SQZ Biotechnologies Co - Annual Report: 2020 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2020

OR

Commission File Number: 001-39662

SQZ BIOTECHNOLOGIES COMPANY

(Exact name of Registrant as specified in its Charter)

Registrant’s telephone number, including area code: (617) 758-8672

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

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

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

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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.  ☐

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Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐ No ☒

The Registrant was not a public company as of the last business day of its most recently completed second fiscal quarter and therefore cannot calculate the aggregate market value of the voting and non-voting common equity held by non-affiliates as of such date.

The number of shares of Registrant’s common stock outstanding as of March 11, 2021 was 27,869,821.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Definitive Proxy Statement relating to the Registrant’s 2021 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the end of the Registrant’s fiscal year ended December 31, 2020 are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent stated herein.

Table of Contents

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. All statements other than statements of historical fact contained in this Annual Report, including without limitation statements regarding our plans to develop, manufacture and commercialize our product candidates, the timing or outcome of our ongoing or planned clinical trials for SQZ-PBMC-HPV, SQZ-AAC-HPV, any of our other pipeline product candidates and any future product candidates, the clinical utility of our product candidates, the anticipated impact of the COVID-19 pandemic on our business and operations, including manufacturing, research and development, clinical trials and employees, our cash needs and availability, and the plans and objectives of management for future operations, are forward-looking statements.

The forward-looking statements in this Annual Report are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Annual Report and are subject to a number of known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from those projected in the forward-looking statements, including, but not limited to, those described in the sections of this Annual Report entitled “Summary Risk Factors,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

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SUMMARY RISK FACTORS

We are subject to numerous risks and uncertainties, including those further described below in the section entitled “Risk Factors” in this Annual Report on Form 10-K, that represent challenges that we face in connection with the successful implementation of our strategy and the growth of our business. In particular, the following considerations, among others, may offset our competitive strengths or have a negative effect on our business strategy, which could materially adversely affect our business, financial conditions, results of operations, future growth prospects, or cause a decline in the price of our common stock:

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PART I

Item 1. Business.

Overview

We are a clinical-stage biotechnology company developing transformative cell therapies for patients with cancer, infectious diseases and other serious conditions. We use our proprietary technology, Cell Squeeze, to physically squeeze cells through a microfluidic chip, temporarily opening the cell membrane and enabling biologic material of interest, or cargo, to diffuse into the cell. This technology allows us to create a broad pipeline of product candidates for different diseases. We believe our Cell Squeeze technology has the potential to create well-tolerated cell therapies that can provide therapeutic benefit for patients. Our potential benefits include accelerated timelines with production time under 24 hours, compared to four to six weeks for other existing cell therapies, improved patient experience by eliminating the need for pre-conditioning or lengthy hospital stays, reduced toxicity concerns by leveraging physiological mechanisms, and broadened therapeutic impact. Our goal is to use the SQZ approach to establish a new paradigm for cell therapies. We are using Cell Squeeze to create multiple cell therapy platforms focused on directing specific immune responses. Our most advanced platform in development, SQZ Antigen Presenting Cells, or SQZ APCs, is currently in a Phase 1 trial in HPV+ tumors. Our additional platforms currently in development are SQZ Activating Antigen Carriers, or SQZ AACs, for which an investigational new drug application, or IND, was cleared by the U.S. Food and Drug Administration, or FDA, in January 2021 for SQZ-AAC-HPV, a cell therapy candidate generated from red blood cells engineered with tumor-specific antigen to treat HPV+ tumors, and SQZ Tolerizing Antigen Carriers, or SQZ TACs. We are leveraging each of these platforms to create differentiated product candidates that have applicability across multiple disease areas.

Our SQZ APC platform is focused on generating robust CD8+ T cell (CD8, CD8 T cell) responses, which are known to be critical to powerful immune responses. We believe that the keys to driving responses are the quantity, quality and specificity of the CD8+ T cells that are generated. In preclinical studies, the SQZ APC platform has shown approximately 1,000 times more efficient CD8+ T cell activation compared to other cancer vaccine approaches and has also shown that these T cells are specific to the target antigen. SQZ APCs have shown encouraging anti-tumor activity and the ability to elicit protective memory preclinically, indications of the quality of the CD8+ T cells produced. We have also shown in preclinical studies the ability of SQZ APCs to elicit specific immune responses for multiple target antigens, including highly immunogenic (HPV) and less immunogenic (mutant KRAS) antigens.

Our lead product candidate, SQZ-PBMC-HPV, from our SQZ APC platform, is a targeted cancer vaccine that has been designed to generate antigen-specific CD8 T cell responses to attack HPV+ tumors. We believe there remains significant unmet need in HPV+ cancers, with over 630,000 new cases every year globally.

We are evaluating SQZ-PBMC-HPV in a Phase 1 clinical trial as a monotherapy and in combination with other immuno-oncology agents for the treatment of HPV16+ advanced or metastatic solid tumors, including cervical, head-and-neck, anal, penile, vulvar and vaginal cancer. The primary objectives of the trial are to evaluate safety and tolerability and to determine the maximum tolerated dose, if any, or maximum administered dose and to define a dose for the expansion cohort and future trials. We are currently enrolling patients in the monotherapy portion of the trial, which includes multiple cohorts of different doses and dosing schedules. As of December 31, 2020, we had dosed 12 patients. This includes three patients in the low-dose monotherapy cohort, five patients in the high-dose monotherapy cohort, and four patients in a high-dose, double-priming monotherapy cohort. We expect to initiate the combination portion of the trial in mid-2021 and anticipate data from combination cohorts in 2022. The total number of patients enrolled will depend on safety and observed immunogenic effects. We can expand the trial to treat additional monotherapy or combination cohorts of patients or expand cohorts that show clinical benefit. If we expand the trial, we may enroll up to a total of 200 patients. Unlike certain other oncology cell therapies, patients in the clinical trial receive no pre-conditioning, and we plan for the treatment to be administered without post-treatment hospitalization. There had been no treatment-related grade 3 or higher adverse events and no dose limiting toxicities, or DLTs, observed as of December 31, 2020. All doses in the trial have been manufactured in under 24 hours and each patient had successful manufacturing of their SQZ APCs. We are encouraged by the safety data and manufacturing we have seen to date as well as the initial biomarker data from the low-dose cohort, which showed early signs of intratumoral immune activity. We expect to present more comprehensive biomarker data from patients in the monotherapy cohorts at a scientific conference in mid-2021.

The SQZ APC platform for oncology is being developed as a part of our collaboration with Roche, a relationship that began in 2015 and was subsequently expanded in 2018 to include a broader cell source to create SQZ APCs, and co-development and co-commercialization terms. The 2018 expanded collaboration agreement includes $125 million in upfront payments and near-term milestone payments, significant cost sharing, royalties, and over $1 billion in potential future payments upon the achievement of specified development, regulatory and sales milestones. The timing of these future milestone payments will depend on the clinical development and commercialization of our SQZ APC product candidates, and we may not receive any or all of these milestone payments. To date, we have received $94 million in upfront and near-term milestone payments from our collaboration agreements with Roche, of which $75 million was received under the 2018 expanded collaboration. Our collaboration with Roche provides us with access to many potential combination drugs, including their PD-L1 drug, atezolizumab. See “—Collaboration, Research and License Agreements—Roche Collaboration.”

Beyond oncology, we are also applying the SQZ APC platform to infectious diseases. As with SQZ APCs for oncology, this approach has the potential to induce an endogenous CD8 T cell-driven immune response targeted against a pathogen of interest, in both prophylactic and therapeutic patient settings. In preclinical studies, we have observed SQZ APCs’ ability to generate responses against multiple infectious disease antigens, including hepatitis B virus, or HBV, cytomegalovirus, or CMV, influenza A and simian immunodeficiency virus, or SIV,

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the non-human primate form of human immunodeficiency virus, or HIV. We expect to submit our first IND to the FDA from the infectious disease platform in 2022 for the treatment of HBV. While we are initially developing this platform to potentially provide a curative vaccine for chronic diseases, we believe the SQZ-APC approach could also enable rapid response vaccines in the face of seasonal or new emerging outbreaks.

Our second oncology platform, SQZ AACs, applies our Cell Squeeze technology to create Antigen Carriers from red blood cells (RBCs). SQZ AACs then leverage a similar process to eryptosis, the natural clearing of aged RBCs, in order to drive powerful activation of patients’ endogenous T cells. Our first SQZ AAC IND in oncology for HPV+ tumors was cleared by the FDA in January 2021 and we expect initial monotherapy data in house by the end of 2021. While our first product candidate from our SQZ AAC platform is autologous, meaning it uses a patient’s own red blood cells, we believe an allogeneic approach is possible in the future, allowing us to potentially create off-the-shelf therapeutics. Our second preclinical product candidate for our SQZ AAC platform targets specific oncogenic KRAS mutations, which are found in approximately 30% of all human cancers in the United States. Historically, targeting mutant KRAS proteins with small molecules has been challenging due to a lack of “druggable” binding pockets. Recently, selective third-party inhibitors of certain KRAS mutations, namely G12C, have demonstrated encouraging preliminary anti-tumor effects, providing clinical validation for targeting mutant KRAS for the treatment of cancer. However, the majority of KRAS mutations remain out of reach for small molecules. In preclinical studies, we have been able to elicit responses to KRAS G12D and G12V mutations with our cellular vaccine platforms, which together represent over 50% of KRAS mutations, four times that of G12C. There are approximately 100,000 patients per year in the United States with KRAS G12D and G12V mutations across multiple tumor types, including pancreatic, colorectal and some lung cancers. We plan to submit an IND for SQZ AACs to treat KRAS-mutated tumors in 2022.

Our third platform, SQZ TACs, applies our Cell Squeeze technology to create Antigen Carriers that leverage a similar cell clearance process as SQZ AACs but as an approach for generating immune tolerance. In preclinical models, we have shown the capability to increase regulatory T cells, which suppress the immune system, and shut down other immune stimulatory drivers such as effector T cells and antibody responses. The SQZ TAC platform is potentially applicable to many autoimmune diseases, such as type 1 diabetes and celiac disease, as well as other applications with unwanted immune responses, such as antibody responses against biologics or gene therapy vectors. We plan to select a first indication and initiate IND-enabling studies with SQZ TACs in 2021.

 Our Product Pipeline

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We believe product candidates from our SQZ platforms could offer meaningful benefits for patients by providing potential efficacy and safety, as well as a better patient experience compared to existing cell therapies. Recently approved cell therapies have advanced the treatment paradigm in disease areas such as cancer; however, many treatments remain challenged by various factors, including limited therapeutic applicability, a burdensome patient experience, such as pre-conditioning and hospitalization, as well as manufacturing, operational, and scaling challenges. We believe the current SQZ platforms and the future evolution of our platforms can offer many advantages over existing cell therapy approaches. Some of these advantages are outlined in the graphic below.

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Company History

Our founder and Chief Executive Officer, Dr. Armon Sharei, is the lead inventor of Cell Squeeze, which is based on his team’s work in the laboratories of Dr. Klavs Jensen and Dr. Robert Langer at the Massachusetts Institute of Technology. In a series of experiments with a complex, high-pressure, fluid-jet delivery system, the team discovered that simple, rapid, mechanical deformation of cells enables intracellular delivery of biomaterials. The team created the SQZ microfluidic chip specifically designed to exploit this phenomenon. Through collaboration with leading scientists in the immunology and regenerative medicine fields, the team discovered the process’ novel capabilities and potential for significant impact through robust engineering of cell therapies. SQZ Biotechnologies was founded with the goal of realizing the broad potential of this technology and establishing a new paradigm for cell therapies as effective, safe treatments to impact the lives of patients around the world.

SQZ Strategy

Our goal is to build a fully integrated cell therapy company leveraging the Cell Squeeze technology to develop differentiated, transformative product candidates for patients across a broad range of disease areas. To enable a future with impactful SQZ cell therapy products as a compelling early-line treatment option for patients, we are executing a strategy with the following key elements:

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SQZ Technology

Generating cell therapy candidates with the Cell Squeeze technology is simple, as illustrated below: we physically squeeze cells at high speeds through a microfluidic constriction to temporarily disrupt the cell membrane and enable the target cargo to enter directly into the cytosol. The elegance of our system enables us to process over 10 billion patient cells per minute at current clinical scale and introduce virtually any cargo of interest into any cell type to create what we believe to be an unprecedented range of potential therapeutics. Our unique technology and its products are covered by over 30 patent families.

SQZ Differentiation

Limitations of Current Cell Therapies

Recently approved cell therapies have advanced the cancer treatment paradigm in certain therapeutic applications; however, efforts to expand into new disease areas have been constrained due to the limitations of cell-engineering approaches, such as lengthy and expensive manufacturing, overall patient safety and efficacy concerns, and limited biological applicability beyond initial indications.

Breadth of Impact

Patient Experience

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Manufacturing

SQZ Solution

We believe the following characteristics highly differentiate our Cell Squeeze approach from existing cell therapies:

Breadth of Impact

Patient Experience

Manufacturing

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SQZ Cell Therapy Platforms

To date, we have leveraged Cell Squeeze to build three cell therapy platforms that we are applying to multiple therapeutic areas. These platforms are designed to modulate the immune system in a target-specific manner with initial applications in oncology, infectious disease and immune disorders. Our SQZ platforms are designed to be able to manufacture product candidates in under 24 hours and administered without any pre-conditioning and without any planned hospitalization, creating what we believe is a more streamlined, accessible patient experience and a lower burden on the health system, from a time and cost perspective. Our current cell therapy platforms are summarized in the table below.

Cell Squeeze Technology Enables the Interchangeability of Cargo and Versatile Target Selection

Our cell therapy platforms are focused on modulating immune responses targeting disease-specific antigens. The SQZ APC and SQZ AAC platforms are designed to activate immune cells against the target antigens and drive killing of specific diseased cells, while in contrast, the SQZ TAC platform is designed to tolerize against the target antigen. Although each platform has demonstrated robust activity across antigens and our strategy includes leveraging Cell Squeeze’s capability to insert cargos interchangeably, antigen selection is a defining factor for each individual product.

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To select the appropriate antigen for a given product candidate, we consider multiple factors, including:

While many diseases have common antigens that can be used as a target across the patient population, there are significant unmet medical needs that would be better addressed by a personalized approach. In this context, we believe we can leverage the cargo flexibility of the SQZ platforms to create personalized therapies. For example, in oncology the field has developed many approaches to identify personalized neoantigens. We could use the same process for our SQZ APCs or AACs to deliver a personalized set of neoantigens and create a patient-specific product. We believe the modularity of our SQZ platforms allows us to potentially address many indications using the same underlying mechanism by targeting both common and personalized antigens.

SQZ Antigen Presenting Cells (APC) Platform

SQZ APC Platform Overview

We are focused on generating powerful CD8+ T cell responses with the SQZ APC platform. CD8+ T cells are known to be critical to anti-tumor and anti-pathogen responses. Moreover, by mimicking the actions of the immune system and generating powerful responses we believe SQZ APCs also elicit protective immune memory. Immunological memory is the ability of the immune system to quickly and specifically recognize an antigen that the body has previously encountered and initiate a corresponding immune response. The potential significance for patients could mean preventing recurrence of disease or protection from future infection.

In order to generate an immune response, CD8+ T cells require robust antigen presentation on MHC Class I by APCs to become activated. Antigens for presentation on MHC Class I are primarily sourced from the cytosol. Traditionally, cell therapies and vaccine systems targeting antigen presentation have relied on APCs endocytosing the target material. Endocytosis is the process by which cells engulf material, resulting in the material being segregated from the cytosol in an endosome. This results primarily in MHC Class II presentation and subsequent CD4+ helper T cell activation. Through a process referred to as cross-presentation as shown below, a small amount of endosomal material can be presented on MHC Class I to yield some CD8+ T cell activation. However, this process is inefficient, resulting in suboptimal anti-tumor activity or viral protection. SQZ APCs on the other hand can access MHC Class I directly, bypassing the need for cross presentation.

Antigen Presentation: MHC Class I vs. MHC Class II

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SQZ APCs are created by engineering a patient’s own PBMCs with specific antigens to develop ex vivo antigen presenting cells that, when administered to the patient, are designed to drive activation and proliferation of antigen-specific CD8+ T cells in vivo. PBMCs include a mixed population of T cells, B cells, natural killer, or NK, cells and monocytes.

We believe that our unique capability to deliver antigen to the cell cytosol enhances MHC Class I presentation and subsequent CD8+ T cell activation relative to other approaches that rely on cross-presentation. In preclinical studies of our SQZ APCs, we have observed presentation of antigen on MHC Class I 1,000 times more efficiently than observed through cross-presentation (endocytosis via incubation), as shown in the graph below.

SQZ Drives CD8+ T cell Activation 1,000 Times More Efficiently Compared to Cross-Presentation

Antigen presentation is the body’s natural mechanism for activating immune responses in many disease contexts, including oncology and infectious diseases. When evaluating immune therapies in oncology, literature has shown that in effective treatments, clinical responses have correlated directly with CD8+ T cell responses and infiltration into patient tumors. To address the underlying challenges of prior approaches in immune therapies in both oncology and infectious disease, we expect our SQZ APC platform to improve:

Quantity:    Achieve sufficient proliferation of activated T cells due to the natural expansion process that T cells undergo in vivo after stimulation by an APC

Specificity:    Drive antigen-specific responses by engineering APCs with precise disease-specific antigens of interest while avoiding broad stimulation of other undesirable responses

Quality:    Create healthy cells that can leverage the body’s natural T cell activation process to generate functional T cell responses

We believe that our approach addresses each of these areas and therefore has advantages over approaches including CAR-T, TCR, TIL and vaccines, all which face challenges in at least one of these areas.

Quantity

Demonstrating the high quantity of T cells and their activation by SQZ PBMC, in a preclinical study we measured activation and absolute numbers of T cells after exposure to SQZ PBMCs. In this study shown below, we squeezed PBMCs with OVA, a common antigen used to measure immune response, and evaluated OT-I activation, the transgenic CD8+ T cells specific to OVA in mouse models, as measured by CD69 protein. We also evaluated CD8+ T cell activation across PBMCs, including T cells, B cells, NK cells and monocytes. We observed that the cells squeezed with OVA activated CD8+ T cells in high percentages, while OT-I CD8+ T cells alone and cells squeezed with no antigen did not activate responses at all, suggesting that the squeezed cells were efficiently presenting the antigen and generating a high proportion of T cells to respond. Since our SQZ APC platform is capable of inserting antigen directly into the cytosol, we are able to engineer all PBMC cell types into APCs to create a greater quantity of active CD8+ T cells. We believe this capability eliminates the need for the cell sorting and expansion that is necessary for cell therapy approaches that require a specific cell type.

SQZ APCs and Sub-Cell Types Activate CD8+ T Cells

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We also measured the quantity of T cells by looking at the TILs when looking at a specific tumor. As shown below, this experiment, shows 21 times the number of CD8+ T cells infiltrate tumors when SQZ APCs are used compared to antigen alone.

SQZ APCs Drive High Number of CD8+ T Cells in Tumors

Specificity

Specificity is key to ensuring responses are targeted, which could potentially result in better tolerability than treatments that broadly stimulate non-targeted T cell reactions. To evaluate specificity, in a preclinical study, we assessed SQZ APCs’ ability to induce specific immune responses without broadly stimulating the immune system by squeezing cells with an OVA. In a murine model, we tested the response of T cells specific to OVA, measured by the OT-I T cells shown in the graph below, and the response of T cells specific to a different model antigen, gp100, measured by the pmel T cells shown in the graph below. We observed that the cells squeezed with OVA caused activation and proliferation of OT-I T cells and not pmel T cells. We also squeezed cells with gp100 and found that nominal pmel T cells were activated and proliferated in vivo, as measured by the percent of cells that divided.

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SQZ APCs Direct Specific Responses

Quality

The true test of functionality of T cells is measured in their ability to impact disease; for example, how they infiltrate and kill tumors. By generating robust endogenous T cell responses, we believe the responses will be functional and of high quality, which is in contrast to ex vivo T cell expansion processes that cannot recreate the endogenous signaling environment necessary to generate a robust T cell response. The oncology preclinical studies described below verify the quality of the response as they demonstrate robust anti-tumor activity and formation of protective memory in vivo.

Taken together, these findings demonstrate that the SQZ-APC platform is capable of producing antigen-specific CD8+ T cell responses that are directed against tumors in vivo.

SQZ APC Pipeline

We believe SQZ APC’s ability to induce CD8+ T cell responses and the importance of these responses have broad applicability in oncology and infectious diseases. With the ability to insert nearly any cargo, clinical data from one APC candidate can help inform implementation of other programs and streamline clinical development decisions on dosing and antigen/indication selection. Because we have seen comparable preclinical immune response data across the antigens we have squeezed into APCs, we believe SQZ APCs could translate to other therapeutic vaccines generated from the platform. Our pipeline of products currently in development with SQZ APCs is displayed below.

SQZ APCs for Oncology

We are developing oncology product candidates derived from our SQZ APC platform in collaboration with Roche, designed to address multiple tumor types. Our lead SQZ APC product candidate, SQZ-PBMC-HPV, is being evaluated in a Phase 1 clinical trial for the treatment of HPV16+ solid tumors. We and Roche will alternate U.S. commercial rights for each SQZ APC oncology product developed, and we maintain full commercial rights for our SQZ APCs outside of oncology. It has not yet been determined whether we or Roche will have U.S. commercial rights for SQZ-PBMC-HPV. See “—Collaboration, Research and License Agreements—Roche Collaboration.”

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The SQZ APC oncology platform is based on squeezing tumor-associated antigens directly into the cytosol, creating SQZ APCs that are designed to induce endogenous CD8+ T cells when administered to the patient. Once the antigens are delivered directly into the cytosol, the antigens are processed and presented on MHC Class I, where they activate the patient’s CD8+ T cells. The activated CD8+ T cells then proliferate and attack tumor cells that are associated with the antigen. In the context of our first product candidate, SQZ-PBMC-HPV, the cell therapy is engineered by squeezing a patient’s own PBMCs with defined HPV16+ tumor antigens to create tumor-targeted APCs ex vivo before administering back to patient. This process is depicted below.

Recent advancements in immuno-oncology have highlighted the importance of CD8+ T cells in attacking tumors. In addition, published clinical studies across tumor types have underscored both the prognostic value of CD8 tumor infiltration and the strong therapeutic correlation of CD8 infiltration to immunotherapy response.

The cancer immunity cycle depicted below describes the way a patient’s immune system interacts with a tumor to generate tumor-killing immune responses. The focus of our SQZ APC oncology product candidates is to engineer antigen presentation (steps 2 & 3), which are the seminal physiological events that lead to a productive CD8+ T cell response. The interaction of T cells with APCs at step 3 has significant downstream impact as it determines the antigen-specific CD8+ T cell response (specificity) in addition to providing the stimulatory signals that determine ultimate proliferation (quantity) and phenotypic diversity (quality) of the resulting response.

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We believe that our SQZ APC platform provides an advantage by driving the physiological interaction between antigen presenting cells and T cells that underpins the generation of a productive CD8+ T cell response, potentially providing a differentiated benefit for cancer patients. In preclinical studies with our SQZ APCs, we have demonstrated our ability to deliver antigen and create APCs (steps 2 and 3) that generate robust, specific CD8+ T cell responses capable of controlling and clearing tumors in mice. Beyond HPV related antigens, we have shown that SQZ APCs are able to elicit robust, specific CD8+ T cell responses to less immunogenic antigens such as KRAS protein with G12D and G12V mutations.

Lead SQZ APC Product Candidate: SQZ-PBMC-HPV

HPV+ Cancers Unmet Need and Market Opportunity

HPV infection causes some of the most common types of cancer, such as cervical and head-and-neck cancer, and there is significant need for new treatment options to address HPV+ tumors. HPV is one of the most common viruses worldwide. In 90% of individuals infected by HPV, the immune system successfully controls the virus and the HPV infection is resolved within two years without intervention. However, when certain strains of HPV persist for many years, the infection can lead to cancer. Despite recent efforts to prophylactically vaccinate for HPV, it is not expected that there will be significant decline in HPV+ cancers for many years due to the gap between vaccination age and average age of HPV+ cancer onset.

According to the Centers for Disease Control, or CDC, in the United States as of September 2020, HPV+ tumors represent 3% of all cancers in women and 2% of all cancers in men, resulting in over 39,000 new cases of HPV+ tumors every year. The burden of HPV infection is even larger outside of the United States, with HPV+ tumors representing 4.5% of all cancers worldwide, according to the International Journal of Cancer, resulting in 570,000 new cases for women and 60,000 new cases for men every year. According to the CDC, HPV infection plays a significant role in the formation of more than 90% of anal and cervical cancers, and most cases of vaginal (75%), oropharyngeal (70%), vulval (70%) and penile (60%) cancers. In addition, an increasing percentage of head-and-neck cancer is being attributed to HPV infection, particularly those arising from the oropharynx.

The current standard of care for HPV+ cancers differs by tumor type but typically involves a combination of chemotherapy, radiation and surgery. These treatments are associated with acute and long-term effects including mucositis, swallowing dysfunction, dry mouth and dental problems. When patients progress, few options are available to them. In some of these tumor types, checkpoint inhibitors are being utilized, however only a portion of patients respond, and significant unmet need remains.

We see the treatment of patients with HPV+ tumors not only as an opportunity to serve a population in significant need of new treatment options, but also as a key to unlocking additional tumor types we could potentially treat. HPV+ cancers are a well-studied cancer type. In particular, HPV+ tumors in patients that are HLA-A*02+ have been extensively researched, with many known biomarkers that can aid in assessing therapeutic activity and monitoring patients’ immune systems and tumors. HLA-A*02+ patients comprise approximately 30% to 50% of the Caucasian population in the United States. We are enrolling patients with various HPV+ tumors who are HLA-A*02+ in our Phase 1 clinical trial of SQZ-PBMC-HPV to allow us to draw on this knowledge in evaluating the activity of SQZ-PBMC-HPV.

Our SQZ APCs are not inherently HLA-restricted and our eAPCs, which are based on an mRNA cargo, are designed to be agnostic to patient HLA type.

We selected our first target antigen, HPV16 E6/E7, to develop SQZ-PBMC-HPV to treat HPV16+ cancers. E6 and E7 are oncoproteins found in HPV16+ tumors. E6 and E7 are highly expressed in tumor cells, absent in normal cells, and are thought to be the cancer drivers in HPV16+ tumors, which we believe make them ideal antigens for use as targets of tumor-directed active immunization. By administering SQZ-PBMC-HPV to activate CD8+ T cells that target HPV E6/E7, we believe we will be able to specifically treat HPV+ tumors.

SQZ-PBMC-HPV: Clinical Development

SQZ-PBMC-HPV is being evaluated in a Phase 1 clinical trial for the treatment of HPV16+ advanced or metastatic solid tumors. In this trial, SQZ-PBMC-HPV is being studied as a monotherapy and in combination with other immune-oncology agents, including cohorts in combination with atezolizumab, as well as ipilimumab and nivolumab. The Phase 1 trial has a flexible design to allow for additional potential combinations. We believe that positive data from this trial could support our development of a new differentiated treatment for patients with HPV16+ tumors, as well as provide support for our SQZ APC platform.

The primary objectives of the trial are to evaluate safety and tolerability, to determine the maximum tolerated dose, if any, or maximum administered dose and to define a dose for the expansion cohort and future studies. Unlike certain other oncology cell therapies, patients in the ongoing Phase 1 clinical trial receive no pre-conditioning and we plan for the treatment to be administered without post-treatment hospitalization. As part of the trial protocol, 24 hours of hospitalization is required for observation purposes only for the first two patients in a newly started cohort. SQZ-PBMC-HPV is administered intravenously via a simple syringe push. The secondary objectives of the trial are to assess antitumor activity in patients with recurrent, locally advanced or metastatic solid tumors and to assess dose manufacturing feasibility. Biomarkers are being measured through both blood and tumor biopsy. These biomarkers include the following:

Peripheral Blood-based Biomarkers

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Tumor Tissue-based Biomarkers

Among other markers of immune responses, we believe CD8 TILs are a potentially relevant pharmacodynamic biomarker. While we cannot predict whether increases in CD8 TILs correlate with clinical benefit in our initial clinical study population, there is evidence supporting this correlation in the scientific literature. Multiple published studies, across tumor types, have demonstrated the strong correlation of increases in CD8 TILs to clinical responses when patients are treated with immunotherapies. Scientific literature also indicates that CD8 TILs are a powerful prognostic indicator for multiple tumor types. With strong support of the scientific literature and industry observations, we believe that demonstrating an increase in CD8 TIL responses in tumor biopsies from patients who are on study, relative to baseline, would be a meaningful indicator of therapeutic activity for SQZ-PBMC-HPV, especially in light of these patients’ immune status and advanced disease, with many patients on trial having progressed on multiple previous therapies, oftentimes including immune checkpoint inhibitors. An additional biomarker that we are measuring is granzyme B, or GZMB, positivity of cells. GZMB is expressed in T cells that have been activated or stimulated to become cytotoxic and can be an indicator of killing activity.

The Phase 1 clinical trial is designed to test multiple monotherapy doses and regimens. The first cohorts include:

As of December 31, 2020, 12 patients with advanced metastatic disease have been dosed across these monotherapy cohorts; three in Cohort 1, five in Cohort 2, and four in Cohort 3. There have been no DLTs observed. One patient in Cohort 1 experienced grade 2 cytokine release syndrome, or CRS, which was self-limiting and a grade 2 infusion reaction, both of which were deemed treatment-related. The grade 2 CRS was classified as a serious adverse event due to the investigator admitting the patient to the hospital to observe the CRS. We have not seen any grade 3 or higher treatment-related adverse events. We believe that these safety data could enable transitioning to earlier lines of therapy. All doses in the trial have been manufactured in under 24 hours and each patient had successful manufacturing of their SQZ APCs.

We are encouraged by the safety data and manufacturing we have seen so far in the trial, as well as the initial biomarker data from the low-dose cohort, which showed some early signs of intratumoral immune activity in certain patients. All three patients had progressed on prior checkpoint inhibitor therapy. The initial biomarker data from the three patients in the low-dose cohort, based on paired tumor biopsies at baseline and four weeks on treatment, is shown below:

For the three patients evaluable for CD8 TIL analysis in Cohort 2, the biomarker data were consistent with that seen in Cohort 1. We expect to present comprehensive biomarker data from patients across the monotherapy cohorts at a scientific conference in mid-2021.

The total number of patients we will enroll in the trial will depend on safety and observed immunogenic effects. We may enroll up to a total of 200 patients and we have the ability to open expansion cohorts to further assess the antitumor activity of SQZ-PBMC-HPV as monotherapy as well as add multiple combination cohorts.

SQZ-PBMC-HPV: Preclinical Studies

We have conducted preclinical studies that support our Phase 1 clinical trial. Our lead product candidate, SQZ-PBMC-HPV, relies on the body’s immune system for its biological activity, specifically to interact with a patient’s CD8+ T cells. For preclinical mouse studies, human cells cannot be used as they would be rejected by the mouse’s immune system. We created a mouse SQZ-APC analogue that is comparable to our human SQZ-APC product candidate. This same analogue is used in all of our preclinical mouse studies. Also, in these studies we often

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compare SQZ to cross-presentation. In order to achieve cross presentation in our preclinical studies, the cells are incubated with antigen which results in endocytosis. The engulfed material is presented on MHC-II and cross-presentation results in a small amount of antigen to be presented on MHC-I.

In a preclinical study, we inoculated 35 mice with HPV+ tumors. After 10 days of tumor growth, we dosed 20 mice with inactive control and 15 mice with SQZ-PBMC-HPV. We observed that at Day 32 the mice dosed with the SQZ-PBMC-HPV had low tumor volume or had their tumors cleared with an average tumor volume of less than 80 mm³, while mice treated with inactive control had an average tumor volume over 1,300 mm³. This data is depicted in the graph below.

Effect of Therapeutic Treatment with SQZ-PBMC-HPV on Tumor Regression in Mice

In a separate preclinical study, we inoculated 28 mice with HPV+ tumors. After 18 days of tumor growth, we administered SQZ-PBMC-HPV to 14 mice and inactive control to 14 mice. At Day 28, the tumors in the SQZ-PBMC-HPV treated mice began to regress, at which point we assessed the T cell activity inside the tumors. For 7 mice in each group, we measured the TILs in these tumors by measuring the percentage of live cells that were immune cells, which we identified by the immune-cell marker CD45. As shown in the graph below, we observed an average of 29% of the live cells were TILs for the mice dosed with SQZ-PBMC-HPV, as compared to approximately 6% of the live cells in the control group. Of these TILs, as shown in the graph below, we assessed that an average of about 25% of the TILs for the treated mice were CD8+ T cells, as compared to an average of about 5% in the control group. In addition, as shown in the graph below, of the CD8+ T cells that gathered in the tumor, we assessed that over 80% of those cells were specific to HPV antigens in the mice treated with SQZ-PBMC-HPV, as compared to less than 9% in the control group. We believe these data show that SQZ-PBMC-HPV induces antigen-specific CD8+ T cells that home to the tumor effectively and exhibit anti-tumor activity.

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Effect of SQZ-PBMC-HPV on HPV-Specific T Cell Infiltration in Mice

In an additional tumor study of SQZ-PBMC-HPV in mice shown below, we measured the increase of CD8+ T cells and E7-specific CD8+ T cells in the tumor. We observed that mice treated with SQZ-PBMC-HPV had 21 times the number of CD8+ T-cells in the tumor when compared to mice receiving inactive control. In addition, mice treated with SQZ-PBMC-HPV had 524 times the number of E7 specific CD8+ T cells in the tumor when compared to mice receiving inactive control.

CD8+ T Cells and HPV-Specific CD8+ T Cells Increase after SQZ-PBMC-HPV Treatment in Mice Tumors

A commonly observed side effect with current T cell therapies is severe cytokine release syndrome. In our preclinical studies in mice, we measured the cytokines, MCP-1, IFNγ, IL-10, IL-12p70, IL-6 and TNFα. Mice dosed with our SQZ APCs had serum cytokine profiles

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similar to untreated mice. We believe these data further demonstrate that SQZ APCs do not induce a pro-inflammatory cytokine profile and thus support our expectation that they should be well tolerated in the clinic.

We also conducted a preclinical study to assess the capabilities of the SQZ-PBMC-HPV to prophylactically prevent tumor growth. We administered SQZ-PBMC-HPV at Day -14 and Day -7 to 15 mice and inactive control to 15 mice prior to inoculating them with HPV+ tumor cells on Day 0. As shown in the graph below, we observed that the 15 mice prophylactically dosed with SQZ-PBMC-HPV cleared the tumor cells and did not show any tumor growth. In contrast, the 15 mice that received inactive control showed tumor growth that averaged nearly 1500 mm³ in volume by Day 30.

Effect of Prophylactic Vaccination with SQZ-PBMC-HPV on Tumor Growth in Mice

We tested for evidence of immunological memory in the prophylactically treated mice by re-injecting these mice with additional tumor cells. As shown in the graph below, 60 days following initial treatment with SQZ-PBMC-HPV, none of the prophylactically treated mice showed evidence of new tumor growth when re-challenged, suggesting that SQZ-PBMC-HPV triggered the development of memory T cells against HPV+ tumors and suppressed recurrence of these tumors.

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Re-Challenge Experiment: Effect on New Tumor Growth in Prophylactically Vaccinated SQZ-PBMC-HPV

Mice 60 Days after Treatment

We have evaluated in preclinical studies how SQZ APCs perform therapeutically in comparison to a peptide-based vaccine, benchmarking their capabilities against a well-established cancer vaccine strategy used in multiple clinical trials. In this preclinical study, we dosed 15 mice with SQZ APCs, 15 with peptide vaccine and 30 with inactive control at Day 16 following injection with tumor cells. At Day 28, the tumors in the SQZ APC-treated mice began to regress, while the inactive control and the peptide vaccine group continued to grow. At this time point we assessed the activity within the tumors, taking TIL measurements. We observed that the tumors of SQZ APC-treated mice were made up of an average of 47% immune cells, as compared to only 20% in the peptide vaccine treated mice, and 9% in the inactive control, as measured by CD45+ cells. Of those immune cells, for the SQZ APC-treated mice, an average of 33% of the immune cells were CD8+ T cells, as compared to only 14% in the peptide vaccine-treated mice, and 4% in the inactive control mice. Of those CD8+ T cells, an average of 87% of them were HPV specific for the SQZ-treated mice, compared to only 33% in the peptide vaccine-treated mice and only 2% for the inactive control. In these experiments, the peptide vaccine contained ~15,000 times more antigen than the SQZ APCs, which we believe further highlights the potential potency of the SQZ APC platform relative to alternative vaccine modalities.

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Anti-Tumor and Infiltration Activity of SQZ-PBMC-HPV and Traditional Vaccine Approaches

We conducted additional preclinical studies in mice to assess the dose-level and boosting effect on anti-tumor activity. We observed both a dose effect shown by the magnitude of the E7 specific CD8+ T cell response being developed in the live cell dose, and a boosting effect shown by additional immunizations increasing the magnitude of E7 specific CD8+ T cell responses.

We have conducted studies of SQZ-PBMC-HPV in combination with other immune-oncology agents in mice. A portion of these studies evaluated the combinations of SQZ-PBMC-HPV with a novel PD1-IL2v bi-specific antibody, under development by our partner Roche, that is designed to bind to PD-1+ T cells and stimulate them with IL2. Data from these studies were presented at SITC in November 2020. This compound aims to enhance endogenous expansion and activity of T cells that express PD-1. We believe this compound could enhance the specific T cells SQZ-PBMC-HPV is able to elicit.

In a study in the TC-1 tumor model we allowed the tumors to progress for 14 days before treatment to model a challenging later-stage tumor. Twenty-four mice remained untreated. On day 14, 24 mice were treated with SQZ-PBMC-HPV. On day 21, half of the mice that were treated with SQZ-PBMC-HPV and 12 of the untreated mice began a weekly regimen of PD1-IL2v. Two other groups in the study assessed a different novel compound and are not included in the data below, accounting for 24 mice. The data below show the tumor growth in untreated mice, PD1-IL2v alone treated mice, SQZ-PBMC-HPV alone treated mice, and PD1-IL2v SQZ-PBMC-HPV combination treated mice. The surviving mice were followed to day 84. All of the mice in the untreated group and the PD1-IL2v group alone had grown tumors and had died by 40 days earlier in the study. In the SQZ-PBMC-HPV alone group 17% of mice remained tumor free and 100% of the mice that received the combination of SQZ-PBMC-HPV and PD1-IL2v were tumor free.

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Anti-tumor Activity of SQZ-PBMC-HPV and PD1-IL2v as Monotherapies and in Combination

In an additional study of SQZ-PBMC-HPV in combination with PD1-IL2v in the TC-1 tumor model, 20 mice were implanted with tumors. On day 14,10 mice were immunized with SQZ-PBMC-HPV. On day 21, 5 mice that had received SQZ-PBMC-HPV and 5 mice who had not were given PD1-IL2v. On day 24 tumor infiltrating lymphocytes were isolated from the tumors and an analysis of the CD8 T cells in the tumors was conducted. The average number of antigen-specific CD8 T cells per mg of tumor in the untreated mice was 34, in PD1-IL2v alone treated mice the average was 42, in SQZ-PBMC-HPV alone treated mice the average was 16,488, and, in the mice that received the combination of the two the average was 60,571. The combination cohort show an over 1,400 times increase in HPV-specific CD8 TILs from PD1-IL2v alone, over 1,700 from untreated mice, and over three times the increase of SQZ-PBMC-HPV alone.

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HPV-Specific CD8+ TILs after Treatment with SQZ-PBMC-HPV and PD1-IL2v as Monotherapies and in Combination as Compared to No Treatment

We have also conducted in vitro preclinical studies to evaluate the activity of SQZ-PBMC-HPV in human cells. We cultured SQZ-PBMC-HPV cells with E7-specific responder cells and measured IFNγ as a surrogate for activity. As shown in the graphs below, we observed an average of more than seven times the amount of IFNγ secretion from the cell lines containing SQZ-PBMC-HPV compared to unprocessed PBMCs. We also evaluated activity in all of the constituent cell types of SQZ-PBMC-HPV. As shown in the graph below, we observed that every cell type showed a functional response as APCs and lead to T cell activation as measured by IFNγ secretion.

In Vitro Functional Responses of SQZ-PBMC-HPV and its Cellular Constituents

Additional Oncology Indications: Targeted Oncology Opportunities Beyond HPV+ Tumors

We believe our SQZ APCs have the potential to be broadly applicable across cancer types in a “plug-and-play” manner by allowing us to swap antigens based on the desired indication. We intend to apply the insights gained from the development of our first product candidate to expand the application of our SQZ APCs to a broad range of cancers, using both defined-antigen and personalized-antigen approaches.

We consider antigen categories based on their immunogenicity, which determines how difficult it will be to create an immune response, with the most immunogenic antigens being the easiest and the least immunogenic being the most difficult (as shown below).

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HPV is a well-studied antigen with well-defined biomarkers. Point mutations, like KRAS mutants, are considered to be more difficult to target with a specific immune response. We have shown in preclinical human in vitro systems the ability of SQZ APCs to elicit immune responses for both highly immunogenic (HPV) and less immunogenic (mutant KRAS) antigens, as shown in the graphs below.

SQZ Showed Immune Responses Across Antigen Types Including HPV and KRAS

Targeting of KRAS protein by small molecule inhibitors in a mutant-specific manner has been historically challenging. Recently, selective inhibitors of certain KRAS mutations, namely G12C, have demonstrated encouraging preliminary anti-tumor effects, providing clinical validation for targeting mutant KRAS in cancer. However, the majority of KRAS mutations remain out of reach for small molecule inhibitors. In preclinical studies, we have been able to elicit responses to KRAS G12D and G12V mutations, which represent over 50% of KRAS mutations, four times that of G12C. There are approximately 100,000 patients per year in the United States with KRAS G12D and G12V mutations across multiple tumor types, including pancreatic, colorectal and some lung cancers.

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In preclinical experiments, we squeezed KRAS G12D and KRAS G12V antigens into two sets of human donor cells and measured the responses by culturing with antigen-specific responder CD8+ T cells and measuring IFNγ as a surrogate for activity. In both studies, we observed antigen-specific activation of CD8+ T cells in quantities more robust than control. The data below show that when cells squeezed with KRAS G12D antigen are compared to those squeezed with HPV or wildtype KRAS, the KRAS G12D SQZ cells activated KRAS G12D specific CD8+ T cells ten times more effectively than the SQZ HPV cells, which served as an active control. In the G12V study, they were over 22 times more effective.

SQZ APCs Squeezed with KRas G12D or G12V Elicit Functional CD8 T Cell Responses

Based on these results, we believe SQZ APCs have significant potential in HPV+, KRAS mutant cancers, and other patient populations in a targeted manner.

Next Generation SQZ APCs: eAPCs and HLA Agnostic Cargo

We are encouraged by initial observations and progress in the ongoing Phase 1 trial of SQZ-PBMC-HPV in HPV+ tumors. Our eAPC program is designed to build on this progress by leveraging the cargo flexibility of the Cell Squeeze technology to create next generation products. There are multiple signals that contribute to effective CD8+ T cell activation. Signal 1 is the presentation of antigen sequences on MHC-I on the APC to the TCR of the CD8+ T cell. Signal 2 is costimulatory surface receptors on the APC that interact with counterparts on the T cell surface. Signal 3 is secreted cytokines that can modulate T cell activation states. We are designing our eAPCs to potentially drive more powerful immune stimulation by incorporating additional signal 2 and signal 3 elements by delivering additional mRNA cargos. This includes potential combinations of signals such as CD70, CD86, IL-2, IL-12, IFNγ, among others. In addition, eAPCs use the full E6 and E7 proteins as the antigen source by delivering mRNA sequences that code for the desired antigens instead of synthetic long peptides. This may ultimately eliminate existing HLA restrictions, enhance presentation of multiple CD8 and CD4 epitopes, and broaden the addressable population by 2-3 times the number of patients.

By directly encoding costimulatory signals and cytokines into the APC, this approach potentially enables us to incorporate critical functionality of desirable combination drugs, such as next generation IL2 drugs, directly into the APC. Moreover, by restricting the availability of the cytokine or costimulatory molecule to the APC itself we believe we can potentially reduce toxicity associated with systemic exposure to potent molecules such as IL2 and IL12 while otherwise retaining the ability of antigen-specific T cells to benefit from their stimulation.

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The eAPC platform advancements would be potentially applicable across future oncology and infectious disease products. We plan to present preclinical data from our next-generation SQZ APCs at a scientific meeting in the first half of 2021 and plan to submit an IND for this program to the FDA by the end of 2021.

We have conducted preclinical experiments evaluating SQZ eAPCs with different cargos and their ability to drive functional enhancements. In one study, we squeezed human-donor PBMCs simultaneously with 4 cargos: an antigen encoding mRNA, CD86 mRNA, membrane bound IL-2 mRNA (mbIL-2), and membrane bound IL-12 mRNA (mbIL-12). One day later the cells were stained with markers for each intracellular cytokine. Less than 2% of control cells express any of the cytokines. An average of over 88% of eAPCs cells were positive for CD86 markers, over 74% for IL-2 markers, and over 75% for IL-12 markers.

SQZ eAPC Expressed Added Functional Enhancement of CD86, IL-2, and IL-12

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SQZ APCs for Infectious Diseases

As with SQZ APCs for oncology, our platform in infectious diseases has the potential to create rapid and powerful therapeutic vaccines that induce specific endogenous CD8+ T cells to drive a targeted immune response against chronic and acute infectious diseases in both prophylactic and therapeutic patient settings.  

Increased pathogen-specific CD8+ T cell activity can be associated with improved patient outcomes for some infectious diseases. For example, the ability to clear HBV infection has been associated with the presence of a strong virus-specific T cell response. Robust CD4+ T cell and CD8+ T cell responses are present in patients with resolved HBV infections, while in patients with chronic HBV infection, the HBV-specific T cell response is weak. Increased levels of HBcAg-specific CD8+ T cells is correlated with lower detectable levels of the HBV viral genome. Additionally, HIV patients that have active CD8+ T cells may be able to control their disease to the point where they are non-symptomatic and cannot transmit. These patients are often referred to as elite controllers. Elite controllers of HIV without disease progression have elevated HIV-specific CD8+ T cell titers.

Although HIV treatments have been in development for decades and anti-retroviral drugs have made strides for HIV, HIV/AIDS is still a leading cause of death in low-income countries. Current therapies have been hampered by drug toxicities and immune-deficiency complications which have limited their ability to control the disease in the long term. Other chronic infections also face therapeutic shortcomings. For example, HBV can lead to chronic infection, severe liver damage, and even cancer. Antivirals and interferon injections are current standard of care and used over a patient’s lifetime, but many patients advance to needing liver transplants. In addition to these known diseases in need of targeted solutions, pandemics like Ebola, Swine Flu, SARS and COVID-19 have highlighted the need for a vaccine system that can rapidly respond to new pathogens. Even prior to the recent COVID-19 impact, the CDC estimated that as many as 56,000 people die from the flu or flu-like illness in the United States each year.

Infectious diseases represent large patient populations with significant unmet medical need. Our first indication in infectious disease, chronic HBV, has the potential to impact the more than 240 million people chronically infected worldwide. Two billion people have been infected with HBV and over 880,000 people die each year due to HBV-associated liver conditions, such as cirrhosis and hepatocellular carcinoma. Chronic hepatitis B infection causes almost 40% of cases of hepatocellular carcinoma, which is the second leading cause of cancer-related mortality worldwide. Although current therapies improve patient outcomes, risk of developing hepatocellular carcinoma remains elevated. According to the CDC, as of 2016, 862,000 patients in the United States were reported to be HBV positive, with over 3,000 new cases every year. Other chronic infections also face shortcomings in treatment. Significant advances have been made in the development of effective HIV treatments that allow people living with HIV to suppress their virus to undetectable levels. However, HIV antiviral therapies are life-long therapeutics and could cause a significant emotional and physical damage to people living with HIV. To address the burdens of life-long treatment, a finite treatment may be essential towards improving patient’s quality of life. Over 1 million people in the US are living with HIV as of 2016 with over 35,000 new diagnoses each year.

In the case of certain high-risk patients and emerging pandemics, the capabilities of SQZ APCs as both a prophylactic and a therapeutic may provide a unique opportunity due to their potential production speed and ability to generate antigen specific CD8+ T cell responses.

We have been assessing our ability to elicit immune response with specific infectious disease model antigens and have observed SQZ APCs’ ability to generate anti-viral responses against multiple antigens, including HBV, HPV, CMV, and SIV, the non-human primate form of HIV. We are currently conducting additional indication-specific studies to support our first IND submission in chronic HBV. We plan to submit an IND for this program to the FDA for the treatment of HBV in 2022.

In a study to assess SQZ APCs ability to induce HBV-specific CD8 T cells responses, we generated SQZ APCs by delivering HbsAg mRNA. As a control, human PBMCs were squeezed with no cargo, an “empty squeeze”. The APCs and control cells were co-cultured with HBsAg responder cells and HBV-specific CD8 T cell activation was measured with IFNγ ELISpot. The SQZ APCs generated with HBsAg mRNA were observed to be approximately 6 times as potent in activating T cells than the empty squeeze APCs. These data demonstrated the ability of SQZ APC to elicit specific CD8 T cell responses against HBV.

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PBMCs Squeezed with HBV mRNA (HBsAg) Elicited Specific CD8 T Cell Responses

To illustrate our potential across disease antigens and patient HLA types, in an experiment with CMV antigen, we squeezed human HLA-A2+HLA-B35+ cells with two synthetic long peptides, or SLPs, containing sequences derived from CMV pp65. One SLP (pp65116-140) contained the HLA-B35 restricted epitope, and the other contained the HLA-A2 restricted epitope. Cells were squeezed with either the A2 SLP alone, B35 SLP alone or both. Following squeezing, the cells were incubated with HLA-B35 reactive CD8+ T cells or HLA-A2, reactive CD8+ T cells. After ~16-18 hours, IFNγ was measured to assess the activation of the CD8+ T cells. The SQZ groups in these studies elicited responses from 4-8 times higher than cross-presented cells. These data also show the ability of SQZ to insert multiple antigens and elicit robust, specific responses to both.

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Cells Squeezed with CMV Antigens Elicited Specific CD8+ T Cell Responses

We also conducted an experiment with SIV antigen in which CD8+ T cells were isolated via negative selection from the PBMCs of SIV-infected CM9-reactive rhesus macaques and frozen. Freshly isolated rhesus macaque PBMCs were squeezed with SIV CM9 SLP. The squeezed group elicited an IFNγ response that was ~10-fold above background.

SQZ APCs Engineered with SIV Antigen Elicited Immune Response

To test for the flu virus and demonstrate flexibility across peptide or mRNA-based cargo, we conducted a study using M1 mRNA as the influenza cargo. Human PBMCs from an HLA-A2+ donor were squeezed with mRNA encoding full-length M1 protein derived from Influenza A virus (IAV). PBMCs were then co-cultured with HLA-A2, M1-reactive CD8+ T cells. After 16 to 20 hours, IFNγ was measured to assess the activation of the CD8+ T cells. The SQZ group elicited an IFNγ response that was ~10-fold above background.

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PBMCs Squeezed with Flu-Associated mRNA Elicited Specific CD8 T Cell Responses

We believe the SQZ APC approach to infectious diseases could offer a more lasting solution as both a prophylactic and therapeutic treatment. Additionally, through the use of conserved viral components as cargo, SQZ APCs could potentially protect against and treat virus with high mutation rates.

Our effort to rapidly develop a new vaccine would be further supported by our ongoing development of a point-of-care solution to manufacture the SQZ PBMC product using a fully closed, automated system suitable for on-site cell therapy production. This decentralized manufacturing approach could enable rapid access to a cell therapy intervention. For therapeutic intervention, the point-of-care implementation could reduce treatment complexity and cost, thereby enhancing accessibility. For rapid response, point of care systems could provide a fast means of reacting to a pandemic. Point of care implementation eliminates the need for a complex shipping/tracking infrastructure and may also save time and cost by simplifying the burdensome release testing typical of centralized manufacturing.

SQZ Antigen Carriers: Engineering RBCs to Direct Immune Responses

In our SQZ AAC and SQZ TAC platforms, we utilize the Cell Squeeze technology to squeeze RBCs to create SQZ Antigen Carriers, that contain antigen and aim to guide a specific immune response. Our process causes the Antigen Carriers to resemble aged RBCs. Once injected into the patient, these engineered Antigen Carriers are cleared by the same process as aged RBCs, acting as “Trojan horses” to deliver high quantities of antigen to endogenous professional antigen presenting cells.

In general, the cargo loaded into the SQZ Antigen Carriers dictates the type of subsequent immune response. SQZ Activating Antigen Carriers (SQZ AACs) loaded with antigen cargo and adjuvant aim to activate an immune response against the antigen. On the other hand, SQZ Tolerizing Antigen Carriers (SQZ TACs) loaded with antigen cargo (no adjuvant) aim to tolerize the immune response to that antigen.

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SQZ Activating Antigen Carriers (AAC) Platform

Our SQZ AAC platform is designed to induce robust antigen presentation in vivo, following a similar logic of targeting antigen presentation as our SQZ APC platform, which is designed to create APCs ex vivo. To create SQZ AACs, we squeeze RBCs with an antigen and activating adjuvant. The process is tuned to make the engineered SQZ AACs appear aged. These SQZ AACs are designed to be rapidly taken up by professional antigen presenting cells once administered to patients in a natural process similar to destroying aged RBCs in the body known as eryptosis. Through this process we use SQZ AACs as a “Trojan horse” to deliver the antigen and activation factors to the professional, endogenous antigen presenting cells. Professional antigen presenting cells are specialized for MHC Class I and MHC Class II presentation of antigens to CD8+ and CD4+ T cells. These professional antigen presenting cells engulf the SQZ AACs and, through cross-presentation, present the antigen on MHC Class I, priming a potent anti-tumor CD8+ T cell response. We believe we will be able to elicit greater CD8+ T cell activation than current cell therapies or vaccines, which also use cross presentation, because we are able to load our SQZ AACs with more antigen and, through eryptosis, have them specifically targeted to and engulfed by the more powerful professional antigen presenting cells.

Our current pipeline of products being developed using the AAC platform is depicted below.

SQZ AACs for Oncology

Our first SQZ AAC IND in oncology for HPV+ tumors was cleared by the FDA in January 2021. We are also developing additional product candidates for the treatment of other solid tumors. For our initial AACs, including SQZ-AAC-HPV, we are using the patient’s RBCs as the originating cells. We plan to follow HPV with additional indications, including SQZ AACs for KRAS mutant tumors, for which we plan to file an IND with the FDA in 2022. In the future, we intend to explore the development of allogeneic AACs using healthy donor RBCs.

SQZ-AAC-HPV relies on the body’s immune system for its biological activity. For our preclinical mouse studies, human cells cannot be used as they would be rejected by the mouse’s immune system. We have created a mouse-cell analogue that is comparable to our human product candidate. We have used this analogue in all of our preclinical studies involving mice that are discussed.

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Key to our process is the rapid uptake of AACs and their engulfment by endogenous antigen presenting cells. In a preclinical study, PKH26, a lipophilic, fluorescent membrane dye, was used to label mouse RBCs, before they were squeezed with E7 SLP and an adjuvant to generate PKH26-labeled SQZ-AAC-HPV. Following administration of these fluorescently labeled cells to 3 mice with unprocessed cells and 3 mice with SQZ-AAC-HPV, the presence of unprocessed RBCs and AACs in the blood was measured at various intervals (0, 0.25, 0.5, 1, 4, and 24 hours) using flow cytometry. We observed that all AACs were cleared from the blood within one hour, as shown in the graph below, suggesting rapid uptake.

Clearance of SQZ AACs from Circulation in Mice

In another preclinical study, we sought to demonstrate that SQZ AACs are responsible for the activation, rather than the adjuvant alone or peptide alone that we squeezed into the cells. In this study, we squeezed RBCs with E7 peptide as the antigen with an activating adjuvant to generate AACs. We also created cells squeezed only with E7 peptide, and cells squeezed only with the adjuvant. We also had an inactive control group. Five mice in each group were dosed and monitored for their endogenous responses by measuring the secretion of IFNγ, as displayed by percentage of IFNγ positive CD44hi marked T cells. The below data are seven days after treatment. We believe these data showed that SQZ AACs require both an antigen and adjuvant to elicit a T cell response.

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Adjuvant and Peptide Squeezed Together Elicited Immune Response

In addition, we have also conducted preclinical studies in mice immunized with our SQZ AACs in which we observed robust proliferation of both CD8+ and CD4 T cells.

Lead SQZ AAC Product Candidate: SQZ-AAC-HPV

We believe the large patient population, significant unmet need, and the validated nature of HPV make HPV+ cancers an attractive target for our lead SQZ AAC product candidate. Our first product candidate using our SQZ AAC platform, SQZ-AAC-HPV, is derived from squeezing defined HPV+ tumor antigens and an adjuvant into a patient’s own RBCs. SQZ-AAC-HPV is designed to be engulfed by the patient’s endogenous, professional antigen presenting cells, causing activation of HPV+-tumor-targeted CD8+ T cells. The FDA cleared our IND for this program in January 2021.

SQZ-AAC-HPV: Clinical Development

We plan to evaluate SQZ-AAC-HPV in a Phase 1 clinical trial for the treatment of HPV16+ advanced or metastatic solid tumors in monotherapy and in combinations with other immune-oncology agents. Like our SQZ-PBMC-HPV trial, this study has a flexible design to allow for expansion of cohorts where there is potential for beneficial impact for patients, addition of multiple potential dosing cohorts and combination cohorts.

The primary objectives of the trial are to evaluate safety and tolerability and to determine a dose for the expansion cohort and future studies. Patients in the trial will not require pre-conditioning and we plan for SQZ-AAC-HPV to be administered without post-treatment hospitalization. As part of the trial protocol, 24 hours of hospitalization will be required for observation purposes only for the first two patients in a newly started cohort. The secondary objective of the trial is to assess antitumor activity in patients with recurrent, locally advanced or metastatic solid tumors through biomarkers from both blood and tumor as well as imaging. We expect data from this trial will inform our translation activities for SQZ-AAC-KRAS given the similarities in manufacturing and immunological mechanism.

SQZ-AAC-HPV: Preclinical Studies

Similar to our SQZ-APC platform, our preclinical work has demonstrated robust immune responses with SQZ AACs across the aforementioned quantity, quality, and specificity metrics. The data detailed below illustrate the potent anti-tumor activity of SQZ AACs in murine HPV tumor models.

In a preclinical study, we prophylactically dosed 10 mice with SQZ-AAC-HPV and 10 mice with inactive control. We then injected the mice with tumor cells. As shown in the graph below, on Day 28, we observed that all 10 mice dosed with SQZ-AAC-HPV cleared the tumor cells and showed no signs of tumor growth, as compared to the mice that received inactive control, which showed an average tumor volume of 900 mm³. In an additional prophylactic study where mice were given SQZ-AAC-HPV on Day -9 and Day -7 before tumor injection, we re-challenged the mice in which we observed no tumor growth on Day 62 with additional tumor cells and observed slowed tumor growth, suggesting generation of a memory response in the SQZ-AAC-HPV treated mice.

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Effect on Tumor Growth in Prophylactically Treated SQZ-AAC-HPV Mice

In another preclinical study, we injected mice with tumor cells to simulate the therapeutic setting. Ten days after injection, we dosed 10 mice with SQZ-AAC-HPV and 10 mice with inactive control. Two days later, we dosed the mice that received SQZ-AAC-HPV with a second dose. Each dose was 250 million cells. As shown in the graph below, we observed that mice dosed with SQZ-AAC-HPV showed reduced tumor growth at Day 28 with average tumor volumes below 60 mm³, as compared to an average tumor volume over 1000 mm³ for untreated mice.

Effect of Therapeutic Treatment with SQZ-AAC-HPV on Tumor Growth in Mice

In a separate preclinical study, we evaluated the activity of the SQZ-AAC-HPV in mouse tumors. We dosed 10 mice with SQZ-AAC-HPV and 5 mice with inactive control. At seven days after treatment with SQZ AACs, we measured the TILs in 5 of the SQZ-AAC-HPV mice. At this timepoint, we observed 15 times the number of CD8+ T cells in the tumor compared to control in these 5 mice. On average, 80% of the CD8+ TILs in the treated mice were specific to E7, the HPV-associated antigen; therefore, the SQZ-AAC-HPV treated tumors contained over 900 times more HPV specific CD8+ T cells compared to control when evaluated at Day 7.

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CD8+ T Cell and HPV-Specific CD8+ T Cell Increased after SQZ-AAC-HPV Treatment in Mice Tumors

Future Development

We believe our SQZ AACs have the potential to be broadly applicable across cancer types and we are currently conducting preclinical studies to evaluate mutant KRAS, an established oncogene that includes some pancreatic, colorectal, lung and many other tumor types for our second SQZ AAC clinical program. KRAS-associated cancers represent ~30% of all cancers, and over 90% of all pancreatic cancers. We plan to target mutant KRAS G12D and G12V as the first targets in KRAS.

We also intend to explore the development of allogeneic SQZ AACs using healthy donor RBCs. With the abilities of the platform to elicit powerful T cell responses, we believe SQZ AACs may also be synergistic with immune therapies as combinations. Additionally, we believe this platform could also have applicability in infectious diseases as with our APC platform.

SQZ Tolerizing Antigen Carrier (TAC) Platform

Our SQZ TAC platform uses RBCs as a “Trojan horse” to deliver the antigen to endogenous, professional antigen presenting cells. To create our SQZ TACs, we squeeze RBCs with antigen and engineer the SQZ TACs so that they appear aged. The TACs are then administered to patients and are rapidly taken up by professional antigen presenting cells in the natural process similar to destroying aged RBCs. Our SQZ TAC platform omits adjuvant in order to leverage the default tolerogenic nature of this process.

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Our pipeline of product candidates based on our SQZ TAC platform is shown below.

 **The JDRF T1D Fund has provided equity investments to help progress the T1D program.

SQZ TACs for Immune Tolerance

We are developing our immune tolerance program to selectively suppress unwanted immune responses. These responses can occur as a result of autoimmune diseases, such as T1D and celiac disease, where the body attacks its own tissues and organs, or in the form of unwanted reactions to therapeutics, where the body mounts an immune response against a drug, such as auto antibodies associated with gene therapy and other biologics. We plan to select an indication for our first application with the TAC platform and conduct IND-enabling studies in 2021.

Broad immunosuppression is the current standard of care for patients who suffer from autoimmune diseases or experience adverse reactions to their life-saving drugs. Current treatments are often associated with long-term side effects, making patients more susceptible to certain types of infections and cancers. These patients would benefit from a therapy that is able to modulate only the undesired immune responses without influencing broader immune functions. With our ability to engineer RBCs into antigen carriers, we believe we can leverage naturally tolerogenic immune mechanisms to specifically suppress undesired immune responses and overcome challenges to current therapies.

The SQZ TAC platform is potentially applicable to many autoimmune diseases, such as type 1 diabetes and celiac disease, as well as other applications with unwanted immune responses, such as antibody responses against biologics or gene therapy vectors.

Cellular tolerance involves multiple mechanisms that modulate the activity of T cells and induction of suppressor or regulatory T cells (T_regs). SQZ TACs aim to delete or functionally inactivate (anergize) the number of antigen-specific CD8+ and CD4+ T cells that can mount an attack on the target. In addition, SQZ TACs aim to induce or expand antigen-specific T_regs that can selectively suppress immune responses.

In a series of preclinical studies we conducted to measure the frequency and performance of these types of T cells, we observed that SQZ TACs squeezed with OVA reduce the frequency of antigen-specific CD4+ and CD8+ T cells compared to inactive control. In the study shown below, we treated 5 mice with SQZ TACs and 5 with inactive control. There was an average of 0.7% OVA-specific CD8+ T cells in the mice dosed with SQZ TACs as compared to an average of 3% in the control group. A similar observation was made in a separate preclinical study where we measured level and performance of CD4+ T cells after treatment with TACs squeezed with the model antigen OVA. We dosed 5 mice with SQZ TACs and 5 mice with inactive control. As shown in the graphs below, there was an average of 0.9% OVA-specific CD4 T cells in the mice dosed with SQZ TACs as compared to an average of 4.3% in mice dosed with inactive control.

In additional studies, we assessed if we could increase regulatory T cells (T_regs). We dosed 5 mice with SQZ TACs and 5 with inactive control. In these studies, in mice dosed with SQZ TACs, CD4 T cells converted to antigen-specific regulatory T cells three times higher than mice treated with control.

SQZ TACs Effect on CD8+ T Cells, CD4+ T Cells and T Regulatory Cells

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Suppressing CD8 and CD4 T cells is achieved through multiple pathways, including deletion and anergy. Deletion can be measured by assessing levels of apoptosis markers in cells, such as AnnexinV. Anergy, the exhaustion of the T cells and state of unresponsiveness to antigen, causes them to be less effective at immune attack and can be measured by the presence of negative regulators such as PD-1 markers.

In one study OT-I cells, the transgenic CD8+ T cells specific to OVA in mouse models, were transferred into a group of 10 mice and OT-II cells, the transgenic CD4+ T cells specific to OVA in mouse models, were transferred into a second group of 10 mice. Five mice in each group were treated with Ova-specific SQZ TACs (SQZ-TAC-OVA) on Day 1. On Day 5, CD8+ and CD4+ T cells were evaluated for percentage of annexinV+ cells. SQZ-TACs more than doubled the percentage of Ova-specific apoptotic CD8 and CD4 T cells. Additionally, when measuring endogenous T cells to assess if the TACs are acting on antigen specific T cells or broadly, levels of apoptosis of endogenous T cells in the SQZ TAC treated groups were not significantly different than in untreated mice, demonstrating SQZ TACs were able to induce antigen specific T cell deletion.

Impact of SQZ TACs on Apoptosis of CD4+ and CD8+ T Cells

In the same study, on Day 5, antigen-specific CD8+ and CD4+ T cells were evaluated for the presence of PD-1 as a marker of exhaustion in 16 of the mice, 4 in each group. One animal from each group was dropped to keep the groups at the same number when one animal was unevaluable. Over 60% of OVA-specific CD8+ T cells in SQZ TAC-treated mice were exhausted, compared to less than 5% in untreated mice. SQZ TAC treated mice showed an average of over 40% of OVA-Specific CD4+ T cells that showed markers for anergy, compared to less than 5% in the untreated mice. The percentage of PD1+ endogenous CD8+ and CD4+ T cells, after SQZ-TAC-OVA treatment was the same as untreated mice, demonstrating that SQZ TACs did not broadly induce markers of T cell anergy.

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Impact of SQZ TACs on Markers for Anergy of CD4+ and CD8+ T Cells

We believe these data, together with the results from other preclinical studies we have conducted, suggest that SQZ TACs have the potential to decrease the T cells activated against a potential target and reduce their pathological functionality, and increase the number of regulatory T cells. These studies showed specific tolerance across multiple cellular mechanisms.

To determine if SQZ TACs could also impact antibody production, we assessed the ability of SQZ-TACs to prevent the clearance of biologic drugs in vivo and maintain the circulation of a foreign drug in mice. We observed that SQZ TAC treatment was able to prevent the clearance of a foreign material in mice by suppressing antibody production against the foreign material.

SQZ-TAC-T1D

Type 1 diabetes is an autoimmune disease characterized by the inability of the pancreas to produce insulin in response to hyperglycemia because of the death of insulin-producing β islet cells. T1D affects approximately 1.6 million people in the United States. The pathology in the majority of type 1 diabetes cases is thought to be driven by autoimmunity. Newly diagnosed symptomatic T1D patients may have sufficient cell functionality to remain insulin independent if treated soon after diagnosis. We are developing SQZ-TAC-T1D to explore the potential for SQZ TACs loaded with T1D-associated antigens to ameliorate immune activity targeting β islet cells to prevent further destruction of cells.

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We tested SQZ-TACs in an aggressive model of T1D using adoptive transfer of activated BDC2.5 transgenic T cells into NOD.SCID recipient mice. Ten mice were treated with SQZ TACs with T1D-specific antigen, p31, over the course of 4 days. An additional 9 mice were treated with TACs containing an antigen that is not associated with T1D, HEL, modeling a non-specific treatment control. Nine mice were untreated. Blood glucose levels were measured in the mice over the course of 80 days. Mice with two consecutive blood glucose readings over 250 mg/dL were considered diabetic. By day 8 all untreated mice and non-specifically treated mice had developed diabetes. SQZ- TAC-p31 delayed onset of diabetes by 42 to 80 days.

SQZ TACs Delayed Diabetes Onset in Mice

In an additional study using this model, mice were administered two doses of SQZ-TAC-p31 or SQZ-TAC-HEL (non -specific TACs) on either day 0 or day 2. Pancreases were collected on day 15 after adoptive transfer (induction of diabetes) and scored for insulitis by a pathologist measured by marked mononuclear cells and islet cells infiltrate as shown below in the pancreas histograms. Animals that received non-specific treatment (SQZ-TAC-HEL) had marked numbers of mononuclear cell infiltrates with greater than 75% of the islet mass infiltrated, and occasional areas of islet cell degeneration. In contrast, animals treated with SQZ-TAC-p31 had the lowest score for insulitis with minimal to mild mononuclear cell infiltrates and less than 25% islet cell infiltrated.

In a set of studies assessing the frequency of antigen-specific T_reg in the pancreas of mice, mice had their pancreases harvested on Day 8. For each study, BDC2.5+ cells were pooled from groups of mice to reach a base of 10⁶ cells for each data point. T1-D-specific Tregs were measured by Foxp3 positivity of the BDC2.5 cells present. SQZ-TAC-p31 treated mice showed over 5 times the number of TI-D specific T_regs over SQZ-TAC-HEL treated mice.

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Frequency of T1D-Specific T_regs in the Pancreas of SQZ-TAC Treated Mice

We believe these disease model data, together with the results from other preclinical studies we have conducted, suggest that SQZ TACs have the potential to induce tolerance through multiple cellular mechanisms and that the SQZ TAC platform is potentially applicable to many autoimmune diseases and immune reactions.

SQZ-TAC-Biologics

Currently, there is a need for a solution to allow patients to receive as many doses of potentially immunogenic therapies (e.g. recombinant proteins, antibodies, or gene therapy vectors) to gain the full, durable benefit these treatments can provide. AAV vectors, for example, are used to deliver functional genes for gene therapies because they are non-pathogenic and do not integrate into the host genome. It is well documented that some patients build immunity to viral vectors and the transgene product, which limits the ability for patients to receive more than one dose of a gene therapy. In 2021, we and AskBio ended our research collaboration that we had established in 2019 related to the SQZ-TAC-AAV program. We believe that primary prevention of immune responses related to re-dosing potentially immunogenic therapies, including gene therapies, continues to be a potential opportunity for the SQZ TAC platform to impact patients. 

Manufacturing

A significant challenge for existing cell therapies is the time, cost, and complexity of manufacturing. By potentially enabling rapid, cost-effective manufacturing of cell therapies, we believe SQZ technology could dramatically improve the feasibility and accessibility of cell therapies for many indications.

The current clinical SQZ process is a fully closed system that maintains aseptic process conditions. The system utilizes a disposable kit that includes the SQZ chips and incorporates integrity tests on the kit prior to the initiation of the manufacturing process. A SQZ chip has hundreds of parallel constriction channels. SQZ chips are designed to optimize the constriction and other parameters depending on the cell populations being squeezed. Our chips are all designed in-house and manufactured by multiple vendors. Our Cell Squeeze technology and therapeutics are covered by more than 30 patent families.

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We outline our manufacturing advantages as follows:

The process for our SQZ APCs is shown below.

As summarized above, beyond our manufacturing process, a critical part of our ability to rapidly turn around the patient product is the release testing the FDA has accepted as part of our ongoing clinical trial. Because the system is fully closed we are able to reduce environmental and sterility tests to be more rapid and efficient.

All patient lots manufactured as of December 31, 2020 have been manufactured in under 24 hours, yielded multiple doses and every patient had successful manufacturing of their SQZ APCs. The cell viability of the patient lots manufactured varied by 15% or less across all of the patients indicating low inter-patient variability.

We are currently working to automate the additional steps in the process to create a point-of-care system to further reduce the manufacturing time and cost. We are integrating upstream and downstream manufacturing operations with our Cell Squeeze system to create a fully closed, automated system suitable for on-site cell therapy production without a cleanroom. This decentralized manufacturing approach is designed to enable rapid access to a cell-therapy intervention at community sites or field clinics, reduce treatment time from days to hours and improve patient access.

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A prototype of the point-of-care system is in development and we expect it will be ready for initial preclinical testing in the second half of 2021. As with our current system, the point-of-care system will be a part of the manufacturing of cell therapies and we believe it will not be regulated as a device. We plan to work with regulatory authorities on integrating necessary quality testing, ensuring bridging studies for any products that would move to this system and any other potential requirements.

By reducing the burden of high cost and time, we believe we can present cell therapies as a more attractive and accessible treatment approach for physicians and patients. We also see these advantages as the foundation of allowing efficacy and patient need to be the primary factor in the treatment paradigm. We believe that by allowing biology to drive the decision of what therapy to use, and with potentially no cost or additional health or economic consequences, we can ensure patients receive the treatment designed to impart a significant therapeutic benefit. This is a particularly important consideration for implementation in indications outside oncology and/or different geographies and healthcare systems.

Collaboration, Research and License Agreements

Roche Collaboration

In October 2018, we entered into a License and Collaboration Agreement, or the Roche Collaboration Agreement, under which we are collaborating with Hoffman-La Roche Inc. and F. Hoffman-La Roche Ltd., or together, Roche, in the development and commercialization of certain nucleated cell therapy product candidates that incorporate antigens for the treatment of oncologic indications in accordance with mutually agreed upon collaboration plans. The Roche Collaboration Agreement enhanced, replaced and terminated a 2015 collaboration agreement between us and Roche.

We agreed, under the Roche Collaboration Agreement, to collaborate with Roche in the development of a cell therapy for oncologic indications made from PBMCs. The initial mutually selected antigen target is HPV, which is the focus of our ongoing SQZ-PBMC-HPV Phase 1 clinical trial. We also agreed to use commercially reasonable efforts to mutually select additional antigens to develop collaboratively. For each mutually selected antigen (including HPV with respect to SQZ-PBMC-HPV), we are responsible for conducting all preclinical research, and all development activities occurring prior to achieving clinical proof of concept for a product candidate containing the antigen, generally through a Phase 1 clinical trial. With respect to each mutually selected antigen, we granted Roche an option, exercisable after we deliver to Roche a clinical proof-of-concept report for a product candidate containing the antigen, to obtain an exclusive license, under our intellectual property, to research, develop, make, use, import, sell, and otherwise exploit the product candidate worldwide for the treatment of oncologic indications using our SQZ platform and a microfluidic chip. We retain all rights with respect to any product for which Roche does not timely exercise its option, and we may elect to commercialize any such product independently. Following Roche’s exercise of its option for a given product candidate, Roche is then responsible for the further clinical development of that product candidate, unless we exercise our option to exploit the product candidate in the United States, as further described below. Roche granted us an option, exercisable with respect to every alternating mutually selected antigen product for which Roche exercises its own option, beginning with the second, to retain the right under our intellectual property, and to obtain an exclusive license under Roche’s intellectual property, to research, develop, make, use, import, sell and otherwise exploit the antigen product candidate in the United States. If we exercise our option, the parties will mutually determine how responsibility for clinical development will be allocated between them, but Roche has the final say as to which party will run each global clinical study. We own any invention relating solely to a product containing a mutually selected antigen that is developed prior to the exercise of Roche’s option. If Roche exercises its option, Roche owns each subsequently developed invention relating solely to the antigen product candidate unless (a) it is solely related to the SQZ platform or microfluidic chips or is dominated by certain patents that belong to us and are necessary or useful for the practice of our SQZ platform or microfluidic chips, or (b) we exercise our option for the product candidate, in which case we will own such invention in the United States, and Roche will own such invention in all other jurisdictions. The budgeted development costs for these antigens are shared by the parties unless and until (i) Roche exercises its option with respect to a given antigen product candidate, and (ii) we do not exercise our option with respect to that antigen product candidate. In such case, Roche will be responsible for subsequent development costs.

Under the Roche Collaboration Agreement, if we propose an antigen that is not ultimately mutually selected for collaborative development, we may still pursue the development of product candidates containing that antigen. For each such antigen that we select, we may be responsible for conducting all preclinical research, and all development activities occurring prior to achieving a clinical proof of concept for an antigen product candidate containing the antigen. With respect to each such antigen product, Roche grants us an exclusive license under its intellectual property to research, develop, make, use, import, sell, and otherwise exploit the product in the United States. If we achieve a proof of concept for a product candidate containing such antigen, Roche will, for a limited period of time, have the option to obtain an exclusive license under our intellectual property to research, develop, make, use, import, sell, and otherwise exploit the product candidate worldwide (subject to our rights to exploit the product in the United States) for the treatment of oncologic indications using our SQZ platform and a microfluidic chip. We retain all rights with respect to any product candidate for which Roche does not timely exercise its option. Following Roche’s exercise of its option, the parties will mutually determine how responsibility for clinical development will be allocated between them, but Roche has the final say as to which party will run each global clinical study. We own any invention relating solely to a product candidate containing an antigen we select that is developed prior to the exercise of Roche’s option. If Roche exercises its option, we will own in the United States, and Roche will own in all other jurisdictions, each subsequently developed invention relating solely to the antigen product candidate, unless such invention is solely related to the SQZ platform or microfluidic chips or is dominated by certain patents that belong to us and are necessary or useful for the practice of our SQZ platform or microfluidic chips. We are responsible for all

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development costs for such antigen, unless and until Roche exercises its option, in which case the development costs subsequently incurred will be shared by the parties.

If Roche proposes an antigen and it is not ultimately mutually selected for collaborative development, Roche may elect to pursue the development of products containing that antigen. At Roche’s cost, we are responsible for conducting all preclinical research, and all development activities occurring prior to achieving a clinical proof of concept for an antigen product candidate containing such antigen. Roche is responsible for all clinical development after a proof of concept is achieved. Roche owns any invention relating solely to antigen product candidates containing such antigen, unless the invention is solely related to the SQZ platform or microfluidic chips or is dominated by certain patents that belong to us and are necessary or useful for the practice of our SQZ platform or microfluidic chips. Roche is responsible for all of the development costs for product candidates containing such antigens.

Under the Roche Collaboration Agreement, preliminary collaboration plans with defined preclinical goals exist for eAPC development and for product candidates containing tumor cell lysate, or TCL. We are responsible for conducting preclinical research and development activities occurring prior to achieving a clinical proof of concept for each such product. With respect to each TCL product candidate, we granted Roche an option, exercisable after we deliver to Roche a clinical proof-of-concept report for such TCL product candidate, to obtain an exclusive license, under our intellectual property, to research, develop, make, use, import, sell, and otherwise exploit the product candidate worldwide for the treatment of oncologic indications using our SQZ platform and a microfluidic chip. We retain all rights with respect to any product candidate for which Roche does not timely exercise its option. Following Roche’s exercise of its option, Roche is then responsible for the further clinical development of each such product candidate. We own any invention relating solely to a TCL product candidate that is developed prior to the exercise of Roche’s option. If Roche exercises its option, each subsequently developed invention relating solely to a TCL product candidate will be owned by Roche, unless it is solely related to the SQZ platform or microfluidic chips or is dominated by certain patents that belong to us and are necessary or useful for the practice of our SQZ platform or microfluidic chips. Prior to the exercise of Roche’s option for a given tumor lysate product candidate, we will share the budgeted Phase 1 clinical costs of developing that product candidate, with Roche responsible for a mid double-digit percentage of the costs and SQZ responsible for the remainder. After Roche exercises its option, we may in some cases elect to opt out of sharing development costs; in such cases, Roche is thereafter responsible for all development costs incurred after exercising its option with respect to a given tumor lysate product candidate. If we do not timely elect to opt out of sharing development costs incurred after Roche’s option exercise, the costs will be shared, with Roche responsible for a mid double-digit percentage and SQZ responsible for the remainder. We will share certain profits and losses associated with the commercialization of TCL product candidates in the United States with Roche, unless we opt out of the cost sharing.

We own any invention developed under the Roche Collaboration Agreement that relates solely to the SQZ platform or microfluidic chips or is dominated by certain patents that belong to us and are necessary or useful for the practice of our SQZ platform or microfluidic chips. Any invention that does not relate solely to an antigen product candidate or TCL product candidate is owned by the party that invents it; if such invention is invented jointly, it is owned jointly by the parties. Each party may freely practice any jointly owned invention with no obligation to account to the other party.

Under the Roche Collaboration Agreement, Roche paid us an upfront payment of $45 million. We are eligible to receive aggregate milestone payments on a product-by-product basis of up to $1.6 billion upon the achievement of specified milestones, consisting of up to $217.0 million of development milestone payments, up to $240.0 million of regulatory milestone payments and up to $1.2 billion of sales milestone payments. Roche has agreed to pay us yearly tiered royalties based on net sales of antigen and TCL product candidates. For each antigen product candidate for which Roche commercializes outside of the United States, and we commercialize in the United States, Roche will pay us tiered royalties on net sales of the product candidate outside of the United States at rates ranging from a mid single-digit percentage to a mid-teens percentage, depending on net sales of the product candidate. For each such product, we will pay Roche tiered royalties on net sales of such product candidate in the United States at rates ranging from a mid single-digit percentage to a mid-teens percentage, depending on net sales of the product candidate in the United States. For antigen product candidates selected by Roche, rather than mutually, Roche will pay us tiered royalties on worldwide net sales of such product candidate at rates ranging from a mid single-digit percentage to a high single-digit percentage, depending on net sales of the product. For certain antigen product candidates with respect to which Roche commercializes worldwide, Roche will pay us tiered royalties at a rate ranging from a high single-digit percentage to a mid-teens percentage, depending on net sales of the product. No royalties will be due for SQZ antigens for which Roche does not exercise its option. For TCL product candidates, Roche will pay us tiered royalties on the aggregate net sales of all TCL products at rates ranging from either a mid single-digit percentage to a percentage in the low twenties, with the caveat that the rates for sales in the United States may instead range from a low teen percentage to a percentage in the mid twenties, depending on whether and when we opt out of sharing certain profits and costs of commercializing the TCL product candidate in the United States with Roche.

Either party may terminate the Roche Collaboration Agreement (a) in its entirety or on a product-by-product or country-by-country basis if the other party breaches materially and such breach remains uncured for 90 days, or (b) in its entirety for insolvency-related events involving the other party. We may terminate the Roche Collaboration Agreement in its entirety or on a product-by-product or country-by country basis, if Roche or its affiliates or sublicensees commences an action challenging certain patent rights licensed to us and sublicensed to Roche. Roche may terminate the Roche Collaboration Agreement without cause (a) in its entirety or on a product-by-product basis with 60 days’ notice, if Roche is terminating prior to exercising an option under the agreement, (b) on a product-by-product basis with 90 days’ notice, if Roche is terminating after exercising an option under the agreement, (c) on a product-by-product basis or country-by-country basis with 180 days’ notice if Roche is terminating after exercising an option under the agreement, and such notice will become effective on or after the first commercial sale of the product. For any product candidate that is terminated, we may provide a continuation election notice to Roche, and,

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for consideration, obtain from Roche all reasonably requested rights to such terminated product candidate, including the transfer of ownership of all INDs and regulatory approvals, and copies of data and reports relating to the product candidate, among other things.

MIT License Agreement

We exclusively license certain foundational technology from the Massachusetts Institute of Technology, or MIT, pursuant to an Amended and Restated Exclusive Patent License Agreement dated as of December 2, 2015, or the MIT License Agreement. The MIT License Agreement replaced an earlier Exclusive Patent License Agreement dated as of May 10, 2013, which was entered into in connection with the organization of the company. Under the MIT License Agreement, MIT granted us a worldwide, royalty bearing license to develop, make, have made, use, sell, offer to sell, lease, and import products incorporating the patent rights and to develop use, sell, offer to sell and perform processes incorporating the patent rights for all research and therapeutic applications for the term of the MIT License Agreement. Our rights under the license are exclusive in our fields of use, except with respect to (a) MIT and Harvard University (which owns the patent rights jointly with MIT), each of which retain rights for research, teaching and educational purposes on their own behalf and on behalf of all other non-profit research institutions, (b) Howard Hughes Medical Institution, which has an irrevocable, non-exclusive, non-assignable, non-sublicensable, license to use the patent rights for its own research purposes and (c) the federal government, which retains a non-exclusive and non-transferrable license to practice any government-funded invention claimed in the patent rights, as provided by law. We also have the right to grant sublicenses to third parties, subject to written agreements containing similar protections of MIT and certain third-party beneficiaries as contained in the agreement.

We are required to use diligent efforts, or cause our affiliates or sublicensees to use diligent efforts, to develop licensed products, to introduce licensed products and processes into the commercial market and, thereafter, to make licensed products and processes reasonably available to the public. In addition, we are obligated to satisfy certain development and commercialization metrics and provide MIT with periodic progress reports. To date, we have met our diligence obligations under the agreement. For example, our collaboration with Roche and the commencement of our SQZ-PBMC-HPV trial meet clinical milestones under the agreement. After the fifth anniversary, and before the sixth anniversary, of the MIT License Agreement, the parties are obligated to discuss additional diligence obligations to continue the development and commercialization of licensed products and processes.

We are obligated to make certain payments to MIT including an up-front license issue fee, annual maintenance fees, clinical milestone payments, running royalties based on net sales (at a rate in the low single digits), reimbursement of patent costs, and sharing of sublicense income. In June of 2019, we agreed with MIT on a payment schedule for the sharing of certain amounts received by us from Roche. MIT prosecutes and maintains the patent rights in close consultation with us and our intellectual property counsel. We also provide certain indemnifications for liabilities arising from claims related to the exercise of our rights under the agreement.

Upon entering into the MIT License Agreement, we paid a nominal license issue fee. We agreed to pay MIT a nominal annual license maintenance fee for each calendar year. Each year’s annual license maintenance fee may be credited to running royalties due in the same calendar year. We also agreed to pay MIT milestone payments in an aggregate amount of up to $1.8 million per licensed product or process that achieves certain clinical and regulatory milestones. Additionally, we agreed to pay royalties based on net sales of the licensed products or processes, at low single-digit rates that vary depending on whether sales are made in the therapeutic or research field. With respect to each sublicensee, we are obligated to pay MIT royalties equal to the lesser of (a) a low single-digit percentage of the sublicensee’s net sales and (b) 50% of the running royalties owed to us by the sublicensee. We also agreed to pay MIT a percentage in the mid teens of our annual sublicense income (which does not include income from royalties).

The license will remain in effect until the expiration or abandonment of all issued patents and filed patent applications within the licensed patent rights. The agreement is terminable by us upon six months written notice, provided that we have paid all amounts due to MIT through such termination date, and by MIT for nonpayment of amounts due, our cessation of the business related to the agreement, our uncured material breach of the agreement or a challenge initiated by us of the validity, enforceability or non-infringement of the patents licensed to us under the agreement. In the event of any dispute relating to the agreement, either party may initiate mediation to facilitate a negotiated settlement prior to seeking other legal remedies.

Intellectual Property

We strive to protect and enhance the proprietary technology, inventions and improvements that we believe are commercially important to the development of our business, including by seeking, maintaining and defending patent rights, whether developed internally or licensed from third parties. We also rely on trade secrets, know-how, continuing technological innovation and in-licensing opportunities to develop, strengthen and maintain our proprietary position in our field.

Our future commercial success depends, in part, on our ability to: (i) obtain and maintain patent and other proprietary protection for commercially important technology, inventions and know-how related to our business; (ii) defend and enforce our intellectual property rights, in particular our patents rights; (iii) preserve the confidentiality of our trade secrets; and (iv) operate without infringing, misappropriating or violating the valid and enforceable patents and proprietary rights of third parties. Our ability to stop third parties from making, using, selling, offering to sell or importing our product candidates or any future products may depend on the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities.

Patents

The patent positions of biotechnology and pharmaceutical companies like ours are generally uncertain and can involve complex legal, scientific and factual issues. 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 issued patents will provide sufficient proprietary protection from competitors. We also

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cannot ensure that patents will issue with respect to any patent applications that we or our licensors may file in the future, nor can we ensure that any of our owned or licensed patents or future patents will be commercially useful in protecting our product candidates. In addition, the coverage claimed in a patent application may be significantly reduced before a patent is issued, and its scope can be reinterpreted and even challenged after issuance. As a result, we cannot guarantee that any of our products will be protected or remain protectable by enforceable patents. Moreover, any patents that we hold may be challenged, circumvented or invalidated by third parties. See “Risk factors—Risks related to our intellectual property” for a more comprehensive description of risks related to our intellectual property.

In the United States, the term of a patent covering an FDA-approved drug may, in certain cases, be eligible for a patent term extension under the Hatch-Waxman Act as compensation for the loss of patent term during the FDA regulatory review process. The period of extension may be up to 5 years but cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval. Only 1 patent among those eligible for an extension and only those claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended. Similar provisions are available in Europe and in certain other jurisdictions to extend the term of a patent that covers an approved drug. It is possible that issued U.S. patents covering the use of products from our intellectual property may be entitled to patent term extensions. If our use of product candidates or the product candidate itself receives FDA approval, we intend to apply for patent term extensions, if available, to extend the term of patents that cover the approved use or product candidate. We also intend to seek patent term extensions in any jurisdictions where available, however, there is no guarantee that the applicable authorities, including the FDA, will agree with our assessment of whether such extensions should be granted, and even if granted, the length of such extensions.

Cell Squeeze Technology

Our patent portfolio for our Cell Squeeze approach includes more than 30 patent families that we own or have licensed, with potential expiration dates ranging from 2028 to 2041. As of February 28, 2021, our portfolio consisted of over 115 issued U.S. and foreign patents (including over 80 issued patents in various European countries) and over 160 pending U.S., Patent Cooperation Treaty (international), and foreign patent applications. A number of these patent families provide coverage for one or more of our SQZ APC, SQZ AAC and SQZ TAC platforms. Fifteen of the patent families apply to the SQZ APC platform with expiration dates ranging from 2032 to 2041. Twelve of the patent families apply to the SQZ AAC platform with expiration dates ranging from 2028 to 2041. Ten of the patent families apply to the SQZ TAC platform with expiration dates ranging from 2030 to 2041. As of February 28, 2021, our patent portfolio includes various issued patents and pending applications with claims directed to systems, devices, composition of matter and methods of use, including methods of inducing an immune response or treating cancer, related to our Cell Squeeze technology for our platforms and product candidates, including our HPV product candidates.

Trademarks

We currently own 13 allowed or registered trademarks in various jurisdictions worldwide, including four registered trademarks in the United States. We have 12 pending trademark applications worldwide, including 10 in the United States. Our trademark portfolio includes Cell Squeeze, SQZ, SQZ Biotech, Empower Cells to Change Lives, SQZ Therapeutics, SQZ Activating Antigen Carriers, SQZ Antigen Carriers, SQZ Tolerizing Antigen Carriers, SQZ TX, SQZ-AC, SQZ-AAC, and SQZ-TAC, which are pending or registered in the United States and certain other countries.

Trade Secrets and Proprietary Information

We rely upon unpatented trade secrets, confidential know-how and continuing technological innovation to develop and maintain our competitive position. However, trade secrets and confidential know-how are difficult to protect. We seek to protect our proprietary information, in part, using confidentiality agreements with applicable collaborators, scientific advisors, employees and consultants. We also have agreements requiring assignment of inventions with our employees and selected consultants, scientific advisors and collaborators. These agreements may not provide meaningful protection. These agreements may also be breached, and we may not have an adequate remedy for any such breach. In addition, our trade secrets and/or confidential know-how may become known or be independently developed by a third party, or misused by any collaborator to whom we disclose such information. Despite any measures taken to protect our intellectual property, unauthorized parties may attempt to copy aspects of our products or obtain or use information that we regard as proprietary. Although we take steps to protect our proprietary information, third parties may independently develop the same or similar proprietary information or may otherwise gain access to our proprietary information. As a result, we may be unable to meaningfully protect our trade secrets and proprietary information.

Competition

As a clinical-stage biotechnology company, we face competition from a wide array of companies in the pharmaceutical and biotechnology industries. This competition include both small companies and large companies with greater financial and technical resources and longer operating histories than our own. We also compete with the intellectual property, technology and product development efforts of academic, governmental and private research institutions.

Our competitors may have significantly greater financial resources, established presence in the market, expertise in research and development, manufacturing, preclinical and clinical testing, obtaining regulatory approvals and reimbursement and marketing approved products than we do. These competitors also compete with us in recruiting and retaining qualified scientific, sales, marketing and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Smaller or early-stage companies may also prove to be significant competitors, particularly if they establish collaborative arrangements with large companies.

The key competitive factors affecting the success of any products that we develop, if approved, are likely to be their efficacy, safety, convenience, price and the availability of reimbursement from government and other third-party payors. Our commercial opportunity for any

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of our product candidates could be reduced or eliminated if our competitors develop and commercialize products that are more effective, have fewer or less severe side effects, are more convenient, or are less expensive than any products that we may develop. Our competitors may also obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours and may commercialize products more quickly than we do.

We expect to compete with companies using other cell engineering approaches, such as electroporation and viral vectors. Companies that are engineering cells with some of these methods include Rubius Therapeutics, which is genetically engineering red blood cells, Fate Therapeutics, which is programing hematopoietic cells and other biotechnology companies working on single cell types.

We expect our lead product candidate, SQZ-PBMC-HPV, will compete with other product candidates for the treatment of HPV+ cancers. While there are currently no FDA-approved therapies that target HPV for HPV+ cancers, there are multiple competing clinical-stage product candidates in development targeting HPV+ cancers. These product candidates include genetically modified T cell therapies in clinical development by Kite, peptide vaccines in clinical development by ISA Pharma, biologics being developed by Cue Biopharma, therapeutics being developed by Rubius and nucleic acid vaccines in clinical development by BioNTech and clinical development by Inovio. Therapies that are not specific to HPV are also being explored and applied to HPV+ tumors, including tumor infiltrating lymphocytes developed by Iovance Biotherapeutics and immune checkpoint inhibitors that are approved for treatment in multiple solid tumors.

Government Regulation

The FDA and other regulatory authorities at federal, state, and local levels, as well as in foreign countries, extensively regulate, among other things, the research, development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling, packaging, storage, distribution, record keeping, approval, advertising, promotion, marketing, post-approval monitoring, and post-approval reporting of biological product candidates such as those we are developing. We, along with third-party contractors, will be required to navigate the various preclinical, clinical and commercial approval requirements of the governing regulatory agencies of the countries in which we wish to conduct studies or seek approval or licensure of our product candidates. The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources.

U.S. Biologics Regulation

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

Prior to beginning the first clinical trial with a product candidate in the United States, we must submit an IND to the FDA. An IND is a request for authorization from the FDA to administer an investigational new drug product to humans. The central focus of an IND submission is on the general investigational plan and the protocol(s) for clinical studies. The IND also includes results of animal and in vitro studies assessing the toxicology, pharmacokinetics, pharmacology, and pharmacodynamic characteristics of the product; chemistry, manufacturing, and controls information; and any available human data or literature to support the use of the investigational product. An IND must become effective before human clinical trials may begin. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises safety concerns or questions about the proposed clinical trial. In such a case, the IND may be placed on clinical hold and the IND sponsor and the FDA must resolve any outstanding concerns or questions before the clinical trial can begin. Submission of an IND therefore may or may not result in FDA authorization to begin a clinical trial.

In addition to the submission of an IND to the FDA, supervision of certain human gene transfer trials may also require evaluation and assessment by an institutional biosafety committee, or IBC, a local institutional committee that reviews and oversees research utilizing recombinant or synthetic nucleic acid molecules at that institution. The IBC assesses the safety of the research and identifies any potential risk to the public health or the environment, and such assessment may result in some delay before initiation of a clinical trial.

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Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical study. Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A separate submission to the existing IND must be made for each successive clinical trial conducted during product development and for any subsequent protocol amendments. Furthermore, an independent IRB for each site proposing to conduct the clinical trial must review and approve the plan for any clinical trial and its informed consent form before the clinical trial begins at that site and must monitor the study until completed. Regulatory authorities, the IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk or that the trial is unlikely to meet its stated objectives. Some studies also include oversight by an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board, which provides authorization for whether or not a study may move forward at designated check points based on access to certain data from the study and may halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy. There are also requirements governing the reporting of ongoing clinical studies and clinical study results to public registries.

For purposes of BLA approval, human clinical trials are typically conducted in three sequential phases that may overlap or be combined:

In some cases, the FDA may require, or companies may voluntarily pursue, additional clinical trials after a product is approved to gain more information about the product. These so-called Phase 4 studies may also be made a condition to approval of the BLA. Concurrent with clinical trials, companies may complete additional animal studies and develop additional information about the biological characteristics of the product candidate and must finalize a process for manufacturing the product in commercial quantities in accordance with cGMP. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

BLA Submission and Review by the FDA

Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product development, nonclinical studies and clinical trials are submitted to the FDA as part of a BLA requesting approval to market the product for one or more indications. The BLA must include all relevant data available from preclinical and clinical studies, including negative or ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry, manufacturing, controls, and proposed labeling, among other things. Data can come from company-sponsored clinical studies intended to test the safety and effectiveness of a use of the product, or from a number of alternative sources, including studies initiated by investigators. The submission of a BLA requires payment of a substantial user fee to FDA, and the sponsor of an approved BLA is also subject to an annual program fee. A waiver of user fees may be obtained under certain limited circumstances. Additionally, no user fees are assessed on BLAs for products designated as orphan drugs, unless the product also includes a non-orphan indication.

Once a BLA has been submitted, the FDA’s goal is to review standard applications within ten months after it accepts the application for filing, or, if the application qualifies for priority review, six months after the FDA accepts the application for filing. Priority review designation will direct overall attention and resources to the evaluation of applications for products that, if approved, would be significant improvements in the safety or effectiveness of the treatment, diagnosis, or prevention of serious conditions. In both standard and priority reviews, the review process may be significantly extended by FDA requests for additional information or clarification. The FDA reviews a BLA to determine, among other things, whether a product is safe, pure and potent and the facility in which it is manufactured, processed, packed, or held meets standards designed to assure the product’s continued safety, purity and potency. The FDA may also convene an advisory committee to provide clinical insight on application review questions. The FDA is not bound by recommendations of an advisory committee, but it considers such recommendations when making decisions regarding approval.

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Before approving a BLA, the FDA will typically inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP and adequate to assure consistent production of the product within required specifications. Additionally, before approving a BLA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. If the FDA determines that the application, manufacturing process or manufacturing facilities are not acceptable, it will outline the deficiencies in the submission and often will request additional testing or information. Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.

After the FDA evaluates a BLA and conducts inspections of manufacturing facilities where the investigational product and/or its drug substance will be produced, the FDA may issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A Complete Response Letter will describe all of the deficiencies that the FDA has identified in the BLA, except that where the FDA determines that the data supporting the application are inadequate to support approval, the FDA may issue the Complete Response Letter without first conducting required inspections, testing submitted product lots, and/or reviewing proposed labeling. In issuing the Complete Response Letter, the FDA may recommend actions that the applicant might take to place the BLA in condition for approval, including requests for additional information or clarification. The FDA may delay or refuse approval of a BLA if applicable regulatory criteria are not satisfied, require additional testing or information and/or require post-marketing testing and surveillance to monitor safety or efficacy of a product.

If regulatory approval or licensure of a product is granted, such approval will be granted for particular indications and may entail limitations on the indicated uses for which such product may be marketed. For example, the FDA may approve the BLA with a Risk Evaluation and Mitigation Strategy, or REMS, to ensure the benefits of the product outweigh its risks. A REMS is a safety strategy to manage a known or potential serious risk associated with a medicine and to enable patients to have continued access to such medicines by managing their safe use, and could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries, and other risk minimization tools. The FDA also may condition approval on, among other things, changes to proposed labeling or the development of adequate controls and specifications. Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing requirements is not maintained or if problems occur after the product reaches the marketplace. The FDA may also require one or more Phase 4 post-market studies and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization, and may limit further marketing of the product based on the results of these post-marketing studies. In addition, new government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could impact the timeline for regulatory approval or otherwise impact ongoing development programs.

Expedited Development and Review Programs

A sponsor may seek approval of its product candidate under programs designed to accelerate FDA’s review and approval of new drugs and biological products that meet certain criteria. Specifically, new drugs and biological products are eligible for fast track designation if they are intended to treat a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition. For a fast track product, the FDA may consider sections of the BLA for review on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the application, the FDA agrees to accept sections of the application and determines that the schedule is acceptable and the sponsor pays any required user fees upon submission of the first section of the application. A fast track-designated product candidate may also qualify for priority review, under which the FDA sets the target date for FDA action on the BLA at six months after the FDA accepts the application for filing. Priority review is granted when there is evidence that the proposed product would offer a significant improvement in the safety or effectiveness of the treatment, diagnosis or prevention of a serious disease or condition. If criteria are not met for priority review, the application is subject to the standard FDA review period of 10 months after FDA accepts the application for filing.

Under the accelerated approval program, the FDA may approve a BLA on the basis of either a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. Post-marketing studies or completion of ongoing studies after marketing approval are generally required to verify the biologic’s clinical benefit in relationship to the surrogate endpoint or ultimate outcome in relationship to the clinical benefit. In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product. FDA may withdraw approval of a drug or indication approved under accelerated approval if, for example, the confirmatory trial fails to verify the predicted clinical benefit of the product.

In addition, a sponsor may seek FDA designation of its product candidate as a breakthrough therapy if the product candidate is intended, alone or in combination with one or more other drugs or biologics, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the therapy may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. If the FDA designates a product as a breakthrough therapy, it may take actions appropriate to expedite the development and review of the application, which may include holding meetings with the sponsor and the review team throughout the development of the therapy; providing timely advice to, and interactive communication with, the sponsor regarding the development of the drug to ensure that the development program to gather the nonclinical and clinical data necessary for approval is as efficient as practicable; involving senior managers and experienced review staff, as appropriate, in a collaborative, cross-disciplinary review; assigning a cross-disciplinary project lead for the FDA review team to facilitate an efficient review of the development program and to serve as a scientific liaison between the review team and the sponsor; and considering alternative clinical

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trial designs when scientifically appropriate, which may result in smaller trials or more efficient trials that require less time to complete and may minimize the number of patients exposed to a potentially less efficacious treatment. Breakthrough therapy designation comes with all of the benefits of fast track designation.

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

Orphan Drug Designation and Exclusivity

Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, defined as a disease or condition with a patient population of fewer than 200,000 individuals in the United States, or a patient population greater than 200,000 individuals in the United States and when there is no reasonable expectation that the cost of developing and making available the drug or biologic in the United States will be recovered from sales in the United States for that drug or biologic. Orphan drug designation must be requested before submitting a BLA. After the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA.

If a product that has orphan drug designation subsequently receives the first FDA approval for a particular active ingredient for the disease 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, including a full BLA, to market the same biologic for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or if the FDA finds that the holder of the orphan drug exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or condition for which the drug was designated. Orphan drug exclusivity does not prevent the FDA from approving a different drug or biologic for the same disease or condition, or the same drug or biologic for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the BLA application user fee.

A designated orphan drug many not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drug exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or, as noted above, if the second applicant demonstrates that its product is clinically superior to the approved product with orphan exclusivity or the manufacturer of the approved product is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition.

Post-Approval Requirements

Any products manufactured or distributed by us pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to record-keeping, reporting of adverse experiences, periodic reporting, product sampling and distribution, and advertising and promotion of the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing, annual program fees for any marketed products.

Biologic manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP, which impose certain procedural and documentation requirements upon us and our third-party manufacturers. Changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting requirements upon us and any third-party manufacturers that we may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.

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

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The FDA closely regulates the marketing, labeling, advertising and promotion of biologics. A company can make only those claims relating to safety and efficacy, purity and potency that are approved by the FDA and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. Physicians may prescribe legally available products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer’s communications on the subject of off-label use of their products.

Biosimilars and Exclusivity

The Affordable Care Act, or ACA, signed into law in 2010, includes the Biologics Price Competition and Innovation Act, or the BPCIA, which created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference biological product. The FDA has issued several guidance documents outlining an approach to review and approval of biosimilars. Biosimilarity, which requires that there be no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency, can be shown through analytical studies, animal studies, and a clinical study or studies. Interchangeability requires that a product is biosimilar to the reference product and the product must demonstrate that it can be expected to produce the same clinical results as the reference product in any given patient and, for products that are administered multiple times to an individual, the biologic and the reference biologic may be alternated or switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic. However, complexities associated with the larger, and often more complex, structures of biological products, as well as the processes by which such products are manufactured, pose significant hurdles to implementation of the abbreviated approval pathway that are still being worked out by the FDA.

Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. During this 12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing that applicant’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of its product. The BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable products. At this juncture, it is unclear whether products deemed “interchangeable” by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy law.

A biological product can also obtain pediatric market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existing exclusivity periods and patent terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may be granted based on the voluntary completion of a pediatric study in accordance with an FDA-issued “Written Request” for such a study.

The BPCIA is complex and continues to be interpreted and implemented by the FDA. In addition, government proposals have sought to reduce the 12-year reference product exclusivity period. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. As a result, the ultimate impact, implementation, and impact of the BPCIA is subject to significant uncertainty.

FDA Regulation of Companion Diagnostics

Our product candidates may require use of an in vitro diagnostic to identify appropriate patient populations. These diagnostics, often referred to as companion diagnostics, are regulated as medical devices. In the United States, the Federal Food, Drug, and Cosmetic Act, or FDCA, and its implementing regulations, and other federal and state statutes and regulations govern, among other things, medical device design and development, preclinical and clinical testing, premarket clearance or approval, registration and listing, manufacturing, labeling, storage, advertising and promotion, sales and distribution, export and import and post-market surveillance. Unless an exemption applies, companion diagnostic tests require marketing clearance or approval from the FDA prior to commercial distribution. The two primary types of FDA marketing authorization applicable to a medical device are premarket notification, also called 510(k) clearance, and premarket approval, or PMA approval.

If use of companion diagnostic is essential to safe and effective use of a drug or biologic product, then the FDA generally will require approval or clearance of the diagnostic contemporaneously with the approval of the therapeutic product. On August 6, 2014, the FDA issued a final guidance document addressing the development and approval process for “In Vitro Companion Diagnostic Devices.” According to the guidance, for novel candidates such as our product candidates, a companion diagnostic device and its corresponding drug or biologic candidate should be approved or cleared contemporaneously by FDA for the use indicated in the therapeutic product labeling. The guidance also explains that a companion diagnostic device used to make treatment decisions in clinical trials of a drug generally will be considered an investigational device, unless it is employed for an intended use for which the device is already approved or cleared. If used to make critical treatment decisions, such as patient selection, the diagnostic device generally will be considered a significant risk device under the FDA’s Investigational Device Exemption, or IDE, regulations. Thus, the sponsor of the diagnostic device will be required to comply with the IDE regulations. According to the guidance, if a diagnostic device and a drug are to be studied together to support their respective approvals, both

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products can be studied in the same investigational study, if the study meets both the requirements of the IDE regulations and the IND regulations. The guidance provides that depending on the details of the study plan and subjects, a sponsor may seek to submit an IND alone, or both an IND and an IDE. In July 2016, the FDA issued a draft guidance document intended to further assist sponsors of therapeutic products and sponsors of in vitro companion diagnostic devices on issues related to co-development of these products.

The FDA generally requires companion diagnostics intended to select the patients who will respond to cancer treatment to obtain approval of a PMA for that diagnostic contemporaneously with approval of the therapeutic. The review of these in vitro companion diagnostics in conjunction with the review of therapeutic candidates such as those we are developing involves coordination of review by the FDA’s Center for Drug Evaluation and Research and by the FDA’s Center for Devices and Radiological Health. The PMA process, including the gathering of clinical and pre-clinical data and the submission to and review by the FDA, can take several years or longer. It involves a rigorous premarket review during which the applicant must prepare and provide the FDA with reasonable assurance of the device’s safety and effectiveness and information about the device and its components regarding, among other things, device design, manufacturing and labeling. PMA applications are also subject to an application fee. In addition, PMAs for certain devices must generally include the results from extensive pre-clinical and adequate and well-controlled clinical trials to establish the safety and effectiveness of the device for each indication for which FDA approval is sought. In particular, for a diagnostic, the applicant must demonstrate that the diagnostic produces reproducible results when the same sample is tested multiple times by multiple users at multiple laboratories. In addition, as part of the PMA review, the FDA will typically inspect the manufacturer’s facilities for compliance with the Quality System Regulation, or QSR, which imposes elaborate testing, control, documentation and other quality assurance requirements.

If the FDA evaluations of both the PMA application and the manufacturing facilities are favorable, the FDA will either issue an approval letter or an approvable letter, which usually contains a number of conditions that must be met in order to secure the final approval of the PMA, such as changes in labeling, or specific additional information, such as submission of final labeling, in order to secure final approval of the PMA. If the FDA concludes that the applicable criteria have been met, the FDA will issue a PMA for the approved indications, which can be more limited than those originally sought by the applicant. The PMA can include post-approval conditions that the FDA believes necessary to ensure the safety and effectiveness of the device, including, among other things, restrictions on labeling, promotion, sale and distribution.

If the FDA’s evaluation of the PMA or manufacturing facilities is not favorable, the FDA will issue an order denying approval of the PMA or issue a not approvable order. A not approvable letter will outline the deficiencies in the application and, where practical, will identify what is necessary to make the PMA approvable. The FDA may also determine that additional clinical trials are necessary, in which case the PMA approval may be delayed for several months or years while the trials are conducted and then the data submitted in an amendment to the PMA. Once granted, PMA approval may be withdrawn by the FDA if compliance with post approval requirements, conditions of approval or other regulatory standards is not maintained or problems are identified following initial marketing. PMA approval is not guaranteed, and the FDA may ultimately respond to a PMA submission with a not approvable determination based on deficiencies in the application and require additional clinical trial or other data that may be expensive and time-consuming to generate and that can substantially delay approval.

After a device is placed on the market, it remains subject to significant regulatory requirements. Medical devices may be marketed only for the uses and indications for which they are cleared or approved. Device manufacturers must also establish registration and device listings with the FDA. A medical device manufacturer’s manufacturing processes and those of its suppliers are required to comply with the applicable portions of the QSR, which cover the methods and documentation of the design, testing, production, processes, controls, quality assurance, labeling, packaging and shipping of medical devices. Domestic facility records and manufacturing processes are subject to periodic unscheduled inspections by the FDA. The FDA also may inspect foreign facilities that export products to the United States.

Other Healthcare Laws

Pharmaceutical manufacturers are subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which they conduct their business. Such laws may include, without limitation, the U.S. federal anti-kickback , fraud and abuse, false claims, consumer fraud, pricing reporting, data privacy and security, and transparency laws and regulations as well as similar state and foreign laws in the jurisdictions outside the U.S. Violation of any such laws or any other governmental regulations that apply may result in penalties, including, without limitation, significant administrative, civil and criminal penalties, damages, fines, disgorgement, reputational harm, additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, the curtailment or restructuring of operations and exclusion from participation in governmental healthcare programs and imprisonment.

Coverage and Reimbursement

In the United States and markets in other countries, patients generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Sales of any pharmaceutical product depend, in part, on the extent to which such product will be covered by third-party payors, such as federal, state and foreign government healthcare programs, commercial insurance and managed healthcare organizations, and the level of reimbursement for such product by third-party payors.

Significant uncertainty exists as to the coverage and reimbursement status of any newly approved product. Adequate coverage and reimbursement from governmental healthcare programs, such as Medicare and Medicaid, and commercial payors are critical to new product acceptance. The availability of coverage and extent of reimbursement by governmental and private payors are essential for most patients to be able to afford treatments. Decisions regarding the extent of coverage and amount of reimbursement to be provided are made on a plan-by-plan basis. In the U.S., the Medicare program, which is administered by the Centers for Medicare & Medicaid Services, or CMS, an agency

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within the U.S. Department of Health and Human Services, or HHS, is increasingly used as a model for how commercial and other governmental payors develop their own coverage and reimbursement policies for new drugs and biologics. One third-party payor’s decision to cover a particular product, however, does not ensure that other payors will also provide coverage for the product. As a result, the coverage determination process can require manufactures to provide scientific and clinical support for the use of a product to each payor separately and can be a time-consuming process, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. For products administered under the supervision of a physician, obtaining coverage and adequate reimbursement may be particularly difficult because of the higher prices often associated with such drugs. Additionally, separate reimbursement for the product itself or the treatment or procedure in which the product is used may not be available, which may impact physician utilization. In addition, companion diagnostic tests require coverage and reimbursement separate and apart from the coverage and reimbursement for their companion pharmaceutical or biological products. Similar challenges to obtaining coverage and reimbursement, applicable to pharmaceutical or biological products, will apply to companion diagnostics.

In addition, third-party payors are increasingly reducing reimbursements for pharmaceutical products and services. The U.S. government and state legislatures have continued implementing cost-containment programs, including price controls, restrictions on coverage and reimbursement and requirements for substitution of generic products. Third-party payors are more frequently challenging the prices charged, examining the medical necessity and reviewing the cost-effectiveness of pharmaceutical products and biologics, in addition to questioning their safety and efficacy. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit sales of any product. Decreases in third-party reimbursement for any product or a decision by a third-party payor not to cover a product could reduce physician usage and patient demand for the product.

In international markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies. For example, the European Union 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. Pharmaceutical products may face competition from lower-priced products in foreign countries that have placed price controls on pharmaceutical products and may also compete with imported foreign products. Furthermore, there is no assurance that a product will be considered medically reasonable and necessary for a specific indication, will be considered cost-effective by third-party payors, that an adequate level of reimbursement will be established even if coverage is available or that the third-party payors’ reimbursement policies will not adversely affect the ability for manufacturers to sell products profitably. Historically, products launched in the European Union do not follow price structures of the U.S. and generally prices tend to be significantly lower.

Healthcare Reform

In the United States and certain foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes to the healthcare system. In March 2010, the ACA was signed into law, which substantially changed the way healthcare is financed by both governmental and private insurers in the United States. By way of example, the ACA increased the minimum level of Medicaid rebates payable by manufacturers of brand name drugs from 15.1% to 23.1%; required collection of rebates for drugs paid by Medicaid managed care organizations; imposed a non-deductible annual fee on pharmaceutical manufacturers or importers who sell certain “branded prescription drugs” to specified federal government programs, implemented 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; expanded eligibility criteria for Medicaid programs; creates a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and established a Center for Medicare Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.

Since its enactment, there have been judicial, executive and Congressional challenges to certain aspects of the ACA, and we expect there will be additional challenges and amendments to the ACA in the future. By way of example, in 2017, Congress enacted the Tax Cuts and Jobs Act, or the Tax Act, which reduced to $0 the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” On December 14, 2018, a Texas U.S. District Court Judge ruled that the individual mandate is a critical and inseverable feature of the ACA, and therefore, because it was effectively repealed as part of the Tax Act, the remaining provisions of the ACA are invalid as well. Additionally, on December 18, 2019, the U.S. Court of Appeals for the 5^th Circuit ruled that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well. It is unclear how these decisions, future decisions, subsequent appeals, and other efforts to repeal and replace the ACA will impact the ACA.

Other legislative changes have been proposed and adopted since the ACA was enacted, including aggregate reductions of Medicare payments to providers of 2% per fiscal year and reduced payments to several types of Medicare providers, which will remain in effect through 2029 absent additional Congressional action.

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Further, on June 14, 2018, U.S. Court of Appeals for the Federal Circuit ruled that the federal government was not required to pay more than $12 billion in ACA risk corridor payments to third-party payors who argued were owed to them. The effects of this gap in reimbursement on third-party payors, the viability of the ACA marketplace, providers, and potentially our business, are not yet known. In December 2018, CMS published a final rule permitting further collections and payments to and from certain ACA qualified health plans and health insurance issuers under the ACA risk adjustment program in response to the outcome of the federal district court litigation regarding the method CMS uses to determine this risk adjustment.

Other legislative changes have been proposed and adopted since the ACA was enacted, including aggregate reductions of Medicare payments to providers of 2% per fiscal year and reduced payments to several types of Medicare providers, which will remain in effect through 2029 absent additional Congressional action.

There has also been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically, there have been several recent U.S. Congressional inquiries and proposed federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. At the federal level, the Trump administration’s budget for fiscal year 2020 contain further drug price control measures that could be enacted during the budget process or in other future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid, and to eliminate cost sharing for generic drugs for low income patients.

Further regulatory changes include passage of the Right to Try Act on May 30, 2018. The law, among other things, provides a federal framework for certain patients to access certain investigational new medical 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.

Employees and Human Capital Resources

As of December 31, 2020, we had 98 full-time employees, including 29 employees with M.D. or Ph.D. degrees. Of these full-time employees, 71 employees are engaged in clinical, research and development, product development and quality assurance activities. None of our employees are represented by a labor union or covered by a collective bargaining agreement. We consider our relationship with our employees to be good. We believe our success depends on our ability to attract, retain, develop and motivate highly skilled personnel. In particular, we depend upon the personal efforts and abilities of the principal members of our senior management to partner effectively as a team, and who provide strategic direction, develop our business, manage our operations and maintain a cohesive and stable work environment. We also rely on highly qualified and skilled employees with technical expertise in operations, scientific knowledge, and quality management experience in order to operate our business successfully. Led by our experienced management team, we believe our strong culture and the disciplined execution of our employees will form the foundation of our success.

Available Information

We file electronically with the SEC our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other information. Our SEC filings are available to the public over the Internet at the SEC's website at http://www.sec.gov. We make available on our website at www.sqzbiotech.com, free of charge, copies of these reports and any amendments as soon as reasonably practicable after filing or furnishing them with the SEC.

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Item 1A. Risk Factors.

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, as well as the other information in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Results of Operations and Financial Condition,” before deciding whether to invest in our common stock. The occurrence of any of the events or developments described below could adversely affect our business, financial condition, results of operations and growth prospects. In such an event, the market price of our common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.

Risks Related to Our Financial Position and Need for Additional Capital

We have a limited operating history and no history of commercializing cell therapy products, which may make it difficult to evaluate the success of our business to date and to assess the prospects for our future viability.

We are a clinical-stage biotechnology company. Our operations to date have been limited to financing and staffing our company, developing our technology, and identifying and developing our product candidates. Our prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by biotechnology companies in their early stages of operations. We have not yet demonstrated an ability to complete any clinical trials, obtain marketing approval, manufacture a commercial scale product, or conduct sales and marketing activities necessary for successful product commercialization, or arrange for third parties to do these activities on our behalf. Consequently, predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and obtaining marketing approval for and commercializing cell therapies.

In addition, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown obstacles. We will eventually need to transition from a company with a research and development focus to a company capable of supporting commercial activities. We may not be successful in this transition.

As we continue to build our business, we expect our financial condition and operating results may fluctuate significantly from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control. Accordingly, you should not rely upon the results of any particular quarterly or annual period as indications of future operating performance.

We have incurred significant losses since inception and expect to incur significant additional losses for the foreseeable future. We have no products that have generated any commercial revenue and we may never achieve or maintain profitability.

We have incurred significant net losses since our inception, including net losses of $50.5 million and $32.2 million for the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020, we had an accumulated deficit of $126.8 million. In addition, we have not commercialized any products and have never generated any revenue from product sales. We have devoted almost all of our financial resources to research and development, including our preclinical development activities and preparing for clinical trials of our product candidates.

We expect to continue to incur significant additional operating losses for the foreseeable future as we seek to advance product candidates through preclinical and clinical development, expand our research and development activities, develop new product candidates, complete preclinical studies and clinical trials, seek regulatory approval and, if we receive regulatory approval, commercialize our products. In order to obtain U.S. Food and Drug Administration, or FDA, approval to market any product candidate in the United States, we must submit to the FDA a biologics license application, or BLA, demonstrating that the product candidate is safe, pure and potent with respect to its intended use. This demonstration requires significant research and animal tests, which are referred to as nonclinical or preclinical studies, as well as human tests, which are referred to as clinical trials. Furthermore, the costs of advancing product candidates into each succeeding clinical phase tend to increase substantially over time. The total costs to advance any of our product candidates to marketing approval in even a single jurisdiction would be substantial and difficult to accurately predict. Because of the numerous risks and uncertainties associated with the development of cell therapies, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to begin generating revenue from the commercialization of products or achieve or maintain profitability. Our expenses will also increase substantially if and as we:

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Furthermore, our ability to successfully develop, commercialize and license our products and generate product revenue is subject to substantial additional risks and uncertainties. Each of our product candidates will require additional preclinical and/or clinical development, regulatory approval in multiple jurisdictions, the securing of manufacturing supply, capacity, distribution channels and expertise, the use of external vendors, the building of a commercial organization, substantial investment and significant marketing efforts before we generate any revenue from product sales. As a result, we expect to continue to incur operating losses and negative cash flows for the foreseeable future. These operating losses and negative cash flows have had, and will continue to have, an adverse effect on our stockholders’ equity and working capital.

The amount of future losses and when, if ever, we will achieve profitability are uncertain. We have no products that have generated any commercial revenue, do not expect to generate revenues from the commercial sale of products in the foreseeable future, and might never generate revenues from the sale of products. Our ability to generate product revenue and achieve profitability will depend on, among other things, successful completion of the clinical development of our product candidates; obtaining necessary regulatory approvals from the FDA and international regulatory authorities; establishing manufacturing, sales, market acceptance of our products, if approved, and marketing infrastructure to commercialize our product candidates for which we obtain approval; and raising sufficient funds to finance our activities. We might not succeed at any of these undertakings. If we are unsuccessful at some or all of these undertakings, our business, prospects, and results of operations may be materially adversely affected.

We will require significant additional funding in order to complete development of and obtain regulatory approval for our product candidates and commercialize our products, if approved. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

We will require additional capital, which we may raise through equity offerings, debt financings, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or other sources. Additional sources of financing might not be available on favorable terms, if at all. If we do not succeed in raising additional funds on acceptable terms, we might be unable to complete planned clinical trials or seek regulatory approvals of any of our product candidates from the FDA, or any foreign regulatory authorities, and could be forced to discontinue product development. In addition, attempting to secure additional financing may divert the time and attention of our management from day-to-day activities and harm our product candidate development efforts.

We will require substantial funds to further develop, seek regulatory approvals for, and if approved, commercialize our product candidates, including SQZ-PBMC-HPV, which is currently in Phase 1 clinical development, SQZ-AAC-HPV, for which an investigational new drug application, or IND, was cleared by the FDA in January 2021, and all of our other product candidates, which are in preclinical development.

Based on our current operating plan, we believe that our existing cash and cash equivalents, will enable us to fund our operating expenses and capital expenditure requirements through the first half of 2023. This estimate is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Changing circumstances could cause us to consume capital significantly faster than we currently anticipate, and we may need to spend more than currently expected because of circumstances beyond our control. Because the length of time and activities associated with successful development of SQZ-PBMC-HPV, SQZ-AAC-HPV and our other product candidates is highly uncertain, we are unable to estimate the actual funds we will require for development, approval and any approved marketing and commercialization activities. Our future funding requirements, both near- and long-term, will depend on many factors, including but not limited to:

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Depending on our business performance, the economic climate and market conditions, we may be unable to raise additional funds through any sources. If we are unable to obtain adequate funding on a timely basis, we may be required to curtail or discontinue one or more of our development programs for SQZ-PBMC-HPV, SQZ-AAC-HPV or our other product candidates, or to reduce our operations. If we raise additional funds by issuing equity securities, our then-existing stockholders will experience dilution and the terms of any new equity securities may have preference over those of our existing common stock.

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

Until such time, if ever, as we can generate substantial revenue from product sales, we may finance our cash needs through a combination of equity offerings, debt financings, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders’ ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect their rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our operations, our ability to take specific actions, such as incurring additional debt, making capital expenditures, declaring dividends, redeeming our stock, making certain investments and engaging in certain merger, consolidation or asset sale transactions, among other restrictions. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

The COVID-19 pandemic has impacted, and will likely continue to impact, our operations and clinical trial execution and may materially and adversely affect our business and financial results in the future.

In December 2019, a novel strain of coronavirus, which causes the disease known as COVID-19, was reported to have surfaced in Wuhan, China. Since then, COVID-19 coronavirus has spread globally. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic and the U.S. government imposed travel restrictions on travel between the United States, Europe and certain other countries. Further, the President of the United States declared the COVID-19 pandemic a national emergency, invoking powers under the Stafford Act, the legislation that directs federal emergency disaster response. Our principal executive offices and laboratory space are located in Watertown, Massachusetts. In March 2020, the Governor of Massachusetts ordered all individuals living in the Commonwealth of Massachusetts to stay at their place of residence for an indefinite period of time (subject to certain exceptions to facilitate authorized necessary activities) to mitigate the impact of the COVID-19 pandemic. A number of other restrictive measures were subsequently implemented. Since then, certain of these restrictions have been eased or lifted in a phased in approach over time. However, the pace of reopening is measured and these government policies and directives are subject to change, including that additional, more restrictive orders, proclamations and/or directives may be issued in the future, as the effects and spread of the COVID-19 pandemic continue to evolve.

In response to these public health directives and to help reduce the risk to our employees, we took precautionary measures, including implementing work-from-home policies for our administrative employees and staggered work times for our lab employees. We plan to continue these measures and are assessing when and how to resume normal operations. The effects of the executive order and our work-from-home policies may negatively impact productivity, disrupt our business and delay our clinical programs and timelines and future clinical trials, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course. These and similar, and perhaps more severe, disruptions in our operations could negatively impact our business, results of operations and financial condition, including our ability to obtain financing.

Quarantines, shelter-in-place and similar government orders, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could occur, related to COVID-19 or other infectious diseases have impacted and may continue to impact personnel at third-party manufacturing facilities in the United States and other countries, or the availability or cost of materials, which would disrupt our supply chain. For example, we have experienced delays in receiving supplies of raw materials for our preclinical activities due to

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the impact of COVID-19 on our suppliers’ ability to timely manufacture these materials. In addition, due to the decreased availability of commercial flights, we have had to arrange for private deliveries, including chartered planes, of some of our product candidates, which has resulted in an increase in cost.

In addition, our ongoing Phase 1 clinical trial of SQZ-PBMC-HPV has been, and any future clinical trials may be, further affected by the COVID-19 pandemic, including:

For example, we have experienced delays in opening clinical trial sites and sites that are open may also have challenges enrolling patients due to the COVID-19 pandemic. There has also been an industry-wide slowdown in enrollment in clinical trials due to the COVID-19 pandemic and we cannot predict when enrollment will return to pre-pandemic rates. In addition, some staff that are required to conduct certain testing, such as biopsies, at our clinical sites or at third-party vendors have been required to stay at home or have been reallocated to other activities, resulting in such tests not being performed or being delayed and specimens being of insufficient quantity and quality to be properly evaluated.

The global outbreak of the COVID-19 coronavirus continues to rapidly evolve. The extent to which the COVID-19 coronavirus may impact our business and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, reopening plans, the resurgence of COVID-19, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

Risks Related to Discovery, Development, Preclinical and Clinical Testing, Manufacturing and Regulatory Approval

Our business is highly dependent on the success of our initial product candidates, SQZ-PBMC-HPV and SQZ-AAC-HPV, each of which will require significant additional preclinical and clinical testing before we can seek regulatory approval and potentially launch commercial sales. If SQZ-PBMC-HPV and/or SQZ-AAC-HPV do not receive regulatory approval or are not successfully commercialized, or are significantly delayed in doing so, our business will be harmed.

A substantial portion of our business and future success depends on our ability to develop, obtain regulatory approval for and successfully commercialize our most advanced product candidates, SQZ-PBMC-HPV, which is currently being evaluated in a Phase 1 clinical trial, and SQZ-AAC-HPV, for which an IND was cleared by the FDA in January 2021. We currently have no products that are approved for commercial sale and have not completed the development of any product candidates, and we may never be able to develop marketable products. We expect that a substantial portion of our efforts and expenditures over the next few years will be devoted to SQZ-PBMC-HPV and SQZ-AAC-HPV, which will require additional preclinical and clinical development, management of clinical, medical affairs and manufacturing activities, obtaining regulatory approvals in multiple jurisdictions, securing of manufacturing supply, building of a commercial organization, substantial investment and significant marketing efforts before we can generate any revenues from any commercial sales from either product candidate, if approved. We cannot be certain that either SQZ-PBMC-HPV or SQZ-AAC-HPV will be successful in ongoing or future clinical trials, receive regulatory approval or be successfully commercialized even if we receive regulatory approval. Even if we

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receive approval to market SQZ-PBMC-HPV and/or SQZ-AAC-HPV from the FDA or other regulatory bodies, we cannot be certain that such product candidates will be successfully commercialized, widely accepted in the marketplace or more effective than other commercially available alternatives. Nor can we be certain that, if and when approved, the safety and efficacy profile of SQZ-PBMC-HPV, SQZ-AAC-HPV or our other product candidates will be consistent with the results observed in clinical trials.

If the required regulatory approvals for SQZ-PBMC-HPV or SQZ-AAC-HPV are not obtained or are significantly delayed, or any approved products are not commercially successful, our business, financial condition and results of operations may be materially harmed.

SQZ-PBMC-HPV and SQZ-AAC-HPV are being developed under our SQZ APC and SQZ AAC platforms, respectively, and the failure of either product to receive regulatory approval could adversely affect other product candidates being developed under those respective technology platforms. Moreover, if we experience similar regulatory or developmental issues with our other pipeline product candidates, our development plans and business could be significantly harmed. Further, our competitors may be developing products with similar mechanisms of action or treating similar indications and may experience problems with their products that could identify problems that would potentially harm our business.

Preclinical and clinical development are lengthy and uncertain, and our preclinical programs or development candidates may be delayed or terminated, or may never advance to the clinic, any of which may affect our ability to obtain funding and may have a material adverse impact on our platforms or our business.

Much of our pipeline is in preclinical development, and these programs could be delayed or not advance into the clinic. Before we can initiate clinical trials for a development candidate, we must complete extensive preclinical studies, including good laboratory practice toxicology testing, that support our planned investigational new drug applications, or INDs, in the United States, or similar applications in other jurisdictions. We must also complete extensive work on Chemistry, Manufacturing, and Controls, or CMC, activities, including yield, purity and stability data, to be included in the IND filing. We cannot be certain of the timely completion or outcome of our preclinical testing and studies and cannot predict if the FDA or other regulatory authorities will accept the results of our preclinical testing or our proposed clinical programs or if the outcome of our preclinical testing, studies, and CMC activities will ultimately support the further development of our programs. As a result, we cannot be sure that we will be able to submit INDs or similar applications for our preclinical programs on the timelines we expect, if at all, and we cannot be sure that submission of INDs or similar applications will result in the FDA or other regulatory authorities allowing clinical trials to begin.

The successful development of cellular therapeutics, such as the product candidates under our Cell Squeeze technology, is highly uncertain.

We have no products approved for commercial sale and have not generated any revenue from product sales. Before we are able to generate any revenue from product sales, our current product candidates, and any future product candidates we develop, will require additional preclinical and clinical development, management of clinical, preclinical and manufacturing activities, marketing approval in the United States and other markets, demonstrating effectiveness to pricing and reimbursement authorities, obtaining sufficient manufacturing supply for both clinical development and commercial production, building of a commercial organization and substantial investment and significant marketing efforts. The success of our current and future product candidates will depend on several factors, including:

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Because of the numerous risks and uncertainties associated with drug development, we are unable to predict the timing or amount of our expenses, or when we will be able to generate any meaningful revenue or achieve or maintain profitability, if ever. In addition, our expenses could increase beyond our current expectations if we are required by the FDA or foreign regulatory authorities to perform studies in addition to those that we currently anticipate, or if there are any delays in any of our or our future collaborators’ clinical trials or the development of any of our product candidates. Even if one or more of our product candidates is approved for commercial sale, we anticipate incurring significant costs associated with commercializing any approved product candidate and ongoing compliance efforts.

Even if we are able to successfully commercialize a product candidate, we may not become profitable, and we will need to obtain additional funding through one or more equity or debt financings in order to continue operations. Revenue from the sale of any product candidate for which regulatory approval is obtained will be dependent, in part, upon the size of the markets in the territories for which we gain regulatory approval, the accepted price for the product, the ability to get reimbursement at any price and whether we own the commercial rights for that territory. If the number of addressable patients is not as significant as we anticipate, the indication approved by regulatory authorities is narrower than we expect, the reasonably accepted population for treatment is narrowed by competition, physician choice or treatment guidelines, or the price and available third-party reimbursement are lower than anticipated, we may not generate significant revenue from sales of such products, even if approved.

Our product candidates are based on a novel technology, which makes it difficult to predict the time and cost of development and of subsequently obtaining regulatory approval, if at all.

Our Cell Squeeze technology is novel. As such, it is difficult to accurately predict the developmental challenges we may incur for our product candidates as they proceed through product discovery or identification, preclinical studies and clinical trials. In addition, because we are currently conducting a Phase 1 clinical trial of our initial product candidate, SQZ-PBMC-HPV, and we have not commenced clinical trials of any of our other pipeline product candidates, we have not yet been able to assess the safety or efficacy of our technology in humans and there may be short-term or long-term effects from treatment with any product candidates that we develop that we cannot predict at this time. Also, animal models may not exist for some of the diseases we choose to pursue in our programs. Moreover, even if we obtain data from our clinical trials, because the Cell Squeeze technology applied in our programs is novel and has not been externally verified, our data may be difficult to replicate and/or subject to misinterpretation by us or others. As a result of these factors, it is difficult for us to predict the time and cost of product candidate development, and we cannot predict whether the application of our Cell Squeeze technology, or any similar or competitive cellular technologies, will result in the identification, development and regulatory approval of any products. There can be no assurance that any development challenges we experience in the future related to our Cell Squeeze technology or any of our research programs will not cause significant delays or unanticipated costs, or that such development problems can be solved. Any of these factors may prevent us from completing our preclinical studies or any clinical trials that we may initiate or commercializing any product candidates we may develop on a timely or profitable basis, if at all.

In addition, the clinical study requirements of the FDA and other regulatory authorities and the criteria these regulators use to determine the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use as well as market of the potential products. The regulatory approval process for novel product candidates such as ours can be more expensive and take longer than for other, better known or extensively studied therapeutic modalities and approaches. Further, as we are developing novel treatments, there is heightened risk that the FDA or comparable foreign regulatory bodies may not consider the clinical trial endpoints to provide clinically meaningful results, and the resulting clinical data and results may be more difficult to analyze. To date, few cell therapy products have been approved by the FDA or comparable foreign regulatory authorities, which makes it difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for our product candidates in the United States, the European Union, or EU, or other jurisdictions. Further, approvals by one regulatory authority may not be indicative of what other regulatory authorities may require for approval.

Regulatory requirements governing cellular therapy products have evolved and may continue to change in the future. For example, the FDA established the Office of Tissues and Advanced Therapies within its Center for Biologics Evaluation and Research, or CBER, to consolidate the review of cellular therapy and related products, and the Cellular, Tissue and Gene Therapies Advisory Committee to advise CBER on its review. These and other regulatory review agencies, committees and advisory groups and the requirements and guidelines they promulgate may lengthen the regulatory review process, require us to perform additional preclinical studies or clinical trials, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of these treatment candidates or lead to significant post-approval limitations or restrictions.

We are subject to significant regulatory oversight by the FDA and foreign regulatory bodies in jurisdictions where we may seek to develop or commercialize our products. In addition to these government bodies, the applicable Institutional Biosafety Committee, or IBC, Institutional Review Board, or IRB, and similar cell therapy boards of each institution at which we or our collaborators conduct clinical trials of our product candidates, or a central IRB if appropriate, would need to review and approve the proposed clinical trial.

Changes in applicable regulatory guidelines may lengthen the regulatory review process, require us to perform additional studies or trials, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of our product candidates or lead to significant post-approval limitations or restrictions. As we advance our product candidates, we will be required to consult with regulatory authorities and comply with applicable guidelines. If we fail to do so, we may be required to delay or discontinue development of such product candidates. These additional processes may result in a review and approval process that is longer than we otherwise would have expected. Delays as a result of an increased or lengthier regulatory approval process or further restrictions on the development of our product candidates can be costly and could negatively impact our ability to complete clinical trials and commercialize our current and future product candidates in a timely manner, if at all.

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Cellular therapies are a novel approach and negative perception of any product candidates that we or third parties develop could adversely affect our ability to conduct our business or obtain regulatory approvals for our product candidates.

The developmental and commercial success of our current product candidates, or any product candidates that we develop alone or with collaborators in the future, will depend in part on public acceptance of the use of cell therapy technology, including the candidates we are developing using our Cell Squeeze technology, for the prevention or treatment of human diseases. Adverse public perception of cell therapies may negatively impact our ability to raise capital or enter into strategic agreements for the development of product candidates.

Cellular therapy remains a novel technology. The commercial success of our cellular therapy product candidates, if successfully developed and approved, may be adversely affected by claims that cellular therapy is unsafe, unethical or immoral. This may lead to unfavorable public perception and the inability of any of our product candidates to gain the acceptance of the public or the medical community. Unfavorable public perceptions may also adversely impact our or our collaborators’ ability to enroll clinical trials for our product candidates.

Our success in commercializing any product candidates that receive regulatory approval will depend upon physicians who specialize in the treatment of diseases targeted by our product candidates prescribing treatments that involve the use of our product candidates in lieu of, or in addition to, existing treatments with which they are more familiar and for which greater clinical data may be available. Adverse events in clinical trials of our product candidates or in clinical trials of others developing similar products and the resulting publicity, as well as any other adverse events in the field of cellular therapies, could result in a decrease in demand for any product that we may develop. In addition, responses by the federal, state or foreign governments to negative public perception or ethical concerns may result in new legislation or regulations that could limit our ability to develop or commercialize any product candidates, obtain or maintain regulatory approval or otherwise achieve profitability. More restrictive statutory regimes, government regulations or negative public opinion would have an adverse effect on our business, financial condition, results of operations and prospects and may delay or impair the development and commercialization of our product candidates or demand for any products we may develop.

The regulatory approval processes of the FDA and comparable foreign regulatory authorities are lengthy, expensive, time-consuming, and inherently unpredictable. If we are ultimately unable to obtain regulatory approval for our product candidates, we will be unable to generate product revenue and our business will be seriously harmed.

We are not permitted to commercialize, market, promote or sell any product candidate in the United States without obtaining marketing approval from the FDA. Foreign regulatory authorities impose similar requirements. The time required to obtain approval by the FDA and comparable foreign regulatory authorities is unpredictable, typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the type, complexity and novelty of the product candidates involved. In addition, 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. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical, clinical or other studies. We have not submitted for or obtained regulatory approval for any product candidate. We must complete additional preclinical or nonclinical studies and clinical trials to demonstrate the safety and efficacy of our product candidates in humans to the satisfaction of the regulatory authorities before we will be able to obtain these approvals, and it is possible that none of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory approval. Applications for our product candidates could fail to receive regulatory approval for many reasons, including but not limited to the following:

This lengthy approval process, as well as the unpredictability of the results of clinical trials, may result in our failing to obtain regulatory approval to market any of our product candidates, which would seriously harm our business. In addition, even if we or our collaborators were to obtain approval, regulatory authorities may approve any of our product candidates for fewer or more limited indications than we request, may impose significant limitations in the form of narrow indications, warnings, or a Risk Evaluation and Mitigation Strategy, or REMS. Regulatory authorities may not approve the price we or our collaborators intend to charge for products we may develop, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Any of the foregoing scenarios could seriously harm our business.

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

Adverse events or other undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign regulatory authorities.

During the conduct of clinical trials, patients report changes in their health, including illnesses, injuries, and discomforts, to their study doctor. Often, it is not possible to determine whether or not the product candidate being studied caused these conditions. It is possible that as we test our product candidates in larger, longer and more extensive clinical trials, or as use of these product candidates becomes more widespread if they receive regulatory approval, illnesses, injuries, discomforts and other adverse events that were observed in previous trials, as well as conditions that did not occur or went undetected in previous trials, will be reported by patients. Many times, side effects are only detectable after investigational products are tested in large-scale clinical trials or, in some cases, after they are made available to patients on a commercial scale following approval.

If any serious adverse events occur, clinical trials or commercial distribution of any product candidates or products we develop could be suspended or terminated, and our business could be seriously harmed. Treatment-related side effects could also affect patient recruitment and the ability of enrolled patients to complete the trial or result in potential liability claims. Regulatory authorities could order us to cease further development of, deny approval of, or require us to conduct a stock recovery of, cease selling or recall any product candidates or products for any or all targeted indications. If we are required to delay, suspend or terminate any clinical trial or commercialization efforts, the commercial prospects of such product candidates or products may be harmed, and our ability to generate product revenues from them or other product candidates that we develop may be delayed or eliminated. Additionally, if one or more of our product candidates receives marketing approval and we or others later identify undesirable side effects or adverse events caused by such products, a number of potentially significant negative consequences could result, including but not limited to:

Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could seriously harm our business.

Clinical development is lengthy and uncertain. We may encounter substantial delays and costs in our clinical trials, or may not be able to conduct or complete our clinical trials on the timelines we expect, if at all.

Clinical testing is expensive, time-consuming and subject to uncertainty. To date, we have not completed any clinical trials for any of our product candidates. We cannot guarantee that any clinical trials will be initiated or conducted as planned or completed on schedule, if at all. We also cannot be sure that submission of an IND or a clinical trial application, or CTA, will result in the FDA, Health Canada, or other regulatory authority, as applicable, allowing clinical trials to begin in a timely manner, if at all. For example, the FDA placed our IND for SQZ-PBMC-APC on clinical hold, pending receipt of additional data related to sterility testing, which was ultimately removed. Moreover, even if these trials begin, issues may arise that could cause regulatory authorities to suspend or terminate such clinical trials. A failure of one or more clinical trials can occur at any stage of testing, and our future clinical trials may not be successful. Events that may prevent successful or timely initiation or completion of clinical trials include:

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In addition, disruptions caused by the COVID-19 pandemic may increase the likelihood that we encounter such difficulties or delays in initiating, enrolling, conducting or completing our planned and ongoing clinical trials. Any inability to successfully initiate or complete Phase 1 trials, or any delay in an ongoing trial, could result in additional costs to us or impair our ability to generate revenue from product sales. For example, certain of the biopsy specimens taken as part of our ongoing clinical trial for SQZ-PBMC-HPV were of insufficient quantity and quality to be properly evaluated due to the impact of COVID-19 on transportation, logistics and staffing at our sites and vendors. In addition, two vaccines for COVID-19 were granted Emergency Use Authorization by the FDA in late 2020, and more are likely to be authorized in the coming months. The resultant demand for vaccines and potential for manufacturing facilities and materials to be commandeered under the Defense Production Act of 1950, or equivalent foreign legislation, may make it more difficult to obtain materials or manufacturing slots for the products needed for our clinical trials, which could lead to delays in these trials. In addition, if we make manufacturing or formulation changes to our product candidates, we may be required to or we may elect to conduct additional studies to bridge our modified product candidates to earlier versions. Clinical trial delays could also shorten any periods during which our products have patent protection and may allow our competitors to bring products to market before we do, which could impair our ability to successfully commercialize our product candidates and may seriously harm our business.

We could also encounter delays if a clinical trial is suspended or terminated by us, by the data safety monitoring board for such trial or by the FDA or any other regulatory authority, or if the IRBs of the institutions in which such trials are being conducted suspend or terminate the participation of their clinical investigators and sites subject to their review. Such authorities may suspend or terminate a clinical trial due to a number of factors, 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 the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a product candidate, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

Delays in the completion of any clinical trial of our product candidates will increase our costs, slow down our product candidate development and approval process and delay or potentially jeopardize our ability to commence product sales and generate product revenue. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.

The limited number of patients who have the diseases for which some of our product candidates may be studied, or meet the eligibility criteria of our clinical trials, may make it more difficult for us to enroll or complete such clinical studies, or may result in findings in our clinical studies that do not reach levels of statistical significance sufficient for marketing approval.

There may be limited patient pools from which to draw for clinical studies. In addition to the rarity of these diseases, the eligibility criteria of our clinical studies will further limit some of the pool of available study participants as we will require that patients have specific characteristics that we can measure or to assure their disease is either severe enough or not too advanced to include them in a study. We may not be able to initiate or continue clinical trials on a timely basis or at all for any of our product candidates if we or our collaborators are unable to locate and enroll a sufficient number of eligible patients to participate in the trials as required by applicable regulations or as needed to provide appropriate statistical power for a given trial. Similarly, we plan to design and conduct clinical trials utilizing a limited number of patients in order to evaluate the safety and therapeutic activity of our product candidates. Conducting trials in smaller subject populations increases the risk that any safety or efficacy issues observed in only a few patients could prevent such studies from reaching statistical

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significance or otherwise meeting their specified endpoints, which could require us to conduct additional clinical studies, or delay or prevent our product candidates from receiving regulatory approval, which would seriously harm our business.

In addition, with respect to clinical trials for certain of our product candidates, such as SQZ-PBMC-HPV on the one hand, and SQZ-AAC-HPV on the other, there is substantial overlap between the populations of patients who are or would be eligible to be enrolled. If we conduct clinical trials for two or more of our product candidates simultaneously, either by choice or necessity, any patient enrollment in one of the clinical trials may be obtained at the expense of or to the detriment of patient enrollment in the other.

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

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

Additionally, disruptions caused by the COVID-19 pandemic may increase the likelihood that we encounter difficulties or delays in initiating, enrolling, conducting or completing our planned and ongoing clinical trials. For example, we have experienced delays in opening clinical trial sites and sites that are open may also have challenges enrolling patients due to the COVID-19 pandemic. There has also been an industry-wide slowdown in enrollment in clinical trials due to the COVID-19 pandemic and we cannot predict when enrollment will return to pre-pandemic rates.

In addition, our clinical trials will compete with other clinical trials for product candidates that are in the same therapeutic areas as our product candidates or similar areas, and this competition will reduce the number and types of patients available to us because some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors. Since the number of qualified clinical investigators is limited, we expect to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who are available for our clinical trials at such clinical trial sites.

Delays in patient enrollment may result in increased costs or may affect the timing or outcome of our ongoing and planned clinical trials, which could prevent completion or commencement of these trials and adversely affect our ability to advance the development of our product candidates.

Our preclinical studies and clinical trials may fail to demonstrate substantial evidence of the safety and efficacy of our product candidates, which would prevent, delay or limit the scope of regulatory approval and commercialization.

Before obtaining regulatory approvals for the commercial sale of any of our product candidates, we or our collaborators must demonstrate through lengthy, complex and expensive preclinical studies and clinical trials that our product candidates are both safe and effective for use in each target indication. Further, because our product candidates are subject to regulation as biological drug products, we will need to demonstrate that they are safe, pure and potent for use for their target indications. Each product candidate must demonstrate an adequate risk versus benefit profile in its intended patient population and for its intended use.

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during preclinical development or the clinical trial process. The results of preclinical studies of our product candidates may not be predictive of the results of early-stage or later-stage clinical trials, and results of early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials. The results of clinical trials in one set of patients or disease indications may not be predictive of those obtained in another. In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, changes in and adherence to the dosing regimen and other clinical trial protocols and the rate of dropout among clinical trial participants. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy profile despite having progressed through preclinical studies and initial clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or unacceptable safety issues, notwithstanding promising results in earlier trials. Most product candidates that begin clinical trials are never approved by regulatory authorities for commercialization.

We have limited experience in designing clinical trials and may be unable to design and execute a clinical trial to support continued product development or marketing approval. We cannot be certain that our ongoing and future clinical trials or any other future clinical trials will be successful. Additionally, any safety concerns observed in any one of our clinical trials for our targeted indications could limit the prospects

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for regulatory approval of our product candidates for those and other indications, which could seriously harm our business. In addition, even if such clinical trials are successfully completed, we cannot guarantee that the FDA or foreign regulatory authorities will interpret the results as we do, and more trials could be required before we submit our product candidates for approval. To the extent that the results of the trials are not satisfactory to the FDA or foreign regulatory authorities for support of a marketing application, we may be required to expend significant resources, which may not be available to us, to conduct additional trials in support of potential approval of our product candidates. Even if regulatory approval is secured for any of our product candidates, the terms of such approval may limit the scope and use of such product candidate, which may also limit its commercial potential.

Additionally, some of our clinical trials may utilize an “open-label” trial design, which is one where both the patient and investigator know whether the patient is receiving the investigational product candidate or either an existing approved drug or placebo. Most typically, open-label clinical trials test only the investigational product candidate and sometimes may do so at different dose levels. Open-label clinical trials are subject to various limitations that may exaggerate any therapeutic effect as patients in open-label clinical trials are aware when they are receiving treatment. Open-label clinical trials may be subject to a “patient bias” where patients perceive their symptoms to have improved merely due to their awareness of receiving an experimental treatment. In addition, open-label clinical trials may be subject to an “investigator bias” where those assessing and reviewing the physiological outcomes of the clinical trials are aware of which patients have received treatment and may interpret the information of the treated group more favorably given this knowledge. The results from an open-label trial may not be predictive of future clinical trial results with any of our product candidates when studied in a controlled environment with a placebo or active control.

 We may conduct clinical trials for our product candidates in sites outside the United States, and the FDA may not accept data from trials conducted in foreign locations.

We may in the future choose to conduct clinical trials outside the United States for SQZ-PBMC-HPV, SQZ-AAC-HPV, our other pipeline product candidates or any of our other future product candidates. Although the FDA may accept data from clinical trials conducted outside the United States, acceptance of this data is subject to certain conditions imposed by the FDA. For example, the clinical trial must be well designed and conducted and performed by qualified investigators in accordance with GCPs, including review and approval by an IRB or Independent Ethics Committee, and receipt of informed consent from subjects. The FDA must also be able to validate the data from the study through an on-site inspection if necessary. In general, the patient population for any clinical trials conducted outside of the United States must be representative of the population for which we intend to seek approval for the product in the United States. In addition, while these clinical trials are subject to the applicable local laws, FDA acceptance of the data will be dependent upon its determination that the trials also complied with all applicable U.S. laws and regulations. There can be no assurance the FDA will accept data from trials conducted outside of the United States. If the FDA does not accept the data from our clinical trials of our product candidates, it would likely result in the need to conduct additional trials, which would be costly and time-consuming and delay or permanently halt our development of our product candidates.

In addition, there are risks inherent in conducting clinical trials in multiple jurisdictions, inside and outside of the United States, such as:

Interim, “topline” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we may publish interim, “topline” or preliminary data from preclinical studies or clinical trials. Interim data are subject to the risk that one or more of the outcomes may materially change as more data become available. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Preliminary or “topline” data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, interim, “topline” and preliminary data should be viewed with caution until the final data are available. Additionally, interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Adverse differences between preliminary, “topline” or interim data and final data could seriously harm our business.

Further, others, including regulatory authorities, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure. Any information we determine not to disclose may ultimately be deemed significant by you or others with respect to future decisions, conclusions, views, activities or otherwise regarding a particular product candidate or our business. If the topline data that we report differ from final

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results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, product candidates may be harmed, which could seriously harm our business.

We may not be successful in our efforts to identify and successfully develop additional product candidates.

Part of our strategy involves identifying novel product candidates. The process by which we identify product candidates may fail to yield product candidates for clinical development for a number of reasons, including those discussed in these risk factors and also:

In addition, we may choose to focus our efforts and resources on a potential product candidate that ultimately proves to be unsuccessful, or to license or purchase a marketed product that does not meet our financial expectations. As a result, we may fail to capitalize on viable commercial products or profitable market opportunities, be required to forego or delay pursuit of opportunities with other product candidates or other diseases that may later prove to have greater commercial potential, or relinquish valuable rights to such product candidates through collaboration, licensing or other royalty arrangements in cases in which it would have been advantageous for us to retain sole development and commercialization rights. If we are unable to identify and successfully commercialize additional suitable product candidates, this would adversely impact our business strategy and our financial position.

We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

Because we have limited financial and managerial resources, we focus on research programs and product candidates that we identify for specific indications. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to timely capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications 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 collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

We may seek orphan drug designation for certain product candidates, but we may be unable to obtain such designation or to obtain or maintain the benefits associated with orphan drug designation, including market exclusivity, which may cause our product revenue, if any, to be reduced.

We may seek orphan product designation for some of our product candidates; however, we may never receive such designations. Under the Orphan Drug Act, the FDA may designate a drug or biologic product as an orphan drug if it is intended to treat a rare disease or condition, defined as a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States. Orphan drug designation must be requested before submitting a BLA.

In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and application fee waivers. After the FDA grants orphan drug designation, the generic identity of the drug and its potential orphan use are disclosed publicly by the FDA.

 In addition, if a product receives the first FDA approval for the indication for which it has orphan designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other application to market the same drug or biologic for the same indication for a period of seven years, except in limited circumstances, such as a showing of clinical superiority over the product with orphan exclusivity or where the manufacturer is unable to assure sufficient product quantity for the orphan patient population. Exclusive marketing rights in the United States may also be unavailable if we or our collaborators seek approval for an indication broader than the orphan designated indication and may be lost if the FDA later determines that the request for designation was materially defective.

Even if we obtain orphan drug designation, we may not be the first to obtain marketing approval for any particular orphan indication due to the uncertainties associated with developing pharmaceutical products. Further, even if we obtain orphan drug exclusivity for a product candidate, that exclusivity may not effectively protect the product from competition because different drugs with different active moieties can be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug with the same active moiety for the same condition if the FDA concludes that the later drug is clinically superior in that it is safer, more effective, or makes a major contribution to patient care. Orphan drug designation neither shortens the development time or regulatory review time of a drug or biologic nor gives the drug or biologic any advantage in the regulatory review or approval process.

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Even if we complete the necessary preclinical studies and clinical trials, the marketing approval process is expensive, time-consuming and uncertain and may prevent us or any future collaboration partners from obtaining approvals for the commercialization of any product candidate we develop.

Any product candidate we may develop and the activities associated with their development and commercialization, including their design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA and other regulatory authorities in the United States and by comparable authorities in other countries. Any product candidates we develop may not be effective, may be only moderately effective, or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use. Failure to obtain marketing approval for a product candidate will prevent us from commercializing the product candidate in a given jurisdiction. Our development programs are early-stage and we have not received approval to market any product candidates from regulatory authorities in any jurisdiction. It is possible that none of the product candidates we are developing or that we may seek to develop in the future will ever obtain regulatory approval. We have no experience in filing and supporting the applications necessary to gain marketing approvals and expect to rely on third-party CROs, suppliers, vendors or regulatory consultants to assist us in this process. Securing regulatory approval requires the submission of extensive preclinical and clinical data and supporting information to the various regulatory authorities for each therapeutic indication to establish the biologic product candidate’s safety, purity, efficacy and potency. Securing regulatory approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the relevant regulatory authority.

Both in the United States and abroad, the process of obtaining marketing approvals, if approval is obtained at all, is expensive, may take many years, especially if additional clinical trials are required and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved. Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application. The FDA and comparable authorities in other countries have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical, clinical or other studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate. Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.

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

 Even if we obtain FDA approval of any of our product candidates, we may never obtain approval or commercialize such products outside of the United States, which would limit our ability to realize their full market potential.

In order to market any products outside of the United States, we must establish and comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. Approval procedures vary among countries and can involve additional product testing and validation and additional administrative review periods. Seeking foreign regulatory approvals could result in significant delays, difficulties and costs for us and may require additional preclinical studies or clinical trials which would be costly and time-consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of our products in those countries. Satisfying these and other regulatory requirements is costly, time-consuming, uncertain and subject to unanticipated delays. In addition, our failure to obtain regulatory approval in any country may delay or have negative effects on the process for regulatory approval in other countries. We do not have any product candidates approved for sale in any jurisdiction, including international markets, and we do not have experience in obtaining regulatory approval in international markets. If we fail to comply with regulatory requirements in international markets or to obtain and maintain required approvals, our ability to realize the full market potential of our products will be harmed.

Even if a current or future product candidate receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.

If any current or future product candidate we develop receives marketing approval, whether as a single agent or in combination with other therapies, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. For example, current approved immunotherapies, and other cancer treatments like chemotherapy and radiation therapy, are well established in the medical community, and doctors may continue to rely on these therapies. If the product candidates we develop do not achieve an adequate level of acceptance, we may not generate significant product revenues and we may not become profitable. The degree of market acceptance of any product candidate, if approved for commercial sale, will depend on a number of factors, including:

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We are developing a product candidate, and in the future may develop other product candidates, in combination with other therapies, which exposes us to additional risks.

SQZ-PBMC-HPV is being evaluated and an IND was cleared by the FDA in January 2021 to evaluate SQZ-AAC-HPV in a Phase 1 clinical trial to treat HPV16+ tumors as a monotherapy and in combination with other immune-oncology agents. In the future, we may develop product candidates to be used with one or more currently approved cancer therapies. Even if any product candidate we develop were to receive marketing approval or be commercialized for use in combination with other existing therapies, we would continue to be subject to the risks that the FDA or similar regulatory authorities outside of the United States could revoke approval of the therapy used in combination with our product candidate or that safety, efficacy, manufacturing or supply issues could arise with these existing therapies. Combination therapies are commonly used for the treatment of cancer, and we would be subject to similar risks if we develop any of our product candidates for use in combination with other drugs or for indications other than cancer. This could result in our own products being removed from the market or being less successful commercially.

We may also evaluate our product candidates in combination with one or more other cancer therapies that have not yet been approved for marketing by the FDA or similar regulatory authorities outside of the United States. We will not be able to market any product candidate we develop in combination with any such unapproved cancer therapies that do not ultimately obtain marketing approval.

If the FDA or similar regulatory authorities outside of the United States do not approve these other drugs or revoke their approval of, or if safety, efficacy, manufacturing or supply issues arise with, the drugs we choose to evaluate in combination with any product candidate we develop, we may be unable to obtain approval or subsequent commercial success.

The market opportunities for any current or future product candidate we develop, if and when approved, may be limited to those patients who are ineligible for established therapies or for whom prior therapies have failed, and may be small.

Cancer therapies are sometimes characterized as first-line, second-line or third-line, and the FDA often approves new therapies initially only for third-line use. When cancer is detected early enough, first-line therapy, usually chemotherapy, hormone therapy, surgery, radiation therapy or a combination of these, is sometimes adequate to cure the cancer or prolong life without a cure. Second- and third-line therapies are administered to patients when prior therapy is not effective. We expect to initially seek approval of our oncology product candidates as a therapy for patients who have received one or more prior treatments. Subsequently, for those products that prove to be sufficiently beneficial, if any, we would expect to seek approval potentially as a first-line therapy, but there is no guarantee that product candidates we develop, even if approved, would be approved for first-line therapy, and, prior to any such approvals, we may have to conduct additional clinical trials.

The number of patients who have the cancers we are targeting may turn out to be lower than expected. Additionally, the potentially addressable patient population for our current programs or future product candidates may be limited, if and when approved. Even if we obtain significant market share for any product candidate, if and when approved, if the potential target populations are small, we may never achieve profitability without obtaining marketing approval for additional indications, including to be used as first- or second-line therapy.

Our investigational products, if approved, may face competition from biosimilars approved through an abbreviated regulatory pathway.

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively the ACA, includes a subtitle called the Biologics Price Competition and Innovation Act of 2009, or BPCIA, which created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-approved reference biological product. Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first approved by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first approved. During this 12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a BLA for the competing product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity, and potency of the other company’s product. The law is complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty.

We believe that any of our investigational products approved as a biological product under a BLA should qualify for the 12-year period of exclusivity. However, there is a risk that this exclusivity could be shortened due to Congressional action or otherwise, or that the FDA will not consider our investigational medicines to be reference products for competing products, potentially creating the opportunity for generic competition sooner than anticipated. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of our reference products in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.

Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire, retain or deploy key leadership and other personnel, or otherwise prevent new or modified products from being developed, approved or commercialized in a timely manner or at all, which could negatively impact our business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory and policy changes, the FDA’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s ability to perform routine functions. Average review times at the FDA have fluctuated in recent years as a result. In addition, funding of other government agencies that finance research and development activities is subject to the political process, which is inherently fluid and unpredictable. Disruptions at the FDA and other agencies may also slow the time necessary for new biologics or modifications to approved or licensed biologics to be reviewed and/or approved by necessary government agencies, which would adversely affect our business.

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Separately, in response to the COVID-19 pandemic, on March 10, 2020, the FDA announced its intention to postpone most inspections of foreign manufacturing facilities, and on March 18, 2020, the FDA temporarily postponed routine surveillance inspections of domestic manufacturing facilities. Subsequently, on July 10, 2020, the FDA announced its intention to resume certain on-site inspections of domestic manufacturing facilities subject to a risk-based prioritization system. The FDA intends to use this risk-based assessment system to identify the categories of regulatory activity that can occur within a given geographic area, ranging from mission critical inspections to resumption of all regulatory activities. Additionally, as of June 23, 2020, the FDA noted it is continuing to ensure timely reviews of applications for medical products during the COVID-19 pandemic in line with its user fee performance goals. On July 16, 2020, the FDA noted that it is continuing to expedite oncology product development with its staff teleworking full-time. However, the FDA may not be able to continue its current pace, and review timelines could be extended, including where a pre-approval inspection or an inspection of clinical sites is required and due to the COVID-19 pandemic and travel restrictions the FDA is unable to complete such required inspections during the review period. In 2020, several companies announced receipt of complete response letters due to the FDA’s inability to complete required inspections for their applications. Regulatory authorities outside the United States may adopt similar restrictions or other policy measures or reallocate resources in response to the COVID-19 pandemic. If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

Our insurance policies are expensive and protect us only from some business risks, which leaves us exposed to significant uninsured liabilities.

We do not carry insurance for all categories of risk that our business may encounter. Some of the policies we currently maintain include general liability, employment practices liability, property, auto, workers’ compensation, umbrella, and directors’ and officers’ insurance.

Any additional product liability insurance coverage we acquire in the future may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive and in the future we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. If we obtain marketing approval for SQZ-PBMC-HPV, SQZ-AAC-HPV and/or any of our other product candidates, we intend to acquire insurance coverage to include the sale of commercial products; however, we may be unable to obtain product liability insurance on commercially reasonable terms or in adequate amounts. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could adversely affect our results of operations and business, including preventing or limiting the development and commercialization of any product candidates we develop. We do not carry specific biological or hazardous waste insurance coverage, and our property, casualty and general liability insurance policies specifically exclude coverage for damages and fines arising from biological or hazardous waste exposure or contamination. Accordingly, in the event of contamination or injury, we could be held liable for damages or be penalized with fines in an amount exceeding our resources, and our clinical trials or regulatory approvals could be suspended.

Operating as a public company has and will continue to make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified people to serve on our board of directors, our board committees or as executive officers. We do not know, however, if we will be able to maintain existing insurance with adequate levels of coverage. Any significant uninsured liability may require us to pay substantial amounts, which would adversely affect our cash position and results of operations.

Our business and operations would suffer in the event of system failures.

Our computer systems, as well as those of our CROs and other contractors and consultants, are vulnerable to damage from computer viruses, unauthorized access, natural disasters (including hurricanes), terrorism, war and telecommunication and electrical failures. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our product candidate development programs. For example, the loss of preclinical studies or clinical trial data from completed, ongoing or planned studies or trials could 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 personal, confidential or proprietary information, we could incur liability and the further development of SQZ-PBMC-HPV, SQZ-AAC-HPV or any other product candidate could be delayed.

In the ordinary course of our business, we directly or indirectly collect and store sensitive data, including intellectual property, confidential information, preclinical and clinical trial data, proprietary business information, personal data and personally identifiable health information of our clinical trial subjects and employees, in our data centers and on our networks, or on those of third parties. The secure processing, maintenance and transmission of this information is critical to our operations. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or internal bad actors, or breached due to employee error, a technical vulnerability, malfeasance or other disruptions. Although, to our knowledge, we have not experienced any such material security breach to date, any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen.

Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information and significant regulatory penalties, and such an event could disrupt our operations, damage our reputation and cause a loss of confidence in us and our ability to conduct clinical trials, which could adversely affect our reputation and delay our clinical development of our product candidates.

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Risks Related to Healthcare Laws and Other Legal Compliance Matters

We are subject to extensive and costly government regulation.

Product candidates employing our technology are subject to extensive and rigorous domestic government regulation, including regulation by the FDA, the Centers for Medicare & Medicaid Services, or CMS, other divisions of the United States Department of Health and Human Services, the United States Department of Justice, state and local governments, and their respective equivalents outside of the United States. The FDA regulates the research, development, preclinical and clinical testing, manufacture, safety, effectiveness, record-keeping, reporting, labeling, packaging, storage, approval, advertising, promotion, sale, distribution, import and export of pharmaceutical products. If products employing our technologies are marketed abroad, they will also be subject to extensive regulation by foreign governments, whether or not they have obtained FDA approval for a given product and its uses. Such foreign regulation may be equally or more demanding than corresponding United States regulation.

Government regulation substantially increases the cost and risk of researching, developing, manufacturing and selling our products. The regulatory review and approval process, which includes preclinical testing and clinical trials of each product candidate, is lengthy, expensive and uncertain. We or our collaborators must obtain and maintain regulatory authorization to conduct preclinical studies and clinical trials. We or our collaborators must obtain regulatory approval for each product we intend to market, and the manufacturing facilities used for the products must be inspected and meet legal requirements. Securing regulatory approval requires the submission of extensive preclinical and clinical data and other supporting information for each proposed therapeutic indication in order to establish the product’s safety and efficacy, potency and purity, for each intended use. The development and approval process takes many years, requires substantial resources, and may never lead to the approval of a product.

Even if we are able to obtain regulatory approval for a particular product, the approval may limit the indicated medical uses for the product, may otherwise limit our ability to promote, sell and distribute the product, may require that we conduct costly post-marketing surveillance, and/or may require that we conduct ongoing post-marketing studies. Material changes to an approved product, such as, for example, manufacturing changes or revised labeling, may require further regulatory review and approval. Once obtained, any approvals may be withdrawn, including, for example, if there is a later discovery of previously unknown problems with the product, such as a previously unknown safety issue.

If we, our collaborators, consultants, CMOs, CROs or other vendors, fail to comply with applicable regulatory requirements at any stage during the regulatory process, such noncompliance could result in, among other things, delays in the approval of applications or supplements to approved applications; refusal of a regulatory authority, including the FDA, to review pending market approval applications or supplements to approved applications; warning letters; fines; import and/or export restrictions; product recalls or seizures; injunctions; total or partial suspension of production; civil penalties; withdrawals of previously approved marketing applications or licenses; recommendations by the FDA or other regulatory authorities against governmental contracts; and/or criminal prosecutions.

Enacted and future healthcare legislation and policies may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and could adversely affect our business.

In the United States, the EU and other jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes and proposed changes to the healthcare system that could prevent or delay marketing approval of our products in development, restrict or regulate post-approval activities involving any product candidates for which we obtain marketing approval, impact pricing and reimbursement and impact our ability to sell any such products profitably. In particular, there have been and continue to be a number of initiatives at the U.S. federal and state levels that seek to reduce healthcare costs and improve the quality of healthcare. In addition, new regulations and interpretations of existing healthcare statutes and regulations are frequently adopted.

In March 2010, the ACA was enacted, which substantially changed the way healthcare is financed by both governmental and private insurers. Among the provisions of the ACA, those of greatest importance to the pharmaceutical and biotechnology industries include the following:

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Since its enactment, there have been judicial, Congressional and executive challenges to certain aspects of the ACA, and we expect there will be additional challenges and amendments to the ACA in the future. By way of example, the Tax Cuts and Jobs Act, or the Tax Act, was signed into law, which included a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”. On December 14, 2018, the U.S. District Court for the Northern District of Texas ruled that the ACA is unconstitutional in its entirety because the penalty imposed by the individual mandate, which was deemed an integral part of the ACA, was reduced to $0 and effectively nullified by Congress as part of the Tax Act. Additionally, on December 18, 2019, the U.S. Court of Appeals for the Fifth Circuit ruled that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well. The U.S. Supreme Court is currently reviewing the case, although it is unclear how the Supreme Court will rule. It is also unclear how other efforts, if any, to challenge, repeal or replace the ACA will impact the ACA or our business.

On June 14, 2018, U.S. Court of Appeals for the Federal Circuit ruled that the federal government was not required to pay more than $12 billion in ACA risk corridor payments to third-party payors who argued that these payments were owed to them. In December 2018, CMS published a final rule permitting further collections and payments to and from certain ACA qualified health plans and health insurance issuers under the ACA risk adjustment program in response to the outcome of the federal district court litigation regarding the method CMS uses to determine this risk adjustment. The U.S. Supreme Court reversed the decision of the U.S. Court of Appeals for the Federal Circuit on April 27, 2020. The effects of this gap in reimbursement on third-party payors, the viability of the ACA marketplace, providers, and potentially our business, are not yet known.

In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. In August 2011, the Budget Control Act of 2011 resulted in aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in April 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2030, with the exception of a temporary suspension from May 1, 2020 through March 31, 2021, unless additional action is taken by Congress. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Additionally, the orphan drug tax credit was reduced as part of a broader tax reform. These new laws or any other similar laws introduced in the future may result in additional reductions in Medicare and other healthcare funding, which could negatively affect our customers and accordingly, our financial operations.

Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives. For example, CMS may develop new payment and delivery models, such as outcomes-based reimbursement. In addition, recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several U.S. Congressional inquiries and proposed and enacted federal legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, and review the relationship between pricing and manufacturer patient programs. We expect that additional U.S. federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that the U.S. federal government will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures.

Individual states in the United States have also increasingly passed legislation and implemented 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. Legally mandated price controls on payment amounts by third-party payors or other restrictions could harm our business, results of operations, financial condition and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. This could reduce the ultimate demand for our product candidates or put pressure on our product pricing.

In the EU, similar political, economic and regulatory developments may affect our ability to profitably commercialize our product candidates, if approved. In addition to continuing pressure on prices and cost containment measures, legislative developments at the EU or member state level may result in significant additional requirements or obstacles that may increase our operating costs. The delivery of healthcare in the EU, including the establishment and operation of health services and the pricing and reimbursement of medicines, is almost exclusively a matter for national, rather than EU, law and policy. National governments and health service providers have different priorities and approaches to the delivery of healthcare and the pricing and reimbursement of products in that context. In general, however, the healthcare budgetary constraints in most EU member states have resulted in restrictions on the pricing and reimbursement of medicines by relevant health service providers. Coupled with ever-increasing EU and national regulatory burdens on those wishing to develop and market products, this could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to commercialize our product candidates, if approved.

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In markets outside of the United States and the EU, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies.

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

We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action in the United States, the EU or any other jurisdiction. If we or any third parties we may engage are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or such third parties are not able to maintain regulatory compliance, our product candidates may lose any regulatory approval that may have been obtained and we may not achieve or sustain profitability.

Even if we obtain regulatory approval for a product candidate, our products will remain subject to regulatory scrutiny and post-marketing requirements.

If one of our product candidates is approved, it will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, conduct of post-marketing studies and submission of safety, efficacy, and other post- market information, including both federal and state requirements in the United States and requirements of comparable foreign regulatory authorities. Manufacturers and manufacturers’ facilities are required to comply with extensive FDA and comparable foreign regulatory authority requirements, including ensuring that quality control and manufacturing procedures conform to current good manufacturing practice, or cGMP, regulations. As such, we and our contract manufacturers will be subject to continual review and inspections to assess compliance with cGMP and adherence to commitments made in any approved marketing application. Accordingly, we and others with whom we work must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production and quality control.

We will also have to comply with requirements concerning advertising and promotion for our products. Promotional communications with respect to prescription drugs and biologics are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved label. As such, we may not promote our products “off-label” for indications or uses for which they do not have approval, though we may share truthful and not misleading information that is otherwise consistent with our product’s FDA approved labeling. The holder of an approved application, such as a BLA, must submit new or supplemental applications and obtain approval for certain changes to the approved product, product labeling or manufacturing process. We could also be asked to conduct post-marketing clinical studies to verify the safety and efficacy of our products in general or in specific patient subsets. An unsuccessful post-marketing study or failure to complete such a study could result in the withdrawal of marketing approval or label restrictions.

If the FDA or another regulatory authority discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing or labeling of a product, such regulatory authorities may impose restrictions on that product or us, including requiring withdrawal of the product from the market. If we fail to comply with applicable regulatory requirements, a regulatory authority or enforcement authority may, among other things:

Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. Any failure to comply with ongoing regulatory requirements may adversely affect our ability to commercialize and generate revenue from our products. If regulatory sanctions are applied or if regulatory approval is withdrawn, our business will be seriously harmed.

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

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Our business operations and current and future relationships with investigators, healthcare professionals, consultants, third-party payors, patient organizations and customers are and will be subject to applicable healthcare regulatory laws, which could expose us to penalties.

Our business operations and current and future arrangements with investigators, healthcare professionals, consultants, third-party payors, patient organizations and customers, may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations. These laws may constrain the business or financial arrangements and relationships through which we conduct our operations, including how we research, market, sell and distribute our product candidates, if approved. Such laws include:

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Ensuring that our internal operations and future business arrangements with third parties comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices, including our relationships with physicians and other healthcare providers, may not comply with current or future statutes, regulations, agency guidance or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of the laws described above or any other governmental laws and regulations that may apply to us, we may be subject to significant penalties, including civil, criminal and administrative penalties, damages, fines, exclusion from government-funded healthcare programs, such as Medicare and Medicaid or similar programs in other countries or jurisdictions, integrity oversight and reporting obligations to resolve allegations of non-compliance, disgorgement, individual imprisonment, contractual damages, reputational harm, diminished profits and the curtailment or restructuring of our operations. If any of the physicians or other providers or entities with whom we expect to do business are found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs and imprisonment, which could affect our ability to operate our business. Further, defending against any such actions can be costly, time-consuming and may require significant personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired.

We are subject to governmental regulation and other legal obligations, particularly related to privacy, data protection and information security, and we are subject to consumer protection laws that regulate our marketing practices and prohibit unfair or deceptive acts or practices. Our actual or perceived failure to comply with such obligations could harm our business.

We are subject to diverse laws and regulations relating to data privacy and security, including, in the United States, HIPAA, and, in the EU and the European Economic Area, or EEA, Regulation 2016/679, known as the GDPR. New privacy rules are being enacted in the United States and globally, and existing ones are being updated and strengthened. For example, on June 28, 2018, California enacted the California Consumer Privacy Act, or CCPA, which took effect on January 1, 2020. The CCPA creates individual privacy rights for California consumers and increases the privacy and security obligations of entities handling certain personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. Complying with these numerous, complex and often changing regulations is expensive and difficult, and failure to comply with any privacy laws or data security laws or any security incident or breach involving the misappropriation, loss or other unauthorized use or disclosure of sensitive or confidential patient or consumer information, whether by us, one of our business associates or another third party, could adversely affect our business, financial condition and results of operations, including but not limited to: investigation costs, material fines and penalties; compensatory, special, punitive and statutory damages; litigation; consent orders regarding our privacy and security practices; requirements that we provide notices, credit monitoring services and/or credit restoration services or other relevant services to impacted individuals; adverse actions against our licenses to do business; and injunctive relief. Furthermore, these rules are constantly changing; for example, the GDPR came into force in May 2018 changing the European regime. Before that, the U.S.-EU Safe Harbor framework was declared invalid in 2015 and replaced with the EU-U.S. Privacy Shield framework, which, along with other methods that permit transfer under European privacy law, are under ongoing review and subject to challenge.

The privacy laws in the EU have been significantly reformed in recent years. On May 25, 2018, the GDPR entered into force and became directly applicable in all EU member states. The GDPR implements more stringent operational requirements than its predecessor legislation. For example, the GDPR requires us to make more detailed disclosures to data subjects, requires disclosure of the legal basis on which we can process personal data, makes it harder for us to obtain valid consent for processing, will require the appointment of data protection officers when sensitive personal data, such as health data, is processed on a large scale, provides more robust rights for data subjects, introduces mandatory data breach notification through the EU, imposes additional obligations on us when contracting with service providers and requires us to adopt appropriate privacy governance, including policies, procedures, training and data audit. If we do not comply with our obligations under the GDPR, we could be exposed to fines of up to the greater of €20 million or up to 4% of our total global annual revenue in the event of a significant breach or non-compliance. In addition, we may be the subject of litigation and/or adverse publicity, which could adversely affect our business, results of operations and financial condition.

We cannot assure you that our third-party service providers with access to our or our customers’, suppliers’, trial patients’ and employees’ personally identifiable and other sensitive or confidential information in relation to which we are responsible will not breach contractual obligations imposed by us, or that they will not experience data security breaches or attempts thereof, which could have a corresponding effect on our business, including putting us in breach of our obligations under privacy laws and regulations and/or which could in turn adversely affect our business, results of operations and financial condition. We cannot assure you that our contractual measures and our own privacy and security-related safeguards will protect us from the risks associated with the third-party processing, storage and transmission of such information.

We face potential liability related to the privacy of health information we obtain from clinical trials sponsored by us.

Most healthcare providers, including research institutions from which we obtain patient health information, are subject to privacy and security regulations promulgated under HIPAA, as amended by the HITECH. We are not currently classified as a covered entity or business associate under HIPAA and thus are not directly subject to its requirements or penalties. However, any person may be prosecuted under HIPAA’s criminal provisions either directly or under aiding-and-abetting or conspiracy principles. Consequently, depending on the facts and circumstances, we could face substantial criminal penalties if we knowingly receive individually identifiable health information from a HIPAA-covered healthcare provider or research institution that has not satisfied HIPAA’s requirements for disclosure of individually identifiable health information. In addition, we may maintain sensitive personally identifiable information, including health information, that we receive throughout the clinical trial process, in the course of our research collaborations, and directly from individuals (or their healthcare providers) who enroll in our patient assistance programs. As such, we may be subject to state laws requiring notification of affected

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individuals and state regulators in the event of a breach of personal information, which is a broader class of information than the health information protected by HIPAA. Our clinical trial programs outside the United States may implicate international data protection laws, including the GDPR and legislation of the EU member states implementing it.

Our activities outside the United States impose additional compliance requirements and generate additional risks of enforcement for noncompliance. Failure by our CROs and other third-party contractors to comply with the strict rules on the transfer of personal data outside of the EU into the United States may result in the imposition of criminal and administrative sanctions on such collaborators, which could adversely affect our business. Furthermore, certain health privacy laws, data breach notification laws, consumer protection laws and genetic testing laws may apply directly to our operations and/or those of our collaborators and may impose restrictions on our collection, use and dissemination of individuals’ health information.

Moreover, patients about whom we or our collaborators obtain health information, as well as the providers who share this information with us, may have statutory or contractual rights that limit our ability to use and disclose the information. We may be required to expend significant capital and other resources to ensure ongoing compliance with applicable privacy and data security laws. Claims that we have violated individuals’ privacy rights or breached our contractual obligations, even if we are not found liable, could be expensive and time-consuming to defend and could result in adverse publicity that could harm our business.

If we or third-party CMOs, CROs or other contractors or consultants fail to comply with applicable federal, state or local regulatory requirements, we could be subject to a range of regulatory actions that could affect our or our contractors’ ability to develop and commercialize our product candidates and could harm or prevent sales of any affected products that we are able to commercialize, or could substantially increase the costs and expenses of developing, commercializing and marketing our products. Any threatened or actual government enforcement action could also generate adverse publicity and require that we devote substantial resources that could otherwise be used in other aspects of our business. Increasing use of social media could give rise to liability, breaches of data security or reputational damage.

We are subject to environmental, health and safety laws and regulations, and we may become exposed to liability and substantial expenses in connection with environmental compliance or remediation activities.

Our operations, including our development, testing and manufacturing activities, are subject to numerous environmental, health and safety laws and regulations. These laws and regulations govern, among other things, the controlled use, handling, release and disposal of and the maintenance of a registry for, hazardous materials and biological materials, such as chemical solvents, human cells, carcinogenic compounds, mutagenic compounds and compounds that have a toxic effect on reproduction, laboratory procedures and exposure to blood-borne pathogens. If we fail to comply with such laws and regulations, we could be subject to fines or other sanctions.

As with other companies engaged in activities similar to ours, we face a risk of environmental liability inherent in our current and historical activities, including liability relating to releases of or exposure to hazardous or biological materials. Environmental, health and safety laws and regulations are becoming more stringent. We may be required to incur substantial expenses in connection with future environmental compliance or remediation activities, in which case, the production efforts of our third-party manufacturers or our development efforts may be interrupted or delayed.

We and our employees are increasingly utilizing social media tools as a means of communication both internally and externally.

Despite our efforts to monitor evolving social media communication guidelines and comply with applicable rules, there is risk that the use of social media by us or our employees to communicate about our product candidates or business may cause us to be found in violation of applicable requirements. In addition, our employees may knowingly or inadvertently make use of social media in ways that may not comply with applicable laws and regulations, our policies and other legal or contractual requirements, which may give rise to regulatory enforcement action, liability, lead to the loss of trade secrets or other intellectual property or result in public exposure of personal information of our employees, clinical trial patients, customers and others. Furthermore, negative posts or comments about us or our product candidates in social media could seriously damage our reputation, brand image and goodwill. Any of these events could have a material adverse effect on our business, prospects, operating results and financial condition and could adversely affect the price of our common stock.

Changes in tax laws, including as a result of the 2020 United States presidential and congressional elections, may impact our future financial position and results of operations.

New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, or interpreted, changed, modified or applied adversely to us, any of which could adversely affect our business operations and financial performance. In particular, the recent presidential and congressional elections in the United States could result in significant changes in, and uncertainty with respect to, tax legislation, regulation and government policy affecting us and our business. For example, the United States government may enact significant changes to the taxation of business entities including, among others, a permanent increase in the corporate income tax rate and the imposition of minimum taxes or surtaxes on certain types of income. No specific United States tax legislation has been proposed at this time and the likelihood of these changes being enacted or implemented is unclear. We are currently unable to predict whether such changes will occur and, if so, the ultimate impact on us or our business. To the extent that such changes have a negative impact on us or our business, these changes may materially and adversely impact our financial condition, results of operations and cash flows.

Risks Related to Commercialization

Developments by competitors may render our products or technologies obsolete or non-competitive or may reduce the size of our markets.

Our industry has been characterized by extensive research and development efforts, rapid developments in technologies, intense competition and a strong emphasis on proprietary products. We face potential competition from many different sources, including pharmaceutical,

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biotechnology and specialty pharmaceutical companies either marketing or developing cell therapies or biologic or small molecule modalities for patients with cancer and other serious diseases. Academic research institutions, governmental agencies and public and private institutions are also potential sources of competitive products and technologies. Our competitors may have or may develop superior technologies or approaches, which may provide them with competitive advantages. Many of these competitors may also have compounds already approved or in development in the therapeutic categories that we are targeting with our current and future product candidates. In addition, many of these competitors, either alone or together with their collaborative partners, may operate larger research and development programs or have substantially greater financial resources than we do, as well as greater experience in:

If these competitors access the marketplace before we do with safer, more effective, or less expensive therapeutics, our product candidates, if approved for commercialization, may not be profitable to sell or worthwhile to continue to develop. Technology in the pharmaceutical industry has undergone rapid and significant change, and we expect that it will continue to do so. Any compounds, products or processes that we develop may become obsolete or uneconomical before we recover any expenses incurred in connection with their development. The success of our product candidates will depend upon factors such as product efficacy, safety, reliability, availability, timing, scope of regulatory approval, acceptance and price, among other things. Other important factors to our success include speed in developing product candidates, completing clinical development and laboratory testing, obtaining regulatory approvals and manufacturing and selling commercial quantities of potential products.

Our product candidates are intended to compete directly or indirectly with existing products and products currently in development. Even if approved and commercialized, our product candidates may fail to achieve market acceptance with hospitals, physicians or patients. Hospitals, physicians or patients may conclude that our potential products are less safe or effective or otherwise less attractive than these existing drugs. If our product candidates do not receive market acceptance for any reason, our revenue potential would be diminished, which would materially adversely affect our ability to become profitable.

Significant competition additionally exists in the treatment of cancer and other serious diseases for which we are developing our cell therapies. We will need to compete with all currently available or future therapies within the indications where our development is focused. SQZ-PBMC-HPV and SQZ-AAC-HPV, if approved and commercialized, will face significant competition with other product candidates for the treatment of HPV+ cancers. While there are currently no FDA-approved therapies that target HPV for HPV+ cancers, there are multiple competing clinical-stage product candidates in development targeting HPV+ cancers. These product candidates include genetically modified T cell therapies in clinical development, peptide vaccines in clinical development, and nucleic acid vaccines in clinical development. Therapies that are not specific to HPV are also being explored and applied to HPV+ tumors, including tumor infiltrating lymphocytes and immune checkpoint inhibitors that are approved for treatment in multiple solid tumors.

In addition, we generally expect to compete with companies using other cell engineering approaches, such as electroporation and viral vectors, including a biotechnology company that is genetically engineering red blood cells, a biotechnology company that is programing hematopoietic cells and other biotechnology companies working on single cell types. In addition, we also expect to compete more generally with companies developing biologic or small molecule modalities.

Many of our competitors have substantially greater capital resources, robust product candidate pipelines, established presence in the market and expertise in research and development, manufacturing, preclinical and clinical testing, obtaining regulatory approvals and reimbursement and marketing approved products than we do. As a result, our competitors may achieve product commercialization or patent protection earlier than we can. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified clinical, regulatory, scientific, sales, marketing and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient, or are less expensive than any products that we may develop or that would render any products that we may develop obsolete or noncompetitive.

The successful commercialization of our product candidates will depend in part on the extent to which governmental authorities and health insurers establish coverage, adequate reimbursement levels and pricing policies. Failure to obtain or maintain coverage and adequate reimbursement for our product candidates, if approved, could limit our ability to market those products and decrease our ability to generate product revenue.

There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States, third-party payors, including private and governmental payors, such as the Medicare and Medicaid programs, play an important role in determining the extent to which new drugs and biologics will be covered. Our ability to successfully commercialize our product candidates will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations. Government authorities and other third-party

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payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. The availability of coverage and extent of reimbursement by governmental and private payors is essential for most patients to be able to afford treatments. The Medicare and Medicaid programs increasingly are used as models in the United States for how private payors and other governmental payors develop their coverage and reimbursement policies for drugs and biologics. Some third-party payors may require pre-approval of coverage for new or innovative drug therapies before they will reimburse healthcare providers who use such therapies. We cannot predict at this time what third-party payors will decide with respect to the coverage and reimbursement for our product candidates.

Third-party payors increasingly are challenging prices charged for pharmaceutical products and services, and many third-party payors may refuse to provide coverage and reimbursement for particular drugs and biologics when an equivalent generic drug, biosimilar or a less expensive therapy is available. It is possible that a third-party payor may consider our product candidates as substitutable and only offer to reimburse patients for the less expensive product.

For products administered under the supervision of a physician, obtaining coverage and adequate reimbursement may be particularly difficult because of the higher prices often associated with such drugs. Even if we show improved efficacy or improved convenience of administration with our product candidates, pricing of existing third-party therapeutics may limit the amount we will be able to charge for our product candidates. These payors may deny or revoke the reimbursement status of a given product or establish prices for new or existing marketed products at levels that are too low to enable us to realize an appropriate return on our investment in our product candidates. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize our product candidates and may not be able to obtain a satisfactory financial return on our product candidates.

In the United States, third-party payors, including private and governmental payors, such as the Medicare and Medicaid programs, play an important role in determining the extent to which new drugs and biologics will be covered and reimbursed. The Medicare program is increasingly used as a model for how private and other governmental payors develop their coverage and reimbursement policies for new drugs. However, no uniform policy for coverage and reimbursement for products exists among third-party payors in the United States. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our product candidates to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. Furthermore, rules and regulations regarding reimbursement change frequently, in some cases on short notice, and we believe that changes in these rules and regulations are likely.

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 the EU and other jurisdictions have and will continue to put pressure on the pricing and usage of our product candidates. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. Other countries allow companies to fix their own prices for medical products, 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. Accordingly, in markets outside the United States, the reimbursement for our product candidates may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenue and profits.

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 the level of reimbursement for newly approved products and, as a result, they may not cover or provide adequate payment for our product candidates. We expect to experience pricing pressures in connection with the sale of our product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and biologics and surgical procedures and other treatments, has become intense. As a result, increasingly high barriers are being erected to the entry of new products.

If we are unable to establish sales, marketing and distribution capabilities either on our own or in collaboration with third parties, we may not be successful in commercializing SQZ-PBMC-HPV, SQZ-AAC-HPV or any of our other product candidates, if approved, and we may not be able to generate any product revenue.

We do not have any infrastructure for the sales, marketing or distribution of our products, and the cost of establishing and maintaining such an organization may exceed the cost-effectiveness of doing so.

We may build our own focused sales, distribution and marketing infrastructure to market SQZ-PBMC-HPV, SQZ-AAC-HPV and our other product candidates, if approved, in the United States and other markets around the world. There are significant expenses and risks involved with establishing our own sales, marketing and distribution capabilities, including our ability to hire, retain and appropriately incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel, and effectively manage a geographically dispersed sales and marketing team. Any failure or delay in the development of our internal sales, marketing and distribution capabilities could delay any product launch, which would adversely impact the commercialization of SQZ-PBMC-HPV, SQZ-AAC-HPV or any of our other product candidates, if approved. Additionally, if the commercial launch of SQZ-PBMC-HPV, SQZ-AAC-HPV or any of our other product candidates for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.

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Factors that may inhibit our efforts to commercialize our product candidates on our own include:

We may not have the resources in the foreseeable future to allocate to the sales and marketing of SQZ-PBMC-HPV, SQZ-AAC-HPV, any of our other pipeline product candidates or any future product candidates in the United States or in markets outside of the United States. Therefore, our future sales in these markets may largely depend on our ability to enter into and maintain collaborative relationships for such capabilities, the collaborator’s strategic interest in the product and such collaborator’s ability to successfully market and sell the product. For example, in October 2018, we entered into the Roche License and Collaboration Agreement, or the Roche Agreement, under which we are collaborating with Roche in the development and commercialization of certain antigen products, including SQZ-PBMC-HPV, and tumor cell lysate products in accordance with mutually agreed upon collaboration plans.

If we are unable to build our own sales force or access a collaborative relationship for the commercialization of SQZ-PBMC-HPV, SQZ-AAC-HPV or any of our other product candidates, we may be forced to delay the potential commercialization of SQZ-PBMC-HPV, SQZ-AAC-HPV or any of our other product candidates or reduce the scope of our sales or marketing activities for such product candidates. If we elect to increase our expenditures to fund commercialization activities ourselves, we will need to obtain additional capital, which may not be available to us on acceptable terms, or at all. We could enter into arrangements with collaborative partners at an earlier stage than otherwise would be ideal and we may be required to relinquish rights to any of our product candidates or otherwise agree to terms unfavorable to us, any of which may have an adverse effect on our business, operating results and prospects.

If we are unable to establish adequate sales, marketing and distribution capabilities, either on our own or in collaboration with third parties, we will not be successful in commercializing SQZ-PBMC-HPV, SQZ-AAC-HPV or any of our other product candidates and may not become profitable and may incur significant additional losses. We will be competing with many companies that currently have extensive and well-funded marketing and sales operations. Without an internal team or the support of a third party to perform marketing and sales functions, we may be unable to compete successfully against these more established companies.

In addition, even if we do establish adequate sales, marketing and distribution capabilities, the progress of general industry trends with respect to pricing models, supply chains and delivery mechanisms, among other things, could deviate from our expectations. If these or other industry trends change in a manner which we do not anticipate or for which we are not prepared, we may not be successful in commercializing our product candidates or become profitable.

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

Our future profitability may depend, in part, on our ability to commercialize our product candidates in foreign markets for which we may rely on collaboration with third parties. We are evaluating the opportunities for the development and commercialization of our product candidates in foreign markets. We are not permitted to market or promote any of our product candidates before we receive regulatory approval from the applicable regulatory authority in that foreign market, and we may never receive such regulatory approval for any of our product candidates. To obtain separate regulatory approvals in other countries, we may be required to comply with numerous and varying regulatory requirements of such countries regarding the safety and efficacy of our product candidates and governing, among other things, clinical trials and commercial sales, pricing and distribution of our product candidates, and we cannot predict success in these jurisdictions. If we obtain approval of our product candidates and ultimately commercialize our product candidates in foreign markets, we would be subject to additional risks and uncertainties, including:

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Foreign sales of our product candidates could also be adversely affected by the imposition of governmental controls, political and economic instability, trade restrictions and changes in tariffs.

If SQZ-PBMC-HPV, SQZ-AAC-HPV or any of our other pipeline product candidates is approved for commercialization, we intend to selectively partner with third parties to market it in certain jurisdictions outside the United States. We expect that we will be subject to additional risks related to international pharmaceutical operations, including:

We have no prior experience in these areas. In addition, there are complex regulatory, tax, labor and other legal requirements imposed by both the EU and many of the individual countries in Europe with which we will need to comply. Many U.S.-based biotechnology companies have found the process of marketing their own products in Europe to be very challenging.

Certain legal and political risks are also inherent in foreign operations. There is a risk that foreign governments may nationalize private enterprises in certain countries where we may operate. In certain countries or regions, terrorist activities and the response to such activities may threaten our operations more than in the United States. Social and cultural norms in certain countries may not support compliance with our corporate policies, including those that require compliance with substantive laws and regulations. Also, changes in general economic and political conditions in countries where we may operate are a risk to our financial performance and future growth. Additionally, the need to identify financially and commercially strong partners for commercialization outside the United States who will comply with the high manufacturing and legal and regulatory compliance standards we require is a risk to our financial performance. As we operate our business globally, our success will depend, in part, on our ability to anticipate and effectively manage these and other related risks. There can be no assurance that the consequences of these and other factors relating to our international operations will not have an adverse effect on our business, financial condition or results of operations.

In some countries, particularly in Europe, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a drug. To obtain reimbursement or pricing approval in some countries, we may be required to conduct clinical trials that compare the cost-effectiveness of our product candidates to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be harmed, possibly materially.

Potential product liability lawsuits against us could cause us to incur substantial liabilities and limit commercialization of any products that we may develop.

The use of our product candidates, including SQZ-PBMC-HPV and SQZ-AAC-HPV, in clinical trials and the sale of any 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. On occasion, large judgments have been awarded in class action lawsuits based on products that had unanticipated adverse effects. If we cannot successfully defend against product liability claims, we could incur substantial liability and costs, which may not be covered by insurance. In addition, regardless of merit or eventual outcome, product liability claims may result in:

Risks Related to Our Dependence on Third Parties

The Roche Agreement is important to our business. If we or Roche fail to adequately perform under the Roche Agreement, or if we or Roche terminate the Roche Agreement, the development and commercialization of certain of our product candidates, including our initial product candidate, SQZ-PBMC-HPV, could be materially delayed and our business would be adversely affected.

Under the Roche Agreement, Roche is jointly responsible for the clinical development, with Roche being primarily responsible for the late-stage clinical development, of certain of our product candidates, which includes our initial product candidate, SQZ-PBMC-HPV. We and Roche may be jointly responsible for conducting global clinical studies and coordinating commercial launch activities.

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Termination of the Roche Agreement, in whole or in part, could cause significant delays in our development and commercialization efforts for our SQZ APC platform in oncology, including for SQZ-PBMC-HPV. If the Roche Agreement is terminated, we would need to expand our internal capabilities or enter into another agreement to compensate for the loss in funding and clinical development support from Roche. Any suitable alternative agreement would take considerable time to negotiate and could also be on less favorable terms to us. Whether or not we identify another suitable collaborator, we may need to seek additional financing to continue the development of our SQZ APC platform in oncology, including SQZ-PBMC-HPV, or we may be forced to discontinue development of our SQZ APC platform in oncology, including SQZ-PBMC-HPV, either of which could have a material adverse effect on our business.

In addition, under the Roche Agreement, we also agreed to use commercially reasonable efforts to mutually select and generate additional preclinical data on additional antigens other than the HPV targeted SQZ-PBMC-HPV to develop collaboratively. With respect to each mutually selected antigen, we granted Roche an option, exercisable after we supply Roche with a clinical proof of concept for a product containing the antigen, to obtain an exclusive license of our intellectual property to exploit the product worldwide for the treatment of oncologic indications using our SQZ platforms and a microfluidic chip. Roche granted us an option, exercisable with respect to every alternating mutually selected antigen product for which Roche exercises its own option, beginning with the second, to obtain an exclusive license of Roche’s intellectual property to exploit the antigen product in the United States. If we exercise our option to obtain, or if this alternating option structure otherwise results in our obtaining, exclusive licenses with respect to antigen products that we are subsequently unable to exploit or otherwise unsuccessful in developing and commercializing, our business could be materially harmed.

Even if the Roche Agreement is adequately performed by us and Roche, any success of our product candidates subject to the agreement may be obtained at the expense of or to the detriment of our other wholly owned product candidates, which could limit our profitability.

There may be substantial overlap in the addressable market of patients which our product candidates, if approved, would be designed to treat. As a result, in order to reduce an overlap, we may seek to commercialize only certain of our product candidates and may forego commercializing other of our product candidates. Furthermore, such an overlap may exist between certain of our product candidates, including SQZ-PBMC-HPV, that are subject to the Roche Agreement, and other of our product candidates, such as SQZ-AAC-HPV, which are wholly owned. Therefore, even if the Roche Agreement is adequately performed by us and Roche and we are able to successfully commercialize a product candidate, such success may be obtained at the expense of or to the detriment of our other wholly owned product candidates, which could limit our profitability.

We will rely on third parties for the manufacture of raw materials and product candidates for our research programs, preclinical studies and clinical trials and we do not have long-term contracts with many of these parties. This reliance on third parties increases the risk that we will not have sufficient quantities of such materials, product candidates, or any therapies that we may develop and commercialize, or that such supply will not be available to us at an acceptable cost, which could delay, prevent, or impair our development or commercialization efforts.

Although we currently conduct certain manufacturing operations internally for preclinical studies, we expect to rely on third parties for the manufacture of raw materials for future preclinical and clinical development, as well as for commercial manufacture if any of our product candidates receive marketing approval. We do not have a long-term agreement with many of the third-party manufacturers we currently use to provide preclinical and clinical raw materials, and we purchase any required materials on a purchase order basis. Certain of these manufacturers are critical to our production and the loss of these manufacturers to one of our competitors or otherwise, or an inability to obtain quantities at an acceptable cost or quality, could delay, prevent or impair our ability to timely conduct preclinical studies or clinical trials, and would materially and adversely affect our development and commercialization efforts.

The facilities used by third-party manufacturers to manufacture our product candidates must be approved by the FDA pursuant to inspections that will be conducted after we submit a BLA to the FDA. We do not control the manufacturing process of, and are dependent on, third-party manufacturers for compliance with cGMP requirements for manufacture of drug products and other laws and regulations. If these third-party manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or others, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities and may limit or restrict our clinical supply of product candidates and ability to supply any approved products to the market. Some of our contract manufacturers may not have produced a commercially approved product and therefore may not have previously obtained the requisite FDA approvals to do so. As such, regulatory authorities may identify compliance gaps or violations in the future, including if and when these contract manufacturers seek approval to manufacture and supply commercial product. In addition, we have limited control over the ability of third-party manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved.

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, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our products. In addition, we may be unable to establish any agreements with third-party manufacturers or to do so on acceptable terms.

Even if we are able to establish agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:

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Our product candidates and any products that we may develop may compete with other product candidates and products for access to manufacturing facilities. There are a limited number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for us. Any performance failure on the part of our existing or future manufacturers could delay clinical development or marketing approval, and any related remedial measures may be costly or time-consuming to implement. We do not currently have arrangements in place for redundant supply or a second source for all required raw materials used in the manufacture of our product candidates. If our current third-party manufacturers cannot perform as agreed, we may be required to replace such manufacturers and we may be unable to replace them on a timely basis or at all. Our current and anticipated future dependence upon others for the manufacture of our product candidates or products may adversely affect our future profit margins and our ability to commercialize any products that receive marketing approval on a timely and competitive basis.

We do not have multiple sources of supply for some of the components used in SQZ-PBMC-HPV, SQZ-AAC-HPV or any of our other product candidates, nor long-term supply contracts, and certain of our suppliers are critical to our production. If we were to lose a critical supplier, it could have a material adverse effect on our ability to complete the development of SQZ-PBMC-HPV, SQZ-AAC-HPV or any of our other product candidates. If we obtain regulatory approval for SQZ-PBMC-HPV, SQZ-AAC-HPV or any of our other product candidates, we would need to expand the supply of their components in order to commercialize them.

We do not have multiple sources of supply for each of the components used in the manufacturing of SQZ-PBMC-HPV, SQZ-AAC-HPV or any of our other product candidates. We also do not have long-term supply agreements with all of our component suppliers. We may not be able to establish additional sources of supply for our product candidates, or may be unable to do so on acceptable terms. Manufacturing suppliers are subject to cGMP quality and regulatory requirements, covering manufacturing, testing, quality control and record keeping relating to our product candidates and subject to ongoing inspections by applicable regulatory authorities. Failure by any of our suppliers to comply with applicable regulations may result in long delays and interruptions in supply. Manufacturing suppliers are also subject to local, state and federal regulations and licensing requirements. Failure by any of our suppliers to comply with all applicable regulations and requirements may result in long delays and interruptions in supply.

The number of suppliers of the raw material components of our product candidates is limited. In the event it is necessary or desirable to acquire supplies from alternative suppliers, we might not be able to obtain them on commercially reasonable terms, if at all. It could also require significant time and expense to redesign our manufacturing processes to work with another company and redesign of processes can trigger the need for conducting additional studies such as comparability or bridging studies. Additionally, certain of our suppliers are critical to our production, and the loss of these suppliers to one of our competitors or otherwise would materially and adversely affect our development and commercialization efforts.

As part of any marketing approval, regulatory authorities conduct inspections that must be successful prior to the approval of the product. Failure of manufacturing suppliers to successfully complete these regulatory inspections will result in delays. If supply from the approved supplier is interrupted, there could be a significant disruption in commercial supply. An alternative vendor would need to be qualified through a BLA amendment or supplement, which could result in further delay. The FDA or other regulatory authorities outside of the United States may also require additional studies if a new supplier is relied upon for commercial production. Switching vendors may involve substantial costs and is likely to result in a delay in our desired clinical and commercial timelines.

If we are unable to obtain the supplies we need at a reasonable price or on a timely basis, it could have a material adverse effect on our ability to complete the development of SQZ-PBMC-HPV, SQZ-AAC-HPV or any of our other product candidates or, if we obtain regulatory approval for SQZ-PBMC-HPV, SQZ-AAC-HPV or any of our other product candidates, to commercialize them.

We rely on third parties to conduct our preclinical studies and clinical trials. Any failure by a third party to conduct the clinical trials according to GCPs and in a timely manner may delay or prevent our ability to seek or obtain regulatory approval for or commercialize our product candidates.

We are dependent on third parties to conduct critical aspects of our preclinical studies and clinical trials, including our ongoing Phase 1 clinical trial for SQZ-PBMC-HPV, and we expect to rely on third parties to conduct future clinical trials and preclinical studies for our other pipeline product candidates. Specifically, we have used and relied on, and intend to continue to use and rely on, medical institutions, clinical investigators, CROs and consultants to conduct our clinical trials in accordance with our clinical protocols and regulatory requirements. These CROs, investigators and other third parties play a significant role in the conduct and timing of these trials and subsequent collection and analysis of data. While we have agreements governing the activities of our third-party contractors, we have limited influence over their actual performance. Nevertheless, we are responsible for ensuring that each of our clinical trials is conducted in accordance with the applicable protocol and legal, regulatory and scientific standards, and our reliance on the CROs and other third parties does not relieve us of our regulatory responsibilities. We and our CROs are required to comply with GCP requirements, which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities for all of our product candidates in clinical development. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of our CROs or trial sites fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable, and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical

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trials complies with GCP regulations. In addition, our clinical trials must be conducted with product produced under cGMP regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.

Any third parties conducting our clinical trials or preclinical studies are not and will not be our employees and, except for remedies available to us under our agreements with such third parties, we cannot guarantee that any such CROs, investigators or other third parties will devote adequate time and resources to such trials or perform as contractually required. If any of these third parties fail to meet expected deadlines, adhere to our clinical protocols or meet regulatory requirements, or otherwise performs in a substandard manner, our clinical trials may be extended, delayed or terminated. In addition, many of the third parties with whom we contract may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other drug development activities that could harm our competitive position. In addition, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and may receive cash or equity compensation in connection with such services. If these relationships and any related compensation result in perceived or actual conflicts of interest, or the FDA concludes that the financial relationship may have affected the interpretation of the trial, the integrity of the data generated at the applicable clinical trial site may be questioned, and the utility of the clinical trial itself may be jeopardized, which could result in the delay or rejection of any BLA we submit to the FDA. Any such delay or rejection could prevent us from commercializing our product candidates.

If any of our relationships with these third parties terminate, we may not be able to enter into arrangements with alternative third parties or do so on commercially reasonable terms. Switching or adding additional CROs, investigators and other third parties involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which could materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships with our CROs, investigators and other third parties, there can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.

 We have collaborated and, in the future, may collaborate with third parties for the development and commercialization of our candidates. We may not succeed in establishing and maintaining collaborative relationships, which may significantly limit our ability to develop and commercialize our product candidates successfully, if at all.

We have collaborated and, in the future, may seek collaborative relationships for the development and commercialization of our product candidates. For example, we have entered into a collaborative relationship with Roche regarding the development of our initial product candidate, SQZ-PBMC-HPV. If we enter into any such arrangements with any third parties, we will likely have shared or limited control over the amount and timing of resources that our collaborators dedicate to the development or potential commercialization of any product candidates we may seek to develop with them. Our ability to generate product revenue from these arrangements with commercial entities will depend on our collaborators’ abilities to successfully perform the functions assigned to them in these arrangements. We cannot predict the success of any collaboration that we enter into. Collaborations involving our product candidates pose the following risks to us:

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We may face significant competition in seeking appropriate collaborations. Recent business combinations among biotechnology and pharmaceutical companies have resulted in a reduced number of potential collaborators. In addition, the negotiation process is time-consuming and complex, and we may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of the product candidate for which we are seeking to collaborate or delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop product candidates or bring them to market and generate product revenue.

If we enter into collaborations to develop and potentially commercialize any product candidates, we may not be able to realize the benefit of such transactions if we or our collaborator elect not to exercise the rights granted under the agreement or if we or our collaborator are unable to successfully integrate a product candidate into existing operations and company culture. In addition, if our agreement with any of our collaborators terminates, our access to technology and intellectual property licensed to us by that collaborator may be restricted or terminate entirely, which may delay our continued development of our product candidates utilizing the collaborator’s technology or intellectual property or require us to stop development of those product candidates completely. We may also find it more difficult to find a suitable replacement collaborator or attract new collaborators, and our development programs may be delayed or the perception of us in the business and financial communities could be adversely affected. Any collaborator may also be subject to many of the risks relating to product development, regulatory approval, and commercialization described in this “Risk Factors” section, and any negative impact on our collaborators may adversely affect us.

If we seek, but are not able to establish, collaborations, we may have to alter our development and commercialization plans.

Our product development programs and the potential commercialization of our product candidates will require substantial additional capital. We may decide to collaborate with pharmaceutical and biotechnology companies for the development and potential commercialization of our product candidates. For example, we have entered into a collaborative relationship with Roche regarding the development of our initial product candidate, SQZ-PBMC-HPV.

We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA or comparable regulatory authorities outside the United States, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge and industry and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our product candidate. Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators.

We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of such product candidate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop our product candidates or bring them to market and generate product revenue.

We may enter into collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships with third parties that may not result in the development of commercially viable products or the generation of significant future product revenues.

In the ordinary course of our business, we may enter into collaborations, in-licensing arrangements, joint ventures, strategic alliances, partnerships or other arrangements to develop new products and to pursue new markets. Proposing, negotiating and implementing

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collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships may be a lengthy and complex process. Other companies, including those with substantially greater financial, marketing, sales, technology or other business resources, may compete with us for these opportunities or arrangements. We may not identify, secure, or complete any such transactions or arrangements in a timely manner, on a cost-effective basis, on acceptable terms or at all. We have limited institutional knowledge and experience with respect to these business development activities, and we may also not realize the anticipated benefits of any such transaction or arrangement. In particular, these collaborations may not result in the development of products that achieve commercial success or result in significant product revenues and could be terminated prior to developing any products.

Additionally, we may not be in a position to exercise sole decision making authority regarding the transaction or arrangement, which could create the potential risk of creating impasses on decisions, and our future collaborators may have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals. It is possible that conflicts may arise with our collaborators, such as conflicts concerning the achievement of performance milestones, or the interpretation of significant terms under any agreement, such as those related to financial obligations or the ownership or control of intellectual property developed during the collaboration. If any conflicts arise with any current or future collaborators, they may act in their self-interest, which may be adverse to our best interest, and they may breach their obligations to us. In addition, we may have limited control over the amount and timing of resources that any current or future collaborators devote to our or their future products. Disputes between us and our collaborators may result in litigation or arbitration, which would increase our expenses and divert the attention of our management. Further, these transactions and arrangements will be contractual in nature and will generally be terminable under the terms of the applicable agreements and, in such event, we may not continue to have rights to the products relating to such transaction or arrangement or may need to purchase such rights at a premium.

If we enter into in-bound intellectual property license agreements, we may not be able to fully protect the licensed intellectual property rights or maintain those licenses. Future licensors could retain the right to prosecute and defend the intellectual property rights licensed to us, in which case we would depend on the ability of our licensors to obtain, maintain and enforce such licensed intellectual property. These licensors may determine not to pursue litigation against other companies or may pursue such litigation less aggressively than we would. If our licensors do not adequately protect such licensed intellectual property, competitors may be able to use such intellectual property and erode or negate any competitive advantage we may have, which could materially harm our business, negatively affect our position in the marketplace, limit our ability to commercialize our products and product candidates and delay or render impossible our achievement of profitability. Further, entering into such license agreements could impose various diligence, commercialization, royalty or other obligations on us. Future licensors may allege that we have breached our license agreement with them, and accordingly seek to terminate our license, which could adversely affect our competitive business position and harm our business prospects.

Data provided by collaborators and others upon which we rely that have not been independently verified could turn out to be false, misleading or incomplete.

We rely on third-party vendors, such as CROs, scientists and collaborators to provide us with significant data and other information related to our projects, preclinical studies or clinical trials and our business. For example, in connection with the clinical development of SQZ-PBMC-HPV, we may rely on data provided by Roche with respect to atezolizumab. If such third parties provide inaccurate, misleading or incomplete data, our business, prospects and results of operations could be materially adversely affected.

Our employees and independent contractors, including principal investigators, CROs, consultants, vendors and any third parties we may engage in connection with research, development, regulatory, manufacturing, quality assurance and other pharmaceutical functions and commercialization may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on our business.

Misconduct by our employees and independent contractors, including principal investigators, CROs, consultants, vendors and any third parties we may engage in connection with research, development, regulatory, manufacturing, quality assurance and other pharmaceutical functions and commercialization, could include intentional, reckless or negligent conduct or unauthorized activities that violate: (i) the laws and regulations of the FDA, and other similar regulatory authorities, including those laws that require the reporting of true, complete and accurate information to such authorities; (ii) manufacturing standards; (iii) data privacy, security, fraud and abuse and other healthcare laws and regulations; or (iv) laws that require the reporting of true, complete and accurate financial information and data. Specifically, 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. Activities subject to these laws could also involve the improper use or misrepresentation of information obtained in the course of preclinical studies or clinical trials, creation of fraudulent data in preclinical studies or clinical trials or illegal misappropriation of drug product, which could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations. For example, we are currently evaluating certain exploratory preclinical experiments conducted by a former employee based on allegations of potential data integrity concerns. While these preclinical experiments do not relate to our product candidates in clinical trials or those for which we have submitted, or plan to submit, INDs, limited data from these experiments have been published or were incorporated in applications and interim reports for government grants that we have been awarded. We are following the review process required by the administrators of the grants to evaluate this data. While the amount we have received from these grants has not been significant, we are unable to predict the impact this evaluation may have on these grants, including the possibility that we may need to repay the funds we have received. We also intend, as appropriate, to inform the journal in which a portion of the data was published once we have

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progressed further in our evaluation. We are unable to predict what action, if any, the journal may take or the timing of such action, and we may decide or be asked to update, correct or retract the article in which the data appeared. Additionally, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, including in connection with the ongoing evaluation described above, and we are not successful in defending ourselves or asserting our rights, those actions could potentially have a significant impact on our business and results of operations, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, restitution, disgorgements, possible exclusion from participation in Medicare, Medicaid, other U.S. federal healthcare programs or healthcare programs in other jurisdictions, integrity oversight and reporting obligations to resolve allegations of non-compliance, individual imprisonment, other sanctions, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations.

If our third-party manufacturers use hazardous and biological materials in a manner that causes injury or violates applicable law, we may be liable for damages.

Our research and development activities involve the controlled use of potentially hazardous substances, including chemical and biological materials, by our manufacturers. Our manufacturers are subject to federal, state and local laws and regulations in the United States governing the use, manufacture, storage, handling and disposal of medical and hazardous materials. Although we believe that our manufacturers’ procedures for using, handling, storing and disposing of these materials comply with legally prescribed standards, we cannot completely eliminate the risk of contamination or injury resulting from medical or hazardous materials. As a result of any such contamination or injury, we may incur liability or local, city, state or federal authorities may curtail the use of these materials and interrupt our business operations. In the event of an accident, we could be held liable for damages or penalized with fines, and the liability could exceed our resources. Generally, we do not have any insurance for liabilities arising from medical or hazardous materials. Compliance with applicable environmental laws and regulations is expensive, and current or future environmental regulations may impair our research, development and production efforts, which could harm our business, prospects, financial condition or results of operations.

Risks Related to Our Intellectual Property

If we are unable to obtain, maintain, enforce and adequately protect our intellectual property rights with respect to our technology and product candidates, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully develop and commercialize our technology and product candidates may be adversely affected.

We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect our intellectual property and prevent others from duplicating SQZ-PBMC-HPV, SQZ-AAC-HPV, any of our other pipeline product candidates and any future product candidates.

The strength of patents in the biotechnology and pharmaceutical field involves complex legal, factual and scientific questions and can be uncertain. It is possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. The patent applications that we own may fail to result in issued patents with claims that cover our product candidates in the United States or in other foreign countries. There is no assurance that all of the potentially relevant prior art relating to our patents and patent applications has been found, which can invalidate a patent or prevent a patent from issuing from a pending patent application. Even if patents do successfully issue and even if such patents cover our product candidates, third parties may challenge the inventorship, ownership, validity, enforceability or scope of such patents, which may result in such patents being narrowed or invalidated, or being held unenforceable.

Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property, provide exclusivity for our product candidates or prevent others from designing around our claims. In addition, no assurances can be given that third parties will not create new products or methods that achieve similar results without infringing upon our patents. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business.

If the patent applications we hold with respect to our programs or product candidates fail to issue, if their breadth or strength of protection is threatened, or if they fail to provide meaningful exclusivity for our product candidates, it could dissuade companies from collaborating with us to develop product candidates and threaten our ability to commercialize future products. Several patent applications covering our product candidates have been filed recently. We cannot offer any assurances about which, if any, patents will issue, the breadth of any such patents or whether any issued patents will be found invalid or unenforceable or will be threatened by third parties. Any successful opposition to these patents or any other patents owned by us could deprive us of rights necessary for the successful commercialization of any product candidates that we may develop.

Further, if we encounter delays in regulatory approvals, the period of time during which we could market a product candidate under patent protection could be reduced. Since patent applications in the United States and most other countries are confidential for a period of time after filing, and some remain so until issued, we cannot be certain that we were the first to file any patent application related to a product candidate.

Furthermore, if third parties have filed such patent applications before enactment of the Leahy-Smith Act on March 16, 2013, an interference proceeding in the United States can be initiated by a third party to determine who was the first to invent any of the subject matter covered by the patent claims of our applications. In addition, patents have a limited lifespan. In the United States, the expiration of a patent is generally 20 years after it is filed. Various extensions may be available; however, the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates are obtained, once the patent life has expired for the patent covering a product, we may be open to competition from generic competing products.

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The issuance of a patent is not conclusive as to its inventorship, ownership, scope, validity or enforceability, and our patents may be challenged in the courts or patent offices in the United States and abroad. In addition, the issuance of a patent does not give us the right to practice the patented invention. Third parties may have blocking patents that could prevent us from marketing our product candidate, if approved, or practicing our own patented technology. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain.

In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is either not patentable or that we elect not to patent, processes for which patents are difficult to enforce and any other elements of our product candidate discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements or security measures may be breached, and we may not have adequate remedies for any breach. If any of our trade secrets are disclosed to a competitor or other third party, we are likely to lose trade secret protection.

Although we require all of our employees and consultants to assign their inventions to us, to the extent that employees or consultants use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. Further, although we require that all of our employees, consultants, collaborators, advisors and any third parties who have access to our proprietary know-how, information or technology enter into confidentiality agreements, we cannot provide any assurances that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently discover our trade secrets or develop substantially equivalent information and techniques. Any of these parties may breach these agreements and we may not have adequate remedies for any specific breach. Misappropriation or unauthorized disclosure of our trade secrets or other confidential proprietary information could impair our competitive position and may have a material adverse effect on our business. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. Additionally, if the steps taken to maintain our trade secrets or other confidential proprietary information are deemed inadequate, we may have insufficient recourse against third parties for misappropriating the trade secret or other confidential proprietary information.

If we are unable to prevent material disclosure of the non-patented intellectual property related to our technologies to third parties, and there is no guarantee that we will have any such enforceable trade secret protection, we may not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, results of operations and financial condition.

Third-party claims of intellectual property infringement may prevent or delay our development and commercialization efforts.

Our commercial success depends in part on our avoiding infringement, or allegations of infringement, of the patents and other proprietary rights of third parties. There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions, reexamination, and inter partes review proceedings before the United States Patent and Trademark Office, or USPTO, and similar proceedings in foreign jurisdictions, such as oppositions before the European Patent Office. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are pursuing development candidates. Many companies in intellectual property-dependent industries, including the biotechnology and pharmaceutical industries, have employed intellectual property litigation as a means to gain an advantage over their competitors. As the biotechnology and pharmaceutical industries expand and more patents are issued, and as we gain greater visibility and market exposure as a public company, the risk increases that our product candidates may be subject to claims of infringement of the patent rights of third parties. Some claimants may have substantially greater resources than we do and may be able to sustain the costs of complex intellectual property litigation to a greater degree and for longer periods of time than we could. In addition, patent holding companies that focus solely on extracting royalties and settlements by enforcing patent rights may target us.

Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to composition of matter, drug delivery, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. We cannot guarantee that our technologies, products, compositions and their uses do not or will not infringe third-party patent or other intellectual property rights. Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. Pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our product candidates or the use of our product candidates. After issuance, the scope of patent claims remains subject to construction as determined by an interpretation of the law, the written disclosure in a patent and the patent’s prosecution history. Our interpretation of the relevance or the scope of a patent or a pending application may be incorrect, which may negatively impact our ability to market our product candidates. If any third-party patents were held by a court of competent jurisdiction to cover the composition of matter of any of our product candidates, the manufacturing process of any of our product candidates, the method of use for any of our product candidates, the holders of any such patents may be able to block our ability to commercialize such product candidate unless we obtained a license under the applicable patents, which may not be available or may not be available on commercially reasonable terms, or until such patents expire.

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The legal threshold for initiating litigation or contested proceedings is low, so that even lawsuits or proceedings with a low probability of success might be initiated and require significant resources to defend. Litigation and contested proceedings can also be expensive and time-consuming, and our adversaries in these proceedings may have the ability to dedicate greater resources to prosecuting these legal actions than we can. The risks of being involved in such litigation and proceedings may increase if and as our product candidates near commercialization and as we gain the greater visibility associated with being a public company. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future, regardless of the merit of such claims. We may not be aware of all intellectual property rights potentially relating to our technology and product candidates and their uses, or we may incorrectly conclude that third party intellectual property is invalid or that our activities and product candidates do not infringe such intellectual property. Thus, we do not know with certainty that our technology and product candidates, or our development and commercialization thereof, do not and will not infringe, misappropriate or otherwise violate any third party’s intellectual property.

Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our product candidates and/or harm our reputation and financial results. Defense of these claims, regardless of their merit, could involve substantial litigation expense and could be a substantial diversion of management and employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products, in the case of claims concerning registered trademarks, rename our product candidates, or obtain one or more licenses from third parties, which may require substantial time and monetary expenditure, and which might be impossible or technically infeasible. Furthermore, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us; alternatively or additionally it could include terms that impede or destroy our ability to compete successfully in the commercial marketplace.

If we are unable to obtain licenses from third parties on commercially reasonable terms or fail to comply with our obligations under such agreements, our business could be harmed.

It may be necessary for us to use the patented or proprietary technology of third parties to commercialize our products, in which case we would be required to obtain a license from these third parties. If we are unable to license such technology, or if we are forced to license such technology on unfavorable terms, our business could be materially harmed. If we are unable to obtain a necessary license, we may be unable to develop or commercialize the affected product candidates, which could materially harm our business and the third parties owning such intellectual property rights could seek either an injunction prohibiting our sales or an obligation on our part to pay royalties and/or other forms of compensation. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us.

If we are unable to obtain rights to required third-party intellectual property rights or maintain the existing intellectual property rights we have, we may be required to expend significant time and resources to redesign our technology, product candidates or the methods for manufacturing them or to develop or license replacement technology, all of which may not be feasible on a technical or commercial basis. If we are unable to do so, we may be unable to develop or commercialize the affected technology and product candidates, which could harm our business, financial condition, results of operations and prospects significantly.

Additionally, if we fail to comply with our obligations under license agreements, our counterparties may have the right to terminate these agreements or seek damages from us, in which event we might not be able to develop, manufacture or market, or may be forced to cease developing, manufacturing or marketing, any product that is covered by these agreements or may face other penalties under such agreements. Such an occurrence could materially adversely affect the value of the product candidate being developed under any such agreement. Termination of these agreements or reduction or elimination of our rights under these agreements, or restrictions on our ability to freely assign or sublicense our rights under such agreements when it is in the interest of our business to do so, may result in our having to negotiate new or reinstated agreements with less favorable terms, cause us to lose our rights under these agreements, including our rights to important intellectual property or technology, or impede, or delay or prohibit the further development or commercialization of one or more product candidates that rely on such agreements.

Although we or our licensors are not currently involved in any relevant litigation, we may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time-consuming and unsuccessful.

Competitors and other third parties may infringe, misappropriate or otherwise violate our or our licensors’ patents, trademarks, copyrights or other intellectual property. As a result, we or our licensors may need to file infringement, misappropriation or other intellectual property related claims against third parties. It may be difficult to detect infringers who do not advertise the components that are used in their products. Moreover, it may be difficult or impossible to obtain evidence of infringement in a competitor’s or potential competitor’s product. To counter infringement or unauthorized use, we may be required to file infringement claims on a country-by-country basis, which can be expensive and time-consuming and divert the time and attention of our management and scientific personnel. There can be no assurance that we will have sufficient financial or other resources to file and pursue such infringement claims, which typically last for years before they are concluded.

Any claims we assert against perceived infringers could also provoke these parties to assert counterclaims against us alleging that we infringe, misappropriate or otherwise violate their intellectual property. In addition, in a patent infringement proceeding, such parties could counterclaim that the patents we or our licensors have asserted are invalid or unenforceable, or both. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. Third parties may institute such claims before administrative bodies in the

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United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, post-grant review, inter partes review, interference proceedings, derivation proceedings and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). The outcome following legal assertions of invalidity and unenforceability is unpredictable.

In any such proceeding, a court may decide that a patent of ours, or a patent that we in-license, is not valid, is unenforceable and/or is not infringed, or may construe such patent’s claims narrowly or refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated, interpreted narrowly or held unenforceable, could put our patent applications at risk of not issuing, and could limit our ability to assert those patents against those parties or other competitors and curtail or preclude our ability to exclude third parties from making and selling similar or competitive products. Similarly, if we assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have asserted trademark infringement has superior rights to the marks in question. In this case, we could ultimately be forced to cease use of such trademarks, which could materially harm our business and negatively affect our position in the marketplace.

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 or at all, or if a non-exclusive license is offered and our competitors gain access to the same technology. Our defense of litigation or 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 ability to raise the funds necessary to continue our research programs, license necessary technology from third parties, or enter into development partnerships that would help us bring our product candidates to market.

Even if we establish infringement, the court may decide not to grant an injunction against further infringing activity and instead award only monetary damages, which may or may not be an adequate remedy. 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.

Recent patent reform legislation has increased the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, and may diminish the value of patents in general.

As is the case with other biopharmaceutical companies, our commercial success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involves both technological and legal complexity and is therefore costly, time-consuming and inherently uncertain. Recent wide-ranging patent reform legislation in the United States, including the Leahy-Smith America Invents Act, or the Leahy-Smith Act, could increase those uncertainties and costs.

The Leahy-Smith Act includes a number of significant changes to U.S. patent law, including provisions that affect the way patent applications are prosecuted and may also affect patent litigation. Under The Leahy-Smith Act, the United States transitioned from a “first-to-invent” to a “first-to-file” system for deciding which party should be granted a patent when two or more patent applications are filed by different parties claiming the same invention. This will require us to be cognizant going forward of the time from invention to filing of a patent application and be diligent in filing patent applications, but circumstances could prevent us from promptly filing patent applications on our inventions. The Leahy-Smith Act also enlarged the scope of disclosures that qualify as prior art, and it expanded the scope of procedures that a third party may use to challenge a U.S. patent, including post-grant review and inter partes review procedures. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in U.S. 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. The Leahy-Smith Act 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, all of which could have a material adverse effect on our business and financial condition.

In addition, recent court rulings in cases such as Association for Molecular Pathology v. Myriad Genetics, Inc., BRCA1- & BRCA2-Based Hereditary Cancer Test Patent Litigation, and Promega Corp. v. Life Technologies Corp. have narrowed the scope of patent protection available in certain circumstances and weakened 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 U.S. courts, the USPTO and the relevant law-making bodies in other countries, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.

We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

We may employ individuals who were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants and independent contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of any of our employee’s former employers or other third parties. Litigation may be necessary to defend against these claims. If

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we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, or our ability to hire personnel, which, in any case of the foregoing, could adversely impact our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

The USPTO and European and other patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications will be due to be paid to the USPTO and various governmental patent agencies outside of the United States in several stages over the lifetime of the patents and/or applications. We have systems in place to remind us to pay these fees, and we employ an outside firm and rely on our outside counsel to pay these fees due to non-U.S. patent agencies. The USPTO and various non-U.S. governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. We employ law firms and other professionals to help us comply, and in many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. However, there are situations in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, our competitors might be able to enter the market, which could have a material adverse effect on our business.

Issued patents covering our product candidates could be found invalid or unenforceable if challenged in court.

If we initiated legal proceedings against a third party to enforce a patent covering one of our product candidates, the defendant could counterclaim that the patent covering our product candidate is invalid and/or unenforceable. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation.

Such mechanisms include re-examination, post-grant review and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). Such proceedings could result in revocation or amendment to our patents in such a way that they no longer cover our product candidates.

The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on one or more of our product candidates. Such a loss of patent protection could have a material adverse impact on our business. A defendant could also challenge our ownership of patents assigned to us. We cannot be certain that a third party would not challenge our rights to these patents and patent applications. Any legal proceeding or enforcement action can also be expensive and time-consuming.

 Patent terms may be inadequate to protect our competitive position on our products for an adequate amount of time.

The term of any individual patent depends on applicable law in the country where the patent is granted. In the United States, provided all maintenance fees are timely paid, a patent generally has a term of 20 years from its application filing date or earliest claimed non-provisional filing date. Extensions may be available under certain circumstances, but the life of a patent and, correspondingly, the protection it affords is limited. 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. For patents that are eligible for extension of patent term, we expect to seek extensions of patent terms in the United States and, if available, in other countries. In the United States, the Drug Price Competition and Patent Term Restoration Act of 1984 permits a patent term extension of up to five years beyond the normal expiration of the patent, which is limited to the approved indication (or any additional indications approved during the period of extension). We might not be granted an extension because of, for example, failure to apply within applicable periods, failure to apply prior to the expiration of relevant patents or otherwise failure to satisfy any of the numerous applicable requirements. Moreover, the applicable authorities, including the FDA and the USPTO in the United States, and any equivalent regulatory authority in other countries, may not agree with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may grant more limited extensions than we request. If this occurs, our competitors may be able to obtain approval of competing products following our patent expiration by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case. If this were to occur, it could have a material adverse effect on our ability to generate product revenue.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting and defending our intellectual property in all countries throughout the world could 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. Therefore, we may choose not to pursue or maintain protection for certain intellectual property in certain jurisdictions. 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 outside the United States, 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 further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with

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our products and our patents or other intellectual property rights may not be effective or sufficient to prevent such competitors from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. 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 in foreign jurisdictions 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 lawsuit 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. In addition, many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties (for example, the patent owner has failed to “work” the invention in that country, or the third party has patented improvements) or limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of the patent.

If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our trademarks of interest and our business may be adversely affected.

While we seek to protect the trademarks we use in the United States and in other countries, we may be unsuccessful in obtaining registrations and/or otherwise protecting these trademarks. If that were to happen, we may be prevented from using our names, brands and trademarks unless we enter into appropriate royalty, license or coexistence agreements, which may not be available or may not be available on commercially reasonable terms. Over the long term, if we are unable to establish name recognition based on our trademarks, trade names, service marks and domain names, then we may not be able to compete effectively, resulting in a material adverse effect on our business. Our registered or unregistered trademarks or trade names may be challenged, infringed, diluted or declared generic, or determined to be infringing on other marks. We rely on both registration and common law protection for our trademarks. We may not be able to protect our rights to these trademarks and trade names or may be forced to stop using these names, which we need to build name recognition among potential partners or customers in our markets of interest. At times, competitors may adopt trademarks and trade names similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks. Over the long term, if we are unable to establish name recognition based on our trademarks, then we may not be able to compete effectively and our business may be adversely affected. During trademark registration proceedings, we may receive rejections. Although we would be given an opportunity to respond to those rejections, we may be unable to overcome such rejections. In addition, in the USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive such proceedings. Effective trademark protection may not be available or may not be sought in every country in which our products are made available. Any name we propose to use for our products in the United States must be approved by the FDA, regardless of whether we have registered it, or applied to register it, as a trademark. The FDA typically conducts a review of proposed product names, including an evaluation of potential for confusion with other product names. If the FDA objects to any of our proposed product names, we may be required to expend significant additional resources in an effort to identify a usable substitute name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively and our business may be adversely affected.

If we fail to comply with our obligations in our intellectual property licenses with third parties, or otherwise experience disruptions to our business relationships with our licensors, we could lose intellectual property rights that are important to our business.

We are party to license agreements that impose, and we may enter into additional licensing arrangements with third parties that may impose, diligence, development and commercialization timelines, milestone payment, royalty, insurance and other obligations on us. Under our existing licensing arrangements, we are obligated to pay royalties based on net sales of product candidates or related technologies to the extent they are covered by the agreements. We are also obligated to make certain milestone and license maintenance fee payments to licensors. If we fail to comply with such obligations under current or future licensing agreements, our counterparties may have the right to terminate these agreements or require us to grant them certain rights. Such an occurrence could materially adversely affect the value of any product candidate that is being developed under such agreement, or for which research, development or commercialization depends on rights licensed to us under such agreement. Termination of these agreements or reduction or elimination of our rights under these agreements may result in our having to negotiate new or reinstated agreements with less favorable terms, or cause us to lose our rights under these agreements, including our rights to important intellectual property or technology, which would have a material adverse effect on our business, financial condition, results of operations and prospects. Disputes which may arise regarding intellectual property subject to a licensing agreement include, but are not limited to:

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In addition, the agreements under which we currently license intellectual property or technology from third parties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant agreement, either of which could have a material adverse effect on our business, financial condition, results of operations and prospects. Moreover, if disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected technology and product candidates, which could have a material adverse effect on our business, financial conditions, results of operations and prospects.

Our current or future licensors may have relied on third-party consultants or collaborators or on funds from third parties such that our licensors are not the sole and exclusive owners of the patents and patent applications we in-license. If other third parties have ownership rights to patents and/or patent applications we in-license, they may be able to license such patents to our competitors, and our competitors could market competing products and technology. This could have a material adverse effect on our competitive position, business, financial conditions, results of operations and prospects.

In spite of our best efforts, our licensors might conclude that we have materially breached our license agreements and might therefore terminate the license agreements, thereby removing our ability to develop and commercialize product candidates and technology covered by these license agreements. If these in-licenses are terminated, or if the underlying intellectual property fails to provide the intended exclusivity, competitors would have the freedom to seek regulatory approval of, and to market, products and technologies identical to ours. This could have a material adverse effect on our competitive position, business, financial conditions, results of operations and prospects.

Our proprietary rights may not adequately protect our technologies and product candidates, and do not necessarily address all potential threats to our competitive advantage.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:

others may be able to make products that are the same as or similar to our product candidates but that are not covered by the claims of the patents that we own;

Risks Related to Employee Matters and Managing Growth

We will need to expand our organization, and we may experience difficulties in managing this growth, which could disrupt our operations.

We expect to experience significant growth over time in the number of our employees and the scope of our operations, particularly in the areas of product candidate development, regulatory and clinical affairs and sales, marketing, manufacturing and distribution. To manage our growth activities, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. As we expand our organization, we may have difficulty identifying, hiring and integrating new personnel. Future growth would impose significant additional responsibilities on our management, including the need to identify, recruit, maintain, motivate and integrate additional employees, consultants and contractors. Also, our management may need to

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divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of product candidates. If our management is unable to effectively manage our growth, our expenses may increase more than expected, our ability to generate and/or grow product revenues could be reduced, and we may not be able to implement our business strategy. Our future financial performance and our ability to commercialize our product candidates and compete effectively will depend, in part, on our ability to effectively manage any future growth.

Many of the biotechnology and pharmaceutical companies that we compete against for qualified personnel and consultants have greater financial and other resources, different risk profiles and a longer history in the industry than we do. If we are unable to continue to attract and retain high-quality personnel and consultants, the rate and success at which we can discover and develop product candidates and operate our business will be limited.

If we lose key management or scientific personnel, cannot recruit qualified employees, directors, officers or other significant personnel or experience increases in our compensation costs, our business may materially suffer.

We are highly dependent on our management and directors, including our Chief Executive Officer, Armon Sharei, Ph.D., among others. Due to the specialized knowledge each of our officers and key employees possesses with respect to our product candidates and our operations, the loss of service of any of our officers or directors could delay or prevent the successful enrollment and completion of our clinical trials. We carry limited key person life insurance on our Chief Executive Officer, but do not carry key person life insurance on our other officers or directors. In general, the employment arrangements that we have with our executive officers do not prevent them from terminating their employment with us at any time.

In addition, our future success and growth will depend in part on the continued service of our directors, employees and management personnel and our ability to identify, hire and retain additional personnel. If we lose one or more of our executive officers or key employees, our ability to implement our business strategy successfully could be seriously harmed. Furthermore, replacing executive officers and key employees may be difficult or costly and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to develop, gain regulatory approval of and commercialize product candidates successfully. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or effectively incentivize these additional key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be engaged by entities other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. If we are unable to continue to attract and retain high quality personnel, our ability to develop and commercialize product candidates will be limited.

Many of our employees have become or will soon become vested in a substantial amount of our common stock or a number of common stock options. Our employees may be more likely to leave us if the shares they own have significantly appreciated in value relative to the original purchase prices of the shares, or if the exercise prices of the options that they hold are significantly below the market price of our common stock, particularly after the expiration of the lock-up agreements entered into in connection with our initial public offering, or IPO. Our future success also depends on our ability to continue to attract and retain additional executive officers and other key employees.

Risks Related to Our Common Stock

Our executive officers, directors and principal stockholders, if they choose to act together, will continue to have the ability to control or significantly influence all matters submitted to stockholders for approval.

Based on the number of shares of common stock outstanding as of March 11, 2021, our executive officers, directors and stockholders who owned more than 5% of our outstanding common stock and their respective affiliates, in the aggregate, hold shares representing approximately 42% of our outstanding voting stock. As a result, if these stockholders choose to act together, they would be able to control or significantly influence all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these persons, if they choose to act together, would control or significantly influence the election of directors, the composition of our management and approval of any merger, consolidation or sale of all or substantially all of our assets.

A significant portion of our total outstanding shares are eligible to be sold into the market in the near future, which could cause the market price of our common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our common stock in the public market, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. As of March 11, 2021, we have 27,869,821 outstanding shares of common stock. Of these shares, 19,601,562 are currently restricted as a result of securities laws or lock-up agreements entered into in connection with our IPO (which may be waived, with or without notice, by BofA Securities, Inc. and Evercore Group L.L.C.) but will become eligible to be sold at various times beginning 180 days after our IPO, and (ii) 1,090,028 are currently restricted as a result of lock-up agreements entered into in connection with our underwritten public offering in February 2021 (the “February Offering”) (which may be waived, with or without notice, by BofA Securities, Inc. and Evercore Group L.L.C.) but will become eligible to be sold at various times beginning 90 days after the February Offering, in each instance, unless held by one of our affiliates, in which case the resale of those

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securities will be subject to volume limitations under Rule 144 of the Securities Act, or Rule 144. Moreover, holders of an aggregate of 4,271,178 shares of our common stock have rights, subject to specified conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders, until such shares can otherwise be sold without restriction under Rule 144 or until the rights terminate pursuant to the terms of the stockholders’ agreement between us and such holders. We have also registered shares of common stock that we may issue under our equity compensation plans. These shares can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates and the lock-up agreements referred to above.

We are an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and may remain an emerging growth company until the last day of the fiscal year following the fifth anniversary of the closing of our IPO. However, if certain events occur prior to the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenues exceed $1.07 billion or we issue more than $1.0 billion of non-convertible debt in the previous three-year period, we will cease to be an emerging growth company prior to the end of such five-year period. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include:

We have taken advantage of reduced reporting burdens in this Annual Report on Form 10-K. In particular, in this Annual Report on Form 10-K, we have provided only two years of audited financial statements and have not included all of the executive compensation related information that would be required if we were not an emerging growth company. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be reduced or more volatile. In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of these accounting standards until they would otherwise apply to private companies.

We are a “smaller reporting company” and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to investors.

We are considered a “smaller reporting company.” We are therefore entitled to rely on certain reduced disclosure requirements for as long as we remain a smaller reporting company, such as an exemption from providing selected financial data and certain executive compensation information and the option to present only two years of audited financial statements in our Annual Report on Form 10-K. In addition, for as long as we are a smaller reporting company with less than $100 million in annual revenue, we would be exempt from the requirement to obtain an external audit on the effectiveness of internal control over financial reporting provided in Section 404(b) of the Sarbanes-Oxley Act. These exemptions and reduced disclosures in our SEC filings due to our status as a smaller reporting company may make it harder for investors to analyze our results of operations and financial prospects. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock prices may be more volatile.

Provisions in our restated certificate of incorporation and restated bylaws and under Delaware law could make an acquisition of our company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our restated certificate of incorporation and our restated bylaws may discourage, delay or prevent a merger, acquisition or other change in control of our company that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions include those establishing:

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Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the General Corporation Law of the State of Delaware, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

Our restated certificate of incorporation designates specific courts as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.

Our restated certificate of incorporation specifies that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for most legal actions involving claims brought against us by stockholders; provided that, the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Securities Act, the Exchange Act, the rules and regulations thereunder or any other claim for which the federal courts have exclusive jurisdiction; and provided further that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state or federal court sitting in the State of Delaware. Our restated certificate of incorporation further provides that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions of our restated certificate of incorporation described above.

We believe these provisions benefit us by providing increased consistency in the application of Delaware law by chancellors particularly experienced in resolving corporate disputes and in the application of the Securities Act by federal judges, as applicable, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. However, the provision may have the effect of discouraging lawsuits against our directors, officers, employees and agents as it may limit any stockholder’s ability to bring a claim in a judicial forum that such stockholder finds favorable for disputes with us or our directors, officers, employees or agents. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in our restated certificate of incorporation to be inapplicable or unenforceable in such action. If a court were to find the choice of forum provision contained in our restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business, financial condition or results of operations.

Our ability to use our net operating losses and research and development credits to offset future taxable income may be subject to certain limitations.

As of December 31, 2020, we had U.S. federal net operating loss carryforwards, or NOLs, of $73.7 million, which may be available to offset future taxable income, if any, of which $11.3 million begin to expire in 2035 and of which $62.4 million do not expire but are (for taxable years beginning after December 31, 2021) generally limited in their usage to an annual deduction equal to 80% of annual taxable income. In addition, as of December 31, 2020, we had state NOLs of $71.9 million, which may be available to offset future taxable income, if any, and begin to expire in 2035. As of December 31, 2020, we also had federal and state research and development credit carryforwards of $6.3 million and $3.8 million, respectively, which will begin to expire in 2034 and 2029, respectively. In general, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an “ownership change,” generally defined as a greater than 50% change by value in its equity ownership over a three-year period, is subject to limitations on its ability to utilize its pre-change NOLs and its research and development credit carryforwards to offset future taxable income. Our existing NOLs and research and development credit carryforwards may be subject to limitations arising from previous ownership changes, and if we undergo an ownership change, our ability to utilize NOLs and research and development credit carryforwards could be further limited by Sections 382 and 383 of

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the Code. In addition, future changes in our stock ownership, some of which might be beyond our control, could result in an ownership change under Sections 382 and 383 of the Code. For these reasons, we may not be able to utilize a material portion of the NOLs or research and development credit carryforwards even if we attain profitability.

General Risk Factors

An active trading market for our common stock may not continue.

It is possible that an active trading market for our shares may not be sustained, which may make it difficult for our stockholders to sell their shares without depressing the market price for the shares, or at all. Further, an inactive market may also impair our ability to raise capital by selling shares of our common stock and may impair our ability to enter into strategic partnerships or acquire companies or products by using our shares of common stock as consideration.

The market price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for holders of our common stock.

Our stock price is likely to be volatile. The stock market in general and the market for smaller biopharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, our stockholders may not be able to sell their common stock at or above the price they paid for it. The market price for our common stock may be influenced by many factors, including:

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If we fail to maintain effective internal control over financial reporting and effective disclosure controls and procedures, we may not be able to accurately report our financial results in a timely manner or prevent fraud, which may adversely affect investor confidence in our company.

We are a public company required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of controls over financial reporting. Although we are required to disclose changes made in our internal controls and procedures on a quarterly basis, we are not required to make our first annual assessment of our internal control over financial reporting pursuant to Section 404 until the year following our first annual report required to be filed with the SEC. As an emerging growth company, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until the later of the year following our first annual report required to be filed with the SEC or the date we are no longer an emerging growth company. At such time, our independent registered public accounting firm may issue a report that is adverse in the event material weaknesses have been identified in our internal control over financial reporting.

To comply with the requirements of being a public company, we have undertaken and will continue to undertake additional actions, such as implementing new internal controls and procedures and hiring additional accounting or internal audit staff. Testing and maintaining internal control can divert our management’s attention from other matters that are important to the operation of our business. In addition, when evaluating our internal control over financial reporting, we may identify material weaknesses that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404. If we identify any material weaknesses in our internal controls over financial reporting or we are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting once we are no longer an emerging growth company, investors may lose confidence in the accuracy and completeness of our financial reports. As a result, the market price of our common stock could be materially adversely affected.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

We are subject to the periodic reporting requirements of the Exchange Act. We have refined our disclosure controls and procedures to provide reasonable assurance that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.

Because we do not anticipate paying any cash dividends on our common shares in the foreseeable future, capital appreciation, if any, would be the sole source of gain for our stockholders.

We have never declared or paid any cash dividends on our common shares. We currently anticipate that we will retain all available funds and future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. As a result, capital appreciation, if any, of our common shares would be the sole source of gain on an investment in our common shares for the foreseeable future.

We could be subject to securities class action litigation.

In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because biopharmaceutical companies have experienced significant stock price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

We incur significant costs as a result of operating as a public company, and our management is required to devote substantial time to new compliance initiatives and corporate governance practices.

As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company, and these expenses will increase after we are no longer an emerging growth company. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the NYSE and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and

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corporate governance practices. Our management and other personnel devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased our legal and financial compliance costs and made some activities more time-consuming and costly. For example, operating as a public company has made and will continue to make it more expensive for us to obtain director and officer liability insurance, which in turn could make it more difficult for us to attract and retain qualified members of our board of directors.

These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, in our second annual report due to be filed with the SEC as a public company, we will be required to furnish a report by our management on our internal control over financial reporting. However, while we remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants, adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing whether such controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. We may discover significant deficiencies or material weaknesses in our internal control over financial reporting, which we may not successfully remediate on a timely basis or at all. Any failure to remediate any significant deficiencies or material weaknesses identified by us or to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations or result in material misstatements in our financial statements. If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

If securities or industry analysts do not continue to publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline, even if our business is doing well.

The trading market for our common stock is influenced by the research and reports that industry or securities analysts publish about us or our business. If no or few securities or industry analysts continue coverage of us, the trading price for our stock would be negatively impacted. If any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock performance, or if our target preclinical studies or clinical trials and operating results fail to meet the expectations of analysts, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

We or the third parties upon whom we depend may be adversely affected by natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.

Natural disasters could severely disrupt our operations and have a material adverse effect on our business, results of operations, financial condition and prospects. If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure, such as the manufacturing facilities on which we rely, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. The disaster recovery and business continuity plans we have in place may prove inadequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which could have a material adverse effect on our business. For example, following Hurricane Maria, shortages in production and delays in a number of medical supplies produced in Puerto Rico resulted, and any similar interruption due to a natural disaster affecting us or any of our third-party manufacturers could materially delay our operations.

Litigation against us could be costly and time-consuming to defend and could result in additional liabilities.

We may from time to time be subject to legal proceedings and claims that arise in the ordinary course of business or otherwise, such as claims brought by our customers in connection with commercial disputes and employment claims made by our current or former employees. Claims may also be asserted by or on behalf of a variety of other parties, including government agencies, patients or vendors of our customers, or stockholders.

Any litigation involving us may result in substantial costs, operationally restrict our business, and may divert management’s attention and resources, which may seriously harm our business, overall financial condition and results of operations. Insurance may not cover existing or future claims, be sufficient to fully compensate us for one or more of such claims or continue to be available on terms acceptable to us. A claim brought against us that is uninsured or underinsured could result in unanticipated costs, thereby adversely impacting our results of operations and resulting in a reduction in the trading price of our stock.

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We may engage in acquisitions or strategic partnerships that could disrupt our business, cause dilution to our stockholders, reduce our financial resources, cause or to incur debt or assume contingent liabilities, and subject us to other risks.

In the future, we may enter into transactions to acquire other businesses, products or technologies or enter into strategic partnerships, including licensing. If we do identify suitable acquisition or partnership candidates, we may not be able to make such acquisitions or partnerships on favorable terms, or at all. Any acquisitions or partnerships we make may not strengthen our competitive position, and these transactions may be viewed negatively by customers or investors. We may decide to incur debt in connection with an acquisition or issue our common stock or other equity securities to the stockholders of the acquired company, which would reduce the percentage ownership of our existing stockholders. We could incur losses resulting from undiscovered liabilities of the acquired business or partnership that are not covered by the indemnification we may obtain from the seller or our partner. In addition, we may not be able to successfully integrate any acquired personnel, technologies and operations into our existing business in an effective, timely and non-disruptive manner. Acquisitions or partnerships may also divert management attention from day-to-day responsibilities, lead to a loss of key personnel, increase our expenses and reduce our cash available for operations and other uses. We cannot predict the number, timing or size of future acquisitions or partnerships or the effect that any such transactions might have on our operating results.

Item 1B. Unresolved Staff Comments

None

Item 2. Properties.

Our principal office is located at 200 Arsenal Yards Blvd, Suite 210, Watertown, MA 02472, where we lease approximately 63,477 square feet of office and laboratory space. We lease this space under a lease agreement, as amended, that terminates on November 30, 2029. We believe that our facilities are sufficient to meet our current needs and that suitable additional space will be available as and when needed.

Item 3. Legal Proceedings.

We are not currently subject to any material legal proceedings.

Item 4. Mine Safety Disclosures.

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information for Common Stock

Our common stock has been publicly traded on The New York Stock Exchange under the symbol “SQZ” since the initial public offering of our common stock on October 30, 2020. Prior to that time, there was no public market for our common stock. As of March 11, 2021, there were 174 holders of record of our common stock.

Dividend Policy

We have never declared or paid any cash dividends on our common shares. We currently anticipate that we will retain all available funds and future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future.

Recent Sales of Unregistered Securities

On November 11, 2020, we issued an aggregate of 1,840 shares of common stock to Silicon Valley Bank in connection with the exercise of a warrant.

Use of Proceeds

On October 29, 2020, the SEC declared effective our registration statement on Form S-1 (File No. 333-249422), as amended, filed in connection with our IPO, or the Registration Statement. Pursuant to the Registration Statement, we registered the offer and sale of 5,073,529 shares of our common stock with a proposed maximum aggregate offering price of approximately $91.3 million. BofA Securities, Inc., Evercore Group L.L.C., Stifel, Nicolaus & Company, Incorporated and BTIG LLC acted as representatives of the underwriters for the offering. On November 3, 2020, we issued and sold 4,411,765 shares of our common stock at a price to the public of $16.00 per share. Upon completion of the IPO on November 3, 2020, we received net proceeds of approximately $65.6 million, after deducting underwriting discounts and commissions, but before deducting offering costs payable by us of $2.6 million. On November 12, 2020, in connection with the full exercise of the over-allotment option granted to the underwriters of our IPO, we issued and sold 661,764 additional shares of common stock at a price of $16.00 per share, generating additional net proceeds of $9.8 million after deducting underwriting discounts of $0.7 million. No payments for such expenses were made directly or indirectly to (i) any of our officers or directors or their associates, (ii) any persons owning 10% or more of any class of our equity securities or (iii) any of our affiliates.

The offering terminated after the sale of all securities registered pursuant to the Registration Statement. Net proceeds of approximately $72.5 million have been invested in money market funds. There has been no material change in the expected use of the net proceeds from our IPO as described in the final prospectus dated October 29, 2020 and filed with the SEC on October 30, 2020, pursuant to Rule 424(b)(4) (File No. 333-252666) of the Securities Act.

Issuer Purchases of Equity Securities

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

Item 6. Selected Financial Data

We are a smaller reporting company, as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, for this reporting period and are not required to provide the information required under this item.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing at the end of this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Annual Report on Form 10-K, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a clinical-stage biotechnology company developing transformative cell therapies for patients with cancer, infectious diseases and other serious conditions. We use our proprietary technology, Cell Squeeze, to physically squeeze cells through a microfluidic chip, temporarily opening the cell membrane and enabling biologic material of interest, or cargo, to diffuse into the cell. This technology allows us to create a broad pipeline of product candidates for different diseases. We believe our Cell Squeeze technology has the potential to create well-tolerated cell therapies that can provide therapeutic benefit for patients. Our potential benefits include accelerated timelines with production time under 24 hours, compared to four to six weeks for other existing cell therapies, improved patient experience by eliminating the need for pre-conditioning or lengthy hospital stays, and broadened therapeutic impact. Our goal is to use the Cell Squeeze approach to establish a new paradigm for cell therapies. We are using Cell Squeeze to create multiple cell therapy platforms focused on directing specific immune responses. Our most advanced platform in development, SQZ Antigen Presenting Cells or SQZ APCs, is currently in a Phase 1 trial in HPV+ tumors. Our additional platforms currently in development are SQZ Activating Antigen Carriers or SQZ AACs and SQZ Tolerizing Antigen Carriers or SQZ TACs. We are leveraging each of these platforms to create differentiated product candidates that have applicability across multiple disease areas.

Since our inception, we have focused substantially all of our resources on building our Cell Squeeze technology, establishing and protecting our intellectual property portfolio, conducting research and development activities, developing our manufacturing process and manufacturing product candidate materials, preparing for and initiating clinical trials of our product candidates, organizing and staffing our company, business planning, raising capital and providing general and administrative support for these operations. We do not have any products approved for sale and have not generated any revenue from product sales. To date, we have funded our operations primarily with proceeds from sales of common and preferred stock, payments received under our collaboration agreements with Hoffman-La Roche Inc. and F. Hoffman La Roche Ltd., or together, Roche, and proceeds from borrowings under a convertible promissory note, which converted into shares of preferred stock. Through December 31, 2020, we have funded our operations from sales of common and preferred stock, upfront and milestone payments under our collaboration agreements with Roche and with proceeds from our initial public offering, or IPO of common stock. In November 2020, we completed our IPO pursuant to which we issued and sold 5,073,529 shares of common stock, inclusive of 661,764 shares sold by us pursuant to the full exercise of the underwriters’ option to purchase additional shares. We received aggregate net proceeds of approximately $75.5 million from the IPO, after deducting underwriting discounts and commissions, but before deducting offering costs payable by us, which were $2.6 million. In February 2021, we completed a public offering pursuant to which we issued and sold 3,000,000 shares of common stock. We received aggregate net proceeds of approximately $56.4 million, after deducting underwriting discounts and commissions, but before deducting offering costs payable by us, which are estimated to be $0.8 million.

Since our inception, we have incurred significant operating losses. Our ability to generate any product revenue or product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our product candidates. We reported net losses of $50.5 million and $32.2 million for the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020, we had an accumulated deficit of $126.8 million. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. We expect that our expenses and capital requirements will increase substantially in connection with our ongoing activities, particularly if and as we:

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We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates. If we obtain regulatory approval for any of our product candidates, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing and distribution.

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we would have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates.

Because of the numerous risks and uncertainties associated with cell therapy product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements through the first half of 2023. See “—Liquidity and Capital Resources.”

Impact of the COVID-19 Coronavirus

In December 2019, a novel strain of coronavirus, which causes the disease known as COVID-19, was reported to have surfaced in Wuhan, China. Since then, COVID-19 coronavirus has spread globally. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic and the U.S. government-imposed travel restrictions on travel between the United States, Europe and certain other countries. The COVID-19 pandemic has impacted and may continue to impact personnel at third-party manufacturing facilities or the availability or cost of materials, which would disrupt our supply chain, and it has affected and may continue to affect our ability to enroll patients in and timely complete our ongoing Phase 1 clinical trials of SQZ-PBMC-HPV and SQZ-AAC-HPV and delay the initiation of any future clinical trials, disrupt regulatory activities, or have other adverse effects on our business and operations. For example, we have experienced delays in receiving supplies of raw materials for our preclinical activities due to the impact of COVID-19 on our suppliers’ ability to timely manufacture these materials, and we have experienced an increase in the transportation cost of our product candidates due to the decreased availability of commercial flights. In addition, we have experienced delays in opening clinical trial sites and sites that are open may also have challenges enrolling patients due to the COVID-19 pandemic. Further, some staff that are required to conduct certain testing, such as biopsies, at our clinical sites or at third-party vendors have been required to stay at home or have been reallocated to other activities, resulting in such tests not being properly or timely performed or being delayed. In response to the public health directives and to help reduce the risk to our employees, we took precautionary measures, including implementing work-from-home policies for our administrative employees and staggered work times for our lab employees. We plan to continue these measures and are assessing when and how to resume normal operations. The effects of the public health directives and our work-from-home policies may negatively impact productivity, disrupt our business and delay our clinical programs and timelines and future clinical trials, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course. These and similar, and perhaps more severe, disruptions in our operations could negatively impact our business, results of operations and financial condition, including our ability to obtain financing.

The pandemic has already caused significant disruptions in the financial markets, and may continue to cause such disruptions, which could impact our ability to raise additional funds to support our operations. Moreover, the pandemic has significantly impacted economies worldwide and could result in adverse effects on our business and operations.

We are monitoring the potential impact of the COVID-19 pandemic on our business and financial statements. To date, we have not incurred impairment losses in the carrying values of our assets as a result of the pandemic and we are not aware of any specific related event or circumstance that would require us to revise our estimates reflected in our consolidated financial statements. We cannot be certain what the overall impact of the COVID-19 pandemic will be on our business and people. The extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations, financial condition, and liquidity, including planned and future clinical trials and research and development costs, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19, the actions taken to contain or treat it, and the duration and intensity of the related effects.

Components of Our Results of Operations

Revenue

To date, we have not generated any revenue from product sales and do not expect to do so for the next several years. All of our revenue to date has been derived from three collaboration agreements with Roche, which we entered into in 2015, 2017 and 2018, and, to a lesser extent, from government grants.

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If our development efforts for our product candidates are successful and result in regulatory approval or license or additional collaboration agreements with third parties, we may generate revenue in the future from product sales, payments from additional collaboration or license agreements that we may enter into with third parties, or any combination thereof. We expect that our revenue for the next several years will be derived primarily from our collaboration agreements with Roche as well as any additional collaborations that we may enter into in the future. We cannot provide assurance as to the timing of future milestone or royalty payments or that we will receive any of these payments at all.

Collaboration Revenue

2017 License and Collaboration Agreement with Roche

In April 2017, we entered into a second license and collaboration agreement with Roche, or the 2017 Roche Agreement, to allow Roche to use our Cell Squeeze technology to enable gene editing of immune cells to discover new targets in cancer immunotherapy. The 2017 Roche Agreement includes several licenses granted by Roche to us and by us to Roche in order to conduct a specified research program in accordance with a specified research plan.

Under the agreement, we received an upfront payment of $5.0 million as a technology access fee and are entitled to (i) payments of up to $1.0 million as reimbursement for our research costs; (ii) milestone payments of up to $7.0 million upon the achievement of specified development milestones; and (iii) annual maintenance fees ranging from $0.5 million to $0.9 million for each year following the fifth anniversary of the effective date, subject to specified prepayment discounts.

We assessed our accounting for the 2017 Roche Agreement under ASC 606 and identified the following promises under the agreement: (i) a non-exclusive license granted to Roche to perform research related to and use our Cell Squeeze technology for gene editing of immune cells; (ii) specified research and development services related to gene editing of immune cells through the research term; (iii) manufacturing activities to support the specified research plan; and (iv) participation on a joint research committee, or JRC. We concluded at the outset of the 2017 Roche Agreement that the first three promises should be combined into a single performance obligation and that the JRC participation had an immaterial impact on the accounting model.

We received the upfront payment of $5.0 million in April 2017 upon execution of the 2017 Roche Agreement. We also received the payments of $0.5 million in each of 2017 and 2018 related to our reimbursable research costs. In addition, during the third quarter of 2018, we received a payment of $2.0 million following the achievement of the first development milestone under the agreement related to Roche’s validation of preclinical proof of concept.

We recognize revenue associated with the performance obligation as the research and development services are provided using an input method, based on the cumulative costs incurred compared to the total estimated costs expected to be incurred to satisfy the performance obligation. The amounts received from Roche that have not yet been recognized as revenue are deferred as a contract liability in our consolidated balance sheet and will be recognized over the remaining research and development period until the performance obligation is satisfied.

During the years ended December 31, 2020 and 2019, there were no significant changes in the total estimated costs expected to be incurred to satisfy the performance obligation under the 2017 Roche Agreement and we recognized revenue of $0.5 million and $0.7 million, respectively, under the 2017 Roche Agreement. As of December 31, 2020 and 2019, we recorded as a contract liability, deferred revenue related to the 2017 Roche Agreement of $1.2 million and $1.7 million, respectively, of which $0.8 million and $0.7 million, respectively, were current liabilities. As of December 31, 2020 and 2019, the research and development services related to the performance obligation were expected to be performed over a remaining period of approximately 1.5 and 2.5 years, respectively.

2018 License and Collaboration Agreement with Roche

In October 2018, we entered into a third license and collaboration agreement with Roche, or the 2018 Roche Agreement, to jointly develop certain products based on mononuclear antigen presenting cells, or APCs, including human papilloma virus, or HPV, using our SQZ APC platform for the treatment of oncology indications. We granted Roche a non-exclusive license to our intellectual property, and Roche granted us a non-exclusive license to its and its affiliates’ intellectual property for the purpose of performing research activities. In connection with this agreement, the parties terminated the original Roche Agreement entered into in 2015.

Under the 2018 Roche Agreement, Roche was granted option rights to obtain an exclusive license to develop APC products or products derived from the collaboration programs on a product-by-product basis in oncology and to develop a Tumor Cell Lysate, or TCL, product. For each of the APC products and TCL product, once Roche exercises its option and pays a specified incremental amount, Roche will receive worldwide, exclusive commercialization rights for the licensed products, subject to our alternating option to retain U.S. APC commercialization rights. Through December 31, 2020, Roche had not exercised any of its options under the 2018 Roche Agreement.

Under the 2018 Roche Agreement, we received an upfront payment of $45.0 million and are eligible to receive (i) reimbursement of a mid double-digit percentage of our development costs; (ii) aggregate milestone payments on a product-by-product basis of up to $1.6 billion upon the achievement of specified milestones, consisting of up to $217.0 million of development milestone payments, up to $240.0 million of regulatory milestone payments and up to $1.2 billion of sales milestone payments; and (iii) tiered royalties on annual net sales of APC and TCL products licensed under the agreement at specified rates ranging from a mid single-digit percentage to a percentage in the mid twenties. We received the upfront payment of $45.0 million in October 2018 upon execution of the agreement. In addition, during the second quarter of 2019, we received a payment of $10.0 million following the achievement of the first development milestone under the 2018 Roche Agreement related to submission by us of preclinical data to the U.S. Food and Drug Administration, or FDA, and during the first quarter of

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2020, we received a payment of $20.0 million following the achievement of the second development milestone under the 2018 Roche Agreement related to first-patient dosing in a Phase 1 clinical trial. For additional information on the 2018 Roche Agreement, see “Business—Collaboration, Research and License Agreements—Roche Collaboration.”

We assessed our accounting for the 2018 Roche Agreement in accordance with ASC 606 and identified the following promises under the agreement: (i) a non-exclusive license granted to Roche to use our intellectual property and collaboration compounds to conduct research activities related to the research plans under the 2018 Roche Agreement; (ii) specified research and development services related to HPV through Phase 1 clinical trials under a specified research plan; (iii) manufacturing of our SQZ APC platform and equipment in order to support the HPV research plan; (iv) specified research and development services on next-generation APCs under a research plan; (v) specified research and development services on TCL under a research plan; and (vi) participation on a joint steering committee, or JSC. We concluded at the outset of the 2018 Roche Agreement that there were three performance obligations under the agreement: (1) the license to our intellectual property, the research and development activities related to HPV through Phase 1 clinical trials under a specified research plan, and the manufacturing of our SQZ APC platform and equipment in order to support the HPV research plan, or the first performance obligation; (2) the license to our intellectual property and the research and development activities on next-generation APCs, or the second performance obligation; and (3) the license to our intellectual property and the research and development activities on TCL, or the third performance obligation. We also concluded that the JSC participation had an immaterial impact on the accounting model.

In addition, we determined that the upfront payment of $45.0 million as well as the reimbursable costs of $10.8 million estimated by us constituted the entirety of the consideration to be included in the transaction price. This transaction price of $55.8 million was initially allocated to the three performance obligations based on the relative standalone selling price of each obligation. The potential milestone payments that we may be eligible to receive were excluded from the transaction price at the outset of the arrangement. We reevaluate the transaction price at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur, and, if necessary, we will adjust our estimate of the transaction price.

During the first quarter of 2019, we became entitled to receive a payment of $10.0 million upon the achievement of the first development milestone under the 2018 Roche Agreement, which was related to submission by us of preclinical data to the FDA. The $10.0 million amount was added to our estimate of the transaction price as of the first quarter of 2019, when we determined that achievement of the milestone was “most likely” and that it was probable that a significant reversal in the amount of cumulative revenue recognized would not occur, and, as a result, we recorded a cumulative catch-up adjustment to collaboration revenue of $1.1 million during the three months ended March 31, 2019 and the year ended December 31, 2019.

In October 2019, we received clearance from the FDA for our investigational new drug application, or IND, for our lead clinical program under the 2018 Roche Agreement. As a result of this IND clearance and progress made toward beginning clinical trials, we concluded as of December 31, 2019 that the achievement in the first quarter of 2020 of a milestone resulting in receipt of a payment of $20.0 million due upon first-patient dosing in a Phase 1 clinical trial under the terms of the 2018 Roche Agreement was “most likely” and that it was probable that a significant reversal in the amount of cumulative revenue recognized would not occur. We therefore included the $20.0 million payment in our estimate of the transaction price for the 2018 Roche Agreement in the fourth quarter of 2019 and recorded a cumulative catch-up adjustment to collaboration revenue of $5.0 million during the three months and year ended December 31, 2019.

During the fourth quarter of 2019, we evaluated our overall program priorities and determined that in 2020 we would continue to focus our resources on progressing the specified APC programs related to the 2018 Roche Agreement as well as our AAC and TAC platforms. As a result of our continuing focus on these specific programs, we reduced the level of priority of the TCL research activities under the 2018 Roche Agreement and expect to perform such TCL research activities over a longer time period than as originally expected under the research plan of the agreement.

We separately recognize revenue associated with each of the three performance obligations as the research, development and manufacturing services are provided using an input method, based on the cumulative costs incurred compared to the total estimated costs expected to be incurred to satisfy each performance obligation. The amounts received from Roche that have not yet been recognized as revenue are deferred as a contract liability in our consolidated balance sheet and will be recognized over the remaining research and development period until each performance obligation is satisfied.

During the year ended December 31, 2020, the total estimated costs expected to be incurred to satisfy the performance obligations under the 2018 Roche Agreement increased by $7.3 million. During the year ended December 31, 2019, the total estimated costs expected to be incurred to satisfy the performance obligations increased by $21.0 million. We recognized revenue of $20.5 million and $18.6 million during the years ended December 31, 2020 and 2019, respectively, under the 2018 Roche Agreement. As of December 31, 2020 and 2019, we recorded as a contract liability deferred revenue related to the 2018 Roche Agreement of $44.0 million and $43.2 million, respectively, of which $24.7 million and $15.7 million, respectively, were current liabilities. As of December 31, 2020, the research and development services related to the first and second performance obligations were expected to be performed over remaining periods ranging from 1.0 years to 1.5 years. The expected remaining period of performance of our research and development services related to the third performance obligation is not currently determinable until TCL research activities resume, or the 2018 Roche Agreement is modified by us and Roche.

For additional information regarding our accounting for the three collaboration agreements with Roche, see “—Critical Accounting Policies and Significant Judgments and Estimates—Revenue Recognition for License and Collaboration Arrangements” and “Business—Collaboration, Research and License Agreements—Roche Collaboration.”

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Grant Revenue

We generate revenue from government contracts with the National Institutes of Health and the National Science Foundation, which reimburse us for certain allowable costs for funded projects. Revenue from government grants is recognized as the qualifying expenses related to the contracts are incurred, provided that there is reasonable assurance of recoverability. Revenue recognized upon incurring qualifying expenses in advance of receipt of funding is recorded as unbilled receivables, a component of prepaid expenses and other current assets, in our consolidated balance sheets.

Operating Expenses

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research activities, including development of our product candidates and costs incurred under our collaboration arrangements with Roche, which include:

We expense research and development costs as incurred. Nonrefundable advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed, or when it is no longer expected that the goods will be delivered or the services rendered. Upfront payments under license agreements are expensed upon receipt of the license, and annual maintenance fees under license agreements are expensed in the period in which they are incurred. Milestone payments under license agreements are accrued, with a corresponding expense being recognized, in the period in which the milestone is determined to be probable of achievement and the related amount is reasonably estimable.

Our direct research and development expenses are tracked on a program-by-program basis and consist of external costs and fees paid to consultants, contractors, CMOs and CROs in connection with our preclinical and clinical development and manufacturing activities. Such program costs also include the external costs of laboratory and consumable materials and costs of raw materials that are directly attributable to and incurred for any single program. We do not allocate employee costs, costs associated with our platform development and discovery efforts, payments made under third-party licensing agreements, costs of laboratory supplies and consumable materials that are not directly attributable to any single program, and facilities expenses, including rent, depreciation and other indirect costs, to specific product development programs because these costs are deployed across multiple programs and our platform technology and, as such, are not separately classified.

Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will increase substantially in connection with our planned preclinical and clinical development activities in the near term and in the future, particularly should Roche determine not to exercise its options and we decide to continue clinical development of a product candidate. At this time, we cannot accurately estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our product candidates. The successful development of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development, including the following:

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A change in the outcome of any of these variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. In addition, we may never succeed in obtaining regulatory approval for any of our product candidates.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs, including stock-based compensation, for personnel in executive, finance and administrative functions. General and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, patent, consulting, investor and public relations, accounting and audit services. We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities and development of our product candidates. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses associated with operating as a public company.

Other Income (Expense)

Interest Income

Interest income consists of interest earned on our cash equivalents and marketable securities balances. We expect that our interest income will increase as we invest the cash received from the net proceeds from our IPO in November 2020 and our public offering in February 2021.

Other Income (Expense), Net

Other income (expense), net consists of miscellaneous income and expense unrelated to our core operations.

Income Taxes

Since our inception, we have not recorded any income tax benefits for the net losses we have incurred in each year or for our earned research and development tax credits, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss, or NOL, carryforwards and tax credit carryforwards will not be realized. As of December 31, 2020, we had U.S. federal NOL carryforwards of $73.7 million, which may be available to offset future taxable income, of which $11.3 million begin to expire in 2034 and of which $62.4 million do not expire but are (for taxable years beginning after December 31, 2020) generally limited in their usage to an annual deduction equal to 80% of annual taxable income. In addition, as of December 31, 2020, we had state NOL carryforwards of $71.9 million, which may be available to offset future taxable income and begin to expire in 2035. As of December 31, 2020, we also had U.S. federal and state research and development tax credit carryforwards of $6.3 million and $3.8 million which will begin to expire in 2034 and 2029, respectively. We have recorded a full valuation allowance against our net deferred tax assets at each balance sheet date.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act, or the CARES Act, was passed by the U.S. Congress and signed into United States law. The CARES Act, among other things, includes certain provisions for individuals and corporations (including a suspension on the application of the 80% limitation described above for taxable years beginning prior to January 1, 2021), and technical amendments for qualified improvement property, or QIP. While we accelerated tax depreciation expenses due to the technical amendments made by the CARES Act to QIP, this and other CARES Act benefits did not materially impact our income tax provisions in the periods presented.

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Results of Operations

Comparison of the Years Ended December 31, 2020 and 2019

The following table summarizes our results of operations for the years ended December 31, 2020 and 2019: