Global Blood Therapeutics, Inc. - Annual Report: 2020 (Form 10-K)

 

 

 

Form

 

 

Commission file number:

 

 

 

 

Registrant’s telephone number, including area code:

 

 

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

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No  ☒

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

S-T

non-accelerated

12b-2

 

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  ☒

12b-2

non-affiliates

As of February 18, 2021, the registrant had 62,156,860 shares of common stock, par value $0.001, outstanding.

Portions of the registrant’s definitive Proxy Statement for the registrant’s 2021 Annual Meeting of Stockholders, to be filed subsequent to the date hereof with the Securities and Exchange Commission, or SEC, are incorporated by reference into Part III of this report. Such proxy statement will be filed with the SEC not later than 120 days after the end of the registrant’s fiscal year ended December 31, 2020.

 

 

 

2020 FORM ANNUAL REPORT

 

 

i

10-K

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ii

 

 

 

 

 

 

 

COVID-19

10-K

10-K,

10-K

 

iii

•

Our business is substantially dependent on our ability to successfully commercialize our first approved product, Oxbryta, which will depend upon the degree of market acceptance by the medical community and marketplace.

•

If our sales and marketing capabilities for Oxbryta or any future product candidate for which we receive regulatory approval are not effective, we may not succeed in our commercialization efforts.

•

Our profitability depends on our ability to sell sufficient amounts of product at competitive prices and on the availability of adequate coverage and reimbursement through governmental or private third-party payors, the status of which is subject to significant uncertainty.

•

Our future growth may depend on our ability to penetrate foreign markets, which would subject us to additional regulatory burdens and other risks and uncertainties.

•

We will be subject to ongoing regulatory obligations and scrutiny for Oxbryta and any other product candidate for which we receive approval, which may include restrictions on product labeling, distribution or other post-marketing activities.

•

Our business operations and relationships with third parties are subject to various laws and regulations, and any failure to comply with such laws and regulations could adversely affect our business.

•

We face intense competition and rapid technological change and the possibility that our competitors may develop therapies that render our only approved product, Oxbryta, or product candidates uneconomical or obsolete, which could adversely affect our development programs, commercialization activities and financial condition.

•

If the market for Oxbryta or our product candidates is smaller than expected, our business and financial condition may be adversely affected.

•

We have a limited operating history, with only one drug approved for marketing, and expect to continue to incur losses for the foreseeable future.

•

We may require substantial additional funds to achieve our business goals, and any inability to obtain such funds may force us to delay, limit or terminate our commercialization of Oxbryta or our other product development efforts and operations.

•

We are party to a loan and security agreement that contains operating covenants and obligations that may restrict our business and financing activities.

•

If we are unable to obtain regulatory approval in additional jurisdictions for Oxbryta or in any jurisdictions for other product candidates, our business will be substantially harmed.

•

All of our programs other than Oxbryta are still in earlier development stages, so we remain very reliant on the potential success of Oxbryta in the clinic and in the marketplace.

•

Expedited development and regulatory approval programs for Oxbryta or other product candidates may not lead to a faster development or regulatory review or approval process, or to a timely approval, if at all.

•

The development of Oxbryta represents a novel therapeutic approach, and the outcomes of our clinical trials may not support any label expansion or any decision to seek, grant or maintain any regulatory approval.

 

iv

 

 

 

 

 

 

 

 

 

 

 

 

 

v

We are a biopharmaceutical company dedicated to the discovery, development and delivery of life-changing treatments that provide hope to underserved patient communities. Founded in 2011, our goal is to transform the treatment and care of sickle cell disease, or SCD, a lifelong, devastating inherited blood disorder that is marked by red blood cell, or RBC, destruction and occluded blood flow and hypoxia, which leads to anemia, stroke, multi-organ failure, severe pain crises, and shortened patient life span. Our mission is driven by the historical lack of understanding, investment and attention given to SCD. Although the fundamental cause of SCD has been understood for decades, therapeutic innovation and access to care have significantly lagged compared to many other rare diseases. For example, there are approximately three times more individuals in the United States living with SCD than cystic fibrosis, or CF. However, since the enactment of the Orphan Drug Act passed in 1983, only four drugs have been approved for SCD compared to 15 drugs approved for CF. As a result of the lack of treatment options, patients with SCD suffer serious morbidity and premature mortality.

Given the estimated prevalence of SCD in our current focus areas of the U.S., Europe, the Gulf Cooperation Council, or GCC, region and Latin America, we believe there is an opportunity to bring our first medicine, Oxbryta (voxelotor) tablets, to more than 350,000 people living with SCD in the next several years. Worldwide, there are millions of people living with SCD, which occurs predominantly in populations of African, Middle Eastern and South Asian descent and has an estimated global incidence of 250,000 to 300,000 births annually.

FDA-approved

The accelerated approval of Oxbryta was based on clinically meaningful and statistically significant improvements in hemoglobin levels, accompanied by reductions in RBC destruction (hemolysis). Data from our Phase 3 HOPE (Hemoglobin Oxygen Affinity Modulation to Inhibit HbS PolymErization) Study of 274 patients 12 years of age and older with SCD showed that, after 24 weeks of treatment, 51.1% of patients receiving the 1500 mg dose of Oxbryta, which is the approved dose, achieved a greater than 1 g/dL increase in hemoglobin compared with 6.5% receiving placebo (p<0.001), and Oxbryta had a favorable safety and tolerability profile.

®

single-arm

 

1

patients 12 years of age and older with SCD. We also expect to conduct additional clinical studies of Oxbryta, including to seek to expand the potential approved product label into younger pediatric populations as well as to study further the efficacy and safety profile of Oxbryta for SCD patients.

COVID-19,

in-person

in-person

COVID-19

mid-March

in-person

COVID-19

 

2

The following table summarizes our approved product and our most advanced research and development programs:

 

outside the United States, for the treatment of hemolytic anemia in SCD patients ages 12 years and older. Through the program, physicians in countries with an early access regulatory and legal pathway may be able to request voxelotor for eligible SCD patients who do not have access to the medicine as part of a clinical trial.

In January 2021, the EMA accepted for review our MAA seeking full marketing authorization of Oxbryta to treat hemolytic anemia (which is low hemoglobin due to red blood cell destruction) in SCD patients ages 12 years and older. The MAA is undergoing standard review by the EMA, and we could potentially secure approval as early as first or second quarter of 2022. The MAA is based on data from our Phase 3 HOPE Study and our Phase 2 HOPE-KIDS 1 Study, both of which enrolled patients at clinical sites in Europe. The EMA has included Oxbryta in its Priority Medicines (PRIME) program, and the European Commission, or EC, has designated Oxbryta as an orphan medicinal product for the treatment of patients with SCD. In addition, we currently plan to submit a separate application for the potential approval of Oxbryta in Great Britain that would rely on the decision, if positive, taken by the EC on our current MAA, as described below under “Regulatory Path for Oxbryta in International Markets.”

Biopharma-MEA

In Latin America, where there are approximately 100,000 SCD patients, mostly in Brazil, we plan to establish a distribution agreement with a local partner to potentially secure regulatory approvals and distribute Oxbryta in this market.

Our strategy includes the expansion of our product pipeline through the discovery and development of novel therapeutic approaches for SCD and grievous blood disorders, including with our internal programs of inclacumab and GBT601 and under our collaboration with Syros. In addition, our drug discovery and business development teams actively work on an ongoing basis on new opportunities to expand our product pipeline.

sub-Saharan

 

 

 

 

6

 

 

 

 

 

 

 

 

 

 

 

7

 

 

SCD is a devastating and rare inherited blood disorder that impacts hemoglobin, a protein carried by RBCs that delivers oxygen to tissues and organs throughout the body. It attacks every organ in the body and causes a wide range of complications, including inflammation, multi-organ damage and failure and early death. Many of these start with anemia and hemolysis. Beginning in childhood, patients can suffer unpredictable and recurrent episodes or crises of severe pain due to blocked blood flow to organs, which often lead to physical and psychosocial disability. In addition, the constant destruction of RBCs and the release of their contents into the blood often leads to damaged or diseased blood vessels, which further exacerbate blood flow obstruction and multi-organ damage. Consequences of SCD can manifest in early childhood and may include stroke, spleen failure, pulmonary hypertension, acute chest syndrome, liver disease, kidney failure, leg ulcers, priapism, which is a medical emergency due to refractory penile erection, and premature death. In the United States, SCD has been estimated to shorten patient life expectancy by approximately 30 years even with available medical care.

SCD is a genetic blood disorder caused by a single gene mutation in the beta-chain of hemoglobin, which results in mutant hemoglobin known as HbS. Hemoglobin is the protein in RBCs that carries oxygen from the lungs to the body’s tissues, releases oxygen at the tissues, and returns carbon dioxide from the tissues back to the lungs. Hemoglobin accomplishes this by binding and then releasing oxygen through allosterism, which means the hemoglobin molecule changes its shape to have a high affinity for oxygen in the lungs, where oxygen is abundant, and to have a low affinity for oxygen in the tissues, where oxygen must be released. Oxyhemoglobin, the high oxygen affinity form of hemoglobin, is formed in the lungs during respiration, when oxygen binds to the hemoglobin molecule. Deoxyhemoglobin, the low oxygen affinity form of hemoglobin, is formed when oxygen molecules are removed from the binding site as blood flows from the lungs to the tissues in the body. In patients with SCD, deoxygenated HbS molecules polymerize to form long, rigid rods within an RBC, much like a “sword within a balloon.” As a consequence, the normally round and flexible RBC becomes rigid and elongates into a “sickled” shape. Sickled RBCs do not flow properly in the bloodstream; they clog small blood vessels and reduce blood flow to the organs. This results in inadequate oxygen delivery, or hypoxia, to all body tissues, which can lead to multi-organ failure and premature death.

 

8

The following graphic illustrates the process by which sickling occurs in SCD patients as a result of the polymerization of deoxygenated HbS in an RBC, leading to occluded blood flow, in contrast to a normal RBC:

 

SCD manifests in individuals who inherit at least one HbS gene from a parent and an additional mutation on the second beta globin gene from the other parent. There are several different genotypes of SCD, including the following major genotypes:

 

 

 

sub-Saharan

Of SCD patients in the United States, approximately 45% are under the age of 18, and approximately 60% to 65% have the HbSS genotype, which is often referred to as sickle cell anemia, with the remaining 35% to 40% having other genotypes. In all genotypes of SCD, the mechanism that leads to the consequences of the disease involves the polymerization of HbS in its deoxygenated state, which results in RBC sickling. Our Phase 3 HOPE Study included SCD patients with all genotypes of SCD, and showed Oxbryta is active across all SCD genotypes. As a result, Oxbryta is approved for use with all SCD genotypes.

end-organ

 

9

Nearly 50% of SCD patients will experience one or more VOCs in a year. At least 80% of all hospitalizations of SCD patients are for a VOC, and in around 50% of these cases, the patient will be readmitted within 90 days for another VOC, adding to the cost of the index hospitalization. As a result, we believe that a safe, effective and convenient treatment that can reduce the frequency of VOCs and related hospital readmissions has the potential to be well received by patients, physicians and payors.

There has historically been limited innovation in the development of SCD therapies and there remains a significant unmet medical need for SCD patients. In recent years this has begun to change, including the FDA approval of Oxbryta in November 2019, and a significant increase in orphan drug approvals by the FDA. However, there are limitations to other currently approved treatment options.

The first drug approved to treat SCD, known as hydroxyurea, which was initially approved as a chemotherapy drug, was approved by the FDA in 1998 for the treatment of sickle cell anemia in adults with three or more painful crises per year. The use of hydroxyurea is significantly limited by its side effect profile, variable patient responses and concerns regarding long-term toxicity. Hydroxyurea’s side effects include impairment of fertility, suppression of white blood cells, or neutropenia, and suppression of platelets, or thrombocytopenia, which place patients at risk for infection and bleeding.

L-glutamine

®

(L-glutamine

®

30-minute

L-glutamine

In light of the devastating effects of SCD on patients and the high costs of care for these patients, there has been a significant unmet need for a treatment that:

 

 

 

 

 

 

 

10

 

In addition, while there have been therapies approved to treat patients with VOCs, or pain crises, there remains an opportunity to improve care with a treatment that:

 

 

FDA-approved

 

 

 

 

Hemoglobin transports oxygen from the lungs to the body’s tissues, releases oxygen into the tissues, and returns carbon dioxide from the tissues back to the lungs by changing its shape to be high affinity for oxygen in the lungs, where oxygen is abundant, and low affinity for oxygen in the tissues, where oxygen must be released. An important tool for assessing how readily hemoglobin acquires and binds oxygen in the lungs and releases oxygen into the tissues is the oxygen equilibrium curve, or OEC. The OEC represents the proportion of oxyhemoglobin, measured as the percentage of oxygen saturation (O % saturation) on the vertical axis relative to the amount of oxygen dissolved in blood, indicated as the oxygen tension, or partial pressure of oxygen (pO) measured in millimeters of mercury (mmHg), on the horizontal axis.

We have demonstrated in preclinical models that our novel hemoglobin modifiers, including Oxbryta, bind to hemoglobin, resulting in increased oxygen affinity. The effect of Oxbryta on the measured OEC is a shift of the curve to the left. In other words, at a given prevailing oxygen tension in the blood, we have observed a higher percentage of oxygen saturation, or a higher proportion of oxyhemoglobin in the blood, following the administration of Oxbryta.

In several preclinical studies of SCD, scientists have demonstrated that hemoglobin in the oxygenated state is a potent inhibitor of HbS polymerization. Since HbS polymerization occurs in the deoxygenated state, we believe that increasing the proportion of oxyhemoglobin, or “left-shifting” the OEC, should delay the polymerization of HbS and prevent the sickling of RBCs, which may ameliorate many of the clinical manifestations of SCD. Importantly, we are able to measure the proportion of hemoglobin modification (%HbMOD), which is expressed as the percentage of hemoglobin molecules occupied or bound by Oxbryta.

 

11

HbF, which is present during fetal development and persists for up to six to nine months in infants until it is replaced by adult hemoglobin, has an inherent high affinity for oxygen, which is critical for a developing fetus to capture oxygen from the mother’s blood. Newborns with SCD do not experience RBC sickling until approximately six to nine months of age, after which HbF is no longer expressed. Additionally, it has been observed that rare individuals who have inherited the HbS mutation and a gene modification that allows them to continue to express 10% to 30% HbF in their RBCs into adulthood do not exhibit the clinical manifestations of SCD, despite expressing up to 90% HbS in their blood. HbF dilutes the concentration of deoxygenated HbS that can participate in polymerization, and, thereby, prevents hemoglobin polymer from forming.

Based on these observations, during our development of Oxbryta we posited that to delay polymerization of HbS, Oxbryta would need to bind to only approximately 10% to 30% of the total hemoglobin in a patient’s blood. One theoretical concern regarding increasing the affinity of hemoglobin for oxygen is that excessive oxygen affinity could prevent hemoglobin from releasing oxygen into the tissues, thus causing hypoxia. However, we have not observed any findings from our clinical programs that demonstrated any evidence of such tissue impairment. Based on HbF data, our animal toxicology studies, and our clinical studies, we believe our target modification of the total hemoglobin in a patient’s blood does not adversely compromise oxygen delivery to the tissues. This is supported by exercise testing we have performed in SCD patients and healthy volunteers showing normal oxygen consumption and the absence of a dose level or exposure related increase in erythropoietin levels in patients enrolled in the HOPE Study.

Oxbryta increases hemoglobin’s affinity for oxygen by binding to the alpha-chain of hemoglobin. Oxbryta has been demonstrated keep a proportion of HbS in its oxygenated state so it cannot participate in polymerization. Similar to HbF, by diluting total HbS with a proportion of Oxbryta-bound hemoglobin, Oxbryta prevents hemoglobin polymer formation. Based on its mechanism of action, we believe that Oxbryta can reduce the physical and clinical manifestations of SCD.

24-week

 

12

Hb, hemoglobin

Source: Long-Term Efficacy and Safety of Voxelator in Adolescents and Adults with Sickle Cell Disease: HOPE Trial 72-Week Analysis, ASH 2020 Poster #1716

post-hoc

(CGI-C)

follow-up

Data and analyses from real-world experience with Oxbryta were presented at the ASH Annual Meeting & Exposition in December 2020, including:

 

 

 

13

We are conducting and plan to conduct additional clinical trials of Oxbryta, including our ongoing Phase 2a HOPE-KIDS 1 Study, our recently initiated Phase 3 HOPE-KIDS 2 Study a dose optimization study, and the ActIVe Phase 4 study. The HOPE-KIDS 1 Study, the HOPE-KIDS 2 Study and other aspects of our overall clinical development program for Oxbryta are also intended to position us to be able to seek approval over time for product labeling for Oxbryta for patients younger than the current age limit (12 years old), down to as young as 9 months of age.

Phase 2a HOPE-KIDS 1 Study

We are continuing to evaluate the safety and pharmacokinetics of single and multiple doses of Oxbryta in adolescent and pediatric patients with SCD in an ongoing Phase 2a clinical trial, which we call the HOPE-KIDS 1 Study. Initiated in August 2016, our ongoing HOPE-KIDS 1 Study is an open-label, single- and multiple-dose Phase 2a study that is evaluating the safety, tolerability, pharmacokinetics and exploratory treatment effect of Oxbryta in pediatric patients aged 4 to 17 years with SCD. Part A of the study evaluated a single 600 mg dose of Oxbryta in 13 patients aged 6 to 17 years, while Part B was designed to explore Oxbryta at doses of 900 mg and 1500 mg per day administered to 40 patients ages 12 to 17 for 24 weeks. Part C of the study is evaluating Oxbryta at a single 1500 mg dose (or weight-based equivalent) in patients age 4 to 17 years for up to 48 weeks, and Part D of the study is evaluating the safety of Oxbryta at the weight based equivalent of 1500 mg in patients age 9 months to under 4 years as measured by Treatment Emergent Adverse Events, or TEAEs, and Serious Adverse Events, or SAEs.

Part A pharmacokinetics, or PK, data in adolescents (12 to 17 years) demonstrated that the PK and half-life of Oxbryta were similar in adolescents and adults with results supporting once-daily dosing. Part A data for pediatric patients (6 to 11 years) demonstrated that PK exposures were higher in children compared with adolescents and adults, which informed dose selection for future pediatric studies in children under 12 years of age.

KIDS-1

Part C is currently enrolling patients age 4 to 17 years and will assess, as its primary endpoint, change in cerebral blood flow as measured by TCD flow velocity. Secondary measures include effect on clinical measures of hemolysis, change in cerebral blood flow and PK profile. We currently expect to complete the study in 2022.

Part D began enrolling patients age 9 months to under 4 years in 2020, and will assess, as its primary endpoint, the safety of a weight based equivalent of 1500 mg. Secondary measures include effect on clinical measures of hemolysis and PK profile.

Phase 3 HOPE-KIDS 2 Study

As a condition of accelerated approval of Oxbryta in the United States, and to potentially obtain full regulatory approval for Oxbryta, we will continue to study Oxbryta in the HOPE-KIDS 2 Study, a post-approval confirmatory study we initiated in December 2019 that is using TCD flow velocity to seek to demonstrate a decrease in stroke risk in children 2 to 15 years of age. HOPE-KIDS 2 is a randomized, placebo-controlled Phase 3 trial that will enroll approximately 220 patients with conditional TCD flow velocity (170-199 cm/sec) at about 50 sites in the United States, Europe and Africa. The primary objective of the study is to evaluate the effect of

 

14

Oxbryta on reducing the risk of stroke in children with SCD at 24 weeks months using mean change in TCD levels. Key secondary measures include conversion to normal or abnormal TCD at 96 weeks, change in hemoglobin over time and effect on clinical measures of hemolysis.

HOPE-KIDS 2 trial activities are ongoing and screening of participants has begun. We continue to focus on site training in the United States, Africa and MENA region, and enrollment of the first patient is planned for the first quarter of 2021. The overall treatment period will be 96 weeks, and, in connection with the accelerated approval of Oxbryta, we have agreed with the FDA to submit the interim study report by July 2025, complete the trial by March 2026 and to submit the final study report by September 2026.

Dose Optimization Study

As part of our overall life cycle management for Oxbryta, we have initiated a Phase 2 clinical trial to assess higher doses of Oxbryta, up to 3000 mg per day.

ActIVe Study

In order to demonstrate that Oxbryta provides a clinical benefit, we recently initiated the Phase 4 ActIVe (Actigraphy Improvement with Voxelotor) Study to evaluate daily physical activity in SCD patients 12 years of age and older who are on Oxbryta therapy.

We assembled our commercial team and infrastructure, including up to approximately 75 internal sales personnel, key payer account management, marketing and patient and distribution support, ahead of our FDA approval of Oxbryta as part of our plan to commercialize Oxbryta as soon as practicable after approval. As such, we were able to make Oxbryta available in early December 2019. We plan to continue to efficiently support the commercial launch of Oxbryta with this targeted commercial organization, given the number of SCD patients in the United States and their geographic concentration primarily in only 17 states. In addition, the prescribing audience is concentrated as many SCD patients receive care from a hematologist or another sickle cell care provider.

We are also providing a comprehensive patient support program, called GBT Source Solutions, to support our commercialization. This high-touch support program helps patients through the entire process by (i) reviewing insurance coverage options and explaining benefits; (ii) working with the specialty pharmacy partner network to coordinate delivery of Oxbryta to wherever the patient chooses; (iii) helping with financial and copay assistance for eligible patients; and (iv) helping patients stay on treatment as prescribed by their treating physicians with a nurse support team.

With respect to commercializing Oxbryta outside of the United States, we are beginning to build a small team and additional capabilities that may be necessary to effectively support such potential commercialization, subject to any required approval. These capabilities will likely focus on a limited number of core European markets, where SCD is prevalent. Where appropriate, we may also utilize strategic partners, distributors or contract sales forces to expand the commercial availability of Oxbryta.

We currently do not expect that we will require large pharmaceutical partners for the commercialization of Oxbryta or our product candidates, although we may consider partnering in certain territories, New Molecular Entities, or NMEs, or indications for other strategic purposes. We intend to continue to evaluate our commercialization strategy as we advance our programs.

 

15

The biopharmaceutical industry is highly competitive. There are many public and private biopharmaceutical companies, universities, governmental agencies and other research organizations actively engaged in the research and development of products that may be similar to our product candidates or address similar markets. In addition, the number of companies seeking to develop and commercialize products and therapies similar to Oxbryta and our product candidates is likely to increase.

FDA-approved

®

®

®

FT-4202,

kinase-R,

one-time

Some of our potential competitors, alone or with their strategic partners, have substantially greater financial, technical and human resources than we do and significantly greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of treatments and the commercialization of those treatments. Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated among a smaller number of our competitors. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, are more convenient or are less expensive than any products that we may develop. Our competitors may also 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.

In January 2021, the EMA validated our MAA, submitted under the Centralized Procedure, seeking full marketing authorization, or MA, of Oxbryta to treat hemolytic anemia in SCD patients ages 12 years and older. The MAA is under a standard review by the EMA and we could potentially secure regulatory approval as early as the first or second quarter of 2022.

Now that the UK (which includes Great Britain and Northern Ireland) has exited the European Union, or EU, often referred to as Brexit, Great Britain will no longer be covered by centralized MAs granted by the EC,

 

16

which, if granted, will include our MA for Oxbryta (while, under the Northern Irish Protocol, centralized MAs will continue to be recognized in Northern Ireland). As such, potential regulatory approval of Oxbryta in Great Britain will now require an application to the UK medicines regulator, the Medicines and Healthcare products Regulatory Agency, or MHRA. For a period of two years from January 1, 2021, the MHRA may rely on a decision taken by the EC to grant an MA under the Centralized Procedure to potentially more quickly grant a new Great Britain MA, and we currently plan to utilize this pathway to seek potential approval for Oxbryta in Great Britain. A separate application will, however, still be required.

Prior to filing our MAA, in November 2016, the EC granted Orphan Drug Designation status in the EU for Oxbryta for the treatment of SCD, and, in June 2017, the EMA granted PRIME designation for Oxbryta for the treatment of SCD. The PRIME program is a regulatory mechanism that provides for early and proactive EMA support to medicine developers to help patients benefit as early as possible from innovative new products that have demonstrated the potential to significantly address an unmet medical need. In addition, we have initiated an early access program in Europe for patients and physicians who may need access to Oxbryta prior to potential marketing authorization.

Biopharma-MEA

Biopharm-MEA

We are commercializing a solid oral formulation of a tablet form of Oxbryta, and we believe we have obtained an adequate supply of Oxbryta to satisfy our immediate commercial, clinical and nonclinical demands. We are also developing a pediatric formulation of Oxbryta for use in clinical trials and to include in our planned pediatric NDA submission for Oxbryta.

With respect to manufacturing, we do not own or operate or have any plans to establish any manufacturing facilities. We currently depend on third-party contract manufacturing organizations, or CMOs, for all of our requirements of raw materials, drug substance and drug product for our commercial, clinical and nonclinical activities for our portfolio, and we have entered into commercial manufacturing agreements with some of our CMOs to support Oxbryta commercialization. We intend to continue to rely on CMOs for the commercialization as well as continued development of Oxbryta, as well as the development and commercialization of any other product candidates, including inclacumab. Although we rely on CMOs, we have personnel and third-party consultants with extensive manufacturing experience to oversee the relationships with our contract manufacturers.

To decrease the risk of an interruption to our drug supply, when we believe it is reasonable for us to do so, we source materials from multiple suppliers so that, in general, the loss of any one source of supply should not have a material adverse effect on commercial production, project timelines or inventory of supplies for our studies or clinical trials. However, currently we have only one or a limited number of suppliers for some of these materials for Oxbryta and for other programs, and the loss of a primary source of supply could potentially delay the availability of Oxbryta or delay our development programs. We intend to maintain a safety stock of certain materials to help avoid delays in production, but we do not know whether such stock will be sufficient. In addition, we have established a second source for commercial drug substance and have identified potential second sources for finished drug product for Oxbryta commercial supply. There is no guarantee as to if or when we may establish the additional sources or whether they will be adequate in all circumstances we may encounter.

Our goal is to build a robust product pipeline focused on the discovery and development of novel therapeutic approaches for SCD and grievous blood disorders. Our research and development pipeline targets

 

17

multiple pathologies, including vascular occlusion and hemoglobin polymerization, and our most advanced development programs are for inclacumab and GBT601.

We have an active business development strategy that may provide new opportunities to expand our product pipeline with next-generation treatments for SCD. To this end, we have entered into agreements with Roche and Syros.

know-how

P-selectin

non-exclusive,

90-day

non-affiliates

know-how

 

18

co-promote

mid-

Since our founding, we have recognized that having a more diverse, inclusive, and equitable environment leads to increased performance, better decision making, increased productivity, and greater motivation. Our team represents a broad range of cultural and professional backgrounds that enrich our culture and drive our future growth and success. We are committed to fostering workplace development, diversity, and inclusion, or WDDI, at our company and across the biotechnology industry. We are dedicated to being at the forefront of efforts to develop a diverse and talented global workforce. We pledge to do our part to foster diversity and inclusion among our employees, customers and patients.

As of December 31, 2020, we employed 389 full-time employees globally, including 154 in research and development and 235 in selling, general and administrative, which includes our commercial team. We have and expect to continue to retain consultants from time to time if required in connection with our business.

COVID-19

To help attract, hire and retain skilled personnel, we offer a stimulating work environment, regular performance feedback, development opportunities, potential for career advancement, and a workplace culture focused on our mission and the wellbeing of our employees. In addition, we also monitor and periodically adjust our compensation programs with the goal of providing a competitive mix of compensation (including salary, incentive bonus and equity) and benefits packages.

We have never had a work stoppage, and none of our employees is represented by a labor organization or under any collective-bargaining arrangements. We consider our employee relations to be good.

We strive to protect the proprietary technology that we believe is important to our business, including seeking and maintaining patents and patent applications intended to cover Oxbryta and our product candidates

 

19

and compositions, their methods of use and processes for their manufacture, and any other aspects of inventions that are commercially important to the development of our business. We also rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection.

know-how

know-how,

in-licensing

The patent positions of biopharmaceutical companies like us are generally uncertain and involve complex legal, scientific and factual questions. In addition, the coverage claimed in a patent application can be significantly reduced before the patent, if any, is issued, and patent scope can be reinterpreted by the courts after issuance. Moreover, many jurisdictions permit third parties to challenge issued patents in administrative proceedings, which may result in further narrowing or even cancellation of patent claims. We cannot predict whether the patent applications we are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any patents, if issued, will provide sufficient protection from competitors for our business.

Because patent applications in the United States and certain other jurisdictions are maintained in secrecy for 18 months or potentially even longer, and since publication of discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot be certain of the priority of inventions covered by pending patent applications. Moreover, we may have to participate in interference proceedings or derivation proceedings declared by the United States Patent and Trademark Office, or USPTO, to determine the priority of inventions.

Our patent portfolio includes multiple issued U.S. and foreign patents, as well as multiple U.S. and foreign patent applications in various stages of prosecution or allowance. Our primary patents and patent applications relate to our general HbS intellectual property portfolio, which includes Oxbryta and its analogs.

Our HbS intellectual property portfolio is comprised of multiple patent families of patents and patent applications relating to Oxbryta and/or analogs that inhibit Hb polymerization. These patent families include patents and patent applications specifically related to Oxbryta, covering certain compositions of matter, methods of use, method of manufacture, commercial formulations, and polymorphs of Oxbryta and analogs. The pending patent applications are in a variety of jurisdictions, including the United States, jurisdictions under the Patent Cooperation Treaty and other countries.

With regard to Oxbryta specifically, we are the sole owner of issued U.S. patents covering Oxbryta, including its composition of matter, methods of use, formulations and polymorphs of Oxbryta. These issued U.S. patents covering Oxbryta are listed in the FDA Orange Book and will expire between 2032 and 2037, absent any applicable patent term extensions. Also with regard to Oxbryta specifically, we are the sole owner of issued composition of matter patents in Europe and certain other foreign jurisdictions. Any patents that may issue from our pending patent applications relating to Oxbryta in the United States or from corresponding foreign patent applications, if issued, are expected to expire between 2032 and 2037, absent any applicable patent term extensions. Some of these pending patent applications are jointly owned by us and Regents of the University of California, or the Regents, as described below.

Our other patents in our HbS intellectual property portfolio are comprised of additional issued U.S. patents covering Oxbryta analogs. These patents, and any patents that may issue from our pending patent applications

 

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relating to Oxbryta analogs in the United States or from corresponding foreign patent applications, if issued, are currently expected to expire between 2032 and 2039, absent any applicable patent term extensions. Some of these pending patent applications are jointly owned by us and the Regents, as described below. With regard to GBT601 specifically, we are the sole owner of an issued U.S. patent covering its composition of matter, which will expire in 2039, absent any applicable patent term extensions. Any foreign patents, if issued from the same patent family, are expected to expire in 2039, absent any applicable patent term extensions.

With regard to inclacumab, we are the exclusive worldwide licensee of Roche’s patent portfolio relating to inclacumab, which includes issued U.S. and foreign patents and pending applications covering the composition of matter of inclacumab. We expect inclacumab to be eligible for regulatory exclusivity (e.g., data exclusivity for biologics and orphan drug exclusivity) in various jurisdictions such as the U.S. and Europe, which exclusivities may extend beyond patent expiry. For example, we expect inclacumab, if approved, would be eligible for regulatory exclusivity (e.g., data exclusivity for biologics and orphan drug exclusivity) in various jurisdictions such as the U.S. and Europe, which exclusivities may extend beyond patent expiry in the case of inclacumab.

In addition, we have exclusively licensed from the Regents worldwide patent rights covering Oxbryta and certain Oxbryta analogs, some of which patent rights we jointly own with the Regents. In exchange for our exclusive license, we have agreed to pay a royalty to the Regents of less than 1% on future net sales and to use commercially reasonable efforts to develop, manufacture, market and sell the products covered by the licensed patents. The risks associated with joint ownership of patent rights are more fully discussed under “Risk Factors—Risks Related to Our Intellectual Property.”

Beyond our HbS intellectual property portfolio, we own other issued U.S. and foreign patents, seek to obtain additional issued patents, and file patent applications relating to our other research and development programs over time.

non-provisional

FDA-approved

FDA-approved

FDA-approved

non-extended

know-how

know-how

 

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confidentiality agreements and invention assignment agreements with our employees, consultants, scientific advisors and contractors. These agreements generally provide that all confidential information developed or made known during the course of an individual or entities’ relationship with us must be kept confidential during and after the relationship. These agreements also typically provide that all inventions resulting from work performed for us or relating to our business and conceived or completed during the period of employment or assignment, as applicable, shall be our exclusive property. In addition, we take other appropriate precautions, such as physical and technological security measures, to guard against misappropriation of our proprietary information by third parties.

Government authorities in the United States at the federal, state and local level and in other countries extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of drug products. Pricing of such products is also subject to regulation in many countries. Generally, before a new drug can be marketed, considerable data demonstrating its quality, safety and efficacy must be obtained, organized into a format specific to each regulatory authority, submitted for review and approved by the regulatory authority.

In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and its implementing regulations. Drugs are also subject to other federal, state and local statutes and regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval may subject an applicant to administrative or judicial sanctions. These sanctions could include, among other actions, the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold, untitled or warning letters, voluntary product recalls or withdrawals from the market, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.

Our product candidates must be approved by the FDA through the NDA process before they may be legally marketed in the United States. The process generally involves the following:

 

 

 

 

 

 

 

 

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non-human

30-day

The clinical stage of development involves the administration of the drug candidate to healthy volunteers or patients under the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor’s control, in accordance with GCPs, which include the requirement that all research subjects 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. Further, each clinical trial must be reviewed and approved by an independent 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 are also requirements governing the reporting of ongoing clinical trials and completed clinical trial results to public registries.

Clinical trials are generally conducted in three sequential phases, known as Phase 1, Phase 2 and Phase 3 trials, which may overlap.

 

 

 

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Post-approval trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval, to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of an NDA. In addition, as part of an accelerated approval such as we received for Oxbryta under the FDA’s Subpart H regulations, at least one post-marketing study to verify clinical benefit is required.

As the drug sponsor, we must submit progress reports detailing the results of the clinical trials and other information at least annually to the FDA, as well as written IND safety reports to the FDA and the study investigators for serious and unexpected suspected adverse events, findings from other studies or animal or in vitro testing suggesting a significant risk to humans exposed to the drug and any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. The sponsor must submit an IND safety report within 15 calendar days after the sponsor determines that the information qualifies for reporting. The sponsor also must notify the FDA of any unexpected fatal or life-threatening suspected adverse reaction within seven calendar days after the sponsor’s initial receipt of the information. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. The FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients. Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This group provides authorization for whether or not a trial may move forward at designated check points based on access to certain data from the trial. Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the drug as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the drug candidate and, among other things, must include methods for testing the identity, strength, quality and purity of the final drug product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life.

A manufacturer of an investigational drug for a serious disease or condition is required to make available, such as by posting on its website, its policy on evaluating and responding to requests for individual patient access to such investigational drug. This requirement applies on the earlier of the first initiation of a Phase 2 or Phase 3 trial of the investigational drug or, as applicable, 15 days after the drug receives a designation as a breakthrough therapy, fast track product or regenerative advanced therapy.

The results of nonclinical studies and clinical trials, together with other detailed information, including extensive manufacturing information and information on the composition of the drug and proposed labeling, are submitted to the FDA in the form of an NDA requesting approval to market the drug for one or more specified indications. The FDA reviews an NDA to determine, among other things, whether a drug is safe and effective for its intended use and whether the product is being manufactured in accordance with cGMP requirements to assure and preserve the product’s identity, strength, quality and purity. FDA approval of an NDA must be obtained before a drug may be legally marketed in the United States.

 

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Under PDUFA, each NDA is typically accompanied by a user fee (adjusted on an annual basis). According to the FDA’s fee schedule, effective through September 30, 2021, the user fee for an NDA is $2,875,842. PDUFA also imposes an annual prescription drug product program fee for human drugs ($336,432). Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application filed by a small business having fewer than 500 employees. Additionally, an application for a product that has been designated as a drug for a rare disease or condition (referred to as an orphan drug) under section 526 of the FDCA is not subject to an application fee unless the application includes an indication for other than a rare disease or condition. Oxbryta for the treatment of SCD has been granted orphan drug designation by the FDA and by the EC.

in-depth

pre-approval

In addition, under Subpart H of the FDA’s NDA regulations, which governs accelerated approval, the FDA may approve an NDA for a new drug product on the basis of adequate and well-controlled clinical trials establishing that the drug product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit or on the basis of an effect on a clinical endpoint other than survival or irreversible morbidity. The FDA grants accelerated approval under Subpart H for new drugs that address serious or life-threatening illnesses and that provide meaningful therapeutic benefit to patients over existing treatments, and the NDA for Oxbryta was approved by the FDA under Subpart H. Drugs approved under Subpart H, such as Oxbryta, are required to be further evaluated in at least one post-marketing study to verify clinical benefit. As a condition of accelerated approval, the FDA may also impose marketing restrictions to limit distribution or use to assure safe use of the drug, although the FDA did not impose any such requirements for the accelerated approval of Oxbryta. Pursuing accelerated approval under Subpart H does not ensure faster development timelines or ensure regulatory approval.

After the FDA evaluates an NDA, 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, and usually describes all of the specific deficiencies in the NDA identified by the FDA. The complete response letter may require additional clinical data and/or additional clinical trial(s), and/

 

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or other significant and time-consuming requirements related to clinical trials, nonclinical studies or manufacturing. If a complete response letter is issued, the applicant may either resubmit the NDA, addressing all of the deficiencies identified in the letter, withdraw the application, or request a hearing. Even if such data and information is submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval.

We were granted orphan drug designation by the FDA in 2015 for Oxbryta for the treatment of SCD. Under the Orphan Drug Act in the United States, the FDA may grant orphan designation to a drug 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 when there is no reasonable expectation that the cost of developing and making available in the United States a drug for such disease or condition will be recovered from sales in the United States of such drug). Orphan product designation must be requested before submitting an NDA. After the FDA grants orphan product designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan product designation does not convey any advantage in or shorten the duration of the regulatory review and approval process, but does confer other potential development and commercialization benefits as described below.

Our NDA seeking approval for Oxbryta for the treatment of SCD qualified for the orphan user fee exemption from the PDUFA application fee. In addition, we should qualify for additional incentives, including tax credits for qualifying clinical trials of Oxbryta, and Oxbryta also qualified for a substantial period of regulatory market exclusivity, which will expire on November 25, 2026. 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 product 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, or by providing a major contribution to patient care. Competitors, however, may receive approval of different products for the indication for which the orphan product has exclusivity and may obtain approval for the same product for a different indication than that for which the orphan product has exclusivity. A competitor could also block the approval of one of our products for seven years by obtaining orphan product exclusivity for the same product (or a competitor product that contains our product candidate) for the same indication we are seeking. If a drug designated as an orphan product receives marketing approval for an indication broader than what is designated, it may not be entitled to orphan product exclusivity. Orphan drug status in the EU has similar, but not identical, requirements and benefits.

In addition to the US orphan drug designation, Oxbryta received a Fast Track designation from the FDA for the potential treatment of SCD. The FDA’s Fast Track program is intended to expedite or facilitate the process for reviewing new drugs that are intended to treat a serious or life threatening condition, where nonclinical or clinical data demonstrate the potential to address unmet medical needs for the condition. Fast Track designation applies to both the product and the specific indication for which it is being studied.

Any product submitted to the FDA for marketing, including under a Fast Track program, may be eligible for other types of FDA programs intended to expedite development and review, such as priority review and accelerated approval under Subpart H. Any product is eligible for priority review if it treats a serious or life-threatening condition and, if approved, would provide a significant improvement in safety and effectiveness compared to available therapies. The FDA will attempt to direct additional resources to the evaluation of an application for a new drug designated for priority review. Our NDA for Oxbryta was reviewed by the FDA pursuant to priority review and received accelerated approval under Subpart H.

Additionally, Oxbryta also received a breakthrough therapy designation from the FDA for the potential treatment of SCD. The benefits of breakthrough therapy designation include the same benefits as a Fast Track

 

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designation, in addition to intensive guidance from the FDA to ensure an efficient drug development program. Fast Track designation, priority review, accelerated approval and breakthrough designation do not change the standards for approval but may expedite the development or approval process.

“off-label

off-label

off-label

Any distribution of prescription drug products and pharmaceutical samples must comply with the U.S. Prescription Drug Marketing Act, or PDMA, which regulates the distribution of drugs and drug samples at the federal level, and sets minimum standards for the registration and regulation of drug distributors by the states.

 

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phased-in

10-year

FDA regulations require that products be manufactured in specific approved facilities and in accordance with cGMP requirements. 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 requirements. Our third party manufacturers must comply with cGMP requirements 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. Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP requirements 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 violative conditions, including failure to conform to cGMP requirements, 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 NDA, including recall.

In seeking approval for a drug through an NDA, including a 505(b)(2) NDA, applicants are required to list with the FDA certain patents having claims that cover the applicant’s product and method of use. Upon approval of an NDA, each of the patents listed in the application for the drug is then published in Approved Drug Products with Therapeutic Equivalence Evaluations, also known as the Orange Book. These products may be cited by potential competitors in support of approval of an ANDA or 505(b)(2) NDA.

Any applicant who files an ANDA seeking approval of a generic equivalent version of a drug listed in the Orange Book or a 505(b)(2) NDA referencing a drug listed in the Orange Book must make patent certifications

 

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to the FDA relating to patents submitted to the FDA for the reference product: (1) that no patent information on the reference drug or method of use that is the subject of the application has been submitted to the FDA; (2) that any and all such patents submitted to the FDA have expired; (3) the date on which any such patent will expire and that ANDA approval will not be sought until after such patent expiration; or (4) that any such patent is invalid or will not be infringed upon by the manufacture, use, or sale of the drug product for which the ANDA is submitted. The last certification is known as a paragraph IV certification. Generally, the ANDA or 505(b)(2) NDA cannot be approved until all listed patents have expired, except where the ANDA or 505(b)(2) NDA applicant challenges a listed patent through a paragraph IV certification or if the applicant is not seeking approval of a patented method of use. If the applicant does not challenge the listed patents or does not indicate that it is not seeking approval of a patented method of use, the ANDA or 505(b)(2) NDA application will not be approved until all of the listed patents claiming the referenced product have expired.

30-month

30-month

In connection with the NDA submission and approval of the NDA for Oxbryta, we have listed six patents in the Orange Book for Oxbryta.

one-half

non-patent

 

29

non-infringement

The FDCA also provides three years of marketing exclusivity for an NDA, or supplement to an existing NDA for a drug product that contains an active moiety that has been previously approved if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example for new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the modification for which the drug received approval on the basis of the new clinical investigations and does not prohibit the FDA from approving ANDAs for drugs containing the active agent for the original indication or condition of use.

FDA-issued

pre-approval

In addition, in the United States, the Biologics Price Competition and Innovation Act of 2009 created an abbreviated approval pathway for biological products that are demonstrated to be “highly similar” or “biosimilar” to or “interchangeable” with an FDA approved biological product. This pathway allows competitors to reference the FDA’s prior approvals regarding innovative biological products and data submitted with a BLA to obtain approval of a biosimilar application twelve years after the time of approval of the innovative biological product. The twelve-year exclusivity period runs from the initial approval of the innovator product and not from approval of a later new indication, if any. In addition, the twelve-year exclusivity period does not prevent another company from independently developing a product that is highly similar to the innovative product, generating all the data necessary for and seeking approval under a full BLA. Further, it is possible that a biosimilar applicant could obtain approval for one or more of the indications approved for the innovator product by extrapolating clinical data from one indication to support approval for other indications. In the European Union, the European Commission has similarly granted marketing authorizations for biosimilars once the marketing exclusivity rights for the innovator product have expired. The EMA has published general and product class-specific guidelines to assist biosimilar developers in preparing marketing authorization applications for biosimilars. An applicant for a marketing authorization for a biosimilar in the European Union is required to demonstrate through comparability studies with the ‘reference’ biological medicine that: (i) their biological medicine is highly similar to the reference medicine, notwithstanding natural variability inherent to all biological medicines; and (ii) there are no clinically meaningful differences between the biosimilar and the reference medicine in terms of safety, quality and efficacy. Both the United States and the EU provide pathways for biologics competitors to seek approval for biosimilar products at the end of the relevant exclusivity period or, in some circumstances, before such period expires (for example, if a biosimilar applicant obtains approval for one or more of the indications approved for the innovator product by extrapolating clinical data from one indication to support approval for other indications). We are aware of many pharmaceutical and biotechnology and other companies that are actively engaged in research and development of biosimilars or interchangeable products.

 

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Manufacturing, sales, promotion and other activities following product approval are also subject to regulation by numerous regulatory authorities in addition to the FDA, including, in the United States, the Centers for Medicare & Medicaid Services, or CMS, other divisions of the Department of Health and Human Services, or HHS, the United States 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.

Although we do not provide healthcare services, submit claims for third-party reimbursement, or receive payments directly from Medicare, Medicaid or other third-party payors for our products, we are subject to broadly applicable healthcare fraud and abuse regulation and enforcement by federal and state governments. Additionally, healthcare providers and third-party payors play a primary role in the recommendation of drugs and other medical items and services. Arrangements with providers, consultants, third-party payors and customers are subject to broadly applicable fraud and abuse, anti-kickback, false claims laws, reporting of payments to physicians and teaching hospitals and patient privacy laws and regulations and other healthcare laws.

Healthcare fraud and abuse and health information privacy and security laws potentially applicable to our operations include:

 

 

 

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32

 

 

Additionally, pricing and rebate programs must comply with the Medicaid rebate requirements of the U.S. Omnibus Budget Reconciliation Act of 1990 and more recent requirements in the ACA. If products are made available to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and requirements apply. The handling of any controlled substances must comply with the U.S. Controlled Substances Act and Controlled Substances Import and Export Act. Products must meet applicable child-resistant packaging requirements under the U.S. Poison Prevention Packaging Act. Manufacturing, sales, promotion and other activities are also potentially subject to federal and state consumer protection and unfair competition laws.

Changes in regulations, statutes or the interpretation of existing regulations could impact our business in the future by requiring, for example: (i) changes to our manufacturing arrangements; (ii) additions or modifications to product labeling; (iii) the voluntary recall or discontinuation of our products; or (iv) additional record-keeping requirements. If any such changes were to be imposed, they could adversely affect the operation of our business.

We have subsidiaries, employees and operations in Europe, which subject us to additional privacy restrictions, including in relation to employee information. We have also conducted, and expect to continue to conduct, clinical trials or continue to enroll subjects in our ongoing or future clinical trials in certain jurisdictions in which we may be subject to additional privacy restrictions. The collection, use, storage, disclosure, transfer, or other processing of personal data regarding individuals in the EU, including personal health data, is subject to the

 

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GDPR, which became effective in May 2018. The GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data, including requirements relating to processing health and other sensitive data, obtaining consent of the individuals to whom the personal data relates, providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, providing notification of data breaches, and taking certain measures when engaging third-party processors. The GDPR also imposes strict rules on the transfer of personal data to countries outside the EU, including the United States, and permits data protection authorities to impose large penalties for violations of the GDPR, including potential fines of up to €20 million or 4% of annual global revenues, whichever is greater. The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR. In addition, the GDPR includes restrictions on cross-border data transfers. The GDPR has increased our responsibility and liability in relation to personal data that we process where such processing is subject to the GDPR, and we may be required to put in place additional mechanisms to ensure compliance with the GDPR, including as implemented by individual countries. Compliance with the GDPR will continue to be a rigorous and time-intensive process that may increase our cost of doing business or require us to change our business practices, and despite those efforts, there is a risk that we may be subject to fines and penalties, litigation, and reputational harm in connection with our European activities. Further, the United Kingdom’s exit from the EU, often referred to as Brexit, has created uncertainty with regard to data protection regulation in the United Kingdom. In particular, it is unclear how data transfers to and from the United Kingdom will be regulated.

California recently enacted the California Consumer Privacy Act, or CCPA, which creates new individual privacy rights for California consumers (as defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households. Effective as of January 2020, the CCPA requires covered companies to provide certain disclosures to consumers about its data collection, use and sharing practices, and to provide affected California residents with ways to opt out of certain sales or transfers of personal information, and also regulates employee information. Further, a new California privacy law, the California Privacy Rights Act, or CPRA, was passed by California voters in November 2020. The CPRA will create additional obligations with respect to processing and storing personal information that are scheduled to take effect on January 1, 2023 (with certain provisions having retroactive effect to January 1, 2022). While there is currently an exception in the CCPA and CPRA for protected health information that is subject to HIPAA, the CCPA and CPRA do and will impact our business activities. Other U.S. states also are considering omnibus privacy legislation and industry organizations regularly adopt and advocate for new standards in these areas.

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

Similar to the United States, the various phases of nonclinical and clinical research in the EU are subject to significant regulatory controls. Although the EU Clinical Trials Directive 2001/20/EC, or Directive, has sought to harmonize the EU clinical trials regulatory framework, setting out common rules for the control and authorization of clinical trials in the EU, the EU Member States have transposed and applied the provisions of the Directive differently. This has led to significant variations in the Member State regimes. Under the current regime, before a clinical trial can be initiated it must be approved in each of the EU countries where the trial is to be conducted by two distinct bodies: the National Competent Authority, or NCA, and one or more Ethics Committees, or ECs. Under the current regime all suspected unexpected serious adverse reactions to the investigated drug that occur during the clinical trial have to be reported to the NCA and ECs of the Member State where they occurred.

 

 

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In April 2014, the EU adopted a new Clinical Trials Regulation (EU) No 536/2014, or Regulation. which is set to replace the current Clinical Trials Directive 2001/20/EC. It will overhaul the current system of approvals for clinical trials in the EU. Specifically, the new Regulation, which will be directly applicable in all Member States, aims at simplifying and streamlining the approval of clinical trials in the EU. For instance, the new Regulation provides for a streamlined application procedure via a single entry point and strictly defined deadlines for the assessment of clinical trial applications. It is expected that the new Regulation will apply following confirmation of full functionality of the Clinical Trials Information System, the centralized EU portal and database for clinical trials foreseen by the regulation, through an independent audit, which is currently anticipated to occur in December 2021.

In November 2016, the EC, acting on a positive recommendation from the Committee for Orphan Medicinal Products, or COMP, of the EMA, designated Oxbryta as an orphan medicinal product for the treatment of SCD. Orphan drug status in the EU has similar, but not identical, requirements and benefits to US orphan drug status, including 10 years of marketing exclusivity from the approval of the marketing authorization, designated product-specific consultation by the EMA, and certain reductions or exemptions in regulatory fees.

In June 2017, the EMA granted PRIME designation for Oxbryta for the treatment of SCD. The PRIME program is a new regulatory mechanism that provides for early and proactive EMA support to medicine developers to help patients benefit as early as possible from innovative new products that have demonstrated the potential to significantly address an unmet medical need, where there is no satisfactory method of diagnosis, prevention or treatment in the EU or, if there is, the new medicine will bring a major therapeutic advantage. It is intended to build upon the scientific advice scheme and accelerated assessment procedure offered by EMA. The scheme is voluntary, and eligibility criteria must be met for a medicine to qualify for PRIME. The PRIME scheme is open to medicines under development and for which the applicant intends to make an initial marketing authorization application through the Centralized Procedure. If a medicine is selected for the PRIME scheme, the EMA:

 

 

 

 

 

Medicines that are selected for the PRIME scheme are also expected to benefit from the EMA’s accelerated assessment procedure at the time of application for a marketing authorization. Where, during the course of development, a medicine no longer meets the eligibility criteria, support under the PRIME scheme may be withdrawn.

In the European Economic Area, or EEA, which is currently comprised of the Member States of the EU plus Norway, Iceland and Liechtenstein, medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA. There are two types of marketing authorizations:

The centralized MA is issued by the EC through the Centralized Procedure, based on the opinion of the CHMP, and is valid throughout the entire territory of the EEA. The Centralized Procedure is mandatory for certain types of products, such as biotechnology medicinal products, orphan medicinal products, advanced-

 

35

therapy medicines (gene-therapy, somatic cell-therapy or tissue-engineered medicines), and medicinal products containing a new active substance indicated for the treatment of HIV, AIDS, cancer, neurodegenerative disorders, diabetes, auto-immune and other immune dysfunctions, and viral diseases. This mandatory Centralized Procedure applies in the case of Oxbryta for SCD, in light of the 2016 designation of Oxbryta as an orphan medicinal product for the treatment of SCD.

The Centralized Procedure is optional for products containing a new active substance not yet authorized in the EEA, or for products that constitute a significant therapeutic, scientific or technical innovation or which are in the interest of public health in the EU.

Under the Centralized Procedure the maximum timeframe for the evaluation of an MAA by the EMA is generally 210 days, when additional written or oral information is to be provided by the applicant in response to questions asked by the CHMP. Clock stops may extend the timeframe of evaluation of a MAA considerably beyond 210 days. Where the CHMP gives a positive opinion, it provides the opinion together with supporting documentation to the EC, who make the final decision to grant a marketing authorization, which is issued within 67 days of receipt of the EMA’s recommendation. Accelerated assessment might be granted by the CHMP in exceptional cases, when a medicinal product is expected to be of major public health interest, particularly from the point of view of therapeutic innovation. The timeframe for the evaluation of a MAA under the accelerated assessment procedure is generally 150 days, but it is possible that the CHMP may revert to the standard time limit for the Centralized Procedure if it determines that the application is no longer appropriate to conduct an accelerated assessment.

National MAs, which are issued by the competent authorities of the Member States of the EEA and only cover their respective territory, are available for products not falling within the mandatory scope of the Centralized Procedure. Where a product has already been authorized for marketing in a Member State of the EEA, this National MA can be recognized in other Member States through the Mutual Recognition Procedure. If the product has not received a National MA in any Member State at the time of application, it can be approved simultaneously in various Member States through the Decentralized Procedure. Under the Decentralized Procedure an identical dossier is submitted to the competent authorities of each of the Member States in which an MA is sought, one of which is selected by the applicant as the Reference Member State, or RMS. The competent authority of the RMS prepares a draft assessment report, a draft summary of the product characteristics, or SmPC, and a draft of the labeling and package leaflet, which are sent to the other Member States (referred to as the Concerned Member States) for their approval. If the Concerned Member States raise no objections, based on a potential serious risk to public health, to the assessment, SmPC, labeling, or packaging proposed by the RMS, the product is subsequently granted a National MA in all the relevant Member States (i.e., in the RMS and the Concerned Member States).

Under the above-described procedures, before granting an 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.

Now that the UK (which includes Great Britain and Northern Ireland) has left the EU, Great Britain will no longer be covered by centralized MAs (while under the Northern Irish Protocol, centralized MAs will continue to be recognized in Northern Ireland). All medicinal products with a current centralized MA were automatically converted to Great Britain MAs on January 1, 2021. For a period of two years from January 1, 2021, the MHRA may rely on a decision taken by the EC on the approval of a new MAA in the Centralized Procedure to more quickly grant a new Great Britain MA. A separate application will, however, still be required. The MHRA also has the power to have regard to MAs approved in EEA Member States through Decentralized or Mutual Recognition Procedures with a view to more quickly granting an MA in the UK or Great Britain.

 

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pre-clinical

two-year

ten-year

In the EEA, the EC, after reviewing the opinion of the EMA’s Committee for Orphan Medicinal Products, grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention or treatment of life-threatening or chronically debilitating conditions and either (i) such condition affects not more than 5 in 10,000 persons in the EEA, or (ii) it is unlikely that the development of the medicine would generate sufficient return to justify the necessary investment in its development. In either case, the applicant must also demonstrate that no satisfactory method of diagnosis, prevention, or treatment for the condition has been authorized (or, if a method exists, the product would be a significant benefit to those affected compared to the product available).

In the EEA, orphan drug designation entitles a party to financial incentives such as reduction of fees or fee waivers and ten years of market exclusivity is granted following marketing authorization approval. During this market exclusivity period, neither the EMA nor the EC nor any of the competent authorities in the EEA Members States can accept an application or grant a marketing authorization for a “similar medicinal product.” A “similar medicinal product” is defined as a medicinal product containing a similar active substance or substances as contained in an authorized orphan medicinal product, and which is intended for the same therapeutic indication. This period may be reduced to six years if the orphan drug designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity. Market exclusivity may also be revoked in very select cases, such as if (i) it is established that a similar medicinal product is safer, more effective or otherwise clinically superior to the authorized product; (ii) the marketing authorization holder consents to such revocation; or (iii) the marketing authorization holder cannot supply enough orphan medicinal product. Orphan drug designation must be requested before submitting an application for marketing approval. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. In November 2016, we were granted orphan drug designation in the EU for Oxbryta for the potential treatment of SCD.

pre-marketing

 

37

In June 2016, the electorate in the UK voted in favor of leaving the EU (commonly referred to as Brexit). Thereafter, in March 2017, the country formally notified the EU of its intention to withdraw pursuant to Article 50 of the Lisbon Treaty. The UK formally left the EU at the end of January 2020, with a transition period from February through December 2020 during which EU pharmaceutical law remained applicable to the UK. It remains to be seen how Brexit will impact regulatory requirements for medicinal products and devices in the UK in the long-term. The MHRA has recently published detailed guidance for industry and organizations to follow now the transition period is over, which will be updated as the UK’s regulatory position on medicinal products evolves over time.

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

If we or our partners 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.

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 health care costs, including price-controls, restrictions on reimbursement and requirements for substitution of generic products for branded prescription drugs. For example, the ACA contains provisions that may reduce the profitability of drug products through increased rebates for drugs reimbursed by Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, and mandatory discounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies’ share of sales to federal health care programs. Adoption of general controls and measures, coupled with the tightening of restrictive policies in jurisdictions with existing controls and measures, could limit payments for pharmaceutical drugs.

The Medicaid Drug Rebate Program requires pharmaceutical manufacturers to enter into and have in effect a national rebate agreement with the Secretary of HHS as a condition for states to receive federal matching funds for the manufacturer’s outpatient drugs furnished to Medicaid patients. Effective in 2010, the ACA made several

 

38

(phased-in

non-governmental

For a drug product to receive federal reimbursement under the Medicaid or Medicare Part B programs or to be sold directly to U.S. government agencies, the manufacturer must extend discounts to entities eligible to participate in the 340B drug pricing program. The required 340B discount on a given product is calculated based on the AMP and Medicaid rebate amounts reported by the manufacturer. As of 2010, the ACA expanded the types of entities eligible to receive discounted 340B pricing, although under the current state of the law these newly eligible entities (with the exception of children’s hospitals) will not be eligible to receive discounted 340B pricing on orphan drugs. As 340B drug pricing is determined based on AMP and Medicaid rebate data, the revisions to the Medicaid rebate formula and AMP definition described above could cause the required 340B discount to increase.

The American Recovery and Reinvestment Act of 2009 provides funding for the federal government to compare the effectiveness of different treatments for the same illness. The plan for the research was published in 2012 by HHS, the Agency for Healthcare Research and Quality and the National Institutes for Health, and periodic reports on the status of the research and related expenditures are made to Congress. Although the results of the comparative effectiveness studies are not intended to mandate coverage policies for public or private payors, it is not clear what effect, if any, the research will have on the sales of Oxbryta or our product candidates, if any such drug or the condition that they are intended to treat are the subject of such research. It is also possible that comparative effectiveness research demonstrating benefits in a competitor’s drug could adversely affect the sales of Oxbryta or our product candidates. If third-party payors do not consider our drugs to be cost-effective compared to other available therapies, they may not cover our drugs after approval as a benefit under their plans or, if they do, the level of payment or utilization may not be sufficient to allow us to sell our drugs on a profitable basis.

 

 

39

In recent years, additional laws have resulted in direct or indirect reimbursement reductions for certain Medicare providers, including:

 

 

These laws, and future state and federal healthcare reform measures may be adopted in the future, any of which may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for any product candidates for which we may obtain regulatory approval or the frequency with which any such product candidate is prescribed or used.

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 adequate coverage and reimbursement. We expect that an increasing emphasis on cost containment measures in the United States 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.

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. For example, the EU provides options for its member states to restrict the range of medicinal products, for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. Historically, products launched in the EU do not follow price structures of the United States and generally prices tend to be significantly lower. It can also take a significant period of time after any regulatory approval to obtain various pricing and reimbursement approvals in various member states. 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, if approved.

The United States and many foreign jurisdictions have enacted or proposed legislative and regulatory changes affecting the healthcare system that could affect our ability to profitably sell our products. In the United States, there have been and continue to be laws enacted by the federal government, state governments, regulators and third-party payers to control healthcare costs, and generally, to reform the healthcare system in the United States. For example, the ACA was passed in March 2010 and has substantially changed the way healthcare is delivered and financed by both governmental and private insurers. The ACA expanded coverage for the uninsured while at the same time containing overall healthcare costs. With regard to pharmaceutical products, the ACA, among other things, addressed 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, increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and

 

40

Some of the provisions of the ACA have yet to be fully implemented, while certain provisions have been subject to judicial and Congressional challenges. The full impact of the ACA, any law repealing, replacing, or modifying elements of it, and the political uncertainty surrounding its repeal, replacement, or modification on our business remains unclear. We expect that additional federal healthcare reform measures may be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare drugs and services, and in turn could significantly reduce the projected value of certain development projects and reduce our profitability and may increase our regulatory burdens and operating costs.

 

 

41

Finally, in May 2018, the Right to Try Act was signed into law. The law, among other things, provides a federal framework for certain patients to access certain investigational new drug products that have completed a Phase 1 clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access program. There is no obligation for a pharmaceutical manufacturer to make its drug products available to eligible patients as a result of the Right to Try Act.

Research and development expenses were $155.1 million for the year ended December 31, 2020, $174.6 million for the year ended December 31, 2019 and $131.3 million for the year ended December 31, 2018.

We operate in a single accounting segment—dedicated to discovering, developing and commercializing novel therapeutics to treat grievous blood-based disorders. Refer to Note 1, “Organization and Basis of Presentation” in the Notes to Consolidated Financial Statements included elsewhere in this report.

(650) 741-7700

e-mail

10-K.

10-K

10-Q

8-K

 

42

Our business depends heavily on our ability to successfully commercialize our first approved product, Oxbryta, for the treatment of sickle cell disease, or SCD. Oxbryta or any future drug of ours approved for commercial sale may fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community and marketplace. If Oxbryta or any other approved drug does not achieve an adequate level of acceptance, we may not generate significant revenue from drug sales and we may not become profitable. Before granting reimbursement approval, healthcare payors may require us to demonstrate that the drug, in addition to treating the target indication, also provides incremental health benefits to patients. For example, there have been numerous instances of government and private payors placing restrictions on coverage for products approved by the U.S. Food and Drug Administration, or FDA, under the FDA’s Subpart H regulations, or Subpart H. Our efforts to educate the medical community and third-party payors about the benefits of Oxbryta or any future drug approved for commercial sale will require significant resources and may never be successful. The degree of market acceptance of Oxbryta and any other approved drugs that we may pursue will depend on a wide range of factors, including:

 

 

 

 

 

 

 

 

 

 

(COVID-19),

COVID-19

 

43

in-person

in-person

COVID-19

In 2019, we established the infrastructure we believed was adequate for the commercial launch of Oxbryta in the United States, which occurred in December 2019. This included establishing a sales and marketing organization with technical expertise and supporting distribution capabilities to commercialize Oxbryta in the United States. Our commercialization of Oxbryta in the United States will continue to be expensive, difficult, risky and time consuming, and we may not deploy or have adequate resources over time to support the successful commercialization of Oxbryta. Any failures or delays in our commercial efforts, including with respect to any changes in related resources or activities following launch, could adversely impact the commercialization of Oxbryta or any other products, if any are approved.

Although many of our employees have experience with commercializing products while employed at other companies, our 2019 launch of Oxbryta is our first experience marketing and selling a drug together as a management team. To successfully commercialize Oxbryta or any other drugs we may develop or obtain, we will need to continue to develop and strengthen our commercial capabilities, either on our own or with others. Our initial estimate of the size of the required sales force may be materially more or less than the size of the sales force actually required to effectively commercialize Oxbryta or any other product candidates, if any. For example, we may have hired substantially more sales representatives than required and may incur excess costs as a result.

COVID-19

in-person

in-person

in-person

COVID-19

With respect to certain geographical markets, we may seek to enter into collaborations with other entities to utilize their local marketing and distribution capabilities, but we may be unable to enter into such agreements on favorable terms, if at all. If our future collaborators do not commit sufficient resources to commercialize Oxbryta or future drugs, if any, and we are unable to develop the necessary marketing capabilities on our own, we will be unable to generate sufficient product revenue to sustain our business. We may also be competing with companies that currently have extensive and well-funded marketing and sales operations. For example, in November 2019, the FDA approved Novartis’ biologic, crizanlizumab, for the reduction of the frequency of vaso-occlusive crises, or VOCs, in patients with SCD, and, in October 2020, Novartis announced that the European Commission approved crizanlizumab for the prevention of recurrent VOCs in patients with SCD. Without an effective internal team or the support of a third party to perform marketing and sales functions, we would be unable to compete successfully against more established companies, and our commercial efforts and ability to generate revenues would be impaired.

 

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per-patient

FDA-approved

co-payments

In the United States, significant decisions about reimbursement for new medicines are made by the Centers for Medicare & Medicaid Services, or CMS, an agency within the U.S. Department of Health and Human Services, as CMS decides whether and to what extent a new medicine will be covered and reimbursed under Medicare, and federal and state programs enter into contracts with drug manufacturers for discounted drug prices for Medicare, VA/Federal Supply Schedule, 340B and Medicaid under the Medicaid Drug Rebate Program, among others. The practices and requirements relating to these arrangements are highly complex and subject to differing regulatory requirements and time frames, which will impact the commercialization of Oxbryta. For example, payment of rebates by drug manufacturers for Medicaid purchases are determined by each state, and in some cases, if a company does not enter into a rebate agreement, its Medicaid sales will be subjected to a “prior authorization” procedure that requires state agency approval to qualify a doctor’s prescription for reimbursement. Limitations could also come from entities such as local Medicare carriers, fiscal intermediaries, or Medicare Administrative Contractors. Further, Medicare Part D, which provides a pharmacy benefit to certain Medicare patients, does not require participating prescription drug plans to cover all drugs within a class of products. Our business could be materially adversely affected if private or governmental payors, including Medicare Part D prescription drug plans, were to limit access to, or deny or limit reimbursement of, Oxbryta or any of our product candidates, if approved.

 

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Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe, Canada, and other countries has and will continue to put pressure on the potential pricing and usage of Oxbryta and any future drugs we may develop or obtain. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems, and changes to these regulations over time contribute to uncertainty regarding the ability to obtain pricing and usage approvals for our product candidates outside of the United States. In addition, the prices of medicines under such systems are, in general, substantially lower than in the United States. Other countries allow companies to fix their own prices for medicines, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates outside of the United States. Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenues and profits.

non-U.S.

Moreover, increasing efforts by governmental and third-party payors, in the United States and abroad, to cap or reduce healthcare costs may cause such organizations to limit both coverage and levels of reimbursement for new products approved and, as a result, they may not cover or provide adequate payment for Oxbryta or our product candidates. We expect to experience pricing pressures in connection with the sale of Oxbryta and any future drugs we may develop or obtain, due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative and political changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. For example, third-party payors are increasingly requiring higher levels of evidence of the benefits and clinical outcomes of new technologies, benchmarking against other therapies, seeking performance-based discounts, and challenging the prices charged. We cannot be sure that coverage will be available for Oxbryta or any other product we commercialize and, if available, that the reimbursement rates will be adequate, as increasingly high barriers are being erected to the entry of new products. In addition, drug prices are under significant scrutiny in the markets in which our products are or may be sold, and drug pricing and other healthcare costs continue to be subject to intense political and social pressures that we anticipate will continue and escalate on a global basis.

Our future profitability will depend, in part, on our ability to commercialize and obtain reimbursement for Oxbryta and our product candidates in markets within and outside of the United States and Europe. If reimbursement for Oxbryta, or our product candidates, if approved, is unavailable or limited in scope or amount,

 

46

or if pricing is set at unsatisfactory levels, in the United States or, based on the large population of patients with SCD who reside in foreign countries, abroad, our business and operations may be harmed, our stock price may be adversely impacted and experience periods of volatility, we may have difficulty raising funds and our results of operations may be adversely impacted.

Our current plans include the pursuit of commercialization for Oxbryta in Europe, the Gulf Cooperation Council, or GCC, region and Latin America. If we commercialize Oxbryta and any future drugs we may develop or obtain in foreign markets, we would be subject to additional risks and uncertainties, including:

 

 

 

 

 

 

 

 

 

 

Any of these factors could impair our ability to commercialize Oxbryta and any future drugs we may develop or obtain outside the United States, which could have a material adverse effect on our business and results of operations.

Even if a product candidate is approved, regulatory authorities may still impose significant restrictions on its indicated uses, approved labeling, distribution or marketing or may impose ongoing requirements for potentially costly post-marketing studies. For example, because the FDA approved Oxbryta under the accelerated approval pathway under Subpart H, we must conduct at least one post-marketing confirmatory study to verify clinical risk/benefit, which we intend to satisfy through our HOPE-KIDS 2 Study, and we may not be able to successfully and timely complete this study or any other post-marketing confirmatory study as required to maintain approval or achieve full approval. Also, the FDA has restricted the indicated use of Oxbryta under the approved label to patients 12 years and older. While we plan to conduct additional studies to potentially lower the indicated age range to 9 months of age, failure to reach agreement with the FDA on these studies, failure to obtain adequate results from them, or disagreements with regulatory authorities over the interpretation of the results may prevent expansion of the age range within our approved label.

 

47

Furthermore, any new legislation addressing drug safety or other drug related issues could result in delays or increased costs to assure compliance. With respect to Oxbryta and any other product candidate that is approved, at a minimum, they will each be subject to current standard ongoing regulatory requirements for labeling, packaging, storage, advertising, promotion, sampling, record-keeping and submission of safety and other post-market information, including both federal and state requirements in the United States. In addition, regulatory agencies may not approve labeling claims that are necessary or desirable for the successful commercialization of Oxbryta, inclacumab or any other product candidates.

For example, the development of Oxbryta for the prophylactic treatment of SCD in pediatric patients is an important part of our current business strategy, and if we are unable to obtain regulatory approval for Oxbryta for the desired age ranges or other key labeling parameters, our business is likely to suffer.

In addition, manufacturers and their facilities are required to comply with extensive FDA requirements, including ensuring that quality control and manufacturing procedures conform to current good manufacturing practices, or cGMPs. For Oxbryta, inclacumab and any other product candidates we may pursue, we are wholly reliant on third party contract manufacturers for clinical as well as any commercial supplies of product candidates and products. As such, we and our contract manufacturers are subject to continual review and periodic inspections to assess compliance with cGMP requirements and must continue to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, production, and quality control. We are also required to report certain adverse reactions and production problems, if any, to the FDA and comparable foreign regulatory authorities, and to comply with requirements concerning advertising and promotion for Oxbryta and any future products. In addition, we are subject to very rapid reporting obligations relating to any adverse events or serious adverse events relating to Oxbryta and our product candidates. Our failure to report adverse events we become aware of within the prescribed timeframes could have serious negative consequences for our commercialization, development programs, business and operations. In addition, any promotional communications or materials for prescription drugs are subject to a variety of complex legal and regulatory restrictions, including, but not limited to, consistency with the approved product’s approved label. Failure to obey these standard marketing requirements for Oxbryta or any other approved product, if any, could have serious negative consequences for our commercialization activities, business and operations.

pre-launch

 

 

 

 

 

 

 

 

 

48

 

 

As a company, we have limited experience with obtaining approval for, launching or commercializing any product candidates or products, or with complying with most of these complex ongoing regulatory requirements. It will continue to take significant effort and management attention to address compliance with these requirements with respect to Oxbryta in the United States and in any jurisdiction for which we seek to commercialize Oxbryta or any other product candidate, if approved. Any government investigation of alleged violations of law could require us to expend significant time and resources in response, and could generate negative publicity even if significant liabilities do not result. Any failure to comply with these complex ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenues from Oxbryta or to obtain approval for, launch, commercialize and generate revenues from inclacumab or any future product candidates. If we are subject to regulatory sanctions or if regulatory approval for our product candidates is withdrawn or limited, our business, prospects, financial condition and results of operations would be significantly harmed.

non-U.S.

non-governmental

Ensuring that our business activities (including our operations and arrangements with third parties) comply with applicable healthcare laws and regulations is complex, time-consuming, costly and could materially impact our operations. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations or case law involving applicable fraud and abuse, price reporting or other healthcare laws and regulations.

Although an effective compliance program can mitigate the risk of investigation and prosecution for violations of these requirements, these risks cannot be entirely eliminated. Moreover, achieving and sustaining compliance with applicable federal, state and foreign privacy, security, and fraud requirements is costly. Any action against us for violation of these requirements, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from our business and operations, and could negatively impact the price of our common stock.

 

 

49

non-compliance

In the United States, there have been and continue to be a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could restrict or regulate post-approval activities, affect our ability to profitably sell Oxbryta and any other drug candidates for which we obtain marketing approval, and prevent or delay marketing approval of our drug candidates. For example, in 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or the Affordable Care Act or ACA, was passed, which substantially changes the way health care is financed by both governmental and private insurers, and significantly impacts the U.S. pharmaceutical industry. Since its enactment, there have been many judicial, executive and legislative challenges to numerous aspects of the ACA. The full impact on our business of the ACA, the potential impacts of any challenges, including any laws repealing and/or replacing elements of it, as well as the political uncertainty surrounding any repeal or replacement legislation, remain unclear.

Additionally, at the federal level, statutes and regulations routinely impact a variety of parameters relating to federal programs and Medicaid. For example, CMS’s final rule regarding the Medicaid drug rebate program, issued in 2016, revised the manner in which the “average manufacturer price” is to be calculated by manufacturers participating in the program. At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control 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. The full impact of these federal and state laws and regulations, as well as other new laws and reform measures that may be proposed and adopted in the future, remains uncertain, but may result in additional reductions in Medicaid and other health care funding, or higher production costs which could have a material adverse effect on our customers and, accordingly, our financial operations.

There have been multiple recent U.S. congressional inquiries and proposed and adopted federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship

 

50

between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs and biologics. In addition, Congress and multiple presidential administrations have indicated that they will continue to seek new legislative and/or administrative measures to control drug costs.

At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological 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. In addition, regional health care authorities are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other health care programs. These measures could reduce the ultimate demand for Oxbryta and our drug candidates, once approved, or put pressure on our product pricing over time.

Moreover, there have been a number of other legislative and regulatory changes in recent years aimed at the biopharmaceutical industry. For instance, the Drug Quality and Security Act imposes obligations on manufacturers of biopharmaceutical products related to product tracking and tracing. Among the requirements of this legislation, manufacturers are required to provide certain information regarding the product to individuals and entities to which product ownership is transferred, will be required to label products with a product identifier, and are required keep certain records regarding the product. The transfer of information to subsequent product owners by manufacturers will eventually be required to be done electronically. Manufacturers are also required to verify that purchasers of the manufacturers’ products are appropriately licensed. Further, manufacturers have product investigation, quarantine, disposition, and FDA and trading partner notification responsibilities related to counterfeit, diverted, stolen, and intentionally adulterated products that would result in serious adverse health consequences or death to humans, as well as products that are the subject of fraudulent transactions or which are otherwise unfit for distribution such that they would be reasonably likely to result in serious health consequences or death.

We expect federal and state healthcare reform measures that may be adopted in the future in the United States may result in more rigorous coverage criteria, increased regulatory burdens and operating costs, decreased net revenue from our pharmaceutical products and additional downward pressure on the price that we receive for Oxbryta and any of our drug candidates approved for use. 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 products. These legislative and executive efforts have significantly increased uncertainty regarding the availability of healthcare programs, insurance coverage and reimbursement as a general matter as well as for Oxbryta and our product candidates, and we cannot predict how these events will impact our business or operations. Accordingly, at this time it is difficult to determine the full impact of these efforts on our business. In the United States, many patients with SCD participate in the Medicaid program, and the impact of uncertainty or changes relating to the ACA or healthcare programs, insurance coverage or reimbursement generally have a particularly significant impact on our business or results of operations.

P-selectin

 

51

market approximately one week earlier than Oxbryta, and substantially earlier than any potential approval of our inclacumab product candidate (which could be a direct competitor to crizanlizumab). As a result, the commercialization of crizanlizumab may also impact our commercialization of Oxbryta in the United States, as well as inclacumab if we are successful in developing and obtaining approval for it for SCD patients. In addition, Novartis announced in October 2020 that the European Commission approved crizanlizumab for the prevention of recurrent VOCs in patients with SCD.

We have competitors both in the United States and internationally, including major multinational pharmaceutical companies, specialty pharmaceutical companies, and biotechnology companies. Many of our competitors have substantially greater financial, technical, and other resources, such as larger research and development, marketing and manufacturing organizations. Additional mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors. As a result, these companies may obtain regulatory approval more rapidly than we are able to and may be more effective in selling and marketing their products as well. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors may succeed in developing, acquiring or licensing on an exclusive basis, products that are more effective or less costly than any product candidate that we may develop, or achieve earlier patent protection, regulatory approval, product commercialization and market penetration than we do. Additionally, technologies developed by our competitors may render Oxbryta or our product candidates uneconomical or obsolete, and we may not be successful in marketing any drugs or product candidates against competitors.

Our initial development and commercialization efforts are focused on the potential of Oxbryta to treat SCD. Our projections of both the number of people who have SCD, as well as the subset of people with SCD who have the potential to benefit from treatment with Oxbryta, are based on our beliefs and estimates. These estimates have been derived from a variety of sources, including the scientific literature, and may prove to be incorrect. Further, new studies may change the estimated incidence or prevalence of SCD. The number of patients may turn out to be lower than expected. The effort to identify patients with diseases we seek to treat is in early stages, and we cannot accurately predict the number of patients for whom treatment might be possible. Additionally, the potential addressable patient population for Oxbryta and our product candidates may be limited or may not be amenable to treatment with Oxbryta or our product candidates, and new patients may become increasingly difficult to identify or gain access to, which would adversely affect our results of operations and our business. Restrictions on labeling of any approved product, including any restrictions that may be imposed in connection with any approval under Subpart H, may also limit the size of the potential market for Oxbryta and our product candidates. Further, even if we obtain significant market share for Oxbryta or any other drug we may develop or obtain, because the potential target populations are small, we may never achieve profitability despite obtaining such significant market share.

 

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Hoffman-La

We are not profitable and have incurred losses in each year since our inception in February 2011 and the commencement of our principal operations in May 2012. Our net losses for the years ended December 31, 2020, 2019, and 2018 were $247.6 million, $266.8 million, and $174.2 million, respectively. As of December 31, 2020, we had an accumulated deficit of $986.5 million. We only begun to generate revenues with the December 2019 commercial launch of Oxbryta, and have financed our operations primarily through the sale of equity securities. We continue to incur significant research and development and other expenses related to our ongoing operations and expect to incur losses for the foreseeable future. We anticipate these losses will increase as we:

 

 

 

 

 

 

 

Prior to the December 2019 commercial launch of Oxbryta, we had never generated any revenues from product sales, and we may never be able to achieve significant revenues or profitability. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our failure to maintain adequate cash reserves to commercialize Oxbryta, advance our development programs or achieve approval to commercialize any other products, or our failure to achieve sustained profitability, would depress the value of our company and could impair our ability to raise capital, expand our business, market Oxbryta,

 

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diversify our research and development pipeline, market any other product candidates we may identify and pursue (if approved), or continue our operations. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital.

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Discovering, developing and commercializing biopharmaceutical products is expensive and time-consuming, and we expect our selling, general and administrative and research and development expenses to increase substantially in connection with our ongoing activities, particularly as we continue to commercialize Oxbryta and engage in research and development efforts for Oxbryta, inclacumab and other product candidates that we may identify and pursue in clinical trials. As of December 31, 2020 and December 31, 2019, we had working capital of $553.1 million and $556.5 million, respectively, and capital resources consisting of cash and cash equivalents and short and long-term marketable securities totaling $560.9 million and $695.0 million, respectively. We expect that our existing capital resources consisting of cash and cash equivalents and marketable securities will be sufficient to fund our operations for at least the next twelve months. Because the outcome of commercialization, reimbursement and any clinical development and regulatory approval process is highly uncertain, we cannot reasonably estimate the actual capital amounts necessary to successfully commercialize Oxbryta and complete our ongoing and planned additional development of activities for Oxbryta or any other future product candidates.

Our future funding requirements will depend on many factors, including, but not limited to:

 

 

 

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Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timely basis, we may be required to delay, limit or terminate our development or commercialization activities for Oxbryta, inclacumab or for any other product candidates we may identify and pursue, or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially and adversely affect our business, prospects, financial condition and results of operations.

In December 2019, we entered into a loan agreement, or Term Loan, with funds managed by Pharmakon Advisors LP, which are BioPharma Credit PLC, as collateral agent, Biopharma Credit Investments V (Master)

 

55

LP, as a lender, and BPCR Limited Partnership, as a lender, for a senior secured credit facility under which we were extended an initial term loan of $75.0 million upon execution of the loan agreement and an additional term loan of $75.0 million in November 2020. Borrowings under the Term Loan are secured by a first priority security interest in and a lien on substantially all of our assets, subject to certain exceptions.

The Term Loan restricts our ability, among other things, to:

 

 

 

 

 

 

 

In addition, we are required under the Term Loan to comply with various operating covenants and default clauses that may restrict our ability to finance our operations, engage in business activities or expand or fully pursue our business strategies. A breach of any of these covenants or clauses could result in a default under the Term Loan, which could cause all of the outstanding indebtedness under the facility to become immediately due and payable.

If we are unable to generate sufficient cash to repay our debt obligations when they become due and payable, we may not be able to obtain additional debt or equity financing on favorable terms, if at all, which may negatively affect our business operations and financial condition.

We cannot commercialize a product until the appropriate regulatory authorities have reviewed and approved the product candidate. Approval by the FDA and comparable foreign regulatory authorities such as the European Medicines Agency, or EMA, is lengthy and unpredictable and depends upon numerous factors. Approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions, which may cause delays in the approval or the decision not to approve an application. We have only obtained regulatory approval for Oxbryta in the United States. In January 2021, the EMA accepted for review our Marketing Authorization Application, or MAA, seeking full marketing authorization of Oxbryta to treat hemolytic anemia in SCD patients ages 12 years and older, and the MAA is undergoing standard review by the EMA. We also plan to submit by mid-2021 a supplemental New Drug Application, or sNDA, to expand the current Oxbryta label to include treatment of SCD in children ages 4 to 11 years, under the FDA’s accelerated approval pathway. Thereafter, we also plan to submit a New Drug Application, or NDA, for a new age-appropriate formulation for this patient population. In addition, Great Britain will no longer be covered by centralized MAs, which, if granted, will include our MA for Oxbryta, as a result of the UK’s exit from the EU (often referred to as Brexit). We, therefore, plan to utilize the decision reliance procedure available for a period of two years from January 1, 2021, to seek approval of Oxbryta in Great Britain by the Medicines and Healthcare products Regulatory Agency, or MHRA, if our MA is granted by the EMA. While utilizing such decision reliance procedure may significantly accelerate the potential regulatory approval of Oxbryta in Great Britain as compared to making a completely separate

 

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application in parallel to our EMA MAA, we will still need to make a separate application to the MHRA and there is no guarantee as to if or when the MHRA will approve such application. It is possible that we will never obtain these or any other regulatory approvals for Oxbryta, for inclacumab or for any other product candidates we may seek to develop in the future.

Applications for product candidates could fail to receive regulatory approval for many reasons, including, but not limited to:

 

 

 

 

 

 

 

 

 

The lengthy regulatory review and approval process, as well as the inherent unpredictability of the results of nonclinical studies and clinical trials, and our reliance on third-party manufacturers for any product candidates, may result in our failure to obtain regulatory approval to market Oxbryta outside of the United States or to market inclacumab or other product candidates that we may pursue in the United States or elsewhere, which would significantly harm our business, prospects, financial condition and results of operations.

The FDA approved Oxbryta through the accelerated approval process under Subpart H, and we plan to seek approval under the accelerated approval process under Subpart H for a sNDA to expand the current Oxbryta label to include treatment of SCD in children ages 4 to 11 years. While the FDA approved Oxbryta under Subpart H, we cannot be assured that our planned sNDA will benefit from or receive accelerated approval under Subpart H, or that any other product candidates that we may develop will qualify for or benefit from any such expedited programs in the United States, including under Subpart H, or in any foreign regulatory jurisdictions.

 

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In June 2017, the EMA granted PRIME designation for Oxbryta for the treatment of SCD. The PRIME program is a regulatory mechanism that provides for early and proactive EMA support to medicine developers to help patients benefit as early as possible from innovative new products that have demonstrated the potential to significantly address an unmet medical need. We cannot be assured that Oxbryta or any other product candidates that we may develop will benefit from a PRIME program designation.

The FDA grants accelerated approval under Subpart H for new drugs that address serious or life-threatening illnesses and that provide meaningful therapeutic benefit to patients over existing treatments. Under Subpart H, the FDA may grant marketing approval for a new drug product on the basis of adequate and well-controlled clinical trials establishing that the drug product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit or on the basis of an effect on a clinical endpoint other than survival or irreversible morbidity.

Drugs approved under Subpart H are required to be further evaluated in at least one post-marketing study to verify clinical benefit. To satisfy such requirement, we are conducting our TCD post-confirmatory study, the HOPE-KIDS 2 Study. We previously announced that the FDA agreed that TCD flow velocity would be an acceptable primary endpoint in a post-approval confirmatory study of Oxbryta to demonstrate stroke risk reduction for purposes of full approval by the FDA and that we had reached final agreement with the FDA on the design of the TCD post-confirmatory study.

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Access to any expedited program, including through the FDA (such as accelerated approval under Subpart H), may be withdrawn by the FDA or a foreign regulatory authority if it believes that the program is no longer supported by data from our clinical development, and accelerated approval under Subpart H may be withdrawn if, among other reasons, required post-marketing confirmatory studies are not completed or if the FDA determines the results of post-marketing confirmatory studies do not verify clinical benefit.

To date, we have invested a majority of our efforts and financial resources in the nonclinical and clinical development of Oxbryta, including conducting nonclinical studies and clinical trials, submitting and obtaining approval for an NDA, and providing general and administrative support for these operations. Our other clinical product candidates are in the earlier stages of development, and our only clinical development program for Oxbryta is in SCD. Our future success is highly dependent on our ability to successfully continue to develop, obtain and maintain regulatory approval for, and commercialize Oxbryta inside and outside the United States for SCD.

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COVID-19

 

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in-licensing

We are also very dependent on the data and results that we obtain over time from our clinical program for Oxbryta, including the HOPE-KIDS 2 Study. The primary endpoint of the HOPE-KIDS 2 Study relates to TCD measurement, and we have not previously conducted any Phase 3 clinical study of Oxbryta in SCD patients using this primary endpoint, nor do we believe this measure has been used as a primary endpoint for any registrational studies for any other SCD therapies.

As we continue our clinical development of Oxbryta, the additional data we generate could be different from, including less favorable in terms of efficacy and/or safety, than the data generated and discussed with the FDA to date. If this were to occur, it could significantly impact our continued development and commercialization of Oxbryta. In addition, depending on the results we obtain from our HOPE-KIDS 2 Study, which we intend to satisfy our post-approval confirmatory requirement under Subpart H, accelerated approval of Oxbryta under Subpart H may be withdrawn (which would also mean full approval would not be achieved, and could also mean that Oxbryta could be required to be removed from the market) if the required post-marketing confirmatory program is not completed or if the FDA determines the results do not verify clinical risk/benefit. If our planned submission of a sNDA to expand the current Oxbryta label to include treatment of SCD in children ages 4 to 11 years is approved and our HOPE-KIDS 2 Study also serves as the post-approval confirmatory study under Subpart H for any such pediatric approval, any accelerated approval of Oxbryta in this pediatric population, if any, may be withdrawn as well depending on the results we obtain from the HOPE-KIDS 2 Study. We do not have a special protocol assessment agreement in place with the FDA for our HOPE-KIDS 2 Study.

We cannot be certain that Oxbryta, inclacumab or any other product candidates that we seek to develop will be successful in nonclinical studies or clinical trials or receive and maintain any regulatory approvals. If we do not receive regulatory approval for, regulatory approval is withdrawn from, or we otherwise fail to successfully commercialize Oxbryta, inclacumab or any other product candidates, we are likely to need to spend significant additional time and resources to identify other product candidates, advance them through nonclinical and clinical development and apply for regulatory approvals, which would adversely affect our business, prospects, financial condition and results of operations.

L-glutamine,

In particular, regulatory authorities in the United States and Europe have not issued definitive guidance as to how to measure and achieve efficacy in treatments for SCD. Based on our discussions with the FDA regarding

 

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the design for the HOPE Study, we determined to measure change in hemoglobin levels as the primary endpoint in the Phase 3 HOPE Study. This primary endpoint has not been used previously in a registration study for any SCD treatment. As a result, regulators outside of the United States have not determined that such data would signify a clinically meaningful result in SCD patients or would support seeking or obtaining regulatory approval.

We did not achieve statistically significant results with respect to either potential key secondary endpoint in Part A of the HOPE Study (relating to episodes of VOCs and to the Patient Reported Outcome instrument developed by us), and we may not achieve key endpoints in other clinical trials, such as any post-marketing confirmatory studies. In addition, we may not achieve the same results with respect to the primary endpoint in Part A of the HOPE Study in other ongoing of future clinical trials, including our ongoing TCD post-confirmatory study, the HOPE-KIDS 2 Study. Any inability to design clinical trials with protocols and endpoints acceptable to applicable regulatory authorities, and to obtain and maintain regulatory approvals for Oxbryta, inclacumab and any other product candidates that we may pursue, would have an adverse impact on our business, prospects, financial condition and results of operations.

The results of nonclinical studies and clinical trials of Oxbryta, inclacumab and of any future product candidates that we may pursue may not be predictive of the results of later-stage clinical trials, and interim results of a clinical trial may not necessarily predict final results. For example, our nonclinical studies and clinical trials to date of Oxbryta in SCD have involved mostly one genotype of SCD, known as HbSS, and the results of these studies may not be replicated in other genotypes of SCD in clinical trials or in the general patient population. In addition, the results obtained in our development program for SCD patients aged 12 years and older, such as in our Phase 3 HOPE Study, may not be replicated in our ongoing studies in pediatric populations, including our HOPE-KIDS 1 Study and HOPE-KIDS 2 Study.

Products evaluated in post-marketing studies and product candidates in later stages of clinical trials may fail to demonstrate the desired safety and efficacy despite having progressed through nonclinical studies and earlier clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier studies, and we cannot be certain that we will not face similar setbacks. Since Oxbryta was approved under Subpart H requiring successful completion of a confirmatory clinical trial to obtain full FDA approval, if the results of our confirmatory study fail to demonstrate efficacy and safety adequate to obtain full regulatory approval for Oxbryta and maintain its marketing approval in the United States, this would have a substantial impact on our business, prospects, financial condition and results of operations.

In addition, nonclinical and clinical data are often susceptible to various 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, in part because of differing interpretations of data and results by regulatory authorities. For example, our HOPE-KIDS 1 Study and our ActIVe Phase 4 study designed to evaluate the effect of Oxbryta on exercise capacity, as measured by cardiopulmonary exercise testing (CPET) in patients 12 years of age and older with SCD, utilize an “open-label” trial design, and we may use open-label trial designs in the future. An open-label clinical trial is one in which both the patient and investigator know whether the patient is receiving the investigational product candidate or either an existing approved drug or placebo. In many cases, open-label clinical trials test only the investigational product candidate and sometimes may do so at different dose levels, as in the case of our HOPE-KIDS 1 Study. Open-label clinical trials may be subject to “patient bias,” where patients perceive their symptoms to have improved merely due to their awareness of receiving the treatment under investigation, or “investigator bias,” where those assessing and reviewing the physiological outcomes of the clinical trials are aware of the treatment administered to patients and may interpret

 

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the information of a treated group more favorably given this knowledge. The results from an open-label trial may not be predictive of future clinical trial results with Oxbryta or any of our product candidates when studied in a controlled environment with a placebo or active control. In addition, data and results from later studies or programs may conflict with earlier findings for a variety of other reasons.

Our failure to demonstrate the required characteristics to support continued marketing of Oxbryta in the United States, full FDA approval, marketing approval for Oxbryta outside of the United States, or marketing approval for inclacumab or any other product candidate we may choose to develop, in any ongoing or future clinical trials would substantially harm our business, prospects, financial condition and results of operations.

Before we can obtain any marketing approval for a drug candidate for any potential indication, we must successfully complete clinical trials. The FDA typically requires at least two pivotal, well-controlled Phase 3 clinical trials as a condition to the submission of an NDA and does not usually consider a single Phase 3 clinical trial to be adequate to support product approval. The FDA will typically only consider relying on one pivotal trial if, in addition, other well-controlled studies of the drug exist (for example, for other dosage forms or in other populations) or if the pivotal trial is a multi-center trial that provides highly reliable and statistically strong evidence of an important clinical benefit, and a confirmatory study would have been difficult to conduct on ethical grounds.

The FDA approved Oxbryta for the treatment of SCD under the accelerated approval pathway under Subpart H, and approval under this accelerated pathway means that we are required to conduct at least one post-marketing confirmatory study sufficient to verify Oxbryta’s clinical benefit, which we intend to satisfy through our HOPE-KIDS 2 Study. With respect to Europe, the EMA accepted for review our Marketing Authorization Application, or MAA, seeking full marketing authorization of Oxbryta to treat hemolytic anemia in SCD patients ages 12 years and older. The MAA is undergoing standard review by the EMA, and it includes data from our Phase 3 HOPE Study and our Phase 2 HOPE-KIDS 1 Study, both of which enrolled patients at clinical sites in Europe.

Foreign authorities may not consider the results of our ongoing, planned or potential future clinical trials of Oxbryta to be sufficient to obtain or maintain any regulatory and/or pricing or reimbursement approvals outside of the United States. For example, in the EU the EMA may not approve the MAA we have submitted which is under standard review for the potential approval of Oxbryta to treat hemolytic anemia in SCD patients ages 12 years and older. Any post-marketing confirmatory studies, if required, would result in increased costs and potential delays in the clinical development and marketing approval process outside the United States, which may require us to expend more resources than are available to us. In addition, it is possible that the FDA and the comparable foreign authorities may have divergent opinions on the elements necessary for a successful NDA or other application for marketing authorization, as applicable, which may cause us to alter our development, regulatory and/or commercialization strategies.

Before obtaining marketing approval from regulatory authorities for the sale of any our product candidates, we must conduct extensive clinical trials to demonstrate the safety and efficacy of the product candidates in humans. In addition, because the FDA approved Oxbryta under the accelerated approval pathway under Subpart H, we must conduct at least one post-marketing confirmatory study to verify clinical risk/benefit, which we intend to satisfy through our HOPE-KIDS 2 Study. Clinical testing is expensive, time-consuming and uncertain

 

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COVID-19

start-up

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We could also encounter delays if a clinical trial is suspended or terminated for any reason (which could occur as a result of termination by us, by the IRBs or ethics committees of the institutions in which such trials are being conducted, by an independent Safety Review Board for such trial, or by the FDA or other regulatory

 

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authorities). A clinical trial can be suspended or terminated for a wide variety of reasons, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by us, or the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, or failure to demonstrate a benefit from using Oxbryta or a drug candidate. In addition, if we make manufacturing or formulation changes to Oxbryta or our product candidates, we may need to conduct additional studies to bridge the development program from the data and results for the previous version to the modified version.

Clinical trial delays could shorten any periods during which we may have the exclusive right to commercialize a drug or product candidate or allow our competitors to bring products to market before we do, which could impair our ability to successfully commercialize Oxbryta and our product candidates. In addition, any delays in completing our clinical trials will increase our costs, slow down our drug development and approval process or jeopardize our ability to maintain our current FDA approval of Oxbryta (or to achieve full FDA approval or any product approvals outside of the United States), and jeopardize our ability to continue or commence product sales and generate revenues. Any of these occurrences may significantly harm our business, prospects, financial condition and results of operations.

Identifying and qualifying patients to participate in our ongoing and planned clinical trials of Oxbryta, inclacumab, and any other product candidates that we may develop are critical to our success. Our clinical development efforts are initially focused on rare chronic blood diseases. For example, according to estimates by the Centers for Disease Control and Prevention, the prevalence of SCD, for which Oxbryta is indicated, is approximately 100,000 individuals in the United States. Accordingly, there are limited patient pools from which to draw for clinical trials in our target indications. We may not be able to identify, recruit, and enroll a sufficient number of subjects to complete our clinical trials of Oxbryta because of the perceived risks and benefits of Oxbryta, the availability of competing therapies and clinical trials, the proximity and availability of clinical trial sites for prospective subjects and the subject referral practices of physicians, among other factors.

Further, if subjects in our clinical trials fail to comply with our dosing regimens or other requirements in our clinical trials, we may not be able to generate clinical data acceptable to the FDA or comparable regulatory authorities in our trials. For example, successful conduct of our HOPE-KIDS 2 Study (our post-approval confirmatory study) will require consistency in TCD measurements, which is why we are providing specific training and equipment to participating clinical trial sites in such clinical trial. Failure to achieve consistent high-quality readings could result in data that are difficult to interpret or that delay or confound the results. If clinical sites or patients are unwilling or unable to participate in, complete or comply with the protocols for our studies for any reason, the timeline for recruiting subjects, conducting studies and obtaining regulatory approval of potential products may be delayed.

If we experience difficulties or delays in enrollment or are otherwise unable to successfully complete any clinical trial of Oxbryta, or any other product candidates we may pursue, our costs are likely to increase, and our ability to obtain and maintain regulatory approval (or achieve full regulatory approval of Oxbryta) and generate product revenue from Oxbryta and any of these product candidates will be impaired. Any of these occurrences would harm our business, prospects, financial condition and results of operations.

Clinical trials by their nature utilize only a small sample of the potential patient population. For example, our Phase 3 HOPE Study in SCD patients represents only a very small fraction of all patients with SCD. Side

 

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non-humans

Our business strategy focuses on the development of product candidates for the treatment of rare, chronic blood disorders that may be eligible for FDA or EU orphan drug designation. Regulatory authorities in some jurisdictions, including the United States and the EU, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a drug as an orphan drug if it is intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals annually in the United States. In the EU, the Committee for Orphan Medicinal Products of the EMA recommends orphan drug designation to promote the development of medical products that are intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting not more than five in 10,000 persons in the EU and for which no satisfactory method of diagnosis, prevention, or treatment is authorized (or in other very limited circumstances). In 2015 and 2016, respectively, the FDA and the European Commission (acting on a positive recommendation by the EMA) each granted orphan drug designation for Oxbryta for the treatment of patients with SCD.

Generally, if a drug with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has such designation, the drug is entitled to a period of marketing exclusivity, which precludes the FDA or the EMA from approving another marketing application for the same drug for the same indication for that time period. The applicable period is seven years in the United States and 10 years in the EU. The EU exclusivity period can be reduced to six years if a drug no longer meets the criteria for orphan drug designation or if the drug is sufficiently profitable so that market exclusivity is no longer justified. Orphan drug exclusivity may be lost if the FDA or EMA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.

Although the FDA and the EMA have each granted orphan drug designation to Oxbryta for the treatment of SCD, we may apply for orphan drug designation for Oxbryta in other jurisdictions or for other indications, or for inclacumab or other product candidates we may develop and pursue in the future. Applicable regulatory authorities may not grant us these additional designations. In addition, the exclusivity granted under any orphan drug designations that we have received from the FDA and the EMA, or may receive from any other regulatory authorities (if any), may not effectively protect Oxbryta or any other product candidate we pursue from competition because different drugs can be approved for the same condition. For example, in the United States,

 

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even after an orphan drug is approved, the FDA can subsequently approve another drug for the same condition if the FDA concludes that the later drug is clinically superior, or the FDA can approve a competitor application for the same drug for a different indication than the orphan drug designation. In addition, legislators or regulators may reevaluate and elect to modify orphan drug exclusivity laws or regulations in ways that could materially impact existing or future orphan drug designations. We do not know if, when, or how such authorities may change their orphan drug regulations and policies in the future, and it is uncertain how any changes may affect our business. Any inability to secure or maintain orphan drug designation or the exclusivity benefits of this designation would have an adverse impact on our ability to develop and commercialize our product candidates. In addition, even if any orphan drug designations we receive are maintained, we may be unable to realize significant commercial benefits from these regulatory exclusivities for Oxbryta or any other product candidate we pursue.

We have relied upon and plan to continue to rely upon third-party CROs, including our CROs for our clinical trials of Oxbryta, to monitor and manage data for some of our ongoing nonclinical studies and for all of our clinical programs. We rely on these parties for execution of these nonclinical studies and clinical trials, and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies and trials are conducted in accordance with the applicable protocol, legal, regulatory, and scientific standards and our reliance on the CROs does not relieve us of our regulatory responsibilities. We and our CROs and other vendors are required to comply with all applicable cGMPs, GCPs, and current good laboratory practices, or GLPs, which are regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the European Economic Area, or EEA, and comparable foreign regulatory authorities. Regulatory authorities enforce these regulations through periodic inspections of study sponsors, principal investigators, study sites, manufacturing facilities, nonclinical testing facilities and other contractors. If we or any of our CROs or other vendors fail to comply with applicable regulations, the data generated in our nonclinical studies and clinical trials may be deemed unreliable and the applicable regulatory authorities may suspend regulatory approval or require us to repeat or to perform additional nonclinical and clinical studies before approving our marketing applications, which would delay the regulatory review and approval process, perhaps significantly.

In addition, the execution of nonclinical studies and clinical trials, the subsequent compilation and analysis of the data and results produced, and the supply of product for our trials and commercialization, requires coordination among various parties. In order for these functions to be carried out effectively and efficiently, it is imperative that these parties communicate and coordinate with one another. These third parties may terminate their agreements with us upon short notice for our uncured material breach, or under certain other circumstances. If any of our relationships with our third-party CROs or other key vendors (including manufacturing and testing facilities) terminates, we may not be able to enter into arrangements with alternative CROs or other key vendors on a timely basis or at all, or do so on commercially reasonable terms. In addition, our CROs and other key vendors are not our employees, and except for remedies available to us under our agreements with them, we cannot control whether they devote sufficient time and resources to our programs. Furthermore, these third party CROs or other key vendors may also have relationships with other entities, some of which may be our competitors. If CROs or other key vendors do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the data and results they obtain or the product they supply is compromised for any reason (including failure to adhere to our protocols, or regulatory requirements), our development activities may be extended, delayed, or terminated and we may not be able to seek, obtain or maintain regulatory approval for or successfully commercialize Oxbryta or any of our product candidates. Switching or adding CROs or any other key vendors involves additional cost, time and

 

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management resources and focus. In addition, our CROs or other key vendors may also generate higher costs than anticipated.

pre-approval

pre-approval

We do not currently have, nor do we plan to acquire, the infrastructure or capability internally to manufacture drug supplies for our ongoing commercialization of Oxbryta and for any clinical trials we are conducting or may conduct for Oxbryta, inclacumab or any other future product candidates, and we do not presently expect that we will establish or acquire the resources necessary to manufacture any of our product candidates on a commercial scale. We rely, and expect to continue to rely, wholly on third-party manufacturers to produce our product candidates for our clinical trials, as well as for commercial manufacture or any required post-marketing studies of Oxbryta, and we expect to do the same with respect to any other product candidates, if any, that receives marketing approval. If any manufacturer with whom we contract fails to perform its obligations, we may be forced to manufacture the materials ourselves, for which do not currently have or anticipate developing the requisite capabilities or resources, or enter into an agreement with one or more different manufacturers, which we may not be able to do on reasonable terms and timelines, if at all. Although we generally do not begin a clinical trial unless we believe we have a sufficient supply of a product candidate to complete the trial, any significant delay or discontinuity in the supply of a product candidate, or the raw material components thereof, for an ongoing clinical trial due to the need to replace a third-party manufacturer could considerably delay the clinical development and potential regulatory approval of our product candidates, which could harm our business and results of operations. We expect to rely on multiple third parties for the manufacture of commercial supplies of Oxbryta as well as for inclacumab or any other product candidates, if approved.

We may be unable to establish or maintain any agreements with third-party manufacturers for Oxbryta, inclacumab or any other product candidates, or to do so on acceptable terms. Even if we are able to establish or maintain agreements with third-party manufacturers for Oxbryta, inclacumab or any other product candidates, reliance on third-party manufacturers entails additional risks, including:

 

 

 

 

 

Our reliance on third-party manufacturers in connection with inclacumab entails additional potential risks, in connection with the transfer of technology from Roche to our third-party manufacturer for inclacumab, and the

 

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requirement for approval by the FDA of any Investigational New Drug application, or IND, from the new site, which may not be successful. In addition, because of our lack of experience manufacturing a biologic product, we will have greater reliance on the expertise and experience of our third-party manufacturer for inclacumab.

Furthermore, all of our contract manufacturers are engaged with other companies to supply and/or manufacture materials or products for such companies, which exposes our manufacturers to regulatory and market risks for the production of such third-party materials and products. As a result, failure to meet the regulatory requirements for the production of those materials and products may affect the regulatory assessment or clearance of our contract manufacturers’ facilities generally, and industry consolidation, pricing or other market factors may cause our contract manufacturers to scale back, terminate or refuse to renew desired arrangements for our materials. Any of these factors could negatively impact our ability to commercialize Oxbryta or develop, obtain additional regulatory approval for or further market, as applicable, Oxbryta or our product candidates, if approved.

Oxbryta, inclacumab and any future product candidates that we may identify and pursue may compete with other product candidates and marketed drugs for access to manufacturing facilities. Any performance failure on the part of our existing or future manufacturers could delay or impair clinical development, marketing approval or commercialization. Although we believe we have adequate supplies to commercialize Oxbryta and conduct our ongoing clinical trials, if we are unable to enter into relationships with additional contract manufacturers, or our current or future contract manufacturers cannot perform as agreed, we may experience delays and incur additional costs in our continued commercialization and clinical development activities. Our current and anticipated future dependence upon others for the manufacturing of Oxbryta, our product candidates and any other marketed drugs may adversely affect our future profit margins and our ability to commercialize Oxbryta or any other product candidates that receive marketing approval on a timely and competitive basis.

All entities involved in the preparation of therapeutics for clinical trials or commercial sale, including our existing contract manufacturers for Oxbryta and for our product candidates, are subject to extensive regulation. Components of a finished therapeutic product approved for commercial sale or used in late-stage clinical trials must be manufactured in accordance with cGMPs, or similar regulatory requirements outside the United States. These regulations govern manufacturing processes and procedures, including recordkeeping, and the implementation and operation of quality systems to control and assure the quality of investigational products and products approved for sale. Poor control of production processes can lead to the introduction of contaminants or to inadvertent changes in the properties or stability of Oxbryta or our product candidates. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, suspension of production, seizures or voluntary recalls of product candidates or marketed drugs, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect clinical or commercial supplies of Oxbryta, inclacumab or any of our future product candidates.

pre-approval

pre-approval

 

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inspections and reviews, additional regulatory approval of Oxbryta or regulatory approval of inclacumab or any of our other future product candidates may never be granted or may be substantially delayed.

In addition, at any time following approval of a product for sale, the regulatory authorities also may audit the manufacturing facilities of our third-party contractors. If any such inspection or audit identifies a failure to comply with applicable regulations or if a violation of our product specifications or applicable regulations occurs independent of such an inspection or audit, we or the relevant regulatory authority may require remedial measures that could be costly or time consuming for us or a third party to implement, and that may include the temporary or permanent suspension of a clinical study or commercial sales or the temporary or permanent closure of a facility. Any such remedial measures imposed upon us or third parties with whom we contract could materially harm our business.

back-up

know-how

 

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Our agreements typically restrict the ability of certain collaborators, CROs, manufacturers, other key vendors and consultants to publish data, although many of our contracts provide for the right to publish data in specified circumstances. A significant breach of these publication provisions could impair our competitive position. In addition, we conduct joint research and development programs that may require us to share trade secrets and other confidential information. Despite our efforts to protect our trade secrets and confidential information, our competitors may discover them, either through breach of agreements relating to these programs, independent development or publication of information where we do not have proprietary or otherwise protected rights at the time of publication. A competitor’s discovery of our trade secrets or confidential information would impair our competitive position and have an adverse impact on our business.

As is the case with other biopharmaceutical companies, our success depends in large part on our ability to obtain and maintain protection of the intellectual property, particularly patents, that we may exclusively license or own solely and jointly with others in the United States and other countries with respect to Oxbryta and our product candidates and technology, including inclacumab. We seek to protect our proprietary position by filing patent applications in the United States and abroad related to Oxbryta and our product candidates.

Obtaining and enforcing biopharmaceutical patents is costly, time consuming, uncertain and complex, and we or our licensors may not be able to file and prosecute all necessary or desirable patent applications, or maintain, enforce and license any patents that may issue from such patent applications, at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. We may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the rights to patents licensed to third parties. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. If our current or future licensors, licensees or collaboration partners fail to establish, maintain or protect such patents and other intellectual property rights, such rights may be reduced or eliminated. If our licensors, licensees or collaboration partners are not fully cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised.

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal, technological and factual questions and has in recent years been the subject of much litigation. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States, or vice versa. Further, we may not be aware of all third-party intellectual property rights potentially relating to Oxbryta or our product candidates. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing or, in some cases, not at all. Therefore, we cannot know with certainty whether we were the first to make the inventions claimed in our patents or pending patent applications, or that we were the first to file for patent protection of such inventions. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are and will remain highly uncertain. The patent examination process may require us or our licensors, licensees or collaboration partners to narrow the scope of the claims of our or our licensors’, licensees’ or collaboration partners’ pending and future patent applications, which may limit the scope of patent protection that may be obtained. Our pending and future patent applications may not result in patents being issued that protect Oxbryta, inclacumab or any future product candidates, in

 

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non-infringing

In addition, the issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical product candidates, or limit the duration of the patent protection of Oxbryta or our product candidates. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing drugs similar or identical to ours.

The United States has enacted patent reform legislation from time to time and the United States Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents once obtained. Depending on future actions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would diminish the value of our patents and patent applications or narrow the scope of our patent protection, or weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.

 

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financial condition. Any further changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents and patent applications or narrow the scope of our potential patent protection.

Our products and product candidates may be eligible for other forms of exclusivity (e.g., data exclusivity) for varying periods in varying jurisdictions. For example, we expect inclacumab, if approved, would be eligible for regulatory exclusivity (e.g., data exclusivity for biologics and orphan drug exclusivity) in various jurisdictions such as the U.S. and Europe, which exclusivities may extend beyond patent expiry in the case of inclacumab. Both the United States and the EU provide pathways for biologics competitors to seek approval for biosimilar products at the end of the relevant exclusivity period or, in some circumstances, before such period expires (for example, if a biosimilar applicant obtains approval for one or more of the indications approved for the innovator product by extrapolating clinical data from one indication to support approval for other indications). As a result, the available forms of exclusivity may not provide us with sufficient protections to exclude others from commercializing drugs similar or identical to ours.

We cannot assure that Oxbryta, inclacumab or any future product candidates that we may develop will not infringe existing or future third-party patents. Because patent applications can take many years to issue and may be confidential for 18 months or more after filing, there may be applications now pending of which we are unaware and which may later result in issued patents that we may infringe by commercializing Oxbryta or any future product candidates that we may develop. We may additionally be unaware of one or more issued patents that would be infringed by the manufacture, sale or use of Oxbryta, inclacumab or any of our other product candidates.

We may in the future become party to, or be threatened with, adversarial proceedings or litigation against us regarding third party intellectual property rights with respect to Oxbryta, inclacumab or any other of our future product candidates, that would cause us to incur substantial expenses and, if successful against us, could cause us to pay substantial damages, including treble damages and attorneys’ fees if we are found to be willfully infringing a third party’s patents. We may also be required to indemnify parties with whom we have contractual relationships against such claims. If a patent infringement suit were brought against us, we could be forced to stop or delay research, development, manufacturing or sales of the product or product candidate that is the subject of the suit. As a result of patent infringement claims, or to avoid potential claims, we may choose to seek, or be required to seek, a license from the third party to continue developing, manufacturing and marketing Oxbryta and our product candidates and would most likely be required to pay license fees or royalties or both, that could be significant. These licenses may not be available on acceptable terms, or at all. Even if we were able to obtain a license, the rights may be nonexclusive, which would give our competitors access to the same intellectual property licensed to us. Ultimately, we could be prevented from commercializing a product, or forced to redesign it, or to cease some aspect of our business operations if, as a result of actual or threatened patent infringement claims, we are unable to enter into licenses on acceptable terms. Even if we are successful in defending against such claims, such litigation can be expensive, uncertain, and time consuming to litigate, and would divert management’s attention from our core business. Any of these events could harm our business significantly.

In addition to infringement claims against us, if third parties prepare and file patent applications in the United States that also claim technology similar or identical to ours, we may have to participate in interference or derivation proceedings in the USPTO to determine which party is entitled to a patent on the disputed invention. We may also become involved in similar opposition proceedings in the European Patent Office or similar offices in other jurisdictions regarding our intellectual property rights with respect to Oxbryta and our product candidates and technology.

 

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Competitors or other parties may infringe our patents or other intellectual property. Although we are not currently involved in any intellectual property litigation, if we were to initiate legal proceedings against a third party to enforce a patent covering Oxbryta or one of our product candidates, the defendant could counterclaim that the patent covering Oxbryta or our product candidate is invalid and/or unenforceable. In addition, there is an abbreviated regulatory pathway, under the Biologics Price Competition and Innovation Act of 2009, for the regulatory approval of biosimilar or interchangeable biologic products, which could create a litigation pathway for a third party to challenge patents covering inclacumab. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace, and there are multiple potential grounds for a validity challenge or an unenforceability assertion. The outcome following legal assertions of invalidity and unenforceability is often highly unpredictable.

Interference or derivation proceedings provoked by third parties or brought by us or declared by the USPTO may be necessary to determine the priority of inventions with respect to our patents or patent applications. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms.

In addition, our defense of litigation, interference or derivation proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. In addition, the uncertainties associated with litigation could have a material adverse effect on our business and operations including our ability to commercialize Oxbryta, raise the funds necessary to continue our clinical trials, continue our research programs, license necessary technology from third parties, or enter into development partnerships that would help us bring Oxbryta and our product candidates to domestic and foreign markets.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock.

co-inventor.

co-ownership

 

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co-owner

co-owner

know-how

know-how

know-how

know-how.

 

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non-compliance

Filing, prosecuting and defending patents on our product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries worldwide, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and may also export infringing products to territories where we have patent protection but patent enforcement is not strong. These products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights throughout the world. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights, whether or not successful, could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involve both technological complexity and legal complexity. Therefore, obtaining and enforcing biopharmaceutical patents is costly, time-consuming and inherently uncertain. In addition, the AIA has been recently enacted in the United States, resulting in significant changes to the U.S. patent system.

 

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are filed by different parties claiming the same invention. A third party that files a patent application in the USPTO after that date but before us could, therefore, be awarded a patent covering an invention of ours even if we had made the invention before it was made by the third party. This will require us to be cognizant going forward of the time from invention to filing of a patent application, but circumstances could prevent us from promptly filing patent applications on our inventions.

Among some of the other changes introduced by the AIA are changes that limit where a patentee may file a patent infringement suit and provide opportunities for third parties to challenge any issued patent in the USPTO. This applies to all of our U.S. patents, even those issued before March 16, 2013. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in United States federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action. The AIA and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.

The USPTO recently has developed regulations and procedures to govern administration of the AIA, and many of the substantive changes to patent law associated with the AIA, and, in particular, the first to file provisions, only became effective on March 16, 2013. Accordingly, the courts have yet to address many of these provisions and it is not clear what, if any, impact the AIA will have on the operation of our business. The AIA and its implementation could increase the uncertainties and costs surrounding the prosecution of our or our licensors’ or collaboration partners’ patent applications and the enforcement or defense of our or our licensors’ or collaboration partners’ issued patents, all of which could have an adverse effect on our business and financial condition.

Additionally, the U.S. Supreme Court has ruled on several patent cases in recent years narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this has also contributed to uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. Similarly, the complexity and uncertainty of European patent laws has also increased in recent years. In addition, the European patent system is relatively stringent in the type of amendments that are allowed during prosecution. These changes could limit our ability to obtain new patents in the future that may be important for our business.

(COVID-19),

COVID-19

COVID-19

COVID-19

 

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COVID-19

on-site

on-site

COVID-19

COVID-19

in-person

in-person

COVID-19

COVID-19

GBT-sponsored

start-up

COVID-19

de-prioritization

non-essential),

COVID-19

COVID-19

COVID-19

COVID-19

COVID-19

 

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COVID-19,

COVID-19

COVID-19

COVID-19

We are highly dependent on the management, commercial, research and development, clinical, financial and business development expertise of our executive officers, as well as the other members of our team. Although we have employment offer letters with each of our executive officers, each of them may terminate their employment with us at any time. We do not maintain “key person” insurance for any of our executives or employees.

COVID-19

 

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us in formulating our research and development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. If we are unable to continue to attract and retain high quality personnel, our ability to pursue our growth strategy will be limited.

With our recent establishment of infrastructure required for commercialization of Oxbryta and our current and planned product development activities, we have experienced significant and rapid growth in the number of our employees and the scope of our operations, particularly in the areas of sales, marketing and distribution, regulatory affairs, research and drug development. To manage this and future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources, we may not be able to effectively manage the expansion of our operations or recruit, train and retain a sufficient number of qualified personnel. The expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability to manage our recent or future growth could delay the execution of our business plans or disrupt our operations.

in-licensing

 

 

 

 

 

 

 

 

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If we fail to develop and successfully commercialize inclacumab or any other product candidates, our business and future prospects may be harmed and our business will be more vulnerable to any problems that we encounter in developing and commercializing Oxbryta.

The commercialization of Oxbryta, the use of Oxbryta and our product candidates, including inclacumab, in clinical trials and the sale of any other products for which we obtain marketing approval exposes us to the risk of product liability claims. Product liability claims might be brought against us by consumers, healthcare providers, pharmaceutical companies or others selling or otherwise coming into contact with our products. There is a risk that Oxbryta or our product candidates may induce adverse events. The risk of product liability claims may be increased now that Oxbryta is approved and being sold in the United States. If we cannot successfully defend against product liability claims, we could incur substantial liability and costs. In addition, regardless of merit or eventual outcome, product liability claims may result in:

 

 

 

 

 

 

 

 

 

We carry product liability insurance in amounts that we believe are sufficient in light of our current commercial activities and clinical programs, but we may not be able to obtain and maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. On occasion, large judgments have been awarded in class action lawsuits based on drugs or medical treatments that had unanticipated adverse effects. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could adversely affect our results of operations and business.

During the course of treatment, patients may suffer adverse events, including death, for reasons that may or may not be related to our products or product candidates. Such events can be time-consuming to address, could subject us to costly litigation, require us to pay substantial amounts of money to injured patients, can delay, negatively impact or end our opportunity to receive or maintain regulatory approval to market our products or product candidates, if approved, can require us to suspend or abandon our commercialization efforts of any approved product candidates, or can impair our ability to raise funds to pursue our development or commercialization efforts. Investigations of these events may interrupt our sales efforts, delay our regulatory approval process in other countries, or impact and limit the type of regulatory approvals our product candidates receive or maintain. As a result of these factors, a product liability claim, even if successfully defended, could have a material adverse effect on our business, financial condition or results of operations.

 

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Because we have limited resources, we may forego or delay the pursuit of opportunities with programs or product candidates or for indications that later prove to have greater commercial potential than those we do pursue. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs for product candidates, including inclacumab, may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through strategic collaboration, licensing or other partnering arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate, or we may allocate internal resources to a product candidate in a therapeutic area in which it would have been more advantageous to enter into a partnering arrangement.

Biopharma-MEA,

Biopharma-MEA.

 

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Our business strategy currently incorporates international expansion as we evaluate data from our Phase 3 HOPE Study, plan to conduct additional studies inside and outside the United States, and plan to seek to obtain regulatory approval to commercialize Oxbryta in additional patient populations inside the United States as well as in patient populations outside the United States. Doing business internationally involves a number of risks, including but not limited to:

 

 

 

 

 

 

 

 

 

 

 

 

Any such factors may impose additional responsibilities, obligations or liability in relation to our current and planned activities outside the United States, and we may be required to put in place additional mechanisms and make additional expenditures to ensure compliance with existing and new requirements, which could significantly harm our future international expansion and operations and, consequently, our results of operations.

Among other matters, Trade Laws prohibit companies and their employees, agents, clinical research organizations, legal counsel, accountants, consultants, contractors, and other partners from authorizing, promising, offering, providing, soliciting, or receiving directly or indirectly, corrupt or improper payments or anything else of value to or from recipients in the public or private sector. Violations of Trade Laws can result in substantial criminal fines and civil penalties, imprisonment, the loss of trade privileges, debarment, tax

 

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Biopharma-MEA

We cannot ensure that our compliance controls, policies, and procedures will in every instance protect us from acts committed by our employees, agents, contractors or collaborators that would violate the law or regulations of the jurisdictions in which we operate, including FDA, healthcare, employment, foreign corrupt practices, environmental, competition, and patient privacy regulations. Misconduct by our employees, agents, contractors, or collaborators could include intentional or unintentional failures to:

 

 

 

 

 

In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Misconduct could also involve the improper use of, including trading on, information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation.

non-U.S.

non-U.S.

There is no certainty that all of our employees, agents, contractors, or collaborators, or those of our affiliates, will comply with all applicable laws and regulations, particularly given the high level of complexity of these requirements. We have adopted a code of conduct, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may be ineffective in

 

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controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these requirements. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business.

Despite the implementation of security measures, our internal computer systems and those of our third-party vendors are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures, and the prevalent use of mobile devices that access confidential information increases the risk of data security breaches. With respect to our data and information technology infrastructure, we continue to invest in the protection of such infrastructure, but there can be no assurance that our efforts will prevent service interruptions or identify breaches in our systems.

If any such event were to occur and cause interruptions in our operations, it could adversely affect our business and operations or result in the loss of critical or sensitive information, which could result in financial, legal, business or reputational harm to us. For example, the loss of data from completed or ongoing clinical trials or nonclinical studies for Oxbryta or any of our product candidates could harm our commercialization activities, result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development of our product candidates could be delayed. In addition, our liability insurance may not be sufficient in type or amount to cover us against claims related to security breaches, cyber-attacks and other related breaches. As a result, any such cyber-attacks or breaches could have a material adverse effect on our business.

The market price of our common stock has experienced volatility since our initial public offering in August 2015 and is likely to continue to be volatile. Our stock price could be subject to wide fluctuations in response to a variety of factors, including the following:

 

 

 

 

 

 

 

 

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COVID-19

Our quarterly and annual operating results may fluctuate significantly in the future, which makes it difficult for us to predict our future operating results. Our operating results may fluctuate due to a variety of factors, many of which are outside of our control and may be difficult to predict, including the following:

 

 

 

 

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S-3

We are also authorized to grant stock options and other equity-based awards to our employees, directors and consultants pursuant to our Amended and Restated 2015 Stock Option and Incentive Plan, or 2015 Plan. The

 

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non-qualified

Sales of a substantial number of shares of our common stock in the public market could occur at any time. A significant portion of our outstanding shares of common stock are held by a small number of stockholders, including our directors, officers and significant stockholders. Sales by our stockholders of a substantial number of shares, or the expectation that such sales may occur, could significantly reduce the market price of our common stock.

10b5-1

Our executive officers, directors, five percent stockholders and their affiliates beneficially owned approximately 60% of our outstanding common stock as of December 31, 2020, based on the latest publicly available information.

These stockholders have the ability to influence us through their ownership positions. These stockholders may be able to determine all matters requiring stockholder approval. For example, these stockholders, acting together, may be able to control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may believe are in your best interest as one of our stockholders.

 

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We have broad discretion over the use of our capital resources consisting of cash and cash equivalents and short and long-term marketable securities. You may not agree with our decisions, and our use of our capital resources may not yield any returns to our stockholders. We expect to use our existing capital resources to continue the commercialization and clinical development of Oxbryta for the treatment of SCD, including in our Phase 2a HOPE-KIDS 1 Study, our Phase 3 HOPE-KIDS 2 Study, our other research and development activities including other clinical and nonclinical studies, including for inclacumab, and for working capital and general corporate purposes. Our failure to apply our capital resources effectively could compromise our ability to pursue our growth strategy and we might not be able to yield a significant return, if any, on our investment of these resources. Our stockholders will not have the opportunity to influence our decisions on how to use our capital resources.

Our restated certificate of incorporation, amended and restated bylaws and Delaware law contain provisions that may have the effect of delaying or preventing a change in control of us or changes in our management. Our restated certificate of incorporation and amended and restated bylaws include provisions that:

 

 

 

 

 

 

 

 

 

 

These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.

In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us.

 

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Any provision of our restated certificate of incorporation or amended and restated bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.

pre-change

pre-change

follow-on

pre-change

follow-on

pre-change

We do not currently intend to pay any cash dividends on our common stock for the foreseeable future. We currently intend to invest our future earnings, if any, to fund our growth. Therefore, you are not likely to receive any dividends on your common stock for the foreseeable future. Since we do not intend to pay dividends, your ability to receive a return on your investment will depend on any future appreciation in the market value of our common stock. There is no guarantee that our common stock will appreciate or even maintain the price at which our holders have purchased it.

COVID-19

 

88

COVID-19

In addition, certain events have caused, and may cause or contribute to global financial crises, which have triggered and may in the future lead to extreme volatility and disruptions in the capital and credit markets. For example, in January 2020, the U.K. formally exited from the EU (such event commonly known as Brexit). Brexit has and could continue to adversely affect European and/or worldwide economic and market conditions and could continue to contribute to instability in the global financial markets and create uncertainty surrounding our business, including affecting our existing relationships with third parties that conduct some of our nonclinical studies and clinical trials and our ability to enter into new relationships with vendors and other third-party contractors, which could have an adverse effect on our business, financial results and operations. The measures could also adversely affect our ability to raise additional capital, potentially disrupt the markets in which we currently conduct and plan to conduct operations and the tax jurisdictions in which we operate and adversely change tax benefits or liabilities in these or other jurisdictions. In addition, changes in, and legal uncertainty with regard to, national and international laws and regulations may present difficulties for our clinical and regulatory strategy.

COVID-19

COVID-19

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or Exchange Act, Section 404, or Section 404, of the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley, and the rules and regulations of NASDAQ. The Exchange Act requires us to file accurate and timely quarterly, annual and current reports with the SEC. Section 404 generally requires our management and independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting and requires us to include an opinion from our independent registered public accounting firm on the effectiveness of our internal control over financial reporting. We are also subject to significant corporate governance and executive compensation-related provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or Dodd-Frank, including the “say on pay” rules adopted by the SEC under Dodd-Frank. We incur significant legal, accounting and other expenses, and expend significant time and effort by management and other personnel, to comply with the rules applicable to us as a public company.

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our internal control over financial reporting for the purpose of providing the reports required by Section 404. Based on our assessment and using the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, criteria, our

 

89

management, Chief Executive Officer and Chief Financial Officer, have concluded that, as of December 31, 2020, our internal control over financial reporting was effective. As required under Section 404 of Sarbanes-Oxley, our independent registered public accounting firm has tested the design and operating effectiveness of our controls over financial reporting and has provided the required attestation report with respect to our internal control over financial reporting. During the course of our or their subsequent review and testing, however, material weaknesses or significant deficiencies may be identified and we may be unable to remediate them before we must provide the required reports. If material weaknesses or significant deficiencies in our internal control over financial reporting are identified in the future, we may not detect or remediate errors on a timely basis and our consolidated financial statements may be materially misstated. We or our independent registered public accounting firm may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting, which could harm our operating results, cause investors to lose confidence in our reported financial information and cause the trading price of our stock to fall. In addition, any failure to report our financial results on an accurate and timely basis could result in sanctions, lawsuits, delisting of our shares from NASDAQ or other adverse consequences that would materially harm our business.

Moreover, stockholder activism, the current political environment, and increased levels of government scrutiny and regulatory reform may lead to substantial new regulations and disclosure obligations for public companies, which may lead to additional compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate. Our management and other personnel will need to devote a substantial amount of time to any new compliance initiatives. In addition, any new rules and regulations will increase our legal and financial compliance costs and will make some activities more time consuming and costly. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain our current levels of such coverage. New laws and regulations as well as changes to existing laws and regulations affecting public companies, including the provisions of Sarbanes-Oxley and rules adopted by the SEC and by NASDAQ, would likely result in increased costs to us as we respond to their requirements.

COVID-19

COVID-19

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We generally contract with third

 

90

parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.

Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials.

In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

The rules dealing with U.S. federal, state and local income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive application) could adversely affect our stockholders or us. In recent years, many such changes have been made and changes are likely to continue to occur in the future. For example, in December 2017, Congress passed the Tax Cuts and Jobs Act, which made broad and complex changes to the tax laws. We cannot predict whether, when, in what form, or with what effective dates, tax laws, regulations and rulings may be enacted, promulgated or decided, which could result in an increase in our, or our stockholders’, tax liability or require changes in the manner in which we operate in order to minimize increases in our tax liability.

The trading market for our common stock depends, in part, on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts may not publish an adequate amount of research on our company, which may negatively impact the trading price for our stock. In addition, if one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline or increase in volatility. Further, if our operating results fail to meet the forecasts of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.

None.

Our headquarters, where we have office and research and development laboratory space, is located in South San Francisco, California, where we lease 164,150 square feet of space pursuant to a noncancelable operating lease, or Lease.

We believe that our existing facilities are sufficient for our current needs and for the foreseeable future.

 

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10-K,

Not applicable.

Our common stock began trading on The NASDAQ Global Select Market on August 12, 2015 and trades under the symbol “GBT”. Prior to such time, there was no public market for our common stock.

10-Q

8-K.

We did not repurchase any securities during the quarter ended December 31, 2020.

As of February 18, 2021, there were 6 holders of record of 62,156,860 outstanding shares of our common stock. We believe that the number of beneficial owners of our common stock at that date was substantially greater.

Information about our equity compensation plans is incorporated by reference to Item 12 of Part III of this Annual Report.

We have never declared or paid any cash dividends. We currently expect to retain all future earnings, if any, for use in the operation and expansion of our business, and therefore do not anticipate paying any cash dividends in the foreseeable future.

The following is not deemed “filed” with the Securities and Exchange Commission and is not to be incorporated by reference into any filing we make under the Securities Act of 1933, as amended, whether made before or after the date hereof and irrespective of any general incorporation by reference language in such filing.

52-Month

 

92

Biotechnology index, and the NASDAQ Pharmaceutical index. The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from December 31, 2015 to December 31, 2020.

Among Global Blood Therapeutics, Inc., the NASDAQ Composite Index,

the NASDAQ Biotechnology Index and the NASDAQ Pharmaceutical Index

 

 

 

 

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10-K

 

 

 

 

94

We are a biopharmaceutical company dedicated to the discovery, development and delivery of life-changing treatments that provide hope to underserved patient communities. Founded in 2011, our goal is to transform the treatment and care of sickle cell disease, or SCD, a lifelong, devastating inherited blood disorder that is marked by red blood cell, or RBC, destruction and occluded blood flow and hypoxia, which leads to anemia, stroke, multi-organ failure, severe pain crises, and shortened patient life span. Our mission is driven by the historical lack of understanding, investment and attention given to SCD. Although the fundamental cause of SCD has been understood for decades, therapeutic innovation and access to care has significantly lagged compared to many other rare diseases. For example, there are approximately three times more individuals in the U.S. living with SCD than cystic fibrosis, or CF. However, since the enactment of the Orphan Drug Act passed in 1983, only four drugs have been approved for SCD compared to 15 drugs approved for CF. As a result of the lack of treatment options, patients with SCD suffer serious morbidity and premature mortality.

®

FDA-approved

®

single-arm

In January 2021, the European Medicines Agency, or EMA, accepted for review our Marketing Authorization Application, or MAA, seeking full marketing authorization of Oxbryta to treat hemolytic anemia

 

95

Biopharma-MEA,

P-selectin

in-license,

Hoffmann-La

Hoffmann-La

non-SCD

48-week

co-promote

COVID-19,

in-person

in-person

COVID-19

 

96

mid-March

in-person

COVID-19

follow-on

follow-on

Our net losses were $247.6 million for the year ended December 31, 2020, $266.8 million for the year ended December 31, 2019 and $174.2 million for the year ended December 31, 2018. As of December 31, 2020, we had an accumulated deficit of $986.5 million. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from selling, general and administrative costs associated with our operations. We had $494.8 million in cash and cash equivalents and $66.1 million in marketable securities as of December 31, 2020.

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles, or U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

 

97

To determine revenue recognition for arrangements that we determine are within the scope of ASC 606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. We only apply the five-step model to contracts when it is probable that we will collect substantially all of the consideration we are entitled to in exchange for the goods or services we transfer to the customer.

Our product sales consist of U.S. sales of Oxbryta, which we began shipping to customers in December 2019. Prior to December 2019, we had no product sales. We sell Oxbryta to a limited number of specialty pharmacies and a specialty distributor, or collectively, Customers. These agreements with our Customers provide for transfer of title to the product at the time the product has been delivered to the Customers. The Customers subsequently dispense our product directly to a patient or resell our product to hospitals and certain pharmacies.

30-60

We consider the effects of items that can decrease the transaction price such as variable consideration and consideration payable to Customers or payer. Amounts related to such items are estimated at contract inception and updated at the end of each reporting period as additional information becomes available. The amount of variable consideration may be constrained and is included in the transaction price only to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Revenue from product sales is recorded after considering the impact of the following variable consideration amounts along with the constraint at the time of revenue recognition:

co-payment

co-payment

co-payment

co-payment

 

98

fund a portion of the Medicare Part D insurance coverage gap for prescription drugs sold to eligible patients. Funding of the coverage gap is generally invoiced and paid in arrears. We estimate the impact of the Medicare Part D coverage gap using the expected-value method based on an amount expected to be incurred for the current quarter’s activity, plus an accrual balance for known prior quarters. Estimates for the impact of the Medicare Part D coverage gap are adjusted quarterly to reflect actual experience. We record an accrued liability for unpaid reserves related to the Medicare Part D coverage gap.

Each of the above items is variable consideration, which we record at the time of revenue recognition, and require significant estimates, judgement and information obtained from external sources. If management’s estimates differ from actual results, we will record adjustments that would affect product sales in the period of adjustment.

The following table summarizes activity with respect to our sales allowances and accruals for the year ended December 31, 2020 and 2019 (in thousands):