonstrate that they are safe or effective in the indications for which we are studying them, and they may not be approved. We submitted a BLA to the FDA for inebilizumab in June 2019, which the FDA accepted for review in August 2019. The FDA set a PDUFA date of June 11, 2020. In 2019, we initiated a Phase 2b trial for VIB4920 in Sjögren’s syndrome, which is designed as Phase 3-enabling, and initiated a separate Phase 2 trial for VIB4920 in kidney transplant rejection. Our Phase 1b multiple ascending dose trial for VIB7734 is ongoing and an interim analysis of data in CLE is planned for the second quarter of 2020. We also have pre-clinical product candidates that will need to progress through IND-enabling studies prior to clinical development. We are not permitted to market or promote any of our product candidates before we receive regulatory approval from the FDA or comparable foreign regulatory authorities, and we may never receive such regulatory approval for any of our product candidates.

Other than the BLA for inebilizumab in patients with NMOSD that we submitted to the FDA in June 2019, which the FDA accepted for review in August 2019, we have not submitted, and we may never submit, marketing applications to the FDA or comparable foreign regulatory authorities for our product candidates. We cannot be certain that any of our product candidates will be successful in clinical trials or receive regulatory approval. Further, our product candidates may not receive regulatory approval even if they are successful in clinical trials and we do submit marketing applications seeking regulatory authorization for their use. If we do not receive regulatory approvals for one or more of our product candidates, we may not be able to continue our operations.

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For each product candidate, we must demonstrate its safety and efficacy in humans, obtain regulatory approval in one or more jurisdictions, obtain manufacturing supply, capacity and expertise, and substantially invest in marketing efforts before we are able to generate any revenue from such product candidate. The success of our product candidates will depend on several factors, including the following:

 

approval by the FDA of a BLA for inebilizumab;

 

submission to, and acceptance by, the FDA of an IND and of clinical trial applications to foreign governmental authorities, for our product candidates to commence planned clinical trials and future clinical trials;

 

successful enrollment in, and completion of, clinical trials, the design and implementation of which are agreed to by the applicable regulatory authorities, and the conduct of clinical trials by contract research organizations, or CROs, to successfully conduct such trials within our planned budget and timing parameters and without materially adversely impacting our trials;

 

successful data from our clinical programs that support an acceptable risk-benefit profile of our product candidates for the targeted indications in the intended populations to the satisfaction of the applicable regulatory authorities;

 

timely receipt, if at all, of regulatory approvals from applicable regulatory authorities;

 

establishment of arrangements with third-party manufacturers, as applicable, for continued clinical supply and commercial manufacturing;

 

successful development of our manufacturing processes and transfer to new third-party facilities to support future development activities and commercialization that are operated by contract manufacturing organizations, or CMOs, in a manner compliant with all regulatory requirements;

 

establishment and maintenance of patent and trade secret protection or regulatory exclusivity for our product candidates;

 

successful commercial launch of our product candidates, if and when approved;

 

acceptance of our products, if and when approved, by patients, the relevant medical communities and third-party payors;

 

effective competition with other therapies;

 

establishment and maintenance of adequate healthcare coverage and reimbursement;

 

our ability to avoid infringing upon the patent and other intellectual property rights of third parties;

 

enforcement and defense of intellectual property rights and claims;

 

continued compliance with any post-marketing requirements imposed by regulatory authorities, including any required post-marketing clinical trials or the elements of any post-marketing Risk Evaluation and Mitigation Strategy, or REMS, that may be required by the FDA or comparable requirements in other jurisdictions to ensure the benefits of the product outweigh its risks; and

 

maintenance of a continued acceptable safety profile of the product candidates following approval.

If we are unable to address one or more of these factors in a timely manner or at all, we could experience significant delays in the successful commercialization of, or an inability to successfully commercialize, our product candidates, which would materially harm our business. If we do not receive regulatory approvals for one or more of our product candidates, we may not be able to continue our operations. Even if we successfully obtain regulatory approvals to manufacture and market our product candidates, our revenues will be dependent, in part, upon the size of the markets in the territories for which we gain regulatory approval and have commercial rights. If the markets for patient subsets that we are targeting are not as significant as we estimate, we may not generate significant revenues from sales of such products, if approved.

We plan to seek regulatory approval to commercialize our product candidates in the United States and potentially in foreign countries. While the scope of regulatory approval is similar in many countries, to obtain separate regulatory approval in multiple countries we will be required to comply with numerous and varying regulatory requirements of each such country or jurisdiction regarding safety and efficacy and governing, among other things, clinical trials and commercial sales, pricing and distribution, and we cannot predict success in any such jurisdictions. The time required to obtain approval in foreign countries may differ substantially from that required to obtain FDA approval.

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Clinical drug development involves a lengthy 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 our product candidates.

The risk of failure in drug development is high. All of our product candidates are in clinical and pre-clinical development, and we have never received marketing approval in any jurisdiction or country. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete nonclinical development and conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinical trials are expensive, difficult to design and implement and can take several years to complete, and their outcomes are inherently uncertain. Failure can occur at any time during the clinical trial process. Nonclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in nonclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products. While we believe the results of our pivotal trial of inebilizumab for the treatment of patients with NMOSD are positive, the FDA or a comparable foreign regulatory authority may disagree and may conclude that the results of our pivotal trial are not sufficient to approve inebilizumab. It is impossible to predict when or if any of our product candidates will prove to be effective or safe in humans or will receive marketing approval.

We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidates. Clinical trials may be delayed, suspended or prematurely terminated because costs are greater than we anticipate or for a variety of other reasons, such as:

 

delay or failure in reaching agreement with the FDA or a comparable foreign regulatory authority on a trial design that we are able to execute;

 

delay or failure in obtaining authorization to commence a trial, including approval from the appropriate Institutional Review Board (“IRB”), to conduct testing of a candidate on human subjects, or inability to comply with conditions imposed by a regulatory authority regarding the scope or design of a clinical trial;

 

delays in reaching, or failure to reach, agreement on acceptable terms with prospective trial sites and prospective CROs, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

 

inability, delay or failure in identifying and maintaining a sufficient number of trial sites, many of which may already be engaged in other clinical programs;

 

delay or failure in recruiting and enrolling suitable subjects to participate in a trial;

 

delay or failure in having subjects complete a trial or return for post-treatment follow-up;

 

clinical sites and investigators deviating from the clinical protocol, failing to conduct the trial in accordance with regulatory requirements, or dropping out of a trial;

 

failure to initiate or delay of or inability to complete a clinical trial as a result of the authorizing IND or clinical trial agreement being placed on clinical hold by the FDA or comparable foreign regulatory authority;

 

lack of adequate funding to continue a clinical trial, including unforeseen costs due to enrollment delays, requirements to conduct additional clinical trials and increased expenses associated with the services of our CROs and other third parties;

 

clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional nonclinical studies, clinical trials or abandon product development programs;

 

the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials at a higher rate than we anticipate;

 

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;

 

regulators, the IRB or a Data Safety Monitoring Board, or DSMB, if one is used for our clinical trials, may require that we suspend or terminate our clinical trials for various reasons, including noncompliance with regulatory requirements, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, or a finding that the participants are being exposed to unacceptable health risks;

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the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient;

 

the FDA or comparable foreign regulatory authorities may require us to submit additional data or impose other requirements before permitting us to initiate a clinical trial; or

 

changes in governmental regulations or administrative actions.

Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of marketing approval for our product candidates. Further, the FDA or comparable foreign regulatory authorities may disagree with our clinical trial design and our interpretation of data from clinical trials, or may change the requirements for approval even after it has reviewed and commented on the design for our clinical trials.

If we are required to conduct additional clinical trials or other nonclinical studies of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our product candidates or other studies, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:

 

be delayed in obtaining marketing approval for our product candidates;

 

not obtain marketing approval for our product candidates at all;

 

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

 

obtain approval with labeling that includes significant use or distribution restrictions or safety warnings that would reduce the potential market for our products or inhibit our ability to successfully commercialize our products;

 

be subject to additional post-marketing restrictions and/or requirements, including post-marketing testing; or

 

have the product removed from the market after obtaining marketing approval.

We cannot be certain as to what type and how many clinical trials the FDA or comparable foreign regulatory authorities will require us to conduct before we may successfully gain approval to market inebilizumab. Prior to approving a new product, the FDA generally requires that the efficacy of the product be demonstrated in two adequate and well-controlled clinical trials. In some situations, the FDA approves products on the basis of a single well-controlled clinical trial. Based on our discussions with the FDA and the EMA, we conducted only a single pivotal trial of inebilizumab for the treatment of patients with NMOSD. However, if the FDA or EMA determines that our pivotal trial results do not demonstrate a clinically meaningful benefit and an acceptable safety profile, or if the FDA or EMA requires us to conduct additional pivotal trials of inebilizumab in order to gain approval, we will incur significant additional development costs, commercialization of inebilizumab would be prevented or delayed and our business would be adversely affected.

Our product development costs will also increase if we experience delays in nonclinical and clinical development or receiving the requisite marketing approvals. We do not know whether any of our nonclinical studies or clinical trials will need to be restructured or will be completed on schedule, or at all. Significant nonclinical or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our product candidates and may harm our business and results of operations.

If we experience delays or difficulties in the enrollment of patients in clinical trials, development of our product candidates may be delayed or prevented, which would have a material adverse effect on our business.

We may not be able to initiate or continue clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or comparable foreign regulatory authorities. Patient enrollment is a significant factor in the timing of clinical trials. In particular, because certain of our clinical trials are focused on indications with small patient populations, our ability to enroll eligible patients may be limited or may result in slower enrollment than we anticipate. For example, based on an estimated prevalence of myasthenia gravis of 20 per 100,000 in the United States, we estimate the patient population to be approximately 56,000 and based on an estimated prevalence of systemic sclerosis of 13.5 to 44.3 per 100,000 in Europe and North America, we estimate the patient population to be approximately 300,000.

Patient enrollment may be affected if our competitors have ongoing clinical trials for product candidates that are under development for the same indications as our product candidates, and patients who would otherwise be eligible for our clinical trials instead enroll in clinical trials of our competitors’ product candidates. Patient enrollment may also be affected by other factors, including:

 

size and nature of the patient population;

 

severity of the disease under investigation;

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patient eligibility criteria for the trial in question;

 

nature of the trial protocol;

 

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

 

perceived risks and benefits of the product candidate under study;

 

the occurrence of adverse events attributable to our product candidates;

 

efforts to facilitate timely enrollment in clinical trials;

 

the number and nature of competing products or product candidates and ongoing clinical trials of competing product candidates for the same indication;

 

patient referral practices of physicians;

 

the ability to monitor patients adequately during and after treatment;

 

proximity and availability of clinical trial sites for prospective patients; and

 

continued enrollment of prospective patients by clinical trial sites.

If we experience delays or difficulties in the enrollment of patients in clinical trials, our clinical trials may be delayed or terminated. Any delays in completing our clinical trials will increase our costs, delay or prevent our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenue. Any of these occurrences may harm our business, financial condition and prospects significantly.

The outcome of pre-clinical testing and early clinical trials may not be predictive of the success of later clinical trials, and the results of our clinical trials may not satisfy the requirements of the FDA or comparable foreign regulatory authorities.*

We currently have no products approved for sale and we cannot guarantee that we will ever have marketable products. Clinical failure can occur at any stage of clinical development. Clinical trials may produce negative or inconclusive results, and we or any future collaborators may decide, or regulators may require us, to conduct additional clinical trials or pre-clinical studies. We will be required to demonstrate with substantial evidence through well-controlled clinical trials that our product candidates are safe and effective for use in a diverse population before we can seek marketing approvals for their commercial sale. Success in pre-clinical studies and early-stage clinical trials does not mean that future larger registration clinical trials will be successful. This is because product candidates in later-stage clinical trials may fail to demonstrate sufficient safety and efficacy to the satisfaction of the FDA and comparable foreign regulatory authorities despite having progressed through pre-clinical studies and early-stage clinical trials. In particular, no compound with the mechanism of action of VIB4920 or VIB7734 has been commercialized, and the outcome of pre-clinical studies and early-stage clinical trials may not be predictive of the success of later-stage clinical trials.

From time to time, we may publish or report interim or preliminary data from our clinical trials. Interim or preliminary data from clinical trials that we may conduct may not be indicative of the final results of the trial and are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Interim or preliminary data also remain subject to audit and verification procedures that may result in the final data being materially different from the interim or preliminary data. As a result, interim or preliminary data should be viewed with caution until the final data are available.

In some instances, there can be significant variability in safety and efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in trial protocols, differences in size and type of the patient populations, differences in and adherence to the dosing regimen and other trial protocols and the rate of dropout among clinical trial participants. For example, in a Phase 1b trial, we observed that VIB4920 decreased disease activity in patients with rheumatoid arthritis. In 2019, we initiated a Phase 2 trial for VIB4920 in Sjögren’s syndrome and initiated a separate Phase 2 trial for VIB4920 in kidney transplant rejection. There is no assurance that VIB4920 will have a similar impact on disease activity in such planned Phase 2 trials.

We do not know whether any clinical trials we may conduct will demonstrate consistent or adequate efficacy and safety sufficient to obtain marketing approval to market our product candidates.

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If we do not achieve our projected development and commercialization goals in the timeframes we announce and expect, the commercialization of inebilizumab or any additional product candidates may be delayed, and our business will be harmed.

For planning purposes, we sometimes estimate the timing of the accomplishment of various scientific, clinical, regulatory and other product development objectives. These milestones may include our expectations regarding the commencement or completion of scientific studies and clinical trials, the submission of regulatory filings, or commercialization objectives. From time-to-time, we may publicly announce the expected timing of some of these milestones, such as the completion of an ongoing clinical trial, the initiation of other clinical programs, receipt of marketing approval or a commercial launch of a product. The achievement of many of these milestones may be outside of our control. All of these milestones are based on a variety of assumptions which, if not realized as expected, may cause the timing of achievement of the milestones to vary considerably from our estimates, including:

 

our available capital resources or capital constraints we experience;

 

the rate of progress, costs and results of our clinical trials and research and development activities, including the extent of scheduling conflicts with participating clinicians and collaborators;

 

our ability to identify and enroll patients who meet clinical trial eligibility criteria;

 

our receipt of approvals by the FDA and other regulatory authorities and the timing thereof;

 

other actions, decisions or rules issued by regulators;

 

our ability to access sufficient, reliable and affordable supplies of materials used in the manufacture of our product candidates;

 

the efforts of our collaborators with respect to the commercialization of our products; and

 

the securing of, costs related to, and timing issues associated with, product manufacturing as well as sales and marketing activities.

If we fail to achieve announced milestones in the timeframes we expect, the commercialization of inebilizumab and any additional product candidates may be delayed, and our business and results of operations may be harmed.

Risks Related to Marketing Approval and Other Legal Compliance Matters

If we are not able to obtain, or if there are delays in obtaining, required marketing approvals, we will not be able to commercialize our product candidates, and our ability to generate revenue will be materially impaired.

Our product candidates and the activities associated with their development and commercialization, including their design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale, distribution, import and export are subject to comprehensive regulation by the FDA and other regulatory agencies in the United States and by comparable authorities in other countries. Before we can commercialize any of our product candidates, each such product candidate must be approved by the FDA pursuant to a BLA in the United States or in the EU by the EMA pursuant to a marketing authorization application, or MAA.

The process of obtaining marketing approvals, both in the United States and abroad, is expensive and takes several years, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved. Failure to obtain marketing approval for a product candidate will prevent us from commercializing the product candidate in the relevant market or country. We have not received approval to market any of our product candidates from regulatory authorities in any jurisdiction. We have limited experience in planning and conducting the clinical trials required for marketing approvals, and we have and expect to continue to rely on third-party CROs to assist us in this process. Obtaining marketing approval requires the submission of extensive nonclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy. Securing marketing approval also requires the submission of information about the product manufacturing process, and in many cases the inspection of manufacturing, processing, and packaging facilities by the regulatory authorities. Our product candidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use, or there may be deficiencies in cGMP compliance by us or by our CMOs that could result in the candidate not being approved. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional nonclinical studies or clinical trials. Inebilizumab for the treatment of NMOSD, or any of our other product candidates could be delayed in receiving, or fail to receive, marketing approval for many reasons, including the following:

 

the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;

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we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for its proposed indication;

 

the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;

 

we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;

 

the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from nonclinical studies or clinical trials;

 

the data collected from clinical trials of our product candidates may not be sufficient to support the acceptance for review of a BLA or other submission to obtain marketing approval in the United States or elsewhere;

 

upon review of our clinical trial sites and data, the FDA or comparable foreign regulatory authorities may find our record keeping or the record keeping of our clinical trial sites to be inadequate;

 

third-party manufacturers or our clinical or commercial product candidates may be unable to meet the FDA’s cGMP requirements or similar requirements of foreign regulatory authorities; and

 

the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.

In addition, even if we were to obtain approval, regulatory authorities may approve any of our product candidates for fewer or more limited indications than we request, may grant approval contingent on the performance of costly post-marketing clinical trials (referred to as “conditional” or “accelerated” approval depending on the jurisdiction) or may approve a product candidate with prescribing information that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Our clinical trials of inebilizumab have been designed for inebilizumab to be approved as a monotherapy that is dosed every six months, but there is no assurance that the FDA will agree that the data presented will be sufficient to approve inebilizumab with those dosing characteristics and we may need to conduct additional clinical trials if that were to occur. Any of the foregoing scenarios could materially harm the commercial prospects for our product candidates.

If we experience delays in obtaining approval or if we fail to obtain approval of our product candidates, the commercial prospects for our product candidates may be harmed and our ability to generate revenues will be materially impaired.

Our product candidates may cause undesirable side effects that could delay or prevent their marketing approval, limit their commercial potential, or result in significant negative consequences following marketing approval, if any.

Undesirable side effects caused by our product candidates could cause us or the FDA or other regulatory authorities to interrupt, delay or halt our clinical trials and could result in a more restrictive label or the delay or denial of marketing approval by the FDA or other regulatory authorities of our product candidates. Results of our clinical trials could reveal a high and unacceptable severity and prevalence of side effects. In such an event, our trials could be suspended or terminated and the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny approval of our product candidates for any or all targeted indications. In addition to this, the product-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly.

All of our product candidates modulate the immune system and carry risks, including the theoretical risk of serious infections and cancer. Some common side effects of inebilizumab include urinary tract infection, arthralgia, back pain, headache, fall, hypoesthesia, cystitis and eye pain. Specifically, in our pivotal clinical trial for inebilizumab in patients with NMOSD, adverse events were reported in 71.8% (125/174) of the patients receiving inebilizumab in the randomized control period and 73.2% (41/56) of the patients receiving placebo in the randomized control period. In addition, two deaths have been reported in the ongoing open-label period. One death occurred in a patient experiencing a myelitis attack and was considered unrelated to inebilizumab by the investigator. The second death was due to complications from mechanical ventilator-associated pneumonia in a patient who developed new neurological symptoms and seizures, the cause of which could not be definitively established. The possibility that the death was treatment-related could not be ruled out, and as a result, under the terms of the protocol for the trial, the death was assessed as treatment-related. There can be no assurance that the FDA or comparable foreign regulatory authority will agree with the classifications of the deaths made by the investigators or that we will not be required to conduct additional clinical trials of inebilizumab in order to establish an adequate safety database.

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Further, clinical trials by their nature utilize a sample of the potential patient population. With a limited number of patients, rare and severe side effects of our product candidates may only be uncovered with a significantly larger number of patients exposed to the product candidate. If our product candidates receive marketing approval and we or others identify undesirable side effects caused by such product candidates (or any other similar products) after such approval, a number of potentially significant negative consequences could result, including:

 

regulatory authorities may withdraw or limit their approval of such product candidates;

 

regulatory authorities may require the addition of labeling statements, such as a “boxed” warning or a contraindication;

 

we may be required to create a medication guide outlining the risks of such side effects for distribution to patients;

 

we may be required to change the way such product candidates are distributed or administered, or change the labeling of the product candidates;

 

FDA may require a REMS plan to mitigate risks, which could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools, and regulatory authorities in other jurisdictions may require comparable risk mitigation plans;

 

we may be subject to regulatory investigations and government enforcement actions;

 

the FDA or a comparable foreign regulatory authority may require us to conduct additional clinical trials or costly post-marketing testing and surveillance to monitor the safety and efficacy of the product;

 

we may decide to recall such product candidates from the marketplace after they are approved;

 

we could be sued and held liable for injury caused to individuals exposed to or taking our product candidates; and

 

our reputation may suffer.

We believe that any of these events could prevent us from achieving or maintaining market acceptance of the affected product candidates and could substantially increase the costs of commercializing our product candidates, if approved, and significantly impact our ability to successfully commercialize our product candidates and generate revenues.

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

The FDA recently granted Breakthrough Therapy Designation to inebilizumab for the treatment of NMOSD, and we may seek such designation in the future for other product candidates. A Breakthrough Therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For drugs that have been designated as Breakthrough Therapies, interaction and communication between the FDA and the sponsor can help to identify the most efficient path for development. Drugs designated as Breakthrough Therapies are also eligible for accelerated approval.

FDA has discretion to determine whether the criteria for a Breakthrough Therapy has been met and whether to grant a Breakthrough Therapy Designation to an investigational product. Accordingly, even if we believe, after completing early clinical trials, that one of our product candidates meets the criteria for designation as a Breakthrough Therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of a Breakthrough Therapy Designation for a product candidate may not result in a faster development process, review or approval compared to product candidates considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even after granting Breakthrough Therapy Designation to our product candidates, the FDA may later decide that such product candidates no longer meet the conditions for qualification and withdraw such designation.

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A Fast Track Designation by the FDA, even if granted for any of our product candidates, may not lead to a faster development or regulatory review or approval process and does not increase the likelihood that our product candidates will receive marketing approval.

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

Any product candidate for which we obtain marketing approval will be subject to extensive post-marketing regulatory requirements and could be subject to post-marketing restrictions or withdrawal from the market, and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our products, when and if any of them are approved.

If the FDA or a comparable foreign regulatory authority approves any of our product candidates, activities such as the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements. The FDA or a comparable foreign regulatory authority may also impose requirements for costly post-marketing nonclinical studies or clinical trials (often called “Phase 4 trials”) and post-marketing surveillance to monitor the safety or efficacy of the product. If we or a regulatory authority discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, production problems or issues with the facility where the product is manufactured or processed, such as product contamination or significant not-compliance with applicable cGMPs, a regulator may impose restrictions on that product, the manufacturing facility or us. If we or our third-party providers, including our CMOs, fail to comply fully with applicable regulations, then we may be required to initiate a recall or withdrawal of our products.

We must also comply with requirements concerning advertising and promotion for any of our product candidates for which we obtain marketing approval. Promotional communications with respect to prescription drugs and biologics are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved labeling. Thus, we will not be able to promote any products we develop for indications or uses for which they are not approved. The FDA closely regulates the post-approval marketing and promotion of drugs to ensure drugs are marketed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers’ communications regarding use of their products, and if we promote our products beyond their approved indications, we may be subject to enforcement actions or prosecution arising from that off-label promotion. Violations of the Federal Food, Drug, and Cosmetic Act relating to the promotion of prescription drugs and biologics may lead to investigations alleging violations of federal and state healthcare fraud and abuse laws, as well as state consumer protection laws. Accordingly, to the extent we receive marketing approval for one or more of our product candidates, we and our CMOs and other third-party partners will continue to expend time, money and effort in all areas of regulatory compliance, including promotional and labeling compliance, manufacturing, production, product surveillance, and quality control. If we are not able to comply with post-approval regulatory requirements, we could have marketing approval for any of our products withdrawn by regulatory authorities and our ability to market any future products could be limited, which could adversely affect our ability to achieve or sustain profitability. Thus, the cost of compliance with post-approval regulations may have a negative effect on our operating results and financial condition.

In addition, later discovery of previously unknown adverse events or other problems with any of our approved products, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including:

 

restrictions on such products, manufacturers or manufacturing processes;

 

restrictions on the labeling or marketing of a product;

 

restrictions on product distribution or use;

 

requirements to conduct post-marketing studies or clinical trials;

 

warning or untitled letters from the FDA or comparable notice of violations from foreign regulatory authorities;

 

withdrawal of the products from the market;

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refusal to approve pending applications or supplements to approved applications that we submit;

 

recall of products;

 

fines, restitution or disgorgement of profits or revenues;

 

suspension or withdrawal of marketing approvals;

 

suspension of any of our ongoing clinical trials;

 

imposition of restrictions on our operations, including closing our contract manufacturers’ facilities;

 

refusal to permit the import or export of our products;

 

product seizure; or

 

injunctions or the imposition of civil or criminal penalties.

Non-compliance with European Union requirements regarding safety monitoring or pharmacovigilance can also result in significant financial penalties. Similarly, failure to comply with the European Union’s requirements regarding the protection of personal information can also lead to significant penalties and sanctions.

The FDA’s policies may change and additional government regulations may be enacted that could prevent, limit or delay marketing approval of our product candidates. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, which would adversely affect our business, prospects and ability to achieve or sustain profitability.

Our relationships with prescribers, purchasers, third-party payors and patients 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.

Although we do not currently have any products on the market, upon commercialization of our product candidates, if approved, we will be subject to additional healthcare statutory and regulatory requirements and oversight by federal and state governments as well as foreign governments in the jurisdictions in which we conduct our business. Physicians, other healthcare providers and third-party payors will play a primary role in the recommendation, prescription and use of any product candidates for which we obtain marketing approval. Our future arrangements with such third parties may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain our business or financial arrangements and relationships through which we market, sell and distribute any products for which we may obtain marketing approval. Restrictions under applicable domestic and foreign healthcare laws and regulations include the following:

 

the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid; a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

 

U.S. federal false claims, false statements and civil monetary penalties laws, including the U.S. False Claims Act, which impose criminal and civil penalties against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; actions may be brought by the government or a whistleblower and may include an assertion that a claim for payment by federal healthcare programs for items and services which results from a violation of the federal Anti-Kickback Statue constitutes a false or fraudulent claim for purposes of the False Claims Act;

 

the U.S. federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, that imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services; similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

 

analogous state and foreign laws and regulations relating to healthcare fraud and abuse, such as state anti-kickback and false claims laws, that may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers;

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the U.S. federal physician payment transparency requirements, sometimes referred to as the “Sunshine Act,” which requires manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program to report to the Centers for Medicare & Medicaid Services, or CMS, information related to physician payments and other transfers of value to physicians and teaching hospitals (and, beginning in 2021, for transfers of value to other healthcare providers), as well as the ownership and investment interests of physicians and their immediate family members;

 

analogous state and foreign laws that require pharmaceutical companies to track, report and disclose to the government and/or the public information related to payments, gifts, and other transfers of value or remuneration to physicians and other healthcare providers, marketing activities or expenditures, or product pricing or transparency information, or that require pharmaceutical companies to implement compliance programs that meet certain standards or to restrict or limit interactions between pharmaceutical manufacturers and members of the healthcare industry;

 

the U.S. federal laws that require pharmaceutical manufacturers to report certain calculated product prices to the government or provide certain discounts or rebates to government authorities or private entities, often as a condition of reimbursement under federal healthcare programs;

 

HIPAA, which imposes obligations on certain covered entity healthcare providers, health plans, and healthcare clearinghouses as well as their business associates that perform certain services involving the use or disclosure of individually identifiable health information, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; and

 

state and foreign laws that govern the privacy and security of health information in certain circumstances, including state security breach notification laws, state health information privacy laws and federal and state consumer protection laws, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. If the FDA or a comparable foreign regulatory authority approves any of our product candidates, we will be subject to an expanded number of these laws and regulations and will need to expend resources to develop and implement policies and processes to promote ongoing compliance. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations, resulting in government enforcement actions.

If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion of products from federal healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from federal healthcare programs.

We may face difficulties from changes to current regulations and future legislation.

Existing regulatory policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.

In the United States, there have been and continue to be a number of significant legislative initiatives to contain healthcare costs. Federal and state governments continue to propose and pass legislation designed to reform delivery of, or payment for, healthcare, which include initiatives to reduce the cost of healthcare. For example, in March 2010, the United States Congress enacted the Patient Protection and Affordable Care Act and the Healthcare and Education Reconciliation Act, or the ACA, which expanded healthcare coverage through Medicaid expansion and the implementation of the individual mandate for health insurance coverage and which included changes to the coverage and reimbursement of drug products under federal healthcare programs. The ACA contains a number of provisions that affect coverage and reimbursement of drug products and/or that could potentially reduce the demand for pharmaceutical products such as increasing drug rebates under state Medicaid programs for brand name prescription drugs and extending those rebates to Medicaid managed care and assessing a fee on manufacturers and importers of brand name prescription drugs reimbursed under certain government programs, including Medicare and Medicaid. Under the Trump administration, there have been ongoing efforts to modify or repeal all or certain provisions of the ACA. For example, tax reform legislation was enacted at the end of 2017 that eliminates the tax penalty established under the ACA for individuals who do not maintain mandated health insurance coverage beginning in 2019. In a May 2018 report, the Congressional Budget Office estimated

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that, compared to 2018, the number of uninsured individuals in the United States will increase by three million in 2019 and six million in 2028, in part due to the elimination of the individual mandate. The ACA has also been subject to judicial challenge. In December 2018, a federal district court, in a challenge brought by a number of state attorneys general, found the ACA unconstitutional in its entirety because, once Congress repealed the individual mandate provision, there was no longer a basis to rely on Congressional taxing authority to support enactment of the law. Pending appeals, which could take some time, the ACA is still operational in all respects.

Additional legislative actions to control U.S. healthcare or other costs have passed. The Budget Control Act, as amended, resulted in the imposition of 2% reductions in Medicare (but not Medicaid) payments to providers in 2013 and will remain in effect through 2027 unless additional Congressional action is taken.

Recently, there has been considerable public and government scrutiny in the United States of pharmaceutical pricing and proposals to address the perceived high cost of pharmaceuticals. The current presidential administration has indicated an intent to address prescription drug pricing and recent Congressional hearings have brought increased public attention to the costs of prescription drugs and biologics. State governments also have sought to put in place limits and caps on pharmaceutical prices and have also requested rebates for certain pharmaceutical products.

We expect that current or future healthcare reform measures may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our product candidates.

Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for biotechnology products. We cannot be sure whether additional legislative changes will be enacted, or whether FDA regulations, guidance or interpretations for biological products will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval and decision-making processes may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.

Inadequate funding for the FDA, the SEC and other government agencies could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.*

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

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and other government employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, in our operations as a public company, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.

Our future growth may depend, in part, on our ability to penetrate foreign markets, where we would be subject to additional regulatory burdens and other risks and uncertainties.*

Our future profitability may depend, in part, on our ability to commercialize our product candidates in foreign markets. In order to market and sell products in the European Union and many other jurisdictions, separate marketing approvals must be obtained and numerous and varying regulatory requirements must be complied with. The approval procedure varies among countries and economic areas and can involve additional testing. The time required to obtain approval may differ substantially from that required to obtain FDA approval. The marketing approval process outside the United States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, it is required that the product be approved for reimbursement before the product can be approved for sale in these countries. Approval from regulatory authorities outside the United States may not be obtained on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. Additionally, a failure or delay in obtaining marketing approval in one jurisdiction may have a negative effect on the marketing approval process in others. Obtaining foreign marketing

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approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs could delay or prevent the introduction of products in certain countries. Failure to comply with the regulatory requirements in international markets and/or receive applicable marketing approvals, will result in the reduced ability to realize the full market potential of product candidates.

We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any foreign market. If we obtain approval of our product candidates and ultimately commercialize our product candidates in foreign markets, we would be subject to additional risks and uncertainties, including:

 

our customers’ ability to obtain reimbursement for our product candidates in foreign markets;

 

our inability to directly control commercial activities because we are relying on third parties;

 

the burden of complying with complex and changing foreign regulatory, tax, accounting and legal requirements;

 

different medical practices and customs in foreign countries affecting acceptance in the marketplace;

 

import or export licensing requirements;

 

longer accounts receivable collection times;

 

longer lead times for shipping;

 

language barriers for technical training;

 

reduced protection of intellectual property rights in some foreign countries;

 

the existence of additional potentially relevant third-party intellectual property rights;

 

foreign currency exchange rate fluctuations; and

 

the interpretation of contractual provisions governed by foreign laws in the event of a contract dispute.

Foreign sales of our product candidates could also be adversely affected by the imposition of governmental controls, political and economic instability, trade restrictions and tariffs. In order to access certain foreign markets we anticipate entering into collaborations with third parties to develop and obtain certain products. For example, in May 2019, we entered into a collaboration agreement with Hansoh Pharmaceutical Group, or Hansoh Pharma, to co-develop and market inebilizumab in China, Hong Kong and Macau, and in October 2019, we entered into a license agreement with Mitsubishi Tanabe Pharma Corporation, or MTPC, for co-development and commercialization of inebilizumab in Japan, Thailand, South Korea, Indonesia, Vietnam, Malaysia, Philippines, Singapore, and Taiwan.

We may be subject to, or may in the future become subject to, U.S. federal and state, and foreign laws and regulations imposing obligations on how we collect, use, disclose, store and process personal information. Our actual or perceived failure to comply with such obligations could result in liability or reputational harm and could harm our business. Ensuring compliance with such laws could also impair our efforts to maintain and expand our customer base, and thereby decrease our revenue.

In many activities, including the conduct of clinical trials, we are subject to laws and regulations governing data privacy and the protection of health-related and other personal information. These laws and regulations govern our processing of personal data, including the collection, access, use, analysis, modification, storage, transfer, security breach notification, destruction and disposal of personal data.

The privacy and security of personally identifiable information stored, maintained, received or transmitted, including electronically, is subject to significant regulation in the United States and abroad. While we strive to comply with all applicable privacy and security laws and regulations, legal standards for privacy continue to evolve and any failure or perceived failure to comply may result in proceedings or actions against us by government entities or others, or could cause reputational harm, which could have a material adverse effect on our business.

Numerous foreign, federal and state laws and regulations govern collection, dissemination, use and confidentiality of personally identifiable health information, including state privacy and confidentiality laws (including state laws requiring disclosure of breaches), federal and state consumer protection and employment laws; HIPAA and European and other foreign data protection laws. These laws and regulations are increasing in complexity and number and may change frequently and sometimes conflict. The European Union’s omnibus data protection law, the General Data Protection Regulation, or GDPR, took effect on May 25, 2018. GDPR imposes numerous requirements on entities that process personal data in the context of an establishment in the European Economic Area, or EEA, or that process the personal data of data subjects who are located in the EEA. These requirements include, for example, establishing a basis for processing, providing notice to data subjects, developing procedures to vindicate expanded data subject rights, implementing appropriate technical and organizational measures to safeguard personal data, and complying with restrictions on the cross-border transfer of personal data from the EEA to countries that the European Union does not consider to have in place adequate data protection legislation, such as the United States. GDPR additionally establishes

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heightened obligations for entities that process “special categories” of personal data, such as health data. Nearly all clinical trials involve the processing of these “special categories” of personal data, and thus processing of personal data collected during the course of clinical trials is subject to heightened protections under GDPR. Violations of GDPR can lead to penalties of up to $20 million or 4% of an entity’s annual turnover.

As a means to transfer personal data from the EEA to the U.S., U.S.-based companies may certify compliance with the privacy principles of the EU-U.S. Privacy Shield, or the Privacy Shield. Certification to the Privacy Shield, however, is not mandatory. If a U.S.-based company does not certify compliance with the Privacy Shield, it may rely on other authorized mechanisms to transfer personal data. Notably, the Privacy Shield is currently subject to challenge in the EU courts, and it is possible that it will be invalidated, which was the fate of its predecessor, the EU-U.S. Safe Harbor. In the event of invalidation of the Privacy Shield, U.S. companies that currently rely on the Privacy Shield as the basis for cross-border transfer of personal data will need to establish another basis for cross-border transfer of personal data.

HIPAA establishes a set of national privacy and security standards for the protection of individually identifiable health information, including protected health information, or PHI, by health plans, certain healthcare clearinghouses and healthcare providers that submit certain covered transactions electronically, or covered entities, and their “business associates,” which are persons or entities that perform certain services for, or on behalf of, a covered entity that involve creating, receiving, maintaining or transmitting PHI. While we are not currently a covered entity or business associate under HIPAA, we may receive identifiable information from these entities. Failure to receive this information properly could subject us to HIPAA’s criminal penalties, which may include fines up to $250,000 per violation and/or imprisonment. In addition, responding to government investigations regarding alleged violations of these and other laws and regulations, even if ultimately concluded with no findings of violations or no penalties imposed, can consume company resources and impact our business and, if public, harm our reputation.

In addition, various states, such as California and Massachusetts, have implemented similar privacy laws and regulations, such as the California Confidentiality of Medical Information Act, that impose restrictive requirements regulating the use and disclosure of health information and other personally identifiable information. In addition to fines and penalties imposed upon violators, some of these state laws also afford private rights of action to individuals who believe their personal information has been misused. California’s patient privacy laws, for example, provide for penalties of up to $250,000 and permit injured parties to sue for damages. The interplay of federal and state laws may be subject to varying interpretations by courts and government agencies, creating complex compliance issues for us and potentially exposing us to additional expense, adverse publicity and liability. Further, as regulatory focus on privacy issues continues to increase and laws and regulations concerning the protection of personal information expand and become more complex, these potential risks to our business could intensify.

The legislative and regulatory landscape for privacy and data security continues to evolve, and there has been an increasing focus on privacy and data security issues which may affect our business. Failure to comply with current and future laws and regulations could result in government enforcement actions (including the imposition of significant penalties), criminal and/or civil liability for us and our officers and directors, private litigation and/or adverse publicity that negatively affects our business.

In the United States, California recently adopted the California Consumer Privacy Act of 2018, or CCPA, which will come into effect beginning in January 2020. The CCPA has been characterized as the first “GDPR-like” privacy statute to be enacted in the United States because it mirrors a number of the key provisions of the EU General Data Protection Regulation. The CCPA establishes a new priva