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Vaxxinity, Inc. - Annual Report: 2022 (Form 10-K)

vaxxq410k
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-K
(Mark One)
☒
Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
 
Act of 1934
for the fiscal year ended
December 31, 2022
or
☐
Transition report
 
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
for the transition period from
 
to
 
.
Commission File Number
 
001-41058
VAXXINITY, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
86-2083865
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)
505 Odyssey Way
 
Merritt Island
,
FL
32953
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code:
(
254
)
244-5739
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of exchange on which registered
Class A Common Stock, par value $0.0001 per
share
VAXX
The
Nasdaq
 
Global Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
☐
No
☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
☐
No
☒
Indicate by
 
check mark
 
whether the
 
registrant (1) has
 
filed all
 
reports required
 
to be
 
filed by
 
Section 13 or
 
15(d) of the
 
Securities Exchange
 
Act of
1934 during the preceding 12 months (or for such shorter
 
period that the registrant was required
 
to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes
☒
 
No
☐
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,
 
a smaller reporting company or
an emerging growth company. See the definitions of “large
 
accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth
company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
☐
Accelerated Filer
☐
Non-Accelerated Filer
 
☒
Smaller Reporting Company
☒
Emerging Growth Company
☒
If an emerging growth company,
 
indicate by check mark if the registrant has
 
elected not to use the extended transition period
 
for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report.
☐
 
If securities are registered
 
pursuant to Section 12(b)
 
of the Act, indicate
 
by check mark whether
 
the financial statements of
 
the registrant included
 
in
the filing reflect the correction of an error to previously issued financial statements.
☐
Indicate by
 
check mark
 
whether any
 
of those
 
error corrections
 
are restatements
 
that required
 
a recovery
 
analysis of
 
incentive-based
 
compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
☐
 
No
☒
The aggregate market value
 
of registrant’s
 
voting and non-voting outstanding
 
common stock held by
 
non-affiliates was approximately
 
$
94.5
 
million
based upon the closing stock price of
 
issuer’s common stock on June 30, 2022, the
 
last business day of the registrant’s most recently completed second
fiscal quarter. Shares of common stock held by each officer and director and by each person who may be deemed
 
to be affiliates of the Company. This
determination of affiliate status is not necessarily a conclusive determination for other purposes.
 
As of March 15,
 
2023, the registrant
 
had
112,188,911
 
shares of $0.0001
 
par value Class
 
A common stock
 
outstanding and
13,874,132
 
shares of $0.0001
par value Class B common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
 
 
Portions of
 
the following document
 
are incorporated by
 
reference in Part III
 
of this
 
Report: the registrant’s
 
definitive proxy statement
 
relating to
 
its
2023
 
Annual Meeting of
 
Shareholders. We
 
currently anticipate that
 
our definitive proxy
 
statement will be
 
filed with the
 
SEC no later
 
than 120 days
after December 31,
2022
, pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended.
 
2
PART
 
I
 
Unless otherwise indicated in this report, “Vaxxinity,” “we,” “us,” “our,” and similar terms refer to
 
Vaxxinity
 
,
 
Inc. and our consolidated
subsidiaries.
SPECIAL NOTE REGARDING FORWARD
 
-LOOKING STATEMENTS
This Annual
 
Report on
 
Form 10-K
 
for the
 
year ended
 
December 31, 2022
 
(“Report”) contains
 
forward-looking statements.
 
Forward-
looking
 
statements
 
are
 
neither
 
historical
 
facts
 
nor
 
assurances
 
of
 
future
 
performance.
 
Instead,
 
they
 
are
 
based
 
on
 
our
 
current
 
beliefs,
expectations and assumptions regarding the
 
future of our business,
 
future plans and strategies
 
and other future conditions. In
 
some cases,
you can identify forward-looking statements because they contain words such
 
as “anticipate,” “believe,” “estimate,” “expect,” “intend,”
“may,” “predict,”
 
“project,” “target,” “potential,”
 
“seek,” “will,” “would,” “could,” “should,” “continue,”
 
“contemplate,” “plan,” other
words and terms of similar meaning and the negative of these words or similar terms.
Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. We
caution
 
you that
 
forward-looking
 
statements are
 
not guarantees
 
of future
 
performance
 
or outcomes
 
and
 
that actual
 
performance
 
and
outcomes may differ materially from
 
those made in
 
or suggested by the
 
forward-looking statements contained in this
 
Report. In addition,
even
 
if
 
our
 
results
 
of
 
operations,
 
financial
 
condition
 
and
 
cash
 
flows,
 
and
 
the
 
development
 
of
 
the
 
markets
 
in
 
which
 
we
 
operate,
 
are
consistent with the forward-looking
 
statements contained in this Report,
 
those results or developments
 
may not be indicative of results
or developments in subsequent periods. New factors emerge from time to time that may cause our business not to develop
 
as we expect,
and it is not possible
 
for us to predict all
 
of them. Factors that could
 
cause actual results and outcomes
 
to differ from those reflected
 
in
forward-looking statements include, among others, the following:
•
 
the prospects of UB-612 and other product
 
candidates, including the timing of data from
 
our clinical trials for UB-612
and other product candidates and our ability to obtain and maintain regulatory
 
approval for our product candidates;
•
 
our ability to develop and commercialize new products and product
 
candidates;
•
 
our ability to leverage our Vaxxine
 
Platform;
•
 
the rate and degree of market acceptance of our products and product
 
candidates;
•
 
our
 
status
 
as
 
a
 
clinical-stage
 
company
 
and
 
estimates
 
of
 
our
 
addressable
 
market,
 
market
 
growth,
 
future
 
revenue,
expenses, capital requirements and our needs for additional financing;
•
 
our
 
ability to
 
comply with
 
multiple legal
 
and regulatory
 
systems relating
 
to privacy,
 
tax, anti-corruption
 
and other
applicable laws;
•
 
our ability to hire and retain key personnel and to manage our future growth
 
effectively;
•
 
competitive companies and technologies and our industry and our ability
 
to compete;
•
 
our and our collaborators’, including
 
United Biomedical’s (“UBI”), ability and willingness to
 
obtain, maintain, defend
and enforce our
 
intellectual property protection for
 
our proprietary and
 
collaborative product candidates, and
 
the scope
of such protection;
•
 
the
 
performance
 
of
 
third-party
 
suppliers
 
and
 
manufacturers
 
and
 
our
 
ability
 
to
 
find
 
additional
 
suppliers
 
and
manufacturers;
•
 
our ability and the potential to successfully manufacture
 
our product candidates for pre-clinical use, for clinical trials
and on a larger scale for commercial use, if approved;
•
 
the ability and willingness of our third-party collaborators to continue
 
research and development activities relating to
our product candidates;
•
 
general economic, political, demographic
 
and business conditions in
 
the United States,
 
Taiwan and other jurisdictions;
•
 
the
 
potential
 
effects
 
of
 
government
 
regulation,
 
including
 
regulatory
 
developments
 
in
 
the
 
United
 
States
 
and
 
other
jurisdictions;
•
 
ability to obtain additional financing in future offerings;
 
3
•
 
expectations about market trends; and
•
 
the
 
effects
 
of
 
the
 
Russia-Ukraine
 
conflict
 
and
 
the
 
COVID-19
 
pandemic
 
on
 
business
 
operations,
 
the
 
initiation,
development and operation of our clinical trials and patient enrollment of our
 
clinical trials.
We discuss many of these factors
 
in greater detail
 
under Item 1A.
 
“Risk Factors.” These
 
risk factors are not
 
exhaustive and other sections
of
 
this
 
report
 
may
 
include
 
additional
 
factors
 
which
 
could
 
adversely
 
impact
 
our
 
business
 
and
 
financial
 
performance.
 
Given
 
these
uncertainties, you should not place undue reliance on these forward
 
-looking statements.
You
 
should read
 
this Report
 
and
 
the documents
 
that we
 
reference
 
in this
 
Report
 
and have
 
filed as
 
exhibits completely
 
and
 
with the
understanding that
 
our actual
 
future results
 
may be
 
materially different
 
from what
 
we expect.
 
We
 
qualify all
 
of the
 
forward- looking
statements in this Report by these
 
cautionary statements. Except as required
 
by law, we undertake
 
no obligation to publicly update any
forward-looking statements, whether as a result of new information, future
 
events or otherwise.
Item 1. Business.
 
 
Overview
We
 
are a purpose-driven
 
biotechnology company
 
committed to democratizing
 
healthcare across the
 
globe. Our vision
 
is to disrupt the
existing treatment paradigm for
 
chronic diseases, increasingly dominated by
 
drugs, particularly monoclonal antibodies
 
(“mAbs”), which
suffer
 
from
 
prohibitive
 
costs
 
and
 
cumbersome
 
administration.
 
We
 
believe
 
our
 
synthetic
 
peptide
 
vaccine
 
platform
 
(“Vaxxine
Platform”) has the
 
potential to
 
enable a
 
new class
 
of therapeutics
 
that will
 
improve the
 
quality and
 
convenience of
 
care, reduce
 
costs
and increase
 
access to treatments
 
for a wide
 
range of indications.
 
Our Vaxxine
 
Platform is designed
 
to harness the
 
immune system
 
to
convert
 
the body
 
into its
 
own “drug
 
factory,”
 
stimulating
 
the production
 
of antibodies
 
with a
 
therapeutic
 
or protective
 
effect.
 
While
traditional vaccines
 
have been able
 
to leverage this
 
approach against infectious
 
diseases, they have
 
historically been unable
 
to resolve
key challenges
 
in the fight
 
against chronic
 
diseases. We
 
believe our
 
Vaxxine
 
Platform has the
 
potential to
 
overcome these
 
challenges
and
 
has the
 
potential to
 
bring the
 
efficiency
 
of vaccines
 
to a
 
whole
 
new class
 
of medical
 
conditions.
 
Specifically,
 
our technology
 
is
designed
 
to
 
use
 
synthetic
 
peptides
 
to
 
mimic
 
and
 
optimally
 
combine
 
biological
 
epitopes
 
in
 
order
 
to
 
selectively
 
activate
 
the
 
immune
system,
 
producing
 
highly
 
specific
 
antibodies
 
against
 
only
 
the
 
desired
 
targets,
 
including
 
self-antigens,
 
making
 
possible
 
the
 
safe
 
and
effective
 
treatment
 
of
 
chronic
 
diseases
 
by
 
vaccines.
 
The
 
modular
 
and
 
synthetic
 
nature
 
of
 
our
 
Vaxxine
 
Platform
 
generally
 
provides
significant speed and efficiency in candidate
 
development and has generated multiple product candidates
 
that we are designing to have
safety
 
and
 
efficacy
 
equal
 
to
 
or
 
greater
 
than
 
the
 
standard-of-care
 
treatments
 
for
 
many
 
chronic
 
diseases,
 
with
 
more
 
convenient
administration and meaningfully lower costs. Our current pipeline consists of
 
five chronic disease product candidates from early to late-
stage development across multiple therapeutic areas, including Alzheimer’s Disease (“AD”), Parkinson’s Disease (“PD”), migraine and
hypercholesterolemia. Additionally,
 
we believe our
 
Vaxxine
 
Platform may be
 
used to disrupt
 
the treatment paradigm
 
for a wide
 
range
of other
 
chronic diseases,
 
including any
 
that are
 
or could
 
potentially be
 
successfully treated
 
by mAbs.
 
We
 
also will
 
opportunistically
pursue infectious disease treatments. When the COVID-19 pandemic struck the world in March 2020, we quickly reallocated resources
to develop a
 
vaccine candidate. We have
 
assembled an industry-leading
 
team with
 
extensive experience developing and
 
commercializing
successful drugs
 
that is
 
committed to
 
realizing our
 
mission of
 
democratizing healthcare.
 
Our website
 
address is
 
www.vaxxinity.com.
The information contained on, or that can be accessed through, our website
 
is not part of, and is not incorporated into, this Report.
Limitations of the Current Healthcare Paradigm
The current healthcare paradigm favors
 
the development of drugs that
 
are primarily intended for the
 
U.S. market, for niche indications
and
 
for
 
treatment
 
of
 
disease
 
rather
 
than
 
prevention.
 
Furthermore,
 
these
 
drugs
 
are
 
expected
 
to
 
be
 
sold
 
at
 
price
 
points
 
that
 
are
 
only
accessible to healthcare systems in developed countries. One class
 
of drugs in particular exemplifies the current environment: biologics,
particularly mAbs. In 2019, biologics represented eight of
 
the ten top selling drugs in
 
the United States, of which seven
 
were mAbs. The
global
 
market
 
for
 
mAbs
 
totaled
 
approximately
 
$163 billion
 
in
 
2019,
 
representing
 
approximately
 
70%
 
of
 
the
 
total
 
sales
 
for
 
all
biopharmaceutical products.
While mAbs can provide life-altering care with generally favorable safety characteristics and significant health benefits
 
for the patients
who receive them, regular in-office transfusions and annual treatment costs, which can exceed
 
hundreds of thousands of dollars, present
challenges to both
 
patients and payors. These
 
price and administration hurdles
 
cause mAb treatments to
 
be available to only
 
a fraction
of the population who
 
could benefit from them.
 
Furthermore, mAbs are often restricted
 
to moderate to severe disease
 
and to later lines
of
 
treatment
 
due
 
to
 
their
 
high
 
cost.
 
Based
 
on
 
internal
 
estimates,
 
less
 
than
 
1%
 
of
 
the
 
worldwide
 
population
 
is
 
treated
 
with
 
mAbs.
Meanwhile, the
 
alternative to mAbs
 
treatments tends
 
to be small
 
molecules, which
 
are sometimes more
 
accessible to patients,
 
but are
often comparatively
 
less effective
 
with more
 
significant side
 
effects.
 
Collectively,
 
this perpetuates
 
a profound
 
inequity in
 
healthcare
access, domestically but even more so globally,
 
that we believe represents a tremendous social and market opportunity.
4
Our Solution
Monoclonal antibodies are developed, produced and purified outside the body and then transfused into the patient on a regular basis, as
frequently as bi-weekly. Therefore, mAbs are inherently
 
less efficient than vaccines, which
 
instead stimulate antibody production within
the patient’s immune system, requiring both less active material and less frequent
 
treatments. However, while traditional vaccines have
historically
 
been
 
successful addressing
 
infectious
 
diseases, previous
 
attempts to
 
utilize vaccines
 
to address
 
chronic
 
disease have
 
not
achieved both acceptable safety and efficacy. This limitation is driven by a
 
traditional vaccine’s inability to either stimulate the requisite
antibody
 
response against
 
harmful
 
self-antigens,
 
that is,
 
break immune
 
tolerance,
 
or produce
 
acceptable levels
 
of reactogenicity,
 
the
physical manifestation of the immune
 
response to vaccination. Our
 
Vaxxine Platform technology contains modular components custom-
designed to
 
mimic select
 
biology and
 
activate the
 
immune system,
 
enabling our
 
product candidates
 
to break
 
immune tolerance
 
when
targeting self-antigens, a
 
property observed across multiple clinical
 
and pre-clinical studies. Our
 
Vaxxine
 
Platform depends heavily on
intellectual property licensed from UBI
 
and its affiliates, a related
 
party and a commercial partner
 
for us, who first
 
developed the peptide
vaccine
 
technology
 
utilized
 
by
 
our
 
Vaxxine
 
Platform.
 
The
 
formulation
 
of
 
our
 
peptide-based
 
product
 
candidates
 
relies
 
on
 
contract
manufacturers at this time, including both related parties as well as third-party
 
manufacturers.
 
We
 
believe
 
our
 
Vaxxine
 
Platform
 
has
 
the
 
potential
 
to
 
generate
 
product
 
candidates
 
with
 
attributes
 
that
 
collectively
 
offer
 
significant
advantages over
 
both mAbs
 
and small
 
molecule therapeutics,
 
and that
 
some of
 
these advantages
 
may allow
 
for use
 
in a first-line
 
or a
prevention setting:
•
Cost
:
 
Monoclonal
 
antibodies
 
require
 
costly
 
and
 
complex
 
biological
 
manufacturing
 
processes.
 
Our
manufacturing
 
process
 
is
 
chemically
 
based
 
and
 
highly
 
scalable
 
and
 
requires
 
lower
 
capital
 
expenditures.
 
In
 
addition,
 
we
 
design
 
our
product
 
candidates
 
to
 
generate
 
antibody
 
production
 
in
 
the
 
body,
 
thus
 
requiring
 
meaningfully
 
less
 
drug
 
substance
 
relative
 
to
 
mAbs,
leading to commensurately lower costs.
•
Administration
:
 
Our
 
product
 
candidates
 
are
 
designed
 
to
 
be
 
injected
 
in
 
quarterly
 
or
 
longer
 
intervals
 
via
intramuscular injection similar to a flu shot. We
 
believe this offers considerable
 
convenience compared to mAbs, which can require
 
up
to bi-weekly dosing via intravenous infusion or subcutaneous injections, and
 
small molecules, which often require daily dosing.
•
Efficacy
: In
 
our
 
clinical
 
trials conducted
 
to
 
date, our
 
product
 
candidates
 
have yielded
 
high
 
response
 
rates
(95% or above at target
 
dose levels) for UB-311,
 
UB-312 and UB-612, high
 
target-specific antibodies against
 
self-antigens (as seen in
UB-311 and
 
UB-312 clinical trials)
 
and long durations
 
of action for
 
UB-311 (based
 
on titer levels
 
remaining elevated
 
between doses)
and UB-612
 
(based on half-life).
 
See our descriptions
 
of these clinical
 
trials under
 
“—Our Product
 
Candidates.” We
 
also believe that
the improved convenience of our product candidates
 
as compared to mAbs has the potential to lead to increased
 
adherence by patients.
Furthermore,
 
our Vaxxine
 
Platform enables
 
the combining
 
of target
 
antigens into
 
a single
 
formulation.
 
For indications
 
that could
 
be
treated more effectively with a multivalent approach, we believe our Vaxxine
 
Platform would have an advantage over other modalities.
Finally,
 
because our
 
Vaxxine
 
Platform is
 
designed to
 
elicit endogenous
 
antibodies, we
 
believe our
 
product candidates
 
may lessen
 
or
avoid altogether the phenomenon of anti-drug antibodies which has limited
 
the efficacy of certain mAbs over time.
•
Safety
: Based on our clinical trials to date, our product
 
candidates have been well tolerated. We
 
aim to offer
product candidates with safety profiles at least comparable to the competing mAb or small molecule alternative for the relevant disease.
vaxxq410kp7i0
5
Our Pipeline
The following chart reflects our current product candidate pipeline:
As used in the chart above, “IND” signifies a program
 
has begun investigational new drug (“IND”)-enabling studies.
Our pipeline
 
consists of
 
five lead
 
programs focused
 
on chronic
 
disease, particularly
 
neurodegenerative disorders,
 
in addition
 
to other
neurology and cardiovascular indications.
Neurodegenerative Disease Programs:
•
UB-311
: Targets toxic
 
forms of aggregated amyloid-beta (“Aβ”) in the brain to fight AD. Phase 1, Phase 2a
and Phase 2a Long Term
 
Extension (“LTE”)
 
trials have shown UB-311 to be well tolerated in mild-to-moderate
 
AD subjects over
three years of repeat dosing, with a safety profile comparable to placebo, with
 
no cases of amyloid-related imaging abnormalities-
edema (“ARIA-E”) observed in the main Phase 2a trial, and only one case of
 
ARIA-E in the LTE
 
trial, which was clinically not
significant according to the study investigator.
 
UB-311 was also shown to be immunogenic, with a high
 
responder rate and antibodies
that bind to the desired target. We
 
held an End of Phase 2 meeting with the U.S. Food and Drug Administration
 
(“FDA”) and have
aligned upon a large scale efficacy trial, which, pending
 
data, could potentially support initial licensure of UB-311
 
for the treatment of
early AD.
 
The FDA granted UB-311 Fast Track
 
Designation in the second quarter of 2022.
 
The expected timing of the Phase 2b
initiation will be determined based upon the timing of a strategic partnership.
•
UB-312
: Targets toxic
 
forms of aggregated α-synuclein in the brain and peripheral tissues to fight PD and
other synucleinopathies, such as Lewy body dementia (“LBD”) and
 
multiple system atrophy (“MSA”). Part A of a Phase 1 trial in
healthy volunteers has been completed and has shown UB-312 to be well tolerated,
 
with no significant safety findings, and
immunogenic,
 
with a high responder rate and antibodies that cross the blood-brain barrier (“BBB”). No serious
 
adverse events were
observed in Part A of the Phase 1 trial. We
 
have completed an end-of-treatment analysis of the ongoing Part
 
B of the Phase 1 trial in
PD patients, which has similarly shown UB-312 to be well tolerated and immunogenic,
 
with anti-α-synuclein antibodies observed in
the serum and CSF of PD patients.
 
We anticipate the
 
completion of Part B of the trial in PD patients in mid-2023.
 
•
VXX-301
:
 
We
 
are
 
developing
 
an
 
anti-tau
 
product
 
candidate
 
that
 
has
 
the
 
potential
 
to
 
address
 
multiple
neurodegenerative
 
conditions,
 
including
 
AD,
 
by
 
targeting
 
abnormal
 
tau
 
proteins
 
alone
 
and
 
in
 
potential
 
combination
 
with
 
other
pathological proteins such as Aβ to combat multiple pathological processes at once. Our lead candidate targets multiple epitopes of tau.
Next Wave Chronic
 
Disease Programs:
•
UB-313
:
 
Targets
 
Calcitonin
 
Gene-Related
 
Peptide
 
(“CGRP”) to
 
fight
 
migraines.
 
We
 
have
 
completed
enrollment in a first-in-human Phase 1 clinical trial, which began in
 
September 2022, and anticipate a topline readout in the mid-2023.
•
VXX-401
:
 
Targets
 
proprotein
 
convertase
 
subtilisin/kexin
 
type
 
9
 
serine
 
protease
 
(“PCSK9”) to
 
lower
 
low-
density lipoprotein (“LDL”)
 
cholesterol and reduce
 
the risk of cardiac
 
events. As of March
 
2023, we have begun
 
dosing of subjects in
a first-in-human clinical trial of VXX-401 in Australia.
6
Given the global COVID-19 pandemic and our Vaxxine
 
Platform’s applicability to infectious disease, we also have advanced a product
candidate that addresses SARS-CoV-2.
COVID-19
•
UB-612
: Employs a “multitope” subunit protein-peptide approach to neutralizing the SARS-CoV-2
 
virus,
meaning the product candidate is designed to activate both antibody and
 
cellular immunity against multiple viral epitopes.
 
A Phase 3
trial evaluating UB-612 as a heterologous boost against SARS-CoV-2,
 
head-to-head versus homologous boosts of VNT162b2
(mRNA), ChAdOx1-S (adenovirus), and BIBP (inactivated virus), was initiated
 
in the first half of 2022 with funding support from the
Coalition of Epidemic Preparedness Innovations (“CEPI”).
 
In December 2022, we announced positive topline data: UB-612 met
primary and key secondary endpoints, eliciting non-inferior neutralizing
 
antibody titers and seroconversion rates (“SCR(s)”), defined
as a 4-fold or greater increase in neutralizing antibodies from baseline,
 
against both Wuhan and Omicron BA.5 variants as compared
to BNT162b2, and superior neutralizing antibody titers and SCRs against both variants
 
as compared to ChAdOx1-S and BIBP.
 
Preliminary safety data show that UB-612 has been generally well tolerated
 
with no serious adverse events reported through day 57 of
data cut-off.
 
The trial is ongoing, with long-term safety and immunogenicity follow-up
 
planned through 12 months.
 
Phase 1 and
Phase 2 trials of UB-612 have also shown UB-612 to be well tolerated,
 
with over 7,500 doses administered to over 3,750 subjects. In
March 2023 we completed rolling submissions for conditional/provisional
 
authorization with regulatory authorities in the United
Kingdom and Australia, who will review under their established work
 
share agreement.
 
We
 
believe our Vaxxine
 
Platform has application
 
across a multitude
 
of chronic and
 
infectious disease indications
 
beyond our
 
existing
pipeline. We are developing additional product candidates that we believe may address significant unmet needs both within and beyond
our current pipeline’s therapeutic areas.
Our Team
We have assembled
 
an experienced group of executives with deep scientific, business and leadership
 
expertise in pharmaceutical and
vaccine discovery and development, manufacturing, regulatory and commercialization.
 
Mei Mei Hu, our co-founder and Chief
Executive Officer, has been a member
 
of the executive committee of UBI since 2010. Our board of directors is chaired by our co-
founder Louis Reese, who has been a member of the executive committee
 
of UBI since 2014. Our research efforts are guided by
highly experienced scientists and physicians on our leadership team
 
including Dr. Ulo Palm, our Chief Medical
 
Officer, and Dr.
 
Jean-
Cosme Dodart, our Senior Vice
 
President of Research. Our leadership team contributes a diverse range of
 
experiences from leading
companies including Allergan, Amgen, Eli Lilly,
 
LEO, Merck, Novavax, Novartis, and Schering-Plough, and were executives in
multiple successful mAb and vaccine launches.
 
As of December 31, 2022, we have assembled an exceptional team of approximately
92 employees, the majority of whom hold Ph.D., M.D., J.D. or Master’s
 
degrees. We also have
 
a highly experienced scientific
advisory board consisting of leading doctors and scientists in relevant
 
therapeutic areas.
 
Our Strategy
Our mission is
 
to develop product candidates
 
that improve the
 
quality of care for
 
chronic diseases and
 
are accessible to
 
all patients across
the globe. In order to achieve this mission, we seek to:
•
Advance our chronic disease pipeline through
 
clinical stage development
: We plan to advance UB-311,
UB-312, UB-313, and VXX-401 through clinical stage development
 
for the treatment of chronic diseases, either ourselves or with a
strategic partner. We
 
believe that our differentiated Vaxxine
 
Platform will enable our product candidates, if approved and successfully
commercialized,
 
to potentially disrupt the treatment paradigm for their respective indications. However,
 
there can be no guarantee that
we will obtain regulatory approval or commercialize of any such product
 
candidates.
 
•
Expand our pipeline of product
 
candidates
: Chronic diseases are prevalent
 
globally and expected to worsen
over the next several decades. In furtherance of our mission, we plan to expand our pipeline by developing new product candidates that
address additional
 
indications. In
 
expanding our
 
pipeline, we rely
 
on our
 
proprietary filtering
 
methodology,
 
which evaluates potential
product
 
candidates
 
across
 
five
 
principal
 
criteria
 
–
 
(i)
 
probability
 
of
 
technical
 
and
 
regulatory
 
success,
 
(ii)
 
addressable
 
market,
 
(iii)
development cost, (iv) competitive dynamics and (v) disruptive potential.
•
Opportunistically develop treatments for
 
infectious diseases
: While
 
our core mission
 
focuses on the
 
treatment
of chronic diseases, we are committed to bringing accessible medicines to people around
 
the world and will address infectious diseases
opportunistically. For
 
example, when the COVID-19 pandemic struck the world,
 
we rapidly deployed resources in pursuit of a product
candidate currently embodied in UB-612.
•
Expand
 
and
 
scale
 
our
 
existing
 
capabilities
:
 
We
 
are
 
investing
 
in
 
our
 
operational
 
processes,
 
facilities
 
and
human capital to accelerate the speed with which we can bring
 
product candidates through the development pipeline, and to
 
strengthen
the capacity for developing more product candidates simultaneously.
7
•
Continue to
 
improve
 
our Vaxxine
 
Platform
: In
 
addition to,
 
and in
 
conjunction with,
 
our product
 
candidate
development
 
efforts,
 
we
 
are
 
continuously
 
working
 
to
 
improve
 
and
 
enhance
 
the
 
richness,
 
breadth
 
and
 
effectiveness
 
of
 
our
 
Vaxxine
Platform. As our
 
Vaxxine Platform further develops, we
 
believe that
 
we can
 
both increase the
 
number of product
 
candidates in
 
concurrent
development and efficiently advance product candidates
 
through pre-clinical and clinical development.
•
Maximize the value of
 
our product candidates through potential partnerships
: We currently retain worldwide
rights for the majority
 
of our product candidates
 
and will consider entering
 
into development and commercialization
 
partnerships with
third parties that align with our mission on an opportunistic basis.
Background and Limitations of Traditional
 
Vaccines and Monoclonal
 
Antibodies
The immune
 
system, the
 
body’s
 
mechanism for
 
fighting off
 
potential threats,
 
is comprised
 
of cells
 
that form
 
the innate
 
and adaptive
immune
 
responses.
 
The
 
main
 
purpose
 
of
 
the
 
innate
 
immune
 
system
 
is
 
to
 
immediately
 
prevent
 
the
 
spread
 
and
 
movement
 
of
 
foreign
pathogens throughout the body. The adaptive immune response is specific to the pathogen presented to T-cells
 
and B lymphocytes (“B-
cells”) and leads to an enhanced response upon future encounters with those antigens. Antibodies represent an important tool within the
adaptive immune system’s arsenal. Upon detection of a potential threat, B-cells produce antibodies that
 
recognize, bind to and eliminate
the threatening pathogen. Over time, the immune system develops the
 
ability to produce countless types of antibodies, each finely tuned
against a specific threat.
Generally, the immune system is able to function effectively by neutralizing
 
viruses, bacteria and even self-generated cells and proteins
from within our own
 
bodies that could cause
 
harm if unchecked.
 
However, as powerful
 
as the immune system
 
is, there are threats
 
that
it
 
cannot
 
overcome
 
on
 
its
 
own,
 
generating
 
the
 
need
 
for
 
medicine.
 
Conventional
 
forms
 
of
 
medicine
 
include
 
small
 
molecules
 
(e.g.,
antibiotics), which can inhibit
 
or promote action within
 
the body by, for instance,
 
binding to a
 
receptor on the surface
 
of a cell,
 
or directly
inducing toxic effects upon bacteria. These
 
medicines do not necessarily modulate
 
the immune system directly in
 
order to work. Instead,
they work
 
alongside it.
 
While small
 
molecules have
 
provided substantial
 
benefits to
 
human health,
 
they are
 
typically not
 
designed to
interact with the immune
 
system. They may also
 
have limited efficacy in cases
 
where an immune
 
response to a target can
 
be used against
a chronic condition.
Vaccines
In the
 
first part
 
of the
 
twentieth century,
 
vaccines revolutionized
 
healthcare by
 
directly interacting
 
with, and
 
modulating, the
 
immune
system — training
 
it to recognize
 
a dangerous pathogen by
 
introducing the immune system
 
to a relatively
 
harmless form of the
 
pathogen,
its toxins
 
or
 
one
 
of
 
its surface
 
proteins,
 
thereby
 
promoting
 
the
 
body’s
 
own
 
production
 
of binding
 
antibodies.
 
Once
 
immunized
 
to
 
a
specific pathogen, the immune system can recognize it and generate the antibodies
 
to fight it more quickly and robustly.
Traditional vaccine
 
technologies have generally
 
focused on the prevention
 
of bacterial and viral
 
infections and not on
 
chronic disease.
In
 
chronic
 
disease
 
settings,
 
the
 
disease-causing
 
agents
 
frequently
 
come
 
from
 
within
 
the
 
body.
 
These
 
self-antigens
 
are
 
proteins
 
that
become too abundant,
 
misfolded or aggregated
 
such that they can no
 
longer perform their healthy
 
function and even may
 
induce toxic
effects.
 
The
 
body
 
can
 
sometimes
 
produce
 
antibodies
 
against
 
such
 
proteins,
 
but
 
this
 
often
 
falls
 
short
 
of
 
providing
 
the
 
right
 
types of
antibodies in the right
 
concentrations to ward off
 
disease. Historically, vaccine technologies developed to target these
 
proteins have been
unable
 
to break
 
immune tolerance
 
— that
 
is, the
 
immune
 
system’s
 
general
 
avoidance
 
of reactivity
 
towards
 
self-antigens
 
— with
 
an
acceptable level of reactogenicity.
 
The challenges faced by
 
prior efforts to advance
 
vaccine technologies for chronic
 
diseases included
low response rates, low titer levels, off-
 
target responses and other
 
safety concerns such as T-cell
 
mediated inflammation.
Monoclonal Antibodies
The first
 
mAbs were
 
developed in
 
the later
 
part of
 
the twentieth
 
century.
 
In contrast
 
to vaccines,
 
which prompt
 
the body
 
to produce
antibodies, mAbs are antibodies manufactured outside of
 
the patient’s body and then
 
injected or infused into the body to recognize and
eliminate
 
harmful
 
targets.
 
Monoclonal
 
antibodies
 
have
 
revolutionized
 
the
 
standard-of-care
 
treatment
 
for
 
many
 
chronic
 
diseases.
However, manufacturing mAbs is
 
often an expensive
 
and complex
 
process and administering
 
mAbs is
 
cumbersome, sometimes
 
requiring
infusions
 
as frequently
 
as bi-weekly.
 
These factors
 
have generally
 
limited mAbs’
 
availability to
 
moderate-to-severe
 
disease, to
 
later
lines of therapy and to wealthier geographies, thus denying
 
access to a substantial portion of the patients who
 
could benefit from them.
Finally,
 
patients
 
on
 
mAbs
 
often
 
experience
 
a
 
loss
 
of
 
effectiveness
 
over
 
time
 
due
 
to
 
a
 
phenomenon
 
known
 
as
 
anti-drug
 
antibodies,
whereby the immune
 
system begins to
 
recognize therapeutic mAbs
 
as foreign, and
 
mounts a
 
response against them,
 
eventually mitigating
their efficacy.
Our Vaxxine
 
Platform
Our Vaxxine
 
Platform is designed to stimulate the patient’s own immune system to generate antibodies and overcome the limitations of
traditional
 
vaccines
 
to
 
target
 
self-antigens
 
safely
 
and
 
effectively
 
in
 
chronic
 
diseases.
 
Our
 
product
 
candidates
 
have
 
broken
 
immune
tolerance against
 
self-antigens consistently.
 
As described
 
in the
 
section titled
 
“Our Product
 
Candidates” below,
 
across seven
 
clinical
trials,
 
we
 
have
 
consistently
 
observed
 
that our
 
product
 
candidates have
 
stimulated
 
the
 
development
 
of
 
antibodies
 
against the
 
desired
vaxxq410kp10i0
8
target at relevant doses in clinical trial subjects, including the elderly. We have observed favorable tolerability and reactogenicity of our
product
 
candidates
 
across
 
studies
 
of
 
UB-311,
 
UB-312
 
and
 
UB-612,
 
with
 
no
 
significant
 
safety
 
findings
 
to
 
date.
 
We
 
aim
 
to
 
develop
product candidates that
 
are more convenient,
 
more cost-effective and
 
more accessible to large
 
patient populations, with safety
 
profiles
at least comparable to,
 
relevant mAbs and small
 
molecule treatments. We believe our product candidates have
 
the potential to eventually
not only capture meaningful market share from mAbs
 
and small molecules, but more importantly, to provide therapeutic benefit to
 
large
patient populations
 
who currently
 
receive neither
 
form of
 
treatment and
 
thereby open
 
up the
 
broadest access
 
to patients.
 
This would
represent
 
an
 
unprecedented
 
shift
 
in
 
the
 
treatment
 
paradigm,
 
potentially
 
providing
 
better
 
global
 
access
 
to
 
treatments
 
that
 
have
 
been
previously
 
limited
 
to
 
the
 
wealthiest
 
nations.
 
In
 
particular,
 
we
 
believe
 
our
 
treatments
 
for
 
chronic
 
disease
 
could
 
reflect
 
the
 
following
benefits as compared with the relevant mAbs and small molecule alternatives:
Characteristics of our Product Candidates versus Monoclonal Antibodies and Small
 
Molecules
History and Design
Our Vaxxine
 
Platform utilizes a peptide vaccine technology first developed by UBI and subsequently refined over the last two decades,
with more
 
than three
 
billion doses
 
of animal
 
vaccines
 
commercialized
 
to date.
 
UBI initiated
 
the development
 
of this
 
technology
 
for
human use; the business focused on human use was then separated from UBI through two separate transactions: a spin-out from UBI in
2014 of operations
 
focused on developing
 
chronic disease product
 
candidates that resulted
 
in United Neuroscience,
 
a Cayman Islands
exempted company (“UNS”),
 
and a second
 
spin-out from UBI
 
in 2020 of
 
operations focused on
 
the development of
 
a COVID-19 vaccine
that resulted
 
in C19 Corp.,
 
a Delaware
 
corporation (“COVAXX”).
 
Our current
 
company,
 
Vaxxinity,
 
Inc., was incorporated
 
under the
laws of the State of Delaware on February 2, 2021 for the purpose of acquiring
 
UNS and COVAXX
 
in March of 2021.
 
On March 2,
 
2021, in
 
accordance with
 
a contribution
 
and exchange
 
agreement among
 
Vaxxinity,
 
UNS, COVAXX
 
and the
 
UNS and
COVAXX
 
stockholders party thereto (the “Contribution and
 
Exchange Agreement”), the existing equity holders of
 
UNS and COVAXX
contributed their
 
equity interests in
 
each of
 
UNS and COVAXX
 
in exchange
 
for equity interests
 
in Vaxxinity
 
(the “Reorganization”).
In
 
connection
 
with
 
the
 
Reorganization,
 
(i) all
 
outstanding
 
shares
 
of
 
UNS
 
and
 
COVAXX
 
preferred
 
stock
 
and
 
common
 
stock
 
were
contributed to
 
Vaxxinity
 
and exchanged
 
for like
 
shares of
 
stock in
 
Vaxxinity,
 
(ii) the outstanding
 
options to
 
purchase shares
 
of UNS
and COVAXX
 
common stock were terminated and substituted with options
 
to purchase shares of Class A common stock in Vaxxinity,
(iii) the
 
outstanding
 
warrant
 
to
 
purchase
 
shares
 
of
 
COVAXX
 
common
 
stock
 
was cancelled
 
and
 
exchanged
 
for
 
a
 
warrant
 
to
 
acquire
Class A
 
common
 
stock
 
in
 
Vaxxinity,
 
and
 
(iv) the
 
outstanding
 
convertible
 
notes
 
and
 
a
 
related
 
party
 
not
 
payable
 
were contributed
 
to
Vaxxinity
 
and the former holders of such notes received Series A preferred stock in Vaxxinity.
 
On December 31, 2022, COVAXX
 
was
merged into Vaxxinity
 
in order to simplify the corporate structure.
 
UBI has used
 
its capabilities
 
in peptide
 
technology for
 
innovations across an
 
array of
 
business endeavors:
 
antibody testing
 
for human
diagnostics, animal health
 
vaccines and the manufacture
 
of medical products. Its
 
innovative products include one
 
of the first approved
peptide-based blood antibody tests in the world (for HIV), one of the first approved
 
peptide vaccines against an infectious disease in the
world in animal health (for a
 
food-and-mouth disease virus) and one of
 
the first approved peptide vaccines against
 
a self-antigen in the
world in
 
animal health
 
(an anti-luteinizing
 
hormone-releasing hormone
 
(“LHRH”) vaccine
 
used for
 
the immunocastration
 
of swine).
vaxxq410kp11i0
9
Grant funding from
 
the National Institutes
 
of Health supported
 
some of UBI’s
 
work in the
 
fields of vaccines
 
and antibody testing.
 
To
commercialize its animal health
 
vaccine business, UBI
 
and its affiliates scaled
 
up GMP vaccine manufacturing to
 
over 500 million doses
per
 
year
 
and
 
partnered
 
with
 
a
 
top-ten
 
animal
 
health
 
company
 
for
 
commercialization
 
of
 
its
 
anti-LHRH
 
vaccine;
 
all
 
together,
 
UBI’s
technology platform is utilized for the vaccination of approximately 25%
 
of the global swine population annually.
We are
 
advancing our peptide-based Vaxxine
 
Platform to develop product
 
candidates that target chronic
 
diseases and COVID-19.
 
Our
Vaxxine
 
Platform
 
comprises
 
a
 
proprietary,
 
custom,
 
rationally
 
designed
 
antigen
 
capable
 
of
 
evoking
 
an
 
immune
 
response
 
(an
“immunogen”)
 
formulated
 
with
 
a
 
proprietary
 
CpG
 
oligonucleotide.
 
The
 
immunogen
 
contains
 
several
 
advanced
 
synthetic
 
peptide
domains,
 
including
 
B-cell
 
epitopes,
 
T-helper
 
(“Th”)
 
peptide
 
carrier
 
constructs
 
and
 
peptide
 
linkers.
 
This
 
composition
 
enables
 
us
 
to
achieve
 
a
 
highly
 
specific
 
immune
 
response
 
to
 
the
 
target
 
antigen,
 
with
 
limited
 
inflammation
 
and
 
off-target
 
effects
 
that
 
could
 
cause
reactogenicity. This design process has evolved into a repeatable series of well-defined steps,
 
which has enabled the development of our
current pipeline of product candidates.
Key Elements of our Vaxxine
 
Platform Constructs and Formulations
When developing
 
a product
 
candidate, we
 
use publicly
 
available information
 
and sophisticated
 
bioinformatics tools
 
to investigate
 
the
entire protein structure of a
 
target in a comprehensive manner
 
to identify functional B-cell epitopes
 
that may provide optimal antigens.
We
 
then synthesize
 
peptides that
 
mimic these
 
identified antigens
 
to elicit
 
highly specific
 
antibodies against
 
these B-cell
 
epitopes. To
yield favorable tolerability profiles, we screen our product candidates for lack of toxicity as well as reactogenicity,
 
and design them not
to elicit T-cell
 
mediated inflammation. To
 
enhance effectiveness, we
 
seek to optimize the
 
size and sequence of
 
our custom peptides to
elicit a robust, specific antibody response when linked to a carrier molecule.
We
 
then attach
 
a proprietary
 
carrier molecule,
 
an artificial Th
 
carrier peptide
 
that delivers the
 
synthetic peptide
 
into cells.
 
Traditional
vaccines have
 
faced challenges
 
in achieving
 
specific responses
 
because they
 
rely on
 
conjugating
 
an antigen
 
to a
 
large toxoid
 
carrier
molecule, to which most of
 
the antibody response is directed,
 
causing off-target effects
 
such as inflammation.
 
In our pre-clinical trials
and clinical trials to date, our product candidates have displayed specific immunogenicity,
 
or the ability to stimulate a targeted immune
response, thereby greatly reducing potential off-target effects and increasing the potential for our
 
product candidates to be well tolerated
and
 
efficacious.
 
We
 
have
 
observed
 
that
 
our
 
carrier
 
molecules
 
have
 
produced
 
consistent
 
results
 
across
 
multiple
 
species
 
and
 
against
multiple targets in seven human clinical trials to date.
vaxxq410kp12i0
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Our Product Candidate Does Not Induce an Antibody Response against its Carrier Molecule
The graph above
 
illustrates that our
 
peptide carriers induce
 
a strong immune response against
 
the target antigen, and
 
a minimal immune
response against themselves, as compared
 
to traditional vaccines formulated with other types of carrier molecules.
Our
 
peptide
 
carriers
 
have
 
short sequence
 
lengths;
 
we
 
design
 
them with
 
the aim
 
that
 
they are
 
not
 
antigenic on
 
their own
 
and
 
do not
stimulate cytotoxic T-cells.
 
The carriers’ sequences model
 
those found in natural
 
pathogens, so they are
 
recognized by T-helper
 
cells.
This encourages
 
robust T-helper
 
cell exposure
 
and promotes activation
 
of other
 
immune cells.
 
In turn,
 
B-cells are exposed
 
to the B-
cell antigen and begin antibody production against the antigen, while avoiding
 
an antibody response to the carrier.
Our library of peptide carriers enables the use of different
 
carrier molecules or different combinations of carrier molecules, which
allows us to potentially regulate the speed of immune response onset as well as the magnitude
 
and duration of that response. For
example, a longer duration of response would allow for less frequent dosing.
 
In the case of vaccines for infectious diseases, where T-
cell mediated activity is desirable, our Vaxxine
 
Platform also affords the flexibility to design immunogen constructs that specifically
promote cytotoxic T-cell
 
activity when warranted.
 
We
 
utilize proprietary
 
linker constructs
 
to fuse
 
our peptide
 
carriers
 
with our
 
custom peptide
 
antigens.
 
These linkers
 
are designed
 
to
promote binding of both B-cell and
 
T-helper epitopes to their respective receptors, contributing to a B-cell response.
 
They may enhance
the
 
immune
 
response
 
by
 
enabling
 
conformational
 
changes
 
to optimize
 
presentation
 
of
 
the B-cell
 
epitope
 
to
 
antigen-presenting
 
cells
(“APCs”), such as dendritic cells (“DCs”).
Our
 
Vaxxine
 
Platform
 
also
 
enables
 
the
 
construction
 
of
 
candidates
 
that
 
target
 
multiple
 
epitopes
 
in
 
a
 
single
 
formulation,
 
whether
 
on
multiple
 
targets
 
or
 
a
 
single
 
target.
 
In
 
certain
 
cases,
 
targeting
 
multiple
 
epitopes
 
of
 
a
 
single
 
target
 
could
 
promote
 
increased
 
target
engagement.
 
Combinations of therapies
 
targeting different molecular
 
mechanisms are common
 
in treating neurologic, cardiovascular,
psychiatric,
 
metabolic,
 
respiratory,
 
infectious
 
and
 
oncologic
 
disease.
 
Our
 
Vaxxine
 
Platform’s
 
favorable
 
cost
 
of
 
goods
 
and
 
efficient
manufacturing process
 
could allow for
 
viable multi-target
 
therapies in a
 
single formulation.
 
This concept could
 
be applied in
 
an array
of potential therapeutic
 
areas. Our current
 
pipeline has candidates
 
against amyloid-β, α-synuclein
 
and tau; targeting
 
of two or more
 
of
these at the same time might prove more effective than any single-target therapy in some patients. Pre-clinical data to date suggests that
we can elicit
 
antibody titers against
 
all three targets in
 
a single formulation.
 
In contrast, multi-target therapy
 
with mAbs would
 
compound
the cost and administration burdens as compared to single-target
 
mAb therapy.
vaxxq410kp13i0
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Immunogenicity of Single- Versus
 
Multi-Target
 
Formulations in Guinea Pigs
Guinea pigs (three per dose)
 
were immunized with either single-target or
 
multi-target formulations, then serum was
 
drawn and antibody
titers compared
 
via enzyme immunoassays
 
(“EIA”). Multi-target
 
formulations elicited
 
similar titer
 
levels against
 
each target
 
as their
corresponding single-target
 
formulations. This suggests we can create product candidates with multiple neurodegenerative targets
 
in a
single formulation and achieve sustainable titer levels.
Product Candidate Formulations
In
 
addition
 
to
 
our
 
immunogen
 
construct,
 
each
 
product
 
candidate
 
formulation
 
includes
 
custom
 
CpG
 
oligonucleotides
 
and
 
adjuvant
selection. CpG oligonucleotides are
 
negatively charged, and we
 
utilize proprietary CpG configurations
 
to stabilize the
 
positively charged
peptides. This
 
stabilization acts
 
to optimize
 
display of
 
the B-cell
 
epitope to
 
the immune
 
system. In
 
this way,
 
the primary
 
function of
CpG oligonucleotides in our formulations is that of an excipient.
A potential secondary
 
function of CpG
 
is that of
 
an adjuvant.
 
Certain CpG configurations
 
are known
 
to act as
 
immunostimulants and
promote direct cytotoxic
 
T-cell activity, while others do not.
 
Accordingly, our selection of the
 
specific CpG modality
 
is highly
 
dependent
on the target
 
indication. For infectious
 
disease indications, the
 
T-cell
 
response generated by
 
the CpG configuration
 
is independent and
in addition to that of the T-cell
 
response generated by the peptide carrier.
The final formulation includes the addition of an adjuvant, such as a well-recognized, alum-derived Adju-Phos or Alhydrogel to further
enhance the immunogenicity of our product candidate.
 
Alum-derived adjuvants are commonly used in vaccines
 
to promote an immune
response. This is not the same adjuvant used in other companies’ failed neurodegenerative
 
vaccine candidates.
How our Product Candidates are Designed to Function
Our immunogens
 
stimulate the
 
body’s
 
adaptive immune
 
system to
 
produce antibodies
 
against a
 
variety of
 
antigen targets,
 
including
secreted
 
peptides
 
or
 
proteins,
 
degenerative
 
or
 
dysfunctional
 
proteins
 
and
 
membrane
 
proteins,
 
as
 
well
 
as
 
infectious
 
pathogens.
 
The
mechanism of action involves the following sequence of steps:
1.
 
The immunogen is taken up by an APC, such
 
as a DC. Antigen uptake leads to DC maturation and migration
to the draining lymph nodes where the DCs interact with CD4+ T-helper
 
cells.
2.
 
DCs engulf and
 
process the antigen
 
internally and present
 
the T-helper
 
epitope on major histocompatibility
complex
 
(“MHC”) Class
 
II molecules.
 
The presentation
 
activates immunogen
 
-specific CD4+
 
T-helper
 
cells causing
 
them to
 
mature,
proliferate and promote B-cell stimulatory activity.
3.
 
B-cells with receptors that
 
recognize the target
 
B-cell epitope bind, internalize
 
and process the immunogen.
The binding of the B-cell receptor to the immunogen provides the first activation
 
signal to the B-cells.
4.
 
When B-cells
 
function
 
as APCs
 
and present
 
the T-helper
 
epitope on
 
MHC Class
 
II molecules,
 
interaction
with immunogen-specific
 
CD4+ T-helper
 
cells provides
 
a second
 
activation signal
 
to B-cells,
 
which causes
 
them to
 
differentiate into
plasma cells.
5.
 
B-cell
 
epitope-specific
 
plasma
 
cells
 
produce
 
high
 
affinity
 
antibodies
 
against
 
the
 
target
 
B-cell
 
epitope.
 
Of
particular
 
importance
 
for
 
targets
 
located
 
in
 
the
 
central
 
nervous
 
system
 
(“CNS”),
 
these
 
antibodies
 
are
 
produced
 
in
 
sufficient
concentrations to cross the BBB.
vaxxq410kp14i1 vaxxq410kp14i0
12
Overview of How our Product Candidates Function
Importantly,
 
from both clinical trials
 
and pre-clinical studies,
 
we have observed
 
the rapid expansion of
 
antibodies upon administration
of a booster of our product candidates. Based
 
on the available data to date, we can infer that
 
while antibody titers decline with time after
administration, a small
 
number of memory
 
B-cells and antibody
 
secreting cells are maintained
 
in the lymphoid organs,
 
spleen or bone
marrow. We
 
believe this is important because if a
 
patient misses a dose of our
 
product candidate, they may be able to
 
recall the antibody
response, and therefore the therapeutic effect of the antibodies, with
 
a single booster, even after a long period of time
 
has passed.
Vaxxine
 
Platform Immunogenicity upon Re-dosing
As shown
 
in
 
the
 
above
 
graph,
 
a
 
rapid
 
antibody
 
response
 
is elicited
 
by
 
a
 
booster
 
dose
 
of
 
UB-311
 
given
 
72
 
weeks after
 
the
 
priming
regimen.
Furthermore, the antibodies elicited by our product candidates have different properties than those of mAbs
 
targeting similar pathology.
In general,
 
we aim
 
to achieve
 
binding affinity,
 
specificity and
 
functionality similar
 
or improved
 
compared to
 
mAbs targeting
 
similar
pathology. We
 
use Bio-Layer Interferometry (ForteBio
®
) to compare the binding kinetics (K
ON
, K
OFF
, and K
D
) of antibodies elicited by
13
our product candidates
 
versus mAbs. We
 
also use Western
 
blot or slot blot
 
to evaluate the binding
 
specificity of antibodies elicited
 
by
our product
 
candidates against
 
the normal,
 
toxic, misfolded
 
or aggregated
 
forms of
 
the target
 
protein. We
 
use immunohistochemical
analyses to observe the binding of antibodies to pathological inclusions on tissue sections, such as brain sections of patients. Moreover,
we use cell-based models and animal models to measure the induced
 
antibodies’ functionality. Additionally,
 
a major challenge in mAb
drug
 
discovery
 
is
 
that
 
mAbs
 
are
 
prone
 
to
 
induce
 
an
 
immune
 
response
 
against
 
themselves,
 
resulting
 
in
 
a
 
potential
inactivation/neutralization of the mAb by the host (i.e., the patient). This is not a concern
 
with our vaccine approach as each patient will
produce its own
 
antibodies against the
 
target. Finally,
 
mAbs have a
 
potential
 
for off-target
 
binding, which could
 
result in non-specific
binding leading
 
to safety and
 
toxicity issues.
 
We
 
believe that
 
this is unlikely
 
to happen
 
using our technology
 
since antibodies
 
elicited
by our product
 
candidates are designed
 
to break immune
 
tolerance against specific
 
targets and should
 
not trigger an
 
immune response
against other self-peptides or proteins.
Product Candidate Selection Process
Because our Vaxxine Platform may have applicability across
 
a range of chronic
 
diseases, we employ a
 
proprietary filtering methodology
to best identify new product candidates for development. We
 
evaluate potential product candidates across five principal criteria:
•
Probability
 
of
 
technical
 
and
 
regulatory
 
success
:
 
We
 
examine
 
the
 
probability
 
of
 
success
 
for
 
a
 
product
candidate based on stage of development and therapeutic area, and then make target-specific
 
adjustments for design difficulty,
 
industry
knowledge and clarity of
 
biological mechanism, general safety
 
risk and estimated
 
titer level required
 
for therapeutic effect. This
 
criterion
accounts for the known validity of a given target in the relevant
 
disease context.
•
Market
 
opportunity
:
 
We
 
account
 
for
 
the
 
prevalence,
 
unmet
 
need
 
and
 
drug
 
market
 
size
 
for
 
each
 
likely
indication associated with a given target, as well as the number of potential
 
indications.
•
Development cost
: We
 
estimate the
 
cost of
 
development through
 
BLA submission,
 
the time
 
to submission
and the number of patient-years to proof-of-concept.
•
Competitive advantages
: We
 
evaluate the extent to
 
which the advantages of
 
our Vaxxine
 
Platform compare
to the current and potential future standard of care, including convenience, dosing,
 
safety, efficacy
 
and cost.
•
Disruptive opportunities
: We evaluate the
 
extent to which the potential disruptive properties of our Vaxxine
Platform may play a
 
role in treatment paradigms,
 
including the ability to
 
“leap-frog” mAbs and treat
 
patients in earlier lines
 
of treatment,
to be used as a prophylactic, to include multiple targets in a single formulation
 
and to be used as an adjuvant therapy.
After assigning
 
values to each
 
criterion for
 
a given product
 
candidate, we
 
weight each criterion
 
according to a
 
confidential algorithm,
and thereby prioritize product candidates for development. We
 
update these values on a regular basis based on new scientific literature,
trial results and our Vaxxine
 
Platform advancements.
As an example, in light of these criteria, AD and other neurodegenerative diseases that involve misfolded proteins are an attractive area
for development. First, as the field has gained knowledge and clinical experience around the biology of targeting
 
aberrant proteins with
antibodies, the relative technical, safety and regulatory risk has decreased. For instance, with two FDA-approved products targeting
 
Aβ
for AD, Aβ
 
has been validated
 
as a target.
 
Both AD and
 
PD have high
 
prevalence worldwide,
 
and large unmet
 
need with no
 
disease-
modifying products readily
 
available to patients.
 
Moreover, the
 
underlying pathologies often
 
begin years or
 
decades before symptoms
may appear and as a result, early intervention in the disease state, as well as prevention or delay of onset strategies, may be optimal and
more
 
practically
 
achievable
 
with
 
a
 
vaccine
 
approach.
 
While
 
mAbs
 
can
 
target
 
the
 
pathology,
 
they
 
face
 
the
 
limitations
 
of
 
high
 
cost,
cumbersome and
 
inefficient administration
 
and limited
 
access, and
 
are not
 
suited for
 
early treatment
 
or prevention,
 
which we
 
believe
provides
 
a disruptive opportunity for our Vaxxine
 
Platform.
We
 
do not
 
currently
 
evaluate oncology
 
and infectious
 
diseases through
 
the above
 
framework. We
 
generally
 
do not
 
pursue oncology
targets
 
given the
 
hyper-segmentation
 
of subjects
 
common in
 
clinical development
 
efforts in
 
oncology that
 
leads to
 
relatively narrow
labels, and
 
due
 
to the
 
strengths of
 
other new
 
modalities such
 
as cell-based
 
therapy in
 
this area.
 
We
 
only consider
 
infectious disease
opportunistically. However,
 
our approach with respect to oncology and infection diseases could change
 
in the future.
We believe that our Vaxxine
 
Platform, and our strategy more generally,
 
will create a significant opportunity for drug development well
beyond our current pipeline
 
of clinical and
 
pre-clinical indications, in therapeutic
 
areas including allergy (e.g.,
 
atopic dermatitis,
 
chronic
rhinosinusitis, , food allergy), autoimmune disease
 
(e.g., psoriasis, psoriatic arthritis, Crohn’s disease), pain (e.g.,
 
peripheral neuropathy,
diabetic neuropathy) and bone and muscle atrophy (e.g., sarcopenia, osteoporosis,
 
osteopenia).
Underlying Drivers of Our Platform Advantages
Our Vaxxine Platform’s
 
properties drive the unique combination
 
of attributes that we
 
believe will be reflected in
 
our product candidates:
14
•
Cost
: Our reliance
 
on chemically linked,
 
custom peptide sequences
 
fuels cost efficiencies
 
that we expect
 
to
enable
 
broad
 
accessibility
 
to
 
our
 
product
 
candidates.
 
Foremost
 
among
 
these
 
relates
 
to
 
dosing.
 
Monoclonal
 
antibodies
 
require
 
more
physical material for annual dosing because the patient needs to be delivered the externally manufactured therapeutic antibodies, which
have high molecular weight. In contrast, our product candidates are designed to
 
stimulate the body’s immune system to produce its own
antibodies and
 
have relatively
 
low molecular
 
weight. While
 
an annual
 
supply of
 
mAbs doses
 
may include
 
grams or
 
tens of
 
grams of
drug substance, our current product candidates only
 
require 1 to 2 milligrams each, or even less, leading
 
to a relatively low annual cost
of goods. In
 
our development programs
 
to date, we
 
have achieved
 
a cost of
 
goods amounting to
 
a small fraction
 
of the typical
 
cost of
mAbs (as low as <1%).
•
Administration
: Administration of our product candidates generally requires three priming doses, each in the
range of several hundred
 
micrograms, followed by booster
 
doses of a similar
 
magnitude 2 to
 
4 times per
 
year. As described in the section
titled
 
“Our
 
Product
 
Candidates” below,
 
in clinical
 
trials we
 
have
 
observed
 
that our
 
product
 
candidates
 
elicited
 
a
 
sustained
 
antibody
response, with elevated antibody levels lasting six
 
months or longer. We believe this presents a meaningful advantage over many mAbs,
which commonly
 
require either bi-weekly
 
or monthly injections,
 
or monthly or
 
quarterly infusions, and
 
many small molecules,
 
which
commonly require a daily pill regimen.
•
Safety
: The
 
antibodies generated
 
by our
 
product candidates
 
are designed
 
to be
 
highly specific
 
to the
 
target
antigen and
 
to avoid an
 
off-target immune
 
response to the
 
peptide carrier,
 
thereby limiting
 
inflammation and
 
other off-target
 
activity.
We
 
believe
 
these characteristics
 
have yielded
 
the high
 
tolerability observed
 
in the
 
clinical studies
 
of our
 
product candidates
 
to date.
Furthermore, the
 
titer response
 
to our
 
product candidates
 
is naturally
 
titrated, which
 
may reduce
 
the likelihood
 
of an
 
antibody Cmax
safety side effect, and is naturally reversible, thus avoiding an uncontrolled
 
or permanent immune response.
•
Efficacy
: In
 
our
 
clinical
 
trials conducted
 
to date,
 
our
 
product candidates
 
have
 
yielded
 
comparatively
 
high
response rates (95%
 
or above at
 
target dose levels)
 
for UB-311, UB-312 and
 
UB-612, high target-specific
 
antibodies against
 
self-antigens
(as
 
seen
 
in
 
UB-311
 
and
 
UB-312
 
clinical
 
trials)
 
and
 
a
 
long
 
duration
 
of
 
action
 
for
 
UB-311
 
(based
 
on
 
titer
 
levels
 
remaining
 
elevated
between doses)
 
and UB-612
 
(based on
 
half-life). Furthermore,
 
our Vaxxine
 
Platform enables
 
the combining
 
of target
 
antigens into
 
a
single formulation. For indications that could be treated more effectively with a multivalent approach, we believe our Vaxxine Platform
would have an advantage over other modalities. Finally,
 
because our Vaxxine
 
Platform is designed to elicit endogenous antibodies,
 
we
believe our product candidates may lessen or avoid altogether the phenomenon of anti-drug antibodies which has
 
limited the efficacy of
certain mAbs over time.
Additionally,
 
we believe our
 
Vaxxine
 
Platform possesses important
 
benefits reflected
 
at the platform
 
level, as opposed
 
to the product
candidate level:
•
Product Candidate Discovery
: Our Vaxxine
 
Platform enables the efficient iteration of product candidates
 
in
the discovery
 
phase through
 
rapid, rational
 
design and
 
formulation. We
 
are able
 
to screen in
 
high throughput
 
rapidly and
 
at low
 
cost.
Upon nominating
 
a target
 
for drug
 
discovery,
 
we can
 
formulate several
 
dozen product
 
candidate compounds
 
for preliminary
 
in vivo
immunogenicity and cross-reactivity screening within 2 to 3
 
months. This process allows nonviable product candidates to
 
“fail fast” and
allows
 
us
 
to
 
carry
 
top
 
product
 
candidates
 
forward
 
through
 
subsequent
 
pre-clinical
 
development
 
to
 
lead
 
identification.
 
In
 
contrast,
biologics require the
 
maintenance and adjustment
 
of living cultures to
 
design, formulate and
 
iterate, and therefore
 
discovery and early
development is inherently less efficient.
•
Process Development
: Scaling the formulation
 
of a drug product from
 
research grade to clinical grade,
 
then
to commercial grade, typically consumes a great deal of resources.
 
This, together with the development of assays for quality
 
control and
quality assurance,
 
comprise process
 
development. We
 
leverage our
 
manufacturing expertise,
 
originally developed
 
alongside UBI
 
and
certain of
 
its affiliates,
 
to enable
 
rapid scale-up
 
of the
 
manufacture of
 
both clinical
 
and commercial
 
compounds that
 
use our
 
Vaxxine
Platform technology. Unlike process development for mAbs, which has inherent challenges such as risk of contamination in cell culture
or bioreactors
 
and time-consuming
 
adjustments to
 
cell lines
 
for any
 
formulation adjustment,
 
our peptide
 
platform relies
 
on synthetic
peptide chemistry, which
 
is more reproducible and scalable, and relatively quick to manipulate for any modifications.
Our Product Candidates
Neurodegenerative Disease Programs
Neurodegenerative diseases are a collection of conditions defined by progressive
 
nervous system dysfunction, degeneration or death of
neurons, which can cause cognitive decline, functional impairment and eventually death. Neurodegeneration represents one of the most
significant unmet medical needs of our time due to an aging population and lack of effective
 
therapeutic options.
Two of the most common neurodegenerative diseases are
 
AD and PD. In
 
the United States, currently
 
more than six million people suffer
from
 
AD,
 
and
 
approximately
 
one million
 
people
 
suffer
 
from
 
PD
 
according
 
to
 
estimates
 
from
 
the
 
Alzheimer’s
 
Association
 
and
 
the
Parkinson’s
 
Disease Foundation,
 
respectively.
 
As a
 
result, AD
 
and PD
 
bring a
 
heavy burden
 
on our
 
society’s
 
cost of
 
care. The
 
direct
costs of caring for
 
individuals with AD and other
 
dementias in the United
 
States were estimated at
 
$305 billion in 2020 according
 
to a
15
study
 
published
 
by
 
the
 
American
 
Journal
 
of
 
Managed
 
Care,
 
and
 
are
 
projected
 
to
 
increase
 
to
 
$1.1
 
trillion
 
by
 
2050
 
according
 
to
 
the
Alzheimer’s Association. The financial
 
burden of PD exceeded $50 billion in
 
the United States in 2019. Many more
 
people around the
world suffer from these two diseases and their related social and
 
economic implications.
UB-311
An Overview of Alzheimer’s
 
Disease
Alzheimer’s
 
disease
 
is a
 
progressive
 
neurodegenerative
 
disorder
 
that slowly
 
affects
 
memory
 
and
 
cognitive
 
skills and
 
eventually
 
the
ability to carry
 
out simple tasks.
 
Its symptoms include
 
cognitive dysfunction, memory
 
abnormalities, progressive impairment
 
in activities
of
 
daily
 
living
 
and
 
a host
 
of other
 
behavioral
 
and
 
neuropsychiatric
 
symptoms.
 
The exact
 
cause
 
of
 
AD
 
is unknown,
 
but
 
genetic
 
and
environmental
 
factors
 
are
 
established
 
contributors.
 
AD
 
affects
 
more
 
than
 
six million
 
people
 
in
 
the
 
United
 
States
 
and
 
44 million
worldwide. The global economic burden of AD is expected to surpass $2.8
 
trillion by 2030.
Many molecular and cellular changes take place in the brain of a person with AD. Aβ plaques and
 
neurofibrillary tangles of tau protein
in the
 
brain are
 
the pathological
 
hallmarks
 
of the
 
disease. Several
 
pathological
 
or toxic
 
forms
 
of Aβ
 
and
 
tau seem
 
implicated
 
in the
disease process, leading to loss of neurons and neuronal connectivity underlying
 
the signs and symptoms of AD.
The Aβ protein involved in AD comes in several different pathological forms that accumulate in the brain parenchyma. Soluble species
of
 
Aβ
 
(e.g.,
 
oligomers)
 
can
 
directly
 
disrupt
 
normal
 
synaptic
 
and
 
neuronal
 
functions.
 
They
 
may
 
also
 
contribute
 
to
 
tau
 
pathology.
 
Research is ongoing to better understand how,
 
and at what stage of the disease, the various forms of Aβ influence AD.
Neurofibrillary tangles
 
are abnormal
 
accumulations of
 
a protein
 
called tau
 
that collect
 
inside neurons.
 
Healthy neurons
 
are supported
internally,
 
in part,
 
by structures
 
called microtubules,
 
which help
 
to guide
 
nutrients and
 
molecules from
 
the cell
 
body to
 
the axon
 
and
dendrites. In healthy neurons, tau normally binds to and stabilizes microtubules. In AD, abnormal chemical changes cause tau to detach
from microtubules
 
and to
 
stick to
 
other tau
 
molecules, forming
 
threads that
 
eventually
 
join to
 
form tangles.
 
These tangles
 
block
 
the
neuron’s transport system,
 
which harms the synaptic communication between neurons.
Converging lines of evidence suggest that AD-related brain changes may result from a complex interplay among Aβ proteins, abnormal
tau, and several other factors. It appears that abnormal tau accumulates in specific brain regions involved in memory.
 
Concurrently, Aβ
clumps
 
into plaques between
 
neurons. As the
 
level of Aβ reaches
 
a tipping point,
 
tau rapidly spreads throughout
 
the brain. In addition
to the spread of Aβ and tau, chronic inflammation and its effect on the cellular functions of microglia and astrocytes, as well as changes
to the vasculature, are thought to be involved in AD’s
 
pathology and progression.
In the last two years, the FDA has approved two different mAbs that target
 
Aβ for the treatment of AD.
Limitations of Current Therapies
Two
 
classes
 
of
 
small
 
molecules
 
approved
 
for
 
the
 
treatment
 
of
 
AD’s
 
symptoms
 
are
 
acetylcholinesterase
 
inhibitors
 
(“AChEIs”)
 
and
glutamatergic modulators. AChEIs are
 
designed to slow
 
the degradation of
 
the neurotransmitter acetylcholine,
 
temporarily compensating
for cholinergic
 
deficits.
 
Glutamatergic modulators
 
are designed
 
to block
 
sustained, low-level
 
activation of
 
the N-methyl-D-aspartate
(“NMDA”)
 
receptor,
 
without
 
inhibiting
 
the
 
normal
 
function
 
of
 
the
 
receptor
 
in
 
memory
 
and
 
cognition.
 
However,
 
these
 
therapeutic
products only address the symptoms of AD and do not modify or alter the progression
 
of the underlying disease.
Aducanumab, marketed under
 
the trade name Aduhelm,
 
is a mAb developed
 
by Biogen, Inc. (“Biogen”)
 
that targets aggregated
 
forms
of Aß. The FDA approved aducanumab in June 2021, making it the first approved immunotherapy for AD,
 
the first new FDA-approved
treatment since 2003 and, importantly, the first to receive accelerated approval based on a biomarker. By approving aducanumab
 
on the
basis of biomarker evidence, we believe the FDA set a precedent for developers
 
of anti-Aβ immunotherapies.
 
Despite the milestone
 
in the treatment
 
of AD that
 
aducanumab’s
 
approval represents,
 
the drug has
 
several limitations.
 
Approximately
one-third of patients experience ARIA-E related adverse events, which can manifest as symptoms ranging from headaches to confusion
to coma. In addition,
 
the drug must be administered
 
monthly via intravenous
 
infusion in healthcare facilities specifically
 
configured to
support
 
an
 
hours-long
 
infusion
 
process
 
with
 
healthcare
 
professionals
 
trained
 
to
 
administer
 
infusion
 
therapies,
 
creating
 
a
 
burden
 
for
patients and additional costs resulting from the complex administration
 
process. Because of the risk of developing ARIA-E, physicians
who prescribe
 
aducanumab
 
must titrate
 
dosing
 
and carefully
 
monitor
 
each patient
 
using magnetic
 
resonance
 
imaging (“MRI”).
 
This
process
 
is
 
costly
 
and
 
burdensome
 
The
 
combination
 
of
 
price,
 
side
 
effects,
 
extra
 
costs,
 
and
 
extra
 
administration
 
burden
 
highlight
 
the
challenges
 
of
 
mAbs.
 
The
 
Center
 
for
 
Medicare
 
&
 
Medicaid
 
Services
 
(“CMS”)
 
decided
 
not
 
to
 
cover
 
aducanumab,
 
leading
 
to
 
its
commercial failure.
Soon after the FDA’s
 
approval of aducanumab, Eli Lilly and Company (“Lilly”) announced that it would file for approval of its
 
anti-Aβ
mAb, donanemab, in 2022 on the basis of Phase 2 data.
 
In January 2023, the FDA declined accelerated approval
 
of donanemab due to
16
an insufficiently
 
sized safety database
 
in its Phase
 
2 trial; however,
 
Lilly has announced
 
its intention to
 
file for approval
 
later in 2023
on the basis of Phase 3 data.
In January 2023, the FDA granted
 
accelerated approval to lecanemab, another mAb targeting Aβ,
 
jointly developed by Biogen and Eisai
Co., Ltd. (“Eisai”).
 
Over 12.5% of patients on lecanemab
 
experience ARIA-E, and physicians who
 
prescribe lecanemab must monitor
each patient using
 
MRI.
 
Lecanemab must be
 
administered every two
 
weeks as
 
an intravenous
 
infusion in healthcare
 
facilities specifically
configured to
 
support an hours-long
 
infusion process with
 
healthcare professionals
 
trained to
 
administer infusion
 
therapies, creating a
burden for patients and additional costs resulting from the complex administration process.
 
Biogen and Eisai have announced that their
wholesale
 
acquisition
 
cost
 
(“WAC”)
 
launch
 
price
 
in
 
the
 
U.S.
 
will
 
be
 
$26,500
 
for
 
the
 
drug
 
product
 
only,
 
which
 
does
 
not
 
include
administration and
 
ongoing monitoring
 
costs.
 
It remains to
 
be seen whether
 
and to what
 
extent CMS will
 
reimburse treatment
 
of AD
patients with lecanemab.
 
We
 
believe the
 
above examples
 
signify not
 
only the
 
validity of
 
targeting
 
toxic forms
 
of Aβ
 
as a
 
target
 
in AD,
 
but also
 
the practical
limitations of mAbs, which so far despite approval have remained unable to
 
serve a population with high unmet need.
 
Our Product Candidate: UB-311
We are developing a novel product candidate, UB-311, as a potential disease-modifying therapy for the treatment of AD.
 
We completed
a Phase 1 open label trial (V118-AD) and a Phase 2a randomized, double-blinded, placebo-controlled
 
trial (the “Phase 2a Main Trial”).
 
We believe that
 
UB-311 may offer
 
several differentiators versus the approved mAbs, including
 
the preferential targeting of aggregated
Aβ
 
oligomers
 
over
 
monomers,
 
longer
 
durability
 
suggesting
 
greater
 
overall
 
exposure,
 
or
 
area
 
under
 
the
 
curve
 
(“AUC”),
 
improved
convenience in dosing and administration, a safety and tolerability profile
 
comparable to placebo with potentially limited ARIA-E, and
an ability
 
to broaden
 
patient access
 
with greater
 
cost-effectiveness
 
and
 
scalability.
 
No signs
 
of ARIA-E
 
related adverse
 
events were
reported in the Phase
 
2a Main Trial despite
 
more than two-thirds of
 
the study participants being
 
APOE4 carriers.
Post hoc
 
exploratory
analyses of UB-311’s Phase 2a clinical data also suggest that quarterly dosing of UB-311 might slow cognitive decline in some subjects
by up to 50%
 
when compared to placebo,
 
as measured by Clinical
 
Dementia Rating Sum of
 
Boxes (“CDR-SB”), Alzheimer’s
 
Disease
Assessment Scale – Cognitive Subscale (“ADAS-Cog”), Alzheimer’s Disease Cooperative Study – Activities of Daily Living (“ADCS-
ADL”) and Mini-Mental State Examination
 
(“MMSE”) scores, all clinically validated
 
measures of cognition or function in
 
AD. In this
small Phase 2a study, these were secondary measures, as the study was not designed to assess cognitive decline. Although our
 
Phase 2a
trial was a proof-of-concept
 
study, not
 
powered to demonstrate significant
 
changes in any endpoint,
 
we believe the data are
 
suggestive
of potential therapeutic efficacy and may lead to clinical benefit.
UB-311 is
 
formulated for
 
intramuscular administration
 
on a dosing
 
schedule of
 
every three or
 
six months.
 
In addition,
 
manufacturing
costs lower
 
than
 
those
 
of
 
mAbs
 
may
 
support
 
meaningfully
 
lower
 
pricing
 
and
 
access to
 
larger
 
patient
 
populations.
 
We
 
believe
 
such
advantages of UB-311,
 
if ever approved
 
for use, could
 
position it not only
 
to disrupt the
 
emerging mAb-based
 
treatment for early
 
AD
as both
 
a
 
monotherapy
 
and
 
adjuvant
 
therapy
 
to
 
existing
 
mAbs,
 
but
 
also
 
to
 
open
 
up a
 
new paradigm
 
for
 
prevention
 
of AD
 
(i.e.,
 
for
potential prophylactic use to delay or interrupt early disease onset).
Clinical Development
We
 
completed a randomized,
 
double-blind, placebo-controlled
 
Phase 2a trial of
 
two dosing regimens
 
of UB-311
 
in subjects with mild
AD. The primary objective of this trial
 
was to assess safety and immunogenicity. Secondary measures for exploratory analyses included
assessment of changes in the
 
CDR-SB, ADAS-Cog, ADCS-ADL and MMSE
 
scales, along with amyloid PET
 
imaging evaluations. This
study was intended
 
for proof-of-concept, so
 
no statistical hypothesis
 
testing was planned,
 
and exploratory analyses
 
were performed to
evaluate trends as described below.
A total of 43
 
patients diagnosed with
 
mild AD were randomized
 
(1:1:1) to one of
 
three treatment groups: UB-311
 
quarterly dosing, or
“Q3M,” receiving a total
 
of seven doses, UB-311
 
every six-month dosing, or
 
“Q6M,” receiving a total of
 
five doses, and placebo. The
Q3M cohort,
 
which included
 
14 subjects,
 
received an
 
initial regimen
 
of three
 
300μg injections,
 
one injection
 
at the
 
trial start,
 
one at
week 4 and the final at week 12,
 
followed by four single 300μg booster doses administered in
 
three-month intervals over the subsequent
12 months. The Q6M cohort,
 
which included 15 subjects, involved the
 
same initial schedule of three
 
300μg injections administered over
the first
 
12-week period,
 
followed by
 
the administration
 
of two
 
300μg booster
 
doses given
 
at six-month
 
intervals. The
 
placebo group
comprised 14 subjects.
In the
 
Phase 2a
 
Main Trial,
 
UB-311 generated
 
an immune
 
response as
 
measured by
 
ELISA in
 
28 out
 
of 29
 
subjects. Across
 
this trial
and the
 
Phase 1
 
trial, 47
 
of the
 
48 subjects
 
(98%) that
 
received
 
UB-311
 
registered an
 
immune response
 
(which we
 
define as
 
a 95%
confidence interval separation from
 
placebo) as measured by ELISA.
 
The intramuscular injection produced
 
appreciable antibody titers
against
 
Aβ.
 
The
 
antibody
 
titers
 
remained
 
elevated
 
through
 
the
 
trial’s
 
duration.
 
Moreover,
in
 
vitro
 
studies
 
demonstrate
 
that
 
UB-311
generated serum antibody titers against Aβ oligomers, comparable to or greater than those measured after maximum
 
therapeutic dosing
with an approved mAb. We
 
believe these results underscore the significant promise of our therapeutic
 
approach.
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Generation of Antibodies Repeatable Across Clinical Studies, and Antibodies Bind Target
 
with High
Specificity as Compared to Monoclonal Antibody
Across Phase
 
1 and
 
Phase 2a
 
trials, UB-311
 
generated an
 
over 95%
 
response rates
 
in subjects.
 
In a
 
comparative in
 
vitro study
 
with
aducanumab, we observed that UB-311
 
elicited titer levels comparable to mAbs.
Phase 1
 
and Phase
 
2a trials
 
of UB-311
 
demonstrated a
 
repeatable anti-Aβ
 
titer response.
 
In an
in vitro
 
comparison of
 
titers in
 
serum
from
 
subjects dosed
 
with UB-311
 
versus pre
 
-immune serum
 
spiked
 
with aducanumab
 
at the
 
published
 
C
max
concentration
 
following
10mg/kg administration
 
(183μg/mL), antibodies
 
generated by
 
UB-311
 
bond to
 
Aβ oligomers
 
similarly to
 
or greater
 
than the
 
mAb as
measured by EIA.
Exploratory analyses of clinical and
 
imaging measures were conducted. Trends of changes in
 
disease assessment scores suggest slowing
of cognitive
 
decline. Changes
 
in the
 
CDR-SB assessment
 
at week
 
78 of
 
the Phase
 
2a Main
 
Trial showed
 
a 48%
 
slowing in
 
cognitive
decline from baseline relative to the placebo group; changes
 
in ADAS-Cog measurements showed a 50% slowing in decline
 
relative to
placebo and showed a 54% slowing in decline in ADCS-ADL relative to placebo.
UB-311 Phase 2a Suggests Slowing of
 
Cognitive Decline in Mild Alzheimer’s Subjects (mITT)
UB-311 Phase 2a secondary endpoint data suggested possible slowing of clinical decline by up to 50% in subjects with mild AD. These
are exploratory analyses,
 
and no statistical inference was performed.
 
In addition,
 
functional
 
MRI suggested
 
marginal
 
increases in
 
connectivity
 
in some
 
brain regions
 
and
 
PET imaging
 
showed a
 
modest
reduction
 
in amyloid
 
plaque burden
 
as measured
 
by standard
 
uptake value
 
ratio.
 
We
 
believe these
 
clinical and
 
biomarker
 
endpoints
suggest a causal
 
effect of UB-311 impacting the
 
underlying molecular pathology of
 
the disease and
 
slowing of clinical
 
decline. Together,
these findings offer some evidence that UB-311
 
may exhibit disease-modifying effects.
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UB-311 Phase 2a Analysis of Clinical and
 
Biomarker Endpoints Suggests Overall Disease-Modifying Effect
Compared to
 
placebo, UB-311
 
low-frequency dosing
 
and high-frequency
 
dosing demonstrated
 
slowing of overall
 
disease progression
in an independent analysis conducted by Pentara Corporation.
 
The Phase
 
2a Main
 
Trial
 
recapitulated
 
the safety
 
and tolerability
 
profile of
 
UB-311
 
that was
 
observed in
 
an earlier
 
Phase 1
 
trial. No
subjects
 
discontinued trial
 
participation due
 
to a treatment
 
emergent adverse
 
effect (“TEAE”).
 
No ARIA-E
 
was observed
 
in quarterly
MRI
 
scans.
 
Aβ-related
 
imaging
 
abnormalities
 
related
 
to
 
microhemorrhages
 
or
 
hemosiderosis
 
seemed
 
similar
 
between
 
the
 
UB-311
treatment groups and placebo group.
 
In the Phase 2a Main Trial,
 
six serious adverse events were
 
observed, including three in the Q6M
dosing arm and one in the Q3M dosing arm. None were deemed related or likely related
 
to UB-311.
Titers generated by UB-311 ramped up gradually over the course of several months, as opposed to titers following the administration of
anti-Aβ mAbs, which reach C
max
 
very rapidly.
 
We believe this led to the relatively low rates of ARIA-E observed in our clinical studies
of UB-311 as compared to those observed in
 
clinical studies of mAbs. No meningoencephalitis was observed.
Summary of Safety Data from UB-311
 
Phase 1 and Phase 2a Trials
As depicted in
 
the table above,
 
UB-311 was well tolerated
 
across Phase 1 and
 
Phase 2a trials.
 
The most common
 
TEAE was site
 
injection
reactivity,
 
and there were no
 
discontinuations or withdrawals due to TEAEs
An
 
extension
 
of
 
the
 
Phase
 
2a
 
Main
 
Trial,
 
the
 
Phase
 
2a
 
LTE
 
trial,
 
involved
 
the
 
continued
 
participation
 
by
 
34
 
of
 
the
 
subjects
 
who
participated in
 
the Phase
 
2a Main
 
Trial for
 
an additional
 
78 weeks.
 
The objective
 
of the Phase
 
2a LTE
 
trial was
 
to assess
 
the longer-
term tolerability of extended treatment
 
with UB-311. Following a
 
non-treatment period of up to 26
 
weeks, participants in the LTE
 
trial
were segmented
 
into two
 
groups: those
 
previously on
 
drug in
 
the Phase
 
2a Main
 
Trial would
 
receive two
 
placebo doses
 
and a
 
single
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300μg priming dose at the start of
 
the LTE
 
treatment period and those previously on placebo
 
would receive three 300μg priming doses
over
 
an
 
initial
 
12-week
 
period.
 
Due
 
to
 
an
 
error
 
by the
 
CRO responsible
 
for
 
administering
 
blinded
 
placebo
 
and
 
active doses
 
to
 
trial
subjects, which reduced the confidence of subsequently collected data, we decided to discontinue the LTE
 
trial, having determined that
we had collected sufficient data
 
on UB-311’s tolerability and immunogenicity. Analysis of the data collected before
 
trial discontinuation
indicated that
 
UB-311
 
was well
 
tolerated, with
 
return of
 
anti-Aβ antibody
 
titers to
 
peak levels
 
achieved after
 
a gap
 
of as
 
long as
 
12
months between
 
doses and
 
a continued
 
trend toward
 
evidence of
 
disease modification.
 
In the
 
Phase 2a
 
LTE
 
trial, six
 
serious adverse
events were observed. One case of ARIA-E was observed in the Phase 2a LTE
 
trial in a subject 10 weeks after receiving a dose of UB-
311,
 
which was
 
clinically not
 
significant according
 
to the
 
study investigator.
 
No serious
 
adverse event
 
was deemed
 
related or
 
likely
related
 
to
 
UB-311,
 
and
 
all
 
such
 
events
 
were
 
recovered/resolved
 
by
 
the
 
end
 
of
 
the
 
study.
 
Exploratory
 
analyses
 
of
 
the
 
clinical
 
data
generated in this portion of the trial suggested that subjects in the treatment cohorts showed sustained improvement, as measured by the
change in CDR-SB from baseline.
We completed
 
an open-label Phase 1 trial of UB-311 in 19 subjects with mild-to-moderate
 
AD between the ages of 51 to 78 years. The
primary
 
objective
 
of the
 
trial was
 
to
 
assess safety
 
and
 
tolerability.
 
Secondary
 
measures
 
included
 
UB-311
 
antibody
 
titers along
 
with
changes in
 
the ADAS-Cog, MMSE
 
and the Alzheimer’s
 
Disease Cooperative
 
Study-Clinician’s
 
Global Impression
 
of Change disease
assessment ratings.
 
The 24-week, open
 
label trial was
 
designed as three
 
intramuscular injections of
 
300μg, the first
 
dose administered
at the start of the trial, a second at week four and a third at week 12. An observation
 
study included additional follow-up visits up to 48
weeks after
 
the first
 
injection to
 
assess the long
 
-term immunogenicity
 
and safety
 
of UB-311.
 
In this
 
trial, UB-311
 
was well tolerated,
with the most common TEAE being injection site redness
 
and swelling. No TEAE resulted in the discontinuation
 
or withdrawal of any
study participant in the trial.
 
In the Phase 1
 
trial, one serious adverse
 
event was observed: a
 
case of herpes zoster
 
deemed unlikely related
to UB-311.
Anti-Aβ
 
antibody
 
titers,
 
recorded
 
among
 
all
 
study
 
participants,
 
approached
 
a
 
100-fold
 
increase
 
during
 
weeks
 
16
 
to
 
48
 
after
administration of the
 
third 300μg
 
injection at
 
week 12,
 
demonstrating the ability
 
of UB-311 to
 
elicit a
 
strong immune response.
 
Durability
of the response was reflected in elevated anti-Aβ antibody titers measurable
 
well beyond the 24-week duration of the trial.
In a Western blot assay,
 
we observed that UB-311 elicited antibody titers specific to toxic forms of Aβ with minimal binding to normal,
non-plaque-causing, forms of Aβ.
Pre-Clinical Data
Pre-clinical trials of
 
UB-311 included
 
multiple antibody titer
 
studies involving mice,
 
guinea pigs, macaques
 
and baboons. Application
of
 
specific
 
transgenic
 
animal
 
models
 
was
 
intended
 
to
 
emulate
 
both
 
therapeutic
 
and
 
preventive
 
treatment
 
paradigms.
 
These
 
trials
demonstrated that UB-311 generated high antibody titers across multiple species that
 
selectively target aggregated Aβ and both slow the
accumulation of and reduce existing Aβ pathology.
We also observed
 
the ability of UB-311 induced antibodies to
 
penetrate the BBB, as well as preferentially bind to toxic Aβ aggregates.
In our study of UB-311 in cynomolgus monkeys, we tested five escalating dose levels of UB-311: 0μg, 30μg, 100μg, 300μg and 900μg.
Each dose
 
level was administered
 
on weeks zero,
 
three and six
 
by intramuscular
 
injection and the
 
cerebrospinal fluid
 
(“CSF”): serum
ratio of
 
UB-311
 
calculated on
 
week eight
 
(two weeks
 
after the
 
last dose).
 
This analysis
 
concluded
 
that UB-311
 
antibody titers
 
were
detectable in the CSF in a dose-dependent manner with CSF: serum antibody ratios of 0.1% to 0.2%, ratios similar
 
to published data for
mAbs in development for neurodegenerative diseases.
UB-311 Shows Dependent Response in CSF in
 
Pre-Clinical Study
The above graphs
 
demonstrates that UB-311
 
induces enough
 
antibodies for BBB
 
penetration, across
 
five dose levels
 
in a pre
 
-clinical
study with cynomolgus monkeys.
20
Development Plans for UB-311
We have completed
 
a pre-Phase 3 meeting with the FDA and obtained guidance on the further development of
 
UB-311.
Subject to the
 
FDA’s
 
review, we
 
plan to conduct
 
a randomized, double-blinded,
 
placebo-controlled Phase
 
2b efficacy trial
 
of UB-311
in approximately
 
900 subjects
 
with early
 
AD. The
 
Phase 2b
 
trial will
 
include subjects
 
diagnosed
 
with early
 
AD with
 
MMSE scores
between 22 and 30. We will also screen to enrich
 
for positive amyloid PET, positive tau PET and positive
 
plasma p-tau181, in quantities
consistent with an early AD population. Subjects in the active arm will receive UB-311 as three 300μg priming
 
doses at weeks 0, 4 and
12, followed by
 
four 300μg booster
 
doses every three
 
months thereafter.
 
The primary objective
 
of this trial will
 
be to assess
 
the effect
of UB-311
 
on the
 
decline of
 
cognitive
 
and functional
 
performance as
 
measured by
 
the CDR-SB
 
over the
 
78-week
 
treatment period.
Secondary endpoints
 
will include
 
the changes
 
from baseline
 
measurements of
 
other validated
 
clinical outcomes
 
scores. The
 
effect of
UB-311 on specific AD biomarkers will also be evaluated, including neurofilament light arm (“NfL”), p-tau, total-tau, brain amyloid as
measured by PET,
 
Aβ-40 and Aβ-42, hippocampal volume and whole brain volume
 
as measured by MRI, and an assessment of certain
CSF biomarkers.
 
We
 
plan to
 
collaborate the
 
development of
 
UB-311
 
with a
 
strategic partner
 
and plan
 
to initiate
 
the Phase
 
2b trial
 
in
collaboration with such strategic partner.
Assuming positive
 
results in the
 
Phase 2b trial,
 
we intend to
 
initiate (with the
 
same partner) a
 
Phase 3 trial
 
in subjects with
 
early AD.
The Phase 3 program may involve one, but more likely two, clinical trials,
 
conducted at multiple international sites. Assuming
 
positive
results in the Phase 2b trial, we may also seek FDA approval under the accelerated approval pathway, which allows for earlier approval
of drugs that treat
 
serious conditions, and that
 
fill an unmet medical
 
need based on a
 
surrogate endpoint. If
 
such Phase 2b trial
 
and the
Phase
 
3
 
program
 
are
 
successful,
 
they
 
may
 
together provide
 
sufficient
 
data
 
to enable
 
BLA filing
 
with
 
the FDA,
 
but
 
there
 
can be
 
no
guarantee that these trials
 
will lead to positive data
 
or that we will not need
 
to conduct additional trials or
 
studies prior to a BLA
 
filing
with the FDA.
We believe UB-311
 
could also have a potential therapeutic benefit in a prophylactic setting for the prevention of AD in at-risk subjects.
We may seek to
 
further develop UB-311 for the prevention of AD.
UB-312
An Overview of Parkinson’s
 
Disease
Parkinson’s disease currently affects approximately one million people in the United
 
States and more than
 
10 million people worldwide.
The economic
 
burden of PD
 
is estimated at
 
$52 billion in
 
the United States
 
alone. PD is
 
a chronic
 
and progressive neurodegenerative
disorder that
 
affects predominately
 
dopamine-producing (“dopaminergic”)
 
neurons in the
 
substantia nigra
 
area of the
 
brain. Although
the
 
mechanisms
 
responsible
 
for
 
the
 
dopaminergic
 
cell
 
loss in
 
PD
 
are
 
not
 
fully
 
elucidated,
 
several
 
lines
 
of
 
evidence
 
suggest
 
that
 
α-
synuclein plays a central role in the neurodegenerative process.
Alpha-synuclein
 
is
 
a
 
protein
 
highly
 
expressed
 
in
 
neurons,
 
mostly
 
at
 
presynaptic
 
terminals,
 
suggesting
 
a
 
role
 
in
 
synaptic
 
vesicle
trafficking,
 
synaptic
 
functions
 
and
 
in
 
regulation
 
of
 
neurotransmitter
 
release
 
at
 
the
 
synapse.
 
Duplications,
 
point
 
mutations
 
or
 
single
nucleotide polymorphisms in
 
the gene encoding
 
α-synuclein are known
 
to cause
 
or increase the
 
risk of developing
 
PD or
 
LBD. Mutations
have been shown to
 
primarily alter the secondary
 
structure of α-synuclein, resulting
 
in misfolded and aggregated
 
forms of α-synuclein
(i.e., pathological forms). While
 
mutations in the
 
α-synuclein gene are rare,
 
aggregates of α-synuclein in
 
the form of
 
Lewy bodies (“LB”)
and Lewy neurites are
 
common neuropathological hallmarks
 
of both familial and
 
sporadic PD, suggesting a
 
key role of α-synuclein
 
in
PD
 
neuropathogenesis.
 
Moreover,
 
preformed
 
fibrils
 
of
 
α-synuclein
 
can
 
induce
 
the
 
formation
 
of
 
LB-like
 
inclusions
 
and
 
cellular
dysfunction in cell-based
 
assays as
 
well as
 
in pre-clinical animal
 
models. Together, these data strongly
 
suggest that targeting
 
pathological
forms of α-synuclein has therapeutic potential.
Limitations of Current Therapies
Most approved therapeutic
 
products are aimed
 
at compensating for
 
the dopaminergic deficits
 
and only provide
 
symptomatic relief. While
existing products can indeed provide meaningful symptomatic relief, they often produce significant side effects and lose
 
their beneficial
effects overtime. On the other hand, there are no currently approved
 
disease-modifying therapeutics for PD.
Immunotherapy approaches
 
targeting α-synuclein
 
have been shown
 
to ameliorate
 
α-synuclein pathology
 
as well
 
as functional
 
deficits
in mouse models
 
of PD and
 
are now being investigated
 
in the clinic. These
 
include passive immunization
 
therapy using humanized
 
or
human anti-α-synuclein mAbs or
 
active immunization therapy aimed
 
at inducing a humoral response
 
against pathological α-synuclein.
These approaches have thus far
 
demonstrated good tolerability profiles in
 
Phase 1 clinical trials. A Phase 2
 
clinical trial in PD subjects
with prasinezumab, a
 
mAb that
 
preferentially recognizes oligomeric
 
and fibrillar forms
 
of α-synuclein, suggested
 
reduced motor function
decline in subjects as compared with placebo; however, this Phase 2 trial
 
did not meet its primary or secondary endpoints.
 
Further trials
of prasinezumab
 
in different
 
patient
 
populations
 
remain ongoing.
 
Even if
 
approved
 
as therapeutic
 
for PD,
 
we expect
 
prasinezumab
would be burdened by the general challenges of cost and administration.
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Our Product Candidate: UB-312
We are
 
developing UB-312, an anti-α-synuclein
 
product candidate, as a treatment
 
for PD and other synucleinopathies.
 
We believe
 
that
UB-312 has
 
the potential
 
to be
 
established as
 
a disease-modifying
 
treatment modality
 
for PD,
 
and possibly
 
for LBD
 
and MSA.
 
Pre-
clinical data indicated that UB-312 elicits
 
antibodies that preferentially recognize pathological forms
 
of a-synuclein and improves motor
performance in
 
mouse models
 
of α-synucleinopathies.
 
Preliminary clinical
 
data from
 
our ongoing
 
Phase 1
 
trial indicate
 
that UB-312
elicits antibody
 
levels sufficient
 
to cross
 
the BBB (i.e.,
 
detectable in
 
CSF). In
 
2018, the
 
European Medical
 
Agency (“EMA”)
 
granted
UB-312 orphan designation for MSA.
Clinical Development
We have completed
 
Part A of a randomized, placebo-controlled, double-blind, dose-escalating,
 
single- center Phase 1 clinical trial of
UB-312 in which 50 healthy volunteers between the ages of 40 and
 
85 years received three intramuscular doses of either UB-312 or
placebo. During this 44-week Part A trial, subjects received three doses
 
(on weeks 1, 5 and 13) with escalating doses ranging from
40μg to 2,000μg. Immunogenicity was evaluated by measuring changes
 
in serum anti-α-synuclein antibody concentrations during the
course of the study.
 
Data from Part A indicated that UB-312 is generally well tolerated, with no significant safety
 
findings. Data from
Part A also suggested that UB-312 is highly immunogenic, with all individuals
 
in the 300μg/dose group showing detectable anti-α-
synuclein antibodies in both serum and CSF samples. CSF: serum ratios
 
appeared similar to those observed in UB-311
 
non-human
primate studies (approximately 0.2%), and to those observed in clinical trials of
 
mAbs. Based on these results, we are now evaluating
two dosing regimens of UB-312 in Part B of the Phase 1 trial: three doses of 300μg,
 
and one dose of 300μg followed by two doses of
100μg. Part B, which began enrollment in January 2022, is evaluating
 
UB-312 and placebo in 20 PD subjects. In addition to the
endpoints evaluated in Part A, an exploratory endpoint involving a clinical
 
assessment using the Movement Disorder Society –
Unified Parkinson’s Disease Response
 
Score will be used.
The Michael J. Fox Foundation (“MJFF”) is funding a 2-year collaborative project
 
between Vaxxinity,
 
the Mayo Clinic, and
University of Texas Houston
 
using CSF collected from individuals enrolled in Part B of the Phase 1 trial of
 
UB-312.
 
This work is
evaluating the potential of protein misfolding cyclic amplification (“PMCA”) to
 
assess target engagement and will also aim to
characterize the anti-α-synuclein antibodies produced after immunization
 
with UB-312. Demonstrating whether pathological forms of
α-synuclein are detectable in the CSF of PD subjects, and whether UB-312
 
-derived antibodies alter CSF levels of α-synuclein seeds
measured by PMCA, might provide a meaningful surrogate marker of
 
target engagement.
 
UB-312 Demonstrated Dose-Dependent Response in Phase 1 Part A Trial
 
Including Penetration of Titers into CSF
Across
 
four cohorts,
 
UB-312 demonstrated
 
a dose-dependent
 
immunogenic
 
response.
 
Antibodies generated
 
by UB-312
 
were
 
readily
detectable in CSF,
 
indicating BBB penetration with a CSF: serum ratio of approximately
 
0.2%.
We paused dosing in high dose cohorts in Part A
 
of the trial after one
 
subject developed an adverse effect (“AE”) of special
 
interest (i.e.,
Grade 3 flu-like symptoms) shortly after
 
receiving the second 1000μg dose of
 
UB-312. Although this AE was
 
transient and not a serious
adverse event (“SAE”),
 
data collected until
 
that point suggested
 
that the 100μg
 
and 300μg dose levels
 
were well tolerated
 
and yielded
relatively high anti-α- synuclein titers. During the evaluation of the AE, the COVID-19 pandemic was becoming increasingly pervasive
throughout Europe, increasing
 
the risk to healthy
 
volunteers participating in
 
the trial. We
 
therefore did not resume
 
dose escalation and
selected 100μg and 300μg doses for Part B in PD subjects.
An end-of-treatment analysis of the ongoing Part B of
 
the Phase 1 trial in PD
 
patients was completed in the fourth quarter of 2022.
 
This
analysis has shown UB-312
 
to be well tolerated and immunogenic,
 
with anti-α-synuclein antibodies observed
 
in the serum and CSF of
PD patients.
 
Three
 
serious adverse
 
events were
 
observed
 
in Part
 
B, which
 
remains
 
blinded,
 
meaning
 
it remains
 
unknown
 
in which
treatment group they occurred (UB-312 or placebo).
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Pre-Clinical Data
We
 
have
 
conducted
 
pre-clinical
 
studies
 
of
 
UB-312
 
across
 
multiple
 
animal
 
species,
 
including
 
mice
 
and
 
guinea
 
pigs.
 
These
 
trials
demonstrated
 
that our
 
product candidates,
 
including UB-312,
 
generated high
 
antibody titers
 
to α-synuclein
 
across animal
 
species. In
addition, in vitro
 
studies provided evidence
 
that anti-α-synuclein antibodies
 
produced after UB-312
 
immunization are highly
 
selective
to pathological α-synuclein, and do not bind to normal α-synuclein.
UB-312 Demonstrates Selective Binding Towards
 
α-Synuclein Fibrils and Ribbons
This in vitro slot blot analysis of sera
 
from guinea pigs dosed with UB-312
 
demonstrates that antibodies induced by UB-312 bind to
 
α-
synuclein fibrils
 
and ribbons,
 
the toxic
 
forms of
 
α-synuclein believed
 
to underlie
 
PD, more
 
strongly
 
than they
 
bind to
 
monomers, the
normal form of α-synuclein
 
in the body.
 
We
 
believe this preference
 
will allow UB-312 antibodies
 
to avoid altering normal functions
 
of
α-synuclein and selectively neutralize the toxic species
(Nimmo et al., Alzheimers Res Ther.
 
2020;12:159).
Anti-α-synuclein
 
antibodies
 
produced
 
by
 
UB-312
 
immunization
 
specifically
 
bind
 
pathogenic
 
species
 
of
 
α-synuclein,
 
including
aggregated fibrils,
 
oligomers and
 
ribbons, while
 
demonstrating low
 
affinity for
 
the monomer.
 
This species
 
selectivity contrasted
 
with
Syn-1, a commercial research mAb used as a control, which failed to differentiate
 
the toxic variants.
In an in vivo study of UB-312 using a transgenic mouse model of PD, we demonstrated prevention of motor deficits in treated animals,
which was associated
 
with significant reduction
 
of brain oligomeric
 
forms of α-
 
synuclein. We
 
believe this data
 
supports the potential
of UB-312 to prevent behavioral motor deficits and reduce toxic forms of
 
α-synuclein.
UB-312 Demonstrates Improvement in Motor Symptoms in Pre-Clinical
 
Study
UB-312
 
immunization
 
in
 
a
 
transgenic
 
mouse
 
model
 
(α-synuclein
 
overexpression)
 
demonstrates
 
improvement
 
in
 
beam
 
test
 
and
 
wire
hanging test, and reductions in α-synuclein oligomers
 
in various brain regions (Nimmo et al., Acta
 
Neuropathol. 2022;143:55-73).
23
We
 
have also observed
 
by immunohistochemistry
 
that serum antibodies
 
from guinea
 
pigs dosed with
 
UB-312 can
 
bind to aberrant
 
α-
synuclein in PD, LBD and MSA brain sections.
Finally,
 
antibodies
 
derived
 
from
 
UB-312
 
showed
 
no
 
off-target
 
binding
 
on
 
human
 
tissue
 
sections.
 
UB-312-treated
 
transgenic
 
mice
showed no signs of neuroinflammation,
 
and GLP toxicity studies in rats indicated a
 
good non-clinical safety and tolerability profile. We
believe
 
our
 
preclinical
 
data
 
suggest
 
that
 
UB-312
 
may
 
potentially
 
induce
 
a
 
well-tolerated,
 
strong
 
and
 
specific
 
IgG
 
response
 
against
pathological forms of
a-synuclein
in PD subjects.
Development Strategy
While certain portions of this Phase 1
 
trial were interrupted by the COVID-19 pandemic, Part
 
A in 50 healthy volunteers was
 
completed
in 2020, and we began dosing
 
PD subjects in Part B in
 
early 2022. In Part B
 
we have included exploratory endpoints potentially relevant
to PD, such
 
as total and
 
free α-synuclein
 
in serum and
 
CSF,
 
in addition to
 
T-cell
 
ELISpot analyses and
 
antibody characterization.
 
We
expect to complete Part B in mid-2023.
Other Neurodegeneration Programs
We are
 
actively engaged in additional
 
initiatives related to neurodegenerative
 
disorders. One of these programs
 
focuses specifically on
tau-protein pathology and
 
its involvement in
 
diseases such
 
as AD
 
and related tauopathies.
 
We believe that targeting different
 
pathological
tau variants simultaneously
 
may enhance treatment
 
efficacy,
 
which will most
 
likely require targeting
 
multiple epitopes concomitantly.
Using
 
our
 
Vaxxine
 
Platform,
 
we
 
have
 
constructed
 
multi-epitope
 
product
 
candidates
 
that
 
have
 
successfully
 
demonstrated
immunogenicity and in vitro activity in various models.
We
 
are also investigating
 
the use of a
 
multi-target of product
 
candidates targeting
 
Aβ, α-synuclein, and
 
tau, as multiple proteins
 
could
be implicated in neurodegenerative diseases.
Next Wave Chronic Disease
 
Treatments
Pathological
 
endogenous
 
proteins
 
(“self-proteins”)
 
drive
 
a
 
wide
 
range
 
of
 
chronic
 
diseases.
 
While
 
mAbs
 
and
 
small
 
molecules
 
have
provided
 
therapeutic
 
benefits in
 
the treatment
 
of these
 
diseases, inherent
 
limitations of
 
these drug
 
classes have
 
restricted
 
access and
adherence to these treatment modalities globally.
Our next
 
wave chronic
 
disease program
 
is initially
 
focused on
 
migraine and
 
hypercholesterolemia. Monoclonal
 
antibodies have
 
been
approved in both therapeutic areas; however,
 
their high costs have limited access and generally limited use to relatively
 
severe disease.
We aim to develop
 
product candidates in these therapeutic areas that could offer
 
similar efficacy as mAbs at a meaningfully lower
 
cost
and
 
improved
 
administrative
 
convenience
 
to
 
patients,
 
thereby
 
potentially
 
allowing
 
for
 
access
 
to
 
broader
 
patient
 
populations
 
versus
mAbs, and greater efficacy than small molecules.
UB-313
An Overview of Migraine
Migraine
 
is
 
a
 
chronic
 
and
 
debilitating
 
disorder
 
characterized
 
by
 
recurrent
 
attacks
 
lasting
 
four
 
to
 
72
 
hours
 
with
 
multiple
 
symptoms,
including
 
typically one
 
-sided, pulsating
 
headaches
 
of moderate
 
to severe
 
pain
 
intensity
 
that are
 
associated with
 
nausea
 
or vomiting,
sensitivity to sound
 
and sensitivity
 
to light. Over
 
90% of the
 
patients are unable
 
to function
 
normally during
 
a migraine attack.
 
Many
experience comorbid conditions such as depression, anxiety and insomnia.
The Migraine Research Foundation ranks migraine
 
as the world’s third most prevalent illness.
 
The disease affects 39 million individuals
in the
 
United States
 
and approximately
 
one billion individuals
 
globally.
 
Patients generally
 
suffer from
 
chronic or
 
episodic migraines.
Chronic migraine is defined as 15 headache days or more
 
per month, while episodic migraine is defined as fewer than 15
 
headache days
per month. Both acute and prophylactic treatments are used to address
 
chronic and episodic migraines.
CGRP’s
 
Role in Migraine
CGRP
 
is
 
a
 
neuropeptide
 
found
 
throughout
 
the
 
body,
 
including
 
in
 
the
 
spinal
 
cord.
 
CGRP
 
activates
 
CGRP
 
receptor
 
in
 
the
trigeminovascular system, which is located within pain-signaling pathways, intracranial arteries and mast cells.
 
Activation of the CGRP
receptor has been demonstrated to induce migraine in migraineurs. Multiple anti-CGRP therapies have been approved for the treatment
of migraine.
vaxxq410kp26i0
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Limitations of Current Therapies
Since the early 1990s, there has been minimal
 
improvement in the standard treatment for migraine. Treatments are characterized as elite
acute or
 
prophylactic. Triptans
 
are the
 
current first-line
 
prescription therapy
 
for the
 
acute treatment
 
of migraine,
 
with over
 
15 million
annual prescriptions written in the United States.
Prophylactic medications approved for
 
migraine include beta
 
blockers, such as
 
propranolol, topiramate, sodium valproate and
 
botulinum
toxin,
 
branded
 
as
 
Botox.
 
However,
 
many
 
of
 
these
 
medications
 
provide
 
limited
 
clinical
 
benefit.
 
In
 
addition,
 
they
 
are
 
often
 
not
 
well
tolerated, with AEs such as cognitive impairment, nausea, fatigue and sleep disturbance.
Therapeutics targeting
 
the CGRP pathway
 
represent an
 
emerging treatment
 
paradigm. Three
 
anti-CGRP mAbs
 
were approved
 
by the
FDA in 2018
 
for the prophylactic
 
treatment of migraine in
 
adults. These mAbs,
 
erenumab-aooe (Aimovig), fremanezumab-vfrm (Ajovy)
and
 
galcanezumab-gnlm
 
(Emgality),
 
are
 
all
 
administered
 
subcutaneously.
 
Their
 
side
 
effects
 
are
 
generally
 
mild,
 
including
 
pain
 
and
redness at the
 
site of injection,
 
nasal congestion
 
and constipation.
 
Studies show that
 
these mAbs
 
reduce the
 
number of headache
 
days
by 50% or more in approximately 50% of patients. Sales for marketed
 
and clinical-stage anti-CGRP therapeutics are projected to reach
approximately $7.4 billion by 2026. Despite the
 
commercial success that this class represents,
 
many of these treatments require frequent
administration, creating inconvenience for patients.
Our Product Candidate: UB-313
We are
 
developing UB-313 as a prophylactic
 
treatment initially for chronic migraine.
 
We believe
 
UB-313 has the potential to improve
upon the current treatments for
 
chronic migraine in multiple aspects:
 
we expect UB-313 will
 
require administration quarterly to annually
in
 
contrast
 
to
 
monthly
 
to
 
quarterly
 
for
 
currently
 
marketed
 
mAbs
 
and
 
frequent
 
administration
 
for
 
small
 
molecules.
 
Furthermore,
 
a
potential long durability of
 
response may offer physicians
 
and patients the option to
 
administer UB-313 in an
 
office setting, which can
potentially improve adherence. We
 
expect the cost of UB-313 treatment, if approved, to be lower than that of
 
mAbs for migraine.
Pre-Clinical Studies
We
 
have completed
 
both in
 
vitro and
 
in vivo
 
pre-clinical studies
 
of UB-313.
 
We
 
used an
 
in vivo
 
proof-of-concept capsaicin-induced
dermal blood flow model in mice to demonstrate target engagement of the marketed CGRP-targeting mAbs. In this model, we
 
observed
similar rates in reduction of dermal blood flow as fremanezumab in
 
a head-to-head comparison against fremanezumab.
UB-313 Reduces Capsaicin-Induced Dermal Blood Flow in Mice
**Dunnett’s:
 
Ctl vs Vac
 
1p < 0.05; Ctl vs Vac
 
2 p < 0.05
In this preliminary study,
 
dermal blood flow measurements were taken 17 weeks following
 
the first dose of UB-313. There were 3 to 11
animals per treatment group. Reduced
 
dermal blood flow indicates target engagement with CGRP.
 
UB-313 reduced dermal blood flow
versus the control with an approximately
 
similar magnitude to fremanezumab,
 
which was administered 24 hours prior to the
 
capsaicin
test.
We observed
 
similar results in a capsaicin / dermal blood flow model in rats, comparing
 
a rat version of UB-313 head-to-head against
galcanezumab.
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Our
in vivo
 
studies of
 
UB-313 have
 
involved multiple
 
animal species.
 
High immunogenicity
 
was observed
 
in all
 
pre-clinical species
tested. Characterization of
 
the antibodies produced
 
after immunization with UB-313
 
indicated that they have
 
limited, if any,
 
off-target
potential, are
 
primarily IgG1 and
 
IgG2, potently bind
 
to CGRP and
 
potently block
 
CGRP activity
in vitro
. We
 
refer to
 
potency as
 
the
amount
 
of
 
drug
 
required
 
to
 
produce
 
a
 
pharmacological
 
effect
 
of
 
given
 
intensity
 
and
 
is
 
not
 
a
 
measure
 
of
 
therapeutic
 
efficacy.
 
In
 
a
comparison
 
of
 
binding
 
affinities
 
with
 
fremanezumab
 
and
 
galcanezumab,
 
UB-313-induced
 
IgG
 
antibodies
 
demonstrated
 
comparable
binding affinities.
UB-313 Demonstrated Induced Antibodies Comparable to Approved
 
CGRP mAbs
We evaluated UB-313 formulations with two different adjuvants in comparison to fremanezumab and galcanezumab; both formulations
demonstrated comparable IgG to these two approved CGRP mAbs.
Additional
in vitro
 
studies using human SK-N-MC cells
 
demonstrated that UB-313-induced IgG antibodies also
 
had comparable
in vitro
activity to CGRP-targeted mAbs.
UB-313 Induced IgGs Have Comparable In Vitro
 
Activities to Marketed CGRP mAbs
In a cyclic
 
AMP (“cAMP”) production
 
assay conducted in
 
human SK-N-MC cells,
 
antibodies taken
 
from the
 
serum of guinea
 
pigs 15
weeks following the first injection of UB-313 demonstrated similar proper
 
ties to two approved CGRP mAbs.
Moreover, the binding potency of
 
UB-313 was determined to be comparable to these mAbs.
vaxxq410kp28i0
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UB-313 Induced IgGs Demonstrate Comparable Binding Potencies to Marketed
 
CGRP mAbs
Antibodies taken from the serum of guinea pigs 15 weeks
 
following the first injection of UB-313 demonstrated similar
 
binding potencies
to two approved CGRP mAbs as measured
 
by ELISA.
Development Strategy
A single-site,
 
randomized, placebo-controlled,
 
first-in-human Phase
 
1 clinical
 
trial is
 
underway in
 
40 healthy
 
volunteers, designed
 
to
measure the
 
safety,
 
tolerability,
 
and immunogenicity
 
of multiple priming
 
dose regimens of
 
UB-313, was
 
initiated in September
 
2022.
 
The study
 
is also
 
measuring dermal
 
blood flow
 
following a
 
capsaicin
 
challenge at
 
multiple timepoints,
 
a well-established
 
model for
CGRP
 
target
 
engagement
 
and efficacy
 
in
 
the preventive
 
treatment
 
of
 
migraine.
 
The
 
trial is
 
fully
 
enrolled,
 
and
 
we
 
expect a
 
topline
readout in the first half of 2023.
VXX-401
An Overview of Hypercholesterolemia
Hypercholesterolemia is the presence
 
of high levels
 
of cholesterol in
 
the blood and
 
typically results from
 
a combination of
 
environmental
and genetic
 
factors. Cholesterol
 
is transported
 
in the
 
blood plasma
 
within particles
 
called lipoproteins.
 
Lipoproteins are
 
classified by
their density: very
 
low-density lipoprotein, intermediate
 
density lipoprotein, LDL
 
and high-density
 
lipoprotein (“HDL”). All
 
lipoproteins
carry
 
cholesterol,
 
but
 
elevated
 
levels
 
of
 
lipoproteins
 
other
 
than
 
HDL,
 
particularly
 
LDL,
 
are
 
associated
 
with
 
the
 
development
 
of
cardiovascular
 
disease.
 
Approximately
 
2 billion
 
people
 
worldwide
 
have
 
elevated
 
levels
 
of LDL,
 
potentially
 
putting
 
them at
 
risk
 
for
cardiovascular disease.
Although hypercholesterolemia itself is asymptomatic, elevation of serum
 
cholesterol can over time lead to atherosclerosis. Over many
years, elevated
 
serum cholesterol
 
contributes to
 
formation of
 
atheromatous plaques
 
in the
 
arteries. These
 
plaque deposits
 
can in
 
turn
lead to progressive narrowing of the involved arteries. Smaller plaques may rupture and cause a clot to form and obstruct blood flow. A
sudden blockage of a coronary artery may result in a heart attack.
 
A blockage of an artery supplying the brain can cause a stroke. If
 
the
development
 
of
 
the
 
stenosis
 
or
 
occlusion
 
is
 
gradual,
 
blood
 
supply
 
to
 
the
 
tissues
 
and
 
organs
 
slowly
 
diminishes
 
until
 
organ
 
function
becomes impaired.
PCSK9 is mainly expressed in the liver and, to a lesser extent, in the small intestine, kidney,
 
pancreas and the CNS. The LDL receptors
(“LDLR”) at
 
the cell
 
surface bind
 
and initiate
 
ingestion of
 
LDL particles
 
from extracellular
 
fluid into
 
cells, leading
 
to a
 
reduction in
serum LDL
 
levels. PCSK9
 
protein plays
 
a major
 
regulatory role
 
in cholesterol
 
homeostasis, mainly
 
by reducing
 
LDLR levels
 
on the
plasma membrane,
 
which leads
 
to decreased
 
metabolism of
 
LDL by
 
the cells.
 
Inhibition of
 
PCSK9 prevents
 
this reduction
 
in LDLR
levels on the plasma membrane, and in consequence the cellular process of
 
internalizing LDL particles, resulting in a reduction of LDL.
Limitations of Current Therapies
Statins are the most
 
commonly used drugs to treat
 
hypercholesterolemia and result in a
 
pronounced reduction in LDL. The
 
unambiguous
benefits of
 
statins, together
 
with the
 
prevalence of
 
coronary heart
 
disease, have
 
made statins
 
the most
 
highly prescribed
 
drug class
 
in
developed countries.
 
However,
 
many patients
 
are unable
 
to achieve
 
targeted
 
lipid levels
 
despite intensive
 
statin therapy.
 
In addition,
continued patient adherence to statin
 
therapy,
 
which is necessary to maintain
 
a lower risk for cardiac
 
events, is variable but considered
to be low – as low as 30% to 40% after two years in persons following a myocardial infarction. Importantly, at the transcriptional level,
vaxxq410kp29i0
27
statins
 
up-regulate
 
not
 
only
 
LDLR,
 
but
 
also
 
PCSK9,
 
causing
 
the
 
so-called
 
paradox
 
of
 
statin
 
treatment.
 
Although
 
statins
 
induce
 
a
beneficial increase in LDLR, they also increase PCSK9, thus leading to LDLR degradation, which indirectly increases LDL, mitigating
the overall LDL reduction that
 
statins otherwise cause. Given the
 
limitations in efficacy and adherence, targeting PCSK9
 
in combination
with statins treatment is an emerging treatment paradigm
 
for hypercholesterolemia.
Two
 
mAbs
 
that
 
inhibit
 
activity
 
have
 
received
 
FDA
 
approval,
 
alirocumab
 
(Praluent)
 
and
 
evolocumab
 
(Repatha).
 
These
 
drugs
 
were
initially approved
 
to treat
 
the genetic
 
condition
 
heterozygous familial
 
hypercholesterolemia,
 
although
 
the approved
 
indications
 
were
expanded
 
after
 
the
 
publication
 
of
 
studies
 
demonstrating
 
that the
 
use
 
of
 
a
 
PCSK9 inhibitor
 
in
 
conjunction
 
with
 
a
 
statin
 
significantly
reduced the risk for major cardiovascular
 
events, including heart attack, stroke, unstable
 
angina requiring hospitalization or death
 
from
coronary heart disease. In addition, inclisiran (Leqvio), an siRNA inhibitor of PCSK9 synthesis, was
 
approved by the EMA in late 2020
for the treatment of heterozygous familial hypercholesterolemia in addition
 
to other dyslipidemia.
While alirocumab and evolucumab
 
have demonstrated clinical benefit,
 
their commercial potential has
 
been limited by their
 
pricing. Both
launched
 
with
 
a
 
wholesale
 
acquisition
 
price
 
exceeding
 
$14,000
 
annually,
 
but
 
prices
 
for
 
both
 
were
 
subsequently
 
reduced
 
in
 
2018.
Nevertheless, this drug class generated sales
 
of approximately $1.3 billion in 2020
 
and is expected to
 
grow to approximately $5.2 billion
by 2026, including the addition of inclisiran to the
 
market. In addition, both are administered bi-weekly (evolocumab also allows
 
for the
option of taking
 
a higher dose
 
monthly), which
 
represents what we
 
believe to be
 
a frequent and
 
inconvenient administration
 
schedule
for patients.
 
While inclisiran
 
represents an
 
improved administration
 
schedule compared
 
to alirocumab
 
and evolucumab,
 
as it must
 
be
administered twice annually,
 
we believe that it may encounter similar pricing challenges due to the published
 
cost effectiveness price.
Our Product Candidate: VXX-401
We are developing VXX-401, an anti-PCSK9
 
product candidate to treat
 
hypercholesterolemia. We are dedicated to developing a
 
product
candidate that has long-acting treatment duration, which we believe will offer a more convenient treatment regimen compared to the up
to
 
bi-weekly
 
dosing
 
required
 
by
 
some
 
mAbs.
 
We
 
believe
 
that
 
lower
 
manufacturing
 
costs
 
commensurate
 
with
 
the
 
requirement
 
of
meaningfully less drug
 
substance relative to
 
mAbs, coupled with
 
our ability to
 
achieve commercial scale
 
production rapidly may
 
promote
expanded
 
use
 
of this
 
drug
 
class as
 
a
 
first-line
 
therapy,
 
allowing
 
for
 
treating
 
a greater
 
number
 
of hypercholesterolemia
 
patients
 
than
currently treated with mAbs.
Pre-Clinical Studies
In August 2022 we announced
 
the selection of VXX-401
 
as our lead anti-PCSK9 vaccine candidate.
 
In pre-clinical studies, VXX-401
generated therapeutic
 
titer levels
 
of anti-PCSK9
 
antibodies, a
 
high response
 
rate among
 
dosed animals,
 
and robust
 
reduction in
 
LDL
across multiple species.
In two studies
 
of VXX-401 in
 
cynomolgus monkeys,
 
VXX-401 reduced LDL-c
 
by up to 54%,
 
an effect sustained
 
for a long
 
duration.
 
In the first study, 3 monkeys received six 300µg IM injections of VXX-401,
 
and 6 monkeys started on placebo with the same schedule.
 
At week 19 (final dose),
 
3 of the 6 placebo
 
monkeys were given 3mg/kg
 
evolocumab to determine the
 
comparability of the magnitude
of LDL reduction with
 
VXX-401.
 
LDL in monkeys treated
 
with evolocumab reduced
 
to approximately the level
 
of those treated with
VXX-401, then returned to near-baseline, while LDL levels in
 
the VXX-401-treated group remained low.
VXX-401 Reduces LDL up to 54% vs. Placebo, Comparable to a
 
Single Dose of an Approved MAb
The
 
VXX-401
 
group
 
(n=3)
 
received
 
a
 
non-optimized
 
vaccine
 
formulation
 
containing
 
the
 
same
 
peptide
 
immunogen
 
as
 
the
 
VXX-401
clinical vaccine
 
candidate and
 
experienced up
 
to a 54%
 
reduction in
 
serum LDL-c from
 
baseline.
 
The placebo
 
and VXX-401 groups
received IM injections at weeks 0, 3, 6, 13, 16, and 19.
 
The evolocumab group received
 
placebo IM injections at weeks 0, 3, 6, 13, and
16, and a dose of evolocumab at week 19.
vaxxq410kp30i0
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In the second study we explored a range of doses in 15 cynomolgus monkeys, which received either 0, 10, 30,
 
100, 300, or 900µg/dose
by 0.5mL IM injection at weeks
 
0, 3, and 6, with follow-up
 
through week 24.
 
In this study we found that
 
three doses of VXX-401 could
product a sustained
 
reduction of serum
 
LDL, returning to near-baseline
 
after 24 weeks.
 
Furthermore, animals received
 
a booster dose
of VXX-401 at week 24, which triggered a rapid anti-PCSK9 antibody response
 
and a corresponding reduction in serum LDL.
Reduction in LDL Correlates with Anti-PCSK9 Antibodies Elicited by
 
VXX-401
The left-hand panel shows the generation of serum anti-PCSK9 antibody
 
titers in cynomolgus monkeys treated with 100µg VXX-401
at weeks 0, 3, 6, and 24 as measured by EIA.
 
These levels correlate with serum LDL level over time, as
 
depicted in the right-hand
panel, represented
 
as a difference from controls.
 
An adjuvant control group
 
(n=3, not shown), was also included in the study;
animals in the adjuvant group did not produce
 
an anti-PCSK9 antibody response, similar to the
 
PBS control group.
A GLP toxicology study was completed in monkeys, which demonstrated
 
that 5 doses of VXX-401 were safe and well tolerated, with
no clinical observations and no pathological findings.
 
Importantly, we found that LDL
 
reduction in VXX-401-treated monkeys in this
study was consistent with observations from preclinical efficacy
 
studies, and supportive of moving VXX-401 into clinical trials.
 
Development Strategy
We
 
have initiated
 
a first-in-human
 
Phase 1
 
clinical trial
 
of VXX-401
 
in Australia
 
in the
 
first quarter
 
of 2023.
 
In this
 
trial we
 
aim to
evaluate 48
 
subjects with
 
elevated cholesterol,
 
monitoring for
 
safety,
 
immunogenicity,
 
and relevant
 
biomarkers.
 
We
 
expect a
 
topline
readout by early 2024.
 
In a potential subsequent Phase 2 trial we may test VXX-401 alone and in combination
 
with statins.
Next Stage Development Candidates
In addition to our
 
initial focus on
 
migraines and hypercholesterolemia, we
 
believe our Vaxxine Platform can generate product
 
candidates
for a range of chronic diseases. We
 
are evaluating opportunities across multiple disease areas, including allergy
 
(e.g., atopic dermatitis,
chronic
 
rhinosinusitis,
 
food
 
allergy),
 
autoimmune
 
(e.g.,
 
psoriasis,
 
psoriatic
 
arthritis),
 
pain
 
(e.g.,
 
peripheral
 
neuropathy,
 
diabetic
neuropathy) and
 
bone and muscle
 
deterioration (e.g.,
 
sarcopenia, osteoporosis,
 
osteopenia) indications
 
as they may
 
apply to geriatrics
and space travel health.
COVID-19 Program
An Overview of COVID-19
COVID-19,
 
caused
 
by
 
SARS-CoV-2,
 
has
 
rapidly
 
swept
 
throughout
 
the
 
world.
 
The
 
World
 
Health
 
Organization
 
(“WHO”)
 
declared
COVID-19 a public health
 
emergency of international
 
concern. As of January 2023,
 
there have been more
 
than 694 million confirmed
COVID-19 cases and
 
more than
 
6.7 million deaths
 
worldwide. Common
 
symptoms of
 
COVID-19 are
 
fever,
 
cough, lymphocytopenia
and
 
chest
 
radiographic
 
abnormality.
 
A
 
proportion
 
of
 
patients
 
recovering
 
from
 
COVID-19
 
continue
 
shedding
 
virus
 
for
 
days,
 
and
asymptomatic carriers may also transmit SARS-CoV-2,
 
indicating a risk of a continuous and long-term pandemic.
SARS-CoV-2
 
is an
 
enveloped,
 
single-stranded,
 
positive-sense
 
RNA virus
 
belonging
 
to
 
the family
Coronavidae
 
within the
 
genus
 
β-
coronavirus. The genome of SARS-CoV-2
 
encodes one large Spike (“S”) protein that plays a pivotal role during viral attachment to the
host receptor,
 
angiotensin converting enzyme 2 (“ACE2”),
 
and entry into host cells. The
 
S protein is the major
 
principal antigen target
for
 
vaccines
 
against
 
human
 
coronavirus,
 
including
 
SARS-Co-V-2.
 
Neutralizing
 
antibodies
 
targeting
 
the
 
receptor
 
binding
 
domain
(“RBD”) subunit of
 
the S protein
 
block the virus
 
from binding to
 
host cells. Over
 
90% of all
 
neutralizing antibodies produced in
 
response
to infection are directed to the RBD subunit, and mAbs that have shown
 
therapeutic activity target epitopes on the RBD.
vaxxq410kp31i0
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Fifty vaccines are authorized for use in one or more
 
countries around the world. Most of these vaccines are based on
 
the S protein of the
SARS-CoV-2,
 
but
 
rely
 
on
 
different
 
mechanisms
 
for
 
presentation
 
or
 
expression
 
of
 
the
 
S
 
antigen,
 
including
 
whole
 
inactivated
 
virus,
defective adenovirus
 
vectors, or
 
mRNA. All
 
have been
 
shown to
 
be safe
 
and effective
 
in placebo-
 
controlled clinical
 
trials. Antiviral
drugs and mAbs have limited availability and effectiveness.
COVID-19 Vaccine
 
Market
As of January 2023, over five billion people have been fully vaccinated against COVID-19.
 
Nearly all of these people received at least
one of three
 
types of vaccine
 
technologies: mRNA, adenovirus
 
vector, or
 
inactivated virus.
 
As SARS-CoV-2
 
continues to evolve
 
and
spread, the market for booster vaccinations has also grown, with over 2.6
 
billion doses sold to date.
We expect demand
 
for booster vaccinations that are safe and well tolerated, offer long
 
lasting immunity against emerging variants, and
allow
 
for
 
manageable
 
storage
 
and
 
shipping
 
conditions
 
will
 
last
 
for
 
the
 
foreseeable
 
future,
 
particularly
 
in
 
low-
 
and
 
middle-income
countries
 
(“LMICs”).
 
We
 
also
 
anticipate
 
demand
 
for
 
more
 
types
 
of
 
vaccine
 
technologies,
 
beyond
 
the
 
readily
 
available
 
mRNA,
adenovirus vector, and inactivated virus vaccine
 
options.
UB-612: Our COVID-19 Vaccine
 
Initiative
We are developing
 
UB-612 as a product candidate for boosting immunity
 
to COVID-19 in vaccinated individuals. UB-612 is designed
to activate both antibody
 
and cellular immunity against
 
multiple viral targets.
 
The vaccine is composed
 
of a recombinant S1-RBD-sFc
fusion
 
protein combined
 
with rationally
 
designed synthetic
 
Th and
 
CTL epitope
 
peptides selected
 
from
 
the S2
 
domain of
 
the spike,
membrane
 
(“M”), and
 
nucleocapsid
 
(“N”) proteins.
 
These peptides
 
bind to
 
MHC class
 
I and
 
II receptors
 
without significant
 
genetic
restriction, so
 
that they may
 
be recognized broadly
 
by the vast
 
majority of the
 
human population. Our
 
mixture of peptides
 
is designed
to elicit
 
T-cell
 
activation, memory
 
recall and
 
effector functions
 
similar to
 
those of
 
natural SARS-CoV-2
 
infection. The
 
S1-RBD-sFc
fusion protein incorporates
 
essential B-cell epitopes
 
that promote the generation
 
of neutralizing antibodies to
 
the RBD of SARS-CoV-
2. UB-612
 
is formulated
 
with Adju-Phos,
 
an adjuvant
 
widely used
 
in many
 
approved vaccines
 
globally.
 
For added
 
safety,
 
synthetic
peptides in UB-612 are
 
adsorbed by our propriety
 
CpG1 excipient, a Toll
 
-like receptor 9 agonist
 
molecule, known to help
 
to stimulate
balanced T-cell immunity in humans.
 
UB-612 can be
 
stored and shipped
 
at 2°
 
to 8°C
 
(conventional cold chain refrigerated
 
temperatures).
An EUA application for UB-612 was
 
denied by the TFDA in
 
August 2021 because the neutralizing antibody response
 
generated by UB-
612
 
delivered
 
in
 
an
 
accelerated
 
two-dose
 
primary
 
immunization
 
schedule,
 
as
 
compared
 
to
 
that
 
of
 
a
 
designated
 
adenovirus
 
vectored
vaccine,
 
did
 
not
 
meet
 
the
 
TFDA’s
 
specified
 
evaluation
 
criteria.
 
We
 
are
 
now
 
pursuing
 
a
 
path
 
to
 
authorization
 
for
 
UB-612
 
as
 
a
heterologous boost and have agreement with two high-income country regulators
 
about our development approach.
Components of the UB-612 Multitope Vaccine
 
Product Candidate
UB-612’s
 
construct contains an S1-RBD-sFc fusion protein for its B-cell epitopes, plus five synthetic Th/CTL peptides for class I and II
MHC molecules
 
derived from
 
SARS-CoV-2
 
S2, M
 
and N
 
proteins,
 
and the
 
UBITh1a peptide.
 
These components
 
are
 
formulated with
CpG1, which binds the positively charged peptides by dipolar interactions and also serves as an adjuvant, which is then bound to Adju-
Phos adjuvant to constitute the UB-612 product
 
candidate.
Clinical Development
In March 2022,
 
Vaxxinity
 
initiated a Phase 3
 
pivotal trial to compare
 
the immune responses stimulated
 
by homologous boosts
 
mRNA
(BNT162b2), adenovirus (ChAdOx1-S), inactivated virus (Sinopharm
 
BIBP) COVID-19 vaccines, to a heterologous boost of UB-612.
This is an active-controlled,
 
randomized trial being conducted in
 
the United States, Panama, and
 
Philippines under a platform protocol
in
 
944
 
subjects
 
16
 
years
 
and
 
older
 
who
 
completed
 
a
 
two-dose
 
primary
 
immunization
 
with
 
one
 
or
 
more
 
of
 
the
 
comparator
 
vaccines
mentioned above. Eligible subjects
 
have been randomized into one
 
of two treatment arms
 
to receive a single
 
dose of UB-612 or
 
an active
comparator.
 
The primary
 
objective of
 
the study
 
is to
 
determine
 
non-inferiority
 
of UB-612-stimulated
 
neutralizing
 
antibodies against
those of the comparator vaccines.
 
CEPI is co-funding this trial, which is expected to conclude in the second half of 2023.
 
vaxxq410kp32i0
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Following
 
positive
 
topline
 
results
 
announced
 
in
 
December
 
2022,
 
we
 
have
 
completed
 
submissions
 
for
 
conditional/provisional
authorization
 
with
 
the
 
Medicines
 
and
 
Healthcare
 
products
 
Regulatory
 
Agency
 
(“MHRA”)
 
in
 
the
 
UK,
 
and
 
the
 
Therapeutic
 
Goods
Administration
 
(“TGA”)
 
in
 
Australia
 
in
 
March
 
2023.
 
We
 
expect
 
that,
 
if
 
successful,
 
these
 
authorizations
 
may
 
enable
 
the
commercialization of UB-612 in multiple countries including select
 
LMICs.
Heterologous Booster Data: Phase 3 Trial
 
Topline
 
Results
In the ongoing global pivotal Phase
 
3 trial, UB-612 elicited strong
 
neutralizing antibodies against SARS-CoV-2
 
when compared head-
to-head
 
to three
 
globally
 
authorized
 
platform
 
vaccines
 
administered
 
as homologous
 
boosters,
 
successfully
 
meeting
 
primary
 
and
 
key
secondary immunogenicity endpoints
 
at topline readout.
 
The primary endpoints
 
of the trial
 
are safety and
 
live virus
 
neutralizing antibody
titers against
 
the Wuhan
 
strain of
 
SARS-CoV-2
 
at day
 
29.
 
Secondary immunogenicity
 
endpoints include
 
neutralizing antibody
 
titers
against Omicron
 
BA.5 at
 
day 29,
 
SCRs at
 
day 29,
 
and kinetics
 
of neutralizing
 
and RBD
 
binding IgG
 
antibody responses
 
through 12
months.
 
The primary objective of the
 
study is to determine non-inferiority
 
of UB-612-stimulated neutralizing
 
antibodies against those
of the comparator vaccines, where statistical non-inferiority is defined by the lower bound
 
of the 95% confidence interval (“CI”) of the
geometric mean titer ratio (“GMR”)
 
> 0.67.
 
When delivered as a
 
heterologous booster in populations previously
 
vaccinated with Pfizer-
BioNTech’s
 
BNT162b2, AstraZeneca’s ChAdOx1-S, or Sinopharm’s BIBP,
 
UB-612 was shown to generate
 
neutralizing antibody titers
28 days after administration that were:
●
Statistically
 
non-inferior
 
to,
 
and
 
directionally
 
higher
 
than,
 
BNT162b2:
 
1.04
 
GMR
 
against
 
Wuhan
 
(95%
 
CI:
 
0.89,
 
1.21;
p=0.6147), 1.11 GMR against Omicron
 
BA.5 (95% CI: 0.94, 1.31; p=0.2171)
●
Statistically superior
 
to ChAdOx1-S:
 
1.92-fold higher
 
geometric mean
 
titers against
 
Wuhan
 
with UB-612
 
(GMR=1.92; 95%
CI: 1.44, 2.56; p<0.0001), 2.85-fold higher against Omicron BA.5 (GMR=2.85;
 
95% CI: 2.00, 4.05; p<0.0001)
●
Statistically superior to BIBP: 5.77-fold higher geometric mean titers against Wuhan with UB-612 (GMR=5.77; 95% CI: 4.62,
7.20; p<0.0001), 5.93-fold higher against Omicron BA.5 (GMR=5.93; 95%
 
CI: 4.60, 7.65; p<0.0001)
Neutralizing Antibodies Against Wuhan
 
(left panel) and Omicron BA.5 (right panel) at Day 29
The above results from a live virus neutralization assay at day 29
 
suggests that the immune response of UB-612 as a
 
heterologous boost
is non-inferior to that
 
of BNT162b2 as a
 
homologous boost, superior to
 
ChAdOx1-S, and superior to
 
BIBP.
 
The relative performance
of UB-612 versus the comparators against Omicron
 
BA.5 is better than that against Wuh
 
an.
SCR as measured
 
against Wuhan
 
and Omicron BA.5 are
 
key secondary endpoints
 
in the Phase 3
 
trial.
 
Seroconversion was defined
 
as
a ≥4-fold increase of neutralizing antibody titers from baseline.
 
SCR non-inferiority was defined by the lower bound of the 95% CI for
the difference of the UB-612 SCR minus the comparator SCR > -10%.
 
SCR superiority was defined by the lower bound of the 95% CI
for the difference
 
of the UB-612
 
SCR minus the
 
comparator SCR >
 
0%.
 
UB-612 SCR at
 
day 29 was
 
statistically non-inferior to,
 
and
directionally higher than, BNT162b2 against both Wuhan and Omicron
 
BA.5, statistically superior to ChAdOx1-S with 1.9-fold higher
SCR against Wuhan (23.6% absolute difference, p=0.0009) and 2.0-fold higher SCR
 
against Omicron BA.5 (29.2% absolute difference,
p<0.0001), and statistically superior to BIBP,
 
with 8.3-fold higher SCR against Wuhan
 
(56.8% absolute difference, p<0.0001) and 5.8-
fold higher SCR against Omicron BA.5 (58.0% absolute difference,
 
p<0.0001).
vaxxq410kp33i0
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Preliminary safety data from the
 
Phase 3 trial shows that UB-612
 
continues to be generally well tolerated; no
 
serious adverse reactions
were reported.
 
The trial remains ongoing, and the long term safety profile
 
continues to be evaluated.
 
The trial is expected to conclude
in the second half of 2023.
2-Dose Clinical Data
In early 2021, we completed an open-label dose escalation
 
Phase 1 clinical trial to evaluate the safety,
 
tolerability and immunogenicity
of UB-612
 
in healthy volunteers
 
between the
 
ages of 20
 
and 55 in
 
Taiwan.
 
This six-month trial
 
consisted of
 
three 20-subject
 
cohorts,
each receiving
 
an initial
 
dose at
 
the start
 
of the
 
trial and
 
a second
 
dose on
 
day 28:
 
one
 
cohort received
 
two 10µg
 
doses, the
 
second
received two
 
30µg doses,
 
and the
 
third received
 
two 100µg
 
doses.
 
The mean
 
titer of
 
antigen-specific
 
antibodies to
 
UB-612 and
 
the
seroconversion rate
 
was evaluated
 
throughout the
 
duration of
 
the trial
 
to determine
 
the humoral
 
immune response
 
and persistence
 
of
immunogenicity. In addition, T-cell
 
responses were evaluated
 
by interferon-γ ELISpot assay and intracellular cytokine staining by flow
cytometry.
 
The Phase 1
 
clinical trial was
 
sponsored by
 
UBIA. UBIA conducted
 
the trial on
 
our behalf in
 
accordance with one
 
of our
related party master services agreements.
After one and
 
two doses,
 
UB-612 was considered
 
to be
 
generally safe and
 
well tolerated, with
 
a low
 
frequency of
 
solicited and unsolicited
AEs, which
 
were all
 
Grade 1
 
(mild) in
 
severity.
 
After each
 
vaccination,
 
the most
 
common AE
 
was injection
 
site pain,
 
with no
 
clear
difference in reactogenicity between dose levels. In all dose groups, there was a trend towards increased reactogenicity
 
with increase in
dose.
 
Three
 
cases
 
of
 
mild
 
allergic
 
reactions
 
were
 
reported
 
(e.g.,
 
itching
 
at
 
vaccine
 
site),
 
which
 
were
 
all
 
resolved
 
within
 
1-3
 
days.
Importantly,
 
and in distinction
 
to certain vaccines
 
authorized for emergency
 
use, no other
 
increase in AEs
 
was seen at
 
second dose as
compared to first injection. We
 
selected the highest dose (100μg) to take into a Phase 2 trial.
In an
 
anti-S1-RBD ELISA
 
assay,
 
we observed
 
that all
 
three dose
 
levels of
 
UB-612 induced
 
titer levels
 
comparable to
 
or greater
 
than
those in sera from patients hospitalized with COVID-19. Furthermore, in
 
a cytopathic effect viral neutralization assay (CPE VNT
50
), we
observed neutralizing titers comparable to those in sera from patients hospitalized
 
with COVID-19.
Neutralizing activities of sample sera from the Phase 1 trial
 
were assessed against live virus variants at the Viral and Rickettsial Disease
Laboratory of
 
the California
 
State Department
 
of Public
 
Health. The
 
results indicate
 
that UB-612
 
induces viral
 
neutralizing antibody
titers against the Alpha, Gamma and Delta variants of SARS-CoV-2,
 
close to the neutralizing titer level against the original (wild-type,
WT)
 
Wuhan
 
strain,
 
while
 
the
 
titer
 
level
 
against
 
the
 
Beta variant
 
is lower
 
in
 
comparison.
 
The
 
latter
 
finding
 
is anticipated
 
by
 
results
published for other COVID-19 vaccines, as pointed out above.
Viral-neutralizing
 
antibody titers
 
(VNT
50
) up
 
to 154
 
days after
 
the second
 
dose (day
 
196) in
 
the Phase
 
1 trial
 
of UB-612
 
remained at
52% of the maximum level
 
observed following the second dose,
 
on average. Based on
 
the interim six-month cutoff, the
 
UB-612-specific
neutralizing antibody half-life was estimated to be 195 days using
 
an exponential model.
Time Course of SARS-CoV-2 Antibody Neutralization
 
Responses after Vaccination
Data from a micro-neutralization assay
 
of sera from subjects
 
who received two 100μg
 
doses of UB-612
 
yielded an estimated
 
neutralizing
titer half-life of 195 days (CI: 136, 349) using an exponential model.
32
A randomized,
 
placebo-controlled,
 
multi-center Phase
 
2 trial
 
of UB-612
 
in 3,850
 
healthy volunteers
 
aged 12
 
to 85
 
was conducted
 
in
Taiwan.
 
Subjects in
 
this trial
 
receive two
 
doses of
 
100μg UB-612,
 
or placebo,
 
28 days
 
apart. The
 
objectives of
 
this trial
 
include the
analysis of safety and immunogenicity of UB-612, in particular, antigen-specific antibodies to UB-612, the seroconversion rate and lot-
to-lot consistency
 
of antibody
 
responses. An
 
interim analysis
 
of data
 
from this
 
Phase 2
 
trial in
 
healthy volunteers
 
18 years
 
and older
based on
 
the data
 
cut-off date
 
of June 27,
 
2021 was
 
submitted to
 
the TFDA
 
as part
 
of a
 
filing for
 
an EUA
 
in Taiwan.
 
The EUA
 
was
denied in August 2021 by the TFDA.
 
In data from the Phase 2 trial, UB-612 appears well tolerated.
 
AEs were generally mild, and no UB-612-related SAEs were
observed. Local injection site AEs occurred
 
in half of the subjects, the most frequent being injection
 
site pain. Systemic AEs
occurred in less than half of the subjects, and the
 
incidence was similar in the active and placebo groups,
 
except for muscle pain
which was more frequent in the active group.
 
Aside from muscle pain, systemic reactions were comparable
 
across the active and
placebo groups, with less than 10% of subjects in
 
either group experiencing fever or chills. Systemic
 
AEs were similar after the first
and second doses. The vast majority of AEs were mild (Grade 1),
 
and all were self-limited. No subject had a severe (Grade
 
3) local
reaction. The incidence of severe (Grade
 
3) systemic reactions was <0.1%.
The Phase 2 interim analysis suggests that
 
Phase 1 observations on immunogenicity, neutralizing titers and tolerability are reproducible,
with an overall seroconversion rate of 94.7% one month after the second dose. In a live virus
 
(Wuhan) neutralization test, sera collected
from UB-612 vaccinated younger adults (19-64
 
years, n=322), 28 days after
 
the second dose (day 57)
 
were estimated to reach geometric
mean titers (“GMT”) of 102 of
 
50% virus-neutralizing antibodies (VNT
50
).
Sera collected from a subset of
 
subjects (n=48) 28 days after
the second
 
immunization was shown
 
to neutralize several
 
SARS-CoV-2
 
variants, with
 
the loss of
 
neutralization activity
 
against Delta
estimated at 1.39-fold when compared to the neutralizing antibodies against the parental Wuhan
 
virus.
Immunization with UB-612
 
in both Phase 2
 
and Phase 1
 
studies led to
 
detectable T-cell
 
responses observed
 
in a subset
 
of subjects. In
Phase 2, a total
 
of 88 subjects
 
receiving UB-612
 
and 12 receiving
 
placebo were tested
 
for T cell responses
 
at baseline and
 
on Day 57.
Preliminary results
 
of ELISpot (Interferon
 
-γ and IL-4)
 
and intracellular
 
cytokine staining indicate
 
robust responses
 
to UB-612,
 
with a
strong
 
Th1
 
orientation.
 
Intracellular
 
cytokine
 
staining
 
(ICS)
 
confirmed
 
the
 
Th1
 
orientation
 
of
 
T
 
cell
 
responses.
 
UB-612
 
induced
measurable CD8+ T cell responses and CD107a+/Granzyme secreting cells, which
 
are putative cytotoxic T cells.
3-Dose Clinical Data
In a Phase 1 extension trial, 50 subjects from Phase 1 received a third booster dose
 
of UB-612 approximately 7-9 months after their
second dose (100µg).
 
In this
extension trial, UB-612 was generally well tolerated after a third dose, with no
 
vaccine-related SAEs
reported.
Immunogenicity and safety data from the Phase
 
1 extension suggests that UB-612 elicits a multi-fold
 
increase in neutralizing
antibody titers upon third dose, significantly
 
exceeding those observed in human convalescent sera,
 
and that the third dose is well
tolerated with no vaccine-related SAEs reported.
 
Published studies have shown a correlation between
 
efficacy in randomized
controlled trials and the ratio of neutralizing
 
titers in sera from vaccinated subjects to titers
 
in human
convalescent sera.
In collaboration with University College London and VisMederi,
 
we analyzed sera from subjects immunized with three doses of UB-
612. Data demonstrated that UB-612 elicited a broad IgG antibody response
 
against multiple SARS-CoV-2
 
variants of concern,
including, Alpha, Beta, Delta, and Gamma, and Omicron, and higher levels of neutralizing
 
antibodies against Omicron than three
doses of an approved mRNA vaccine.
vaxxq410kp35i0
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Third immunization with UB-612 Produces Neutralizing
 
Antibodies Against Omicron
 
Phase 1 extension subjects (n=15) received primary
 
series with UB-612 100µg. Serum is taken 28 days after the second dose and 14
days after the third booster immunization
 
administered 7-9 months after the primary series. Live virus neutralization
 
test against
Wuhan and Omicron
 
are performed at VisMederi;
 
results are expressed
 
as virus neutralization antibody GMT ± 95% CI.
An extension of the Phase 2, observer-blind, multicenter,
 
randomized, placebo-controlled trial was sponsored by UBIA to evaluate the
immunogenicity,
 
safety, tolerability,
 
and lot consistency of a homologous booster dose of UB-612 in
 
adolescents, younger adults, and
elderly adults.
 
Adult subjects who completed the primary 2-dose UB-612 series in the main Phase 2
 
trial were unblinded around and
offered a third dose of UB-612.
 
The third dose of UB-612 stimulated both arms of adaptive immunity in subjects.
 
The frequency of
solicited and unsolicited adverse events following the third dose was consistent with the
 
safety profile observed after the first and
second doses.
 
Development Strategy
Based on our
 
belief in UB-612’s
 
potential utility
 
as a heterologous
 
booster dose (boosting
 
the immunity
 
of a subject
 
who has already
received
 
a
 
different
 
vaccine),
 
we
 
have
 
completed
 
rolling
 
submissions
 
for
 
conditional/provisional
 
authorization
 
with
 
regulatory
authorities in the United Kingdom and Australia, who will review under their
 
established work share agreement.
 
We expect to complete the ongoing Phase 3 trial
 
of UB-612 as a heterologous booster
 
in the second half of
 
2023, with continued support
from CEPI.
Competition
The
 
pharmaceutical
 
industry
 
is
 
characterized
 
by
 
rapidly
 
advancing
 
technologies,
 
intense
 
competition
 
and
 
a
 
strong
 
emphasis
 
on
proprietary
 
products.
 
While
 
we
 
believe
 
that
 
our
 
technology,
 
the
 
expertise
 
of
 
our
 
executive
 
and
 
scientific
 
teams,
 
research,
 
clinical
capabilities, development experience and scientific knowledge provide us with competitive advantages, we face increasing competition
from multiple sources,
 
including pharmaceutical and
 
biotechnology companies, academic institutions,
 
governmental agencies and
 
public
and private research institutions both in the United States and abroad.
Many of our competitors may have significantly greater
 
financial resources and expertise in research and development, manufacturing,
preclinical
 
testing,
 
conducting
 
clinical
 
trials,
 
obtaining
 
regulatory
 
approvals
 
and
 
marketing
 
approved
 
products
 
than
 
we
 
do.
 
These
competitors
 
also compete
 
with us
 
in recruiting
 
and retaining
 
qualified scientific
 
and management
 
personnel and
 
establishing clinical
trial sites and
 
patient enrollment 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 through
 
collaborative arrangements
 
with
larger or more established companies.
Vaccines
The global
 
vaccine market
 
is highly
 
concentrated among
 
a small
 
number of
 
multinational pharmaceutical
 
companies: Pfizer,
 
Merck,
GlaxoSmithKline and Sanofi
 
together control most of
 
the global vaccine
 
market. Other pharmaceutical
 
and biotechnology companies,
academic institutions, governmental
 
agencies and public and private
 
research institutions are also working
 
toward new solutions given
the continuing global unmet need.
34
Neurodegenerative Disorders
We
 
expect
 
that,
 
if
 
approved,
 
our
 
product
 
candidates
 
will
 
compete
 
with
 
currently
 
approved
 
therapies
 
for
 
management
 
of
neurodegenerative diseases, such as
 
AD and PD.
 
In AD, four drugs are currently
 
approved by the FDA for the treatment
 
of symptoms
of AD, based
 
on acetylcholinesterase (“AChE”)
 
inhibition and NMDA
 
receptor antagonism. In
 
addition to the
 
marketed therapies, we
are aware of
 
several companies
 
currently developing
 
therapies for AD,
 
including Eisai,
 
Lilly,
 
Hoffman-LaRoche, Abbvie,
 
Johnson &
Johnson, and Novartis.
 
Biogen’s aducanumab
 
was approved by
 
the FDA in June
 
2021 under the
 
accelerated approval pathway,
 
which
allows for
 
earlier approval
 
of drugs
 
that treat
 
serious conditions,
 
and that
 
fill an
 
unmet medical
 
need based
 
on a
 
surrogate endpoint.
Aducanumab failed to achieve approval in Europe and
 
Japan.
 
Eisai and Biogen’s lecanemab was approved by the FDA in
 
January 2023
under an accelerated approval pathway.
Pharmaceutical treatments for PD address its symptoms only and do not treat the underlying causes of PD. The majority of prescription
drugs
 
are
 
dopaminergic
 
medications
 
and
 
act
 
by
 
increasing
 
dopamine,
 
a
 
neurotransmitter.
 
We
 
are
 
aware
 
of
 
several
 
companies
 
with
product
 
candidates
 
at
 
various
 
stages
 
of
 
clinical
 
development,
 
including
 
Sanofi,
 
Kyowa
 
Kirin,
 
Cerevel
 
Therapeutics
 
and
 
Hoffman-
LaRoche. Hoffman-LaRoche is developing prasinezumab,
 
a mAb, as a potential treatment for PD.
 
CGRP-Directed Migraine Treatments
Six migraine treatments have been
 
approved by the FDA that target
 
CGRP.
 
Four of these therapeutics are
 
mAbs and were approved to
prevent or
 
reduce the
 
number of
 
migraine episodes.
 
These medications
 
are galcanezumab
 
(Emgality), which
 
was developed
 
by Lilly;
erenumab (Aimovig),
 
which was
 
developed by
 
Amgen in
 
collaboration with
 
Novartis; fremanezumab
 
(Ajovy), which
 
was developed
by
 
Teva;
 
and
 
eptinezumab
 
(Vyepti),
 
which
 
was
 
developed
 
by
 
Alder,
 
acquired
 
by
 
Lundbeck.
 
Ubrogepant
 
(Ubrelvy),
 
developed
 
by
Allergan,
 
was approved
 
for
 
the treatment
 
of acute
 
migraine episodes;
 
rimegepant
 
(Nurtec),
 
also approved
 
for
 
the treatment
 
of acute
migraine,
 
is sold
 
by Pfizer
 
following
 
its acquisition
 
of Biohaven.
 
Atogepant
 
(Qulipta), developed
 
by AbbVie,
 
was approved
 
for
 
the
preventive treatment of episodic migraine.
PCSK-9 Inhibitors
Three companies
 
currently have
 
PCSK-9 inhibitors
 
approved by
 
the FDA
 
to treat
 
hypercholesterolemia:
 
Regeneron Pharmaceuticals
developed alirocumab (Praluent), a mAb, in
 
collaboration with Sanofi, and Amgen developed
 
evolocumab (Repatha), another mAb, and
 
Novartis is commercializing inclisiran, an RNAi construct, to down-regulate
 
synthesis of PCSK-9.
Collaborations
From
 
time to
 
time, we
 
may
 
enter
 
into licensing
 
and
 
commercialization
 
agreements
 
when they
 
align with
 
our mission,
 
including
 
the
Platform
 
License
 
Agreement
 
described
 
under
 
“—Intellectual
 
Property—Platform
 
License
 
Agreement”
 
and
 
the
 
agreement
 
with
 
our
partner Aurobindo.
Aurobindo License Agreement
In
 
December
 
2020,
 
we
 
entered
 
into
 
an
 
exclusive
 
license
 
agreement
 
with
 
Aurobindo
 
(as
 
amended,
 
the
 
“Aurobindo
 
Agreement”)
 
to
develop
 
and
 
commercialize
 
UB-612
 
to India
 
and
 
other
 
territories.
 
Pursuant
 
to
 
the Aurobindo
 
Agreement,
 
we
 
granted
 
Aurobindo
 
an
exclusive license
 
(with certain
 
rights reserved
 
to us) to
 
develop, manufacture
 
and commercialize UB-612
 
in India
 
and other countries
through
 
UNICEF
 
and
 
a
 
non-exclusive
 
license
 
to
 
develop,
 
manufacture
 
and
 
commercialize
 
UB-612
 
in
 
other
 
selected
 
emerging
 
and
developing markets.
 
The Aurobindo Agreement may be terminated (i) by Aurobindo, without
 
cause at any time after three years following the effective
date or prior to such time if UB-612 fails to meet clinical endpoints or fails in development,
 
(ii) by us, (a) if Aurobindo disputes the
patentability, enforceability
 
or validity of our patent rights related to the UB-612 technology,
 
(b) in case of a suit alleging Aurobindo’s
use of the licensed intellectual property infringes a third party’s
 
intellectual property rights if we reasonably believe the license is no
longer commercially reasonable in light of such claim or (c) without cause
 
at any time after four years following the effective date,
(iii) by either party in the event of the other party’s
 
material breach of its obligations under the Aurobindo Agreement (subject to
 
a
cure period) or (iv) by either party in the event of the other party’s
 
insolvency.
 
Manufacturing
The manufacture of our
 
product candidates encompasses both
 
the manufacture of custom
 
components and the
 
formulation, fill and finish
of the final
 
product. We
 
do not currently
 
own or operate
 
manufacturing facilities
 
for these processes.
 
We
 
currently rely upon
 
contract
manufacturing organizations, including those mentioned below,
 
to produce our product candidates for both pre-clinical and clinical use
and
 
will continue
 
to rely
 
upon
 
these
 
relationships
 
for
 
commercial
 
manufacturing
 
if any
 
of
 
our
 
product
 
candidates
 
obtain
 
regulatory
35
approval.
 
Although
 
we rely
 
upon contract
 
manufacturers,
 
we also
 
have
 
personnel
 
with extensive
 
manufacturing
 
experience that
 
can
oversee the relationships with our manufacturing partners.
Historically,
 
we
 
have
 
depended
 
heavily
 
on
 
UBI
 
and
 
its
 
affiliates
 
for
 
our
 
business
 
operations,
 
including
 
the
 
provision
 
of
 
research,
development
 
and
 
manufacturing
 
services.
 
Currently,
 
UBIA
 
provides
 
testing
 
services
 
for
 
UB-312
 
and
 
UB-612,
 
UBI
 
Pharma
 
Inc.
(“UBIP”)
 
provides
 
testing
 
relating
 
to
 
formulation-fill-finish
 
services
 
for
 
UB-312,
 
and
 
United
 
BioPharma,
 
Inc.
 
(“UBP”)
 
is
 
the
 
sole
manufacturer of protein for UB-612. Our commercial arrangements with UBI and
 
its affiliates are described in more detail below.
Formulation-fill-finish services for UB-612 are provided by
 
multiple contract manufacturers to ensure adequate capacity
 
and minimize
supply
 
chain
 
risks.
 
For
 
supply
 
of
 
our
 
other
 
custom
 
components,
 
in
 
addition
 
to
 
protein
 
manufacturing
 
conducted
 
by
 
UBP,
 
we
 
have
engaged third party
 
CMOs, including C
 
S Bio Co. (“CSBio”)
 
as our primary
 
peptide supplier for
 
UB-612 peptides and Wuxi
 
STA
 
for
process development and manufacturing services of oligonucleotides.
 
UBI Group Manufacturing Partnership
We
 
primarily
 
rely
 
on
 
our
 
relationships
 
with
 
third-party
 
contract
 
manufacturing
 
organizations
 
to
 
produce
 
product
 
candidates for
 
our
clinical trials. Historically, we have heavily depended on UBI as a manufacturing partner for these efforts. In support of our COVID-19
program (UB-612), we have entered into a master services agreement with UBP and an additional master services agreement with UBI,
UBIA and UBP.
 
Pursuant to these
 
agreements, UBI and
 
its affiliates have
 
provided research, development,
 
testing and manufacturing
services to
 
us and
 
continue to provide
 
manufacturing services
 
for our
 
protein. Payment
 
terms are
 
mutually agreed
 
in connection
 
with
each work order
 
relating to services
 
rendered. Our
 
agreement with UBP
 
will expire on
 
the later of
 
March 2024 and
 
the completion of
all services
 
under the
 
last work
 
order executed
 
prior to
 
such scheduled
 
expiration and
 
our agreement
 
with UBI,
 
UBIA and
 
UBP will
expire on
 
the later
 
of September
 
2023 and
 
the completion
 
of all
 
services under
 
the last
 
work order
 
executed prior
 
to such
 
scheduled
expiration. We also have a management
 
services agreement with
 
UBI pursuant to
 
which UBI has
 
provided research and prior
 
back office
administrative services to us and acts as our agent with respect to certain matters relating our COVID-19 program. UBI is compensated
for its services on a cost-plus basis. The agreement terminates upon mutual
 
agreement between the parties.
In support of our chronic disease pipeline, we
 
have entered into master service agreements with
 
each of UBI, UBIA and UBIP. Pursuant
to these agreements, UBI currently provides limited research services to us on a cost-plus
 
basis, UBIA provides testing services related
to UB-312 clinical trial material already manufactured and UBIP has provided manufacturing, quality control, testing, validation, GMP
warehousing
 
and supply
 
services to
 
us for
 
UB-312 on
 
payment terms
 
agreed in
 
connection with
 
work orders
 
relating to
 
the services
rendered. UBI
 
and its affiliates
 
no longer provide
 
clinical or manufacturing
 
services for other
 
programs. These agreements
 
may all be
terminated for convenience upon 180 days’ notice or less.
We have
 
also entered into a research
 
and development services agreement
 
with UBI. Pursuant to
 
this agreement, UBI and
 
its affiliates
may
 
provide
 
research
 
and
 
development
 
services
 
to
 
us.
 
Service
 
fees
 
payable
 
by
 
us
 
to
 
UBI
 
for
 
research
 
and
 
development
 
projects
undertaken in accordance with the research and development
 
plan would be determined by a joint steering committee
 
and set forth in a
research and development plan. Any aggregate
 
services fees payable by us under the research and
 
development services agreement are
subject to
 
a quarterly
 
cap throughout
 
the term of
 
the agreement.
 
The research
 
and development
 
services agreement
 
expires in
 
August
2026.
Intellectual Property
Our ability
 
to obtain
 
and maintain
 
intellectual property
 
protection for
 
our product
 
candidates and
 
core technologies
 
is fundamental
 
to
the
 
long-term
 
success
 
of
 
our
 
business.
 
We
 
rely
 
on
 
a
 
combination
 
of
 
intellectual
 
property
 
protection
 
strategies,
 
including
 
patents,
trademarks, trade secrets, license agreements,
 
confidentiality policies and procedures, nondisclosure
 
agreements, invention assignment
agreements and technical measures designed to
 
protect the intellectual property and
 
commercially valuable confidential information and
data used in our business.
In summary, our patent estate includes issued patents and patent applications
 
which claims cover our Vaxxine
 
Platform and each of our
product candidates. As of December 31, 2022 our patent estate include
 
d
 
three U.S. issued patents, twelve U.S. patent applications, five
U.S. provisional
 
patent applications,
 
four pending
 
Patent Cooperation
 
Treaty (“PCT”)
 
patent applications,
 
60 issued
 
non-U.S. patents
and 158 pending non-U.S. patent applications.
For our
 
product
 
candidates targeting
 
the prevention
 
and treatment
 
of neurodegenerative
 
disease, including
 
claims covering
 
UB-311,
UB-312, and
 
anti-tau patent
 
rights are
 
provided by
 
patents and
 
patent applications,
 
the majority
 
of which
 
are being
 
prosecuted in
 
the
United States, Australia,
 
Brazil, Canada, China,
 
the EPO, Hong
 
Kong, Indonesia, India,
 
Israel, Japan, the
 
Republic of Korea,
 
Mexico,
Russia, Singapore, South Africa, Taiwan and
 
the United Arab Emirates directed to peptide vaccines for the prevention and treatment of
neurodegenerative
 
diseases.
 
These
 
issued
 
patents
 
and
 
patent
 
applications,
 
if
 
issued,
 
are
 
expected
 
to
 
expire
 
between
 
2023
 
and
 
2043,
excluding any patent term adjustments or patent term extensions.
36
For our product candidates directed
 
to peptide immunogens targeting
 
CGRP and formulations thereof for
 
the prevention and treatment
of migraine, including UB-313,
 
patent rights may be
 
provided by a
 
patent family being prosecuted
 
in the United
 
States, Australia, Brazil,
Canada, China, India, Indonesia,
 
Japan, Mexico, Russia,
 
the Republic of
 
Korea, Singapore, Taiwan and the United
 
Arab Emirates. These
patent applications, if issued, are expected to expire in 2039, excluding
 
any patent term adjustments or patent term extensions.
For
 
our
 
product
 
candidates
 
targeting
 
cholesterol
 
and
 
cardiovascular
 
disease,
 
including
 
our
 
anti-PCSK9
 
product
 
candidate
 
targeting
PCSK9 and
 
formulations thereof
 
for prevention
 
and treatment
 
of PCSK9-mediated
 
disorders, we
 
have pending
 
patent applications
 
in
the United States,
 
Australia, Brazil, Canada,
 
India, Indonesia, Japan,
 
Mexico, the Philippines,
 
the Republic of
 
Korea, Taiwan,
 
and the
United
 
Arab Emirates.
 
These patent
 
applications,
 
if issued,
 
are expected
 
to expire
 
in 2041,
 
excluding any
 
patent
 
term adjustment
 
or
patent term extension.
For our product
 
candidates targeting SARS-CoV-2, including UB-612 for COVID-19, we
 
have pending patent applications
 
in the United
States,
 
Australia,
 
Brazil,
 
Canada,
 
India,
 
Indonesia,
 
Japan,
 
Pakistan,
 
the
 
Philippines,
 
the
 
Republic
 
of
 
Korea,
 
Russia,
 
Saudi
 
Arabia,
 
Taiwan, United Arab Emirates, and Vietnam, four pending
 
PCT patent applications and
 
one provisional patent applications
 
in the United
States. These patent applications, if issued, and any U.S. or non-U.S. patent issuing
 
from the PCT or provisional patent applications, are
expected to expire between 2041 and 2042, excluding any patent term adjustments
 
or patent term extensions.
For each product
 
candidate utilizing the
 
Vaxxine
 
platform, additional patent
 
rights directed to
 
artificial T helper
 
cell epitopes and
 
to a
CpG delivery system
 
are provided by patents
 
and patent applications, the
 
majority of which
 
are being prosecuted
 
in the United States,
Australia, Austria,
 
Belgium, Brazil,
 
Canada, Chile,
 
China, Colombia,
 
Denmark,
 
the EPO,
 
France, Germany,
 
Hong Kong,
 
Indonesia,
India, Ireland, Israel, Italy, Japan, Mexico,
 
the Netherlands, New Zealand, Peru, Philippines, the Republic of Korea, Russia, Singapore,
South
 
Africa,
 
Spain,
 
Sweden,
 
Switzerland/Liechtenstein,
 
Taiwan,
 
Thailand,
 
the
 
United
 
Arab
 
Emirates,
 
the
 
United
 
Kingdom
 
and
Vietnam.
 
These issued patents
 
and patent applications,
 
if issued, are
 
expected to expire
 
between 2023
 
and 2039, excluding
 
any patent
term adjustments or patent term extensions.
The term of
 
individual patents depends on
 
the countries in
 
which they are obtained.
 
The patent term
 
is 20 years
 
from the earliest
 
effective
filing date of
 
a non-provisional patent
 
application in most
 
of the countries
 
in which we
 
file, including the
 
United States. In
 
the United
States, a
 
patent’s
 
term may
 
be lengthened
 
by patent
 
term adjustment,
 
which compensates
 
a patentee
 
for administrative
 
delays by
 
the
USPTO in
 
examining and
 
granting a
 
patent, or
 
may be
 
shortened if
 
a patent
 
is terminally disclaimed
 
over an
 
earlier filed
 
patent. The
term of a patent
 
that covers a drug
 
or biological product
 
may also be eligible
 
for patent term extension
 
when FDA approval
 
is granted
for a
 
portion of
 
the term
 
effectively
 
lost as
 
a result
 
of the
 
FDA regulatory
 
review period,
 
subject to
 
certain limitations
 
and provided
statutory and regulatory requirements are met.
In addition to our reliance on patent protection for our inventions, products and technologies, we also seek to protect our brand
 
through
the procurement of
 
trademark rights. We
 
own registered trademarks
 
and pending trademark
 
applications for our
 
brands, including our
“Vaxxinity”, “United Neuroscience” and “COVAXX”
 
brands and other related
 
names and logos, in
 
the United States
 
and certain foreign
jurisdictions.
Furthermore, we rely
 
upon trade secrets
 
and know-how and
 
continuing technological innovation
 
to develop and
 
maintain our competitive
position. However,
 
trade secrets and
 
know-how can be
 
difficult to protect.
 
We
 
generally control access
 
to and use
 
of our trade
 
secrets
and know-how, through the use
 
of internal and
 
external controls, including
 
by entering into
 
nondisclosure and confidentiality agreements
with
 
our
 
employees
 
and
 
third
 
parties.
 
We
 
cannot
 
guarantee,
 
however,
 
that
 
we
 
have
 
executed
 
such
 
agreements
 
with
 
all
 
applicable
counterparties, that such agreements will not be breached or that these
 
agreements will afford us adequate protection of our intellectual
property and proprietary rights.
 
Furthermore, although we take
 
steps to protect
 
our proprietary information
 
and trade secrets,
 
third parties
may independently develop substantially equivalent proprietary information and
 
techniques or otherwise gain access
 
to our trade secrets
or disclose our technology.
 
As a result, we may not be able to meaningfully protect our trade secrets. For further discussion of the risks
relating to intellectual property,
 
see “Risk Factors—Risks Related to Our Intellectual Property Rights.”
Platform License Agreement
In August 2021,
 
Vaxxinity
 
entered into a
 
license agreement (the
 
“Platform License Agreement”)
 
with UBI and
 
certain of its
 
affiliates
(collectively, the “Licensors”) that expanded intellectual
 
property rights previously licensed
 
under the Original UBI
 
Licenses (as defined
below).
 
Pursuant to
 
the Platform
 
License Agreement,
 
Vaxxinity
 
obtained
 
a worldwide,
 
sublicensable
 
(subject to
 
certain conditions),
perpetual, fully paid-up, royalty-free (i) exclusive license (even
 
as to the Licensors) under all patents owned or otherwise controlled
 
by
the Licensors or
 
their affiliates existing
 
as of the effective
 
date of the
 
Platform License Agreement,
 
(ii) exclusive license
 
(except as to
the Licensors) under all patents owned
 
or otherwise controlled by the
 
Licensors or their affiliates arising
 
after the effective date during
the term of the Platform
 
License Agreement, and (iii)
 
non-exclusive license under all
 
know-how owned or otherwise
 
controlled by the
Licensors or their affiliates existing as of the effective date or arising during the term of the Platform License Agreement, in each of the
foregoing
 
cases,
 
to
 
research,
 
develop,
 
make,
 
have
 
made,
 
utilize,
 
import,
 
export,
 
market,
 
distribute,
 
offer
 
for
 
sale,
 
sell,
 
have
 
sold,
commercialize or otherwise exploit
 
peptide-based vaccines in the field
 
of all human prophylactic and
 
therapeutic uses, except for
 
such
vaccines related
 
to human immunodeficiency
 
virus (HIV), herpes
 
simplex virus (HSE)
 
and Immunoglobulin
 
E (IgE). The
 
patents and
patent applications licensed under the Platform License Agreement include claims directed to a CpG delivery system, artificial T helper
37
cell
 
epitopes
 
and
 
certain
 
designer
 
peptides
 
and
 
proteins
 
utilized
 
in
 
UB-612.
 
As
 
partial
 
consideration
 
for
 
the
 
rights
 
and
 
licenses
 
we
received pursuant to the Platform License Agreement,
 
we granted UBI a warrant to purchase 1,928,020
 
shares of our Class A common
stock (“UBI Warrant”). The UBI Warrant is exercisable at an exercise price
 
of $12.45 per share
 
(subject to adjustment pursuant thereto),
is not subject to vesting, and has a term of five years.
Vaxxinity
 
has the first right to control
 
the filing, prosecution, maintenance and
 
enforcement of the licensed patents
 
at Vaxxinity’s
 
own
expense, subject to
 
the Licensors’ right
 
to comment on
 
and review any
 
patent filings. The
 
Platform License Agreement
 
shall continue
until the parties mutually consent in writing to terminate the agreement. Upon such termination,
 
all licenses granted under the Platform
License Agreement
 
shall terminate
 
and Vaxxinity
 
will assign any
 
regulatory documentation
 
previously assigned
 
to Vaxxinity
 
back to
the Licensors.
Pricing, Coverage and Reimbursement
Sales of our product
 
candidates in the United
 
States will depend, in
 
part, on the
 
extent to which third-party
 
payors, including government
health programs
 
such as Medicare
 
and Medicaid,
 
commercial insurance
 
and managed
 
health care organizations
 
provide coverage
 
and
establish
 
adequate
 
reimbursement
 
levels
 
for
 
such
 
product
 
candidates.
 
The
 
process
 
for
 
determining
 
whether
 
a
 
third-party
 
payor
 
will
provide coverage for a pharmaceutical or biological product is typically separate from the process for setting the price of
 
such a product
or for establishing
 
the reimbursement rate
 
that the payor
 
will pay for the
 
product once coverage
 
is approved, and
 
we may also need
 
to
provide
 
discounts
 
to
 
purchasers,
 
private
 
health
 
plans
 
or
 
government
 
healthcare
 
programs,
 
as
 
increasingly,
 
third-party
 
payors
 
are
requiring that
 
drug companies
 
provide them
 
with predetermined
 
discounts from
 
list prices
 
and are
 
challenging the
 
prices charged
 
for
medical products.
 
As a
 
result, a
 
third-party payor’s
 
decision to
 
provide coverage
 
for a
 
pharmaceutical or
 
biological product
 
does not
imply that the reimbursement rate will be adequate for commercial
 
viability, and inadequate reimbursement
 
rates, including significant
patient
 
cost
 
sharing
 
obligations,
 
may
 
deter
 
patients
 
from
 
selecting
 
our
 
product
 
candidates.
 
Obtaining
 
coverage
 
and
 
reimbursement
approval of
 
a product
 
from a third-party
 
payor is
 
a time-consuming
 
and costly
 
process that
 
could require
 
us to
 
provide to
 
each payor
supporting scientific,
 
clinical and
 
cost-effectiveness data
 
for the use
 
of our product
 
on a payor
 
-by-payor basis,
 
with no
 
assurance that
coverage and adequate reimbursement will be obtained. Third-party payors may limit coverage to specific products on an approved list,
also known as a formulary,
 
which might not include all of the approved products for a particular indication.
Further,
 
no uniform
 
policy
 
for coverage
 
and
 
reimbursement
 
exists in
 
the United
 
States, and
 
coverage
 
and reimbursement
 
can differ
significantly from payor to
 
payor. In general, factors a
 
payor considers in
 
determining coverage and reimbursement
 
are based on
 
whether
the product is a covered
 
benefit under its health plan;
 
safe, effective, and medically
 
necessary, including
 
its regulatory approval status;
medically appropriate for the specific patient; cost-effective; and neither experimental nor investigational. Third-party payors often rely
upon Medicare coverage policy and payment limitations in setting their own reimbursement rates, but also have their own methods and
approval process apart
 
from Medicare determinations.
 
As such, one
 
third-party payor’s
 
decision to
 
cover a particular
 
medical product
or service does not ensure that other payors will also provide coverage for the medical product or service, and the level of coverage and
reimbursement can differ significantly from
 
payor to payor. Even if favorable
 
coverage and reimbursement status is attained for
 
one or
more products for which we receive
 
regulatory approval, less favorable coverage policies and reimbursement rates
 
may be implemented
in the future.
Product Approval and Government Regulation
Government authorities in the
 
United States, at the federal,
 
state and local level, and
 
other countries extensively
 
regulate, among other
things,
 
the
 
research,
 
development,
 
testing,
 
manufacture,
 
quality
 
control,
 
approval,
 
labeling,
 
packaging,
 
storage,
 
record-keeping,
promotion, advertising, distribution, post-approval monitoring and reporting, marketing and
 
export and import of products such
 
as those
we are
 
developing.
 
Any product
 
candidate
 
that we
 
develop
 
must be
 
approved
 
by the
 
FDA before
 
it may
 
be legally
 
marketed
 
in the
United States and by the appropriate foreign regulatory agency before
 
it may be legally marketed in foreign countries.
38
U.S. Drug Development Process
In the United
 
States, the development,
 
manufacturing and marketing
 
of human drugs
 
and vaccines are
 
subject to extensive
 
regulation.
The FDA
 
regulates
 
drugs
 
under the
 
Federal
 
Food,
 
Drug and
 
Cosmetic Act
 
(“FDCA”)
 
and
 
implementing
 
regulations,
 
and biological
products, including vaccines, under provisions of
 
the FDCA and the Public Health Service Act (“PHSA”). Drugs and
 
vaccines are also
subject
 
to
 
other
 
federal,
 
state
 
and
 
local
 
statutes
 
and
 
regulations.
 
The
 
process
 
of
 
obtaining
 
regulatory
 
approvals
 
and
 
the
 
subsequent
compliance
 
with appropriate
 
federal, state,
 
local and
 
foreign
 
statutes and
 
regulations
 
require the
 
expenditure
 
of substantial
 
time and
financial
 
resources.
 
Failure
 
to
 
comply
 
with
 
the
 
applicable
 
U.S.
 
requirements
 
at
 
any
 
time
 
during
 
the
 
product
 
development
 
process,
approval process or after approval, may subject an
 
applicant to administrative or judicial sanctions. FDA sanctions
 
could include refusal
to approve
 
pending applications,
 
withdrawal
 
of an
 
approval, clinical
 
hold,
 
warning letters,
 
product
 
recalls,
 
product
 
seizures, total
 
or
partial
 
suspension
 
of
 
production
 
or
 
distribution,
 
injunctions,
 
fines,
 
refusals
 
of
 
government
 
contracts,
 
debarment,
 
restitution,
disgorgement or civil
 
or criminal penalties. Any
 
agency or judicial enforcement
 
action could have a
 
material adverse effect on
 
us. The
process required by the FDA before a
 
drug or biological product may be marketed in
 
the United States generally involves the following:
•
 
completion of
 
nonclinical laboratory
 
tests, animal
 
studies and
 
formulation and
 
stability studies
 
according to
 
good laboratory
practices, or GLPs and other applicable regulations;
•
 
submission to the FDA of an application for an IND, which must become
 
effective before human clinical trials may begin;
•
 
performance of
 
adequate and
 
well-controlled human
 
clinical trials according
 
to the
 
FDA’s
 
good clinical
 
practice regulations
commonly
 
referred to
 
as GCPs,
 
among
 
other requirements,
 
to establish
 
the safety
 
and efficacy
 
of the
 
proposed drug
 
for
 
its
intended uses;
•
 
submission to the FDA of an NDA or BLA for a new drug;
•
 
satisfactory completion
 
of an FDA
 
inspection of
 
the manufacturing
 
facility or
 
facilities where
 
the drug
 
is produced
 
to assess
compliance
 
with
 
the
 
FDA’s
 
cGMP,
 
to
 
assure
 
that
 
the
 
facilities,
 
methods
 
and
 
controls
 
are
 
adequate
 
to
 
preserve
 
the
 
drug’s
identity, strength, quality
 
and purity;
•
 
potential FDA audit of the nonclinical and clinical trial sites that generated the
 
data in support of the NDA or BLA; and
•
 
FDA review and approval of the NDA or BLA.
The
 
lengthy
 
process of
 
seeking
 
required
 
approvals
 
and
 
the continuing
 
need
 
for
 
compliance
 
with
 
applicable
 
statutes
 
and
 
regulations
require the expenditure of substantial resources and approvals are inherently
 
uncertain.
Before testing any compounds with potential therapeutic value in humans, the product
 
candidate enters the pre-clinical study stage. Pre-
clinical tests,
 
also referred
 
to as
 
nonclinical studies,
 
include laboratory
 
evaluations of
 
product chemistry,
 
toxicity and
 
formulation, as
well as animal studies
 
to assess the potential safety
 
and activity of the
 
product candidate. The Consolidated Appropriations Act
 
for 2023,
signed into law on December 29, 2022, (P.L.
 
117-328) amended both the FDCA and PHSA to specify that nonclinical testing for drugs
and biologics, respectively,
 
may,
 
but is not
 
required to, include
 
in vivo animal
 
testing. According to
 
the amended language,
 
a sponsor
may
 
fulfill
 
nonclinical
 
testing
 
requirements
 
by
 
completing
 
various
 
in
 
vitro
 
assays
 
(e.g.,
 
cell-based
 
assays,
 
organ
 
chips,
 
or
microphysiological
 
systems),
 
in
 
silico
 
studies
 
(i.e.,
 
computer
 
modeling),
 
other
 
human
 
or
 
non-human
 
biology-based
 
tests
 
(e.g.,
bioprinting), or in vivo animal tests.
The conduct of
 
the pre-clinical tests
 
must comply with
 
federal regulations
 
and requirements including
 
GLP.
 
The sponsor must
 
submit
the results of the pre-clinical tests, together with manufacturing information, analytical data, any available clinical data or literature and
a proposed clinical protocol, to the FDA as
 
part of the IND. The IND automatically becomes effective 30 days after receipt
 
by the FDA,
unless the FDA imposes a
 
clinical hold within that 30-day
 
time period. In such a case,
 
the IND sponsor and the
 
FDA must resolve any
outstanding concerns
 
before the
 
clinical trial
 
can begin.
 
The FDA
 
may also
 
impose clinical
 
holds on
 
a product
 
candidate at
 
any time
before or
 
during clinical
 
trials due
 
to safety
 
concerns or
 
non-compliance. Accordingly,
 
we cannot
 
be sure
 
that submission
 
of an
 
IND
will result in the FDA allowing clinical trials to begin, or that, once begun,
 
issues will not arise that suspend or terminate such trial.
Clinical trials
 
involve the
 
administration of
 
the product
 
candidate to
 
healthy volunteers
 
or patients
 
under the
 
supervision of
 
qualified
investigators,
 
generally
 
physicians
 
not
 
employed
 
by
 
or
 
under
 
the
 
trial
 
sponsor’s
 
direct
 
control.
 
Clinical
 
trials
 
are
 
conducted
 
under
protocols detailing,
 
among other things,
 
the objectives of
 
the clinical trial,
 
dosing procedures,
 
subject selection
 
and exclusion
 
criteria,
and the parameters to be used to monitor subject safety.
 
Each protocol must be submitted to the FDA as part of the IND. Congress also
recently amended the FDCA, as part of the Consolidated Appropriations Act for 2023, in order to require sponsors of a Phase 3 clinical
trial, or
 
other “pivotal
 
study” of
 
a new
 
drug to
 
support marketing
 
authorization, to
 
design and
 
submit a
 
diversity action
 
plan for
 
such
clinical
 
trial.
 
The
 
action
 
plan
 
must
 
include
 
the
 
sponsor’s
 
diversity
 
goals
 
for
 
enrollment,
 
as
 
well
 
as
 
a
 
rationale
 
for
 
the
 
goals
 
and
 
a
description of how the sponsor
 
will meet them. Sponsors must
 
submit a diversity action plan
 
to the FDA by
 
the time the sponsor submits
the
 
relevant
 
clinical
 
trial protocol
 
to the
 
agency for
 
review.
 
The FDA
 
may
 
grant
 
a
 
waiver
 
for
 
some
 
or all
 
of the
 
requirements
 
for a
39
diversity
 
action
 
plan.
 
It is
 
unknown
 
at this
 
time how
 
the diversity
 
action
 
plan
 
may
 
affect
 
Phase 3
 
trial planning
 
and
 
timing
 
or what
specific information
 
FDA will
 
expect in
 
such plans,
 
but if
 
the FDA
 
objects to
 
a sponsor’s
 
diversity action
 
plan or
 
otherwise requires
significant changes to be made,
 
it could delay initiation of
 
the relevant clinical trial. Clinical
 
trials must be conducted in
 
accordance with
the FDA’s
 
regulations comprising the
 
good clinical practices requirements.
 
Further, each clinical
 
trial must be reviewed
 
and approved
by an independent
 
IRB at or servicing
 
each institution at which
 
the clinical trial
 
will be conducted.
 
An IRB is charged
 
with protecting
the welfare and rights of trial participants and considers
 
such items as whether the risks to individuals participating
 
in the clinical trials
are minimized and are
 
reasonable in relation to
 
anticipated benefits. The IRB
 
also approves the form
 
and content of the
 
informed consent
that
 
must
 
be
 
signed
 
by
 
each
 
clinical
 
trial
 
subject
 
or
 
his
 
or
 
her
 
legal
 
representative
 
and
 
provide
 
oversight
 
for
 
the
 
clinical
 
trial
 
until
completed.
Human clinical trials are typically conducted in three sequential phases that may
 
overlap or be combined:
•
Phase 1
. The drug is initially introduced into healthy human subjects and tested for
 
safety, dosage
tolerance, absorption, metabolism, distribution and excretion. In the
 
case of some products for severe or life-threatening diseases,
especially when the product may be too inherently toxic to ethically administer
 
to healthy volunteers, the initial human testing may be
conducted in patients;
•
Phase 2
. The drug is evaluated in a limited patient population to identify possible adverse effects
 
and safety
risks, to preliminarily evaluate the efficacy of the product
 
for specific targeted diseases and to determine dosage tolerance, optimal
dosage and dosing schedule; and
•
Phase 3
. Clinical trials are undertaken to further evaluate dosage, clinical efficacy
 
and safety in an
expanded patient population at geographically dispersed clinical trial sites. These
 
clinical trials are intended to establish the overall
risk/benefit ratio of the product and provide an adequate basis for product labeling.
 
Generally, a well-controlled
 
Phase 3 clinical trial is
required by the FDA for approval of an NDA or BLA.
Post-approval clinical
 
trials, sometimes referred
 
to as Phase
 
4 clinical trials,
 
may be conducted
 
after initial marketing
 
approval. These
clinical trials are used to gain additional experience from the treatment of patients
 
in the intended therapeutic indication.
During all phases
 
of clinical development,
 
regulatory agencies require extensive
 
monitoring and auditing
 
of all clinical
 
activities, clinical
data and clinical trial investigators. Annual progress reports detailing
 
the results of the clinical trials must be submitted to the FDA and
written IND safety
 
reports must be
 
promptly submitted to
 
the FDA and the
 
investigators for serious
 
and unexpected adverse
 
events or
any finding
 
from tests in
 
laboratory animals
 
that suggests a
 
significant risk
 
for human
 
subjects. Phase 1,
 
Phase 2
 
and Phase 3
 
clinical
trials may
 
not be
 
completed successfully
 
within any
 
specified period,
 
if at
 
all. The
 
FDA or
 
the sponsor
 
or its
 
data safety
 
monitoring
board may
 
suspend a
 
clinical trial
 
at any
 
time on
 
various grounds,
 
including a
 
finding that
 
the research
 
subjects or
 
patients are
 
being
exposed to
 
an unacceptable
 
health risk.
 
Similarly,
 
an IRB
 
can suspend
 
or terminate
 
approval of
 
a clinical
 
trial at
 
its institution
 
if the
clinical trial is
 
not being conducted in
 
accordance with the
 
IRB’s requirements or if the
 
drug has been
 
associated with unexpected serious
harm to patients.
Concurrently with clinical
 
trials, companies usually
 
complete additional nonclinical
 
studies and
 
must also
 
develop additional information
about the chemistry
 
and physical characteristics
 
of the drug
 
as well as
 
finalize a process
 
for manufacturing the
 
product in commercial
quantities in accordance with
 
cGMP requirements. The
 
manufacturing process must be
 
capable of consistently
 
producing quality batches
of the product candidate and, among other things, must develop methods for testing the identity, strength, quality
 
and purity of the final
drug. For biological products in particular, the PHSA
 
emphasizes the importance of manufacturing control for
 
products whose attributes
cannot be precisely
 
defined in
 
order to help
 
reduce the
 
risk of
 
the introduction of
 
adventitious agents. 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.
U.S. Review and Approval Processes
Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product
development, nonclinical studies and clinical trials, along with descriptions
 
of the manufacturing process, analytical tests conducted on
the
 
chemistry
 
of
 
the
 
drug,
 
proposed
 
labeling
 
and
 
other
 
relevant
 
information
 
are
 
submitted
 
to
 
the
 
FDA
 
as
 
part
 
of
 
an
 
NDA
 
or
 
BLA
requesting approval to market the product. The submission of an NDA or BLA is subject to the payment of substantial fees; a waiver of
such fees may be obtained under certain limited circumstances.
In addition, under the
 
Pediatric Research Equity Act (“PREA”),
 
an NDA or BLA or
 
supplement to an NDA or
 
BLA must contain data
to
 
assess the
 
safety
 
and
 
effectiveness
 
of
 
the
 
drug for
 
the
 
claimed
 
indications
 
in all
 
relevant
 
pediatric
 
subpopulations
 
and
 
to
 
support
dosing and administration for each pediatric subpopulation for which the product is safe
 
and effective. The FDA may grant deferrals for
submission of data or full
 
or partial waivers. Unless
 
otherwise required by regulation, PREA does
 
not apply to any
 
drug for an indication
for which orphan designation has been granted.
40
The FDA reviews
 
all NDAs or
 
BLAs submitted to
 
determine if they
 
are substantially complete
 
before it accepts
 
them for filing.
 
If the
FDA determines that an NDA or BLA is incomplete or the application is found to be non-navigable, the filing may be refused and must
be re-submitted for consideration.
 
Once the submission is accepted
 
for filing, the FDA begins an
 
in-depth review of the NDA or
 
BLA.
Under the goals and policies agreed to by the
 
FDA under the Prescription Drug User Fee Act
 
(“PDUFA”), the FDA has 10 months from
acceptance of filing in which to
 
complete its initial review of
 
a standard NDA or BLA
 
and respond to the applicant, and
 
six months from
acceptance of
 
filing for
 
a priority
 
NDA or
 
BLA. The
 
FDA does
 
not always
 
meet its
 
PDUFA
 
goal dates.
 
The review
 
process and
 
the
PDUFA
 
goal date
 
may be
 
extended by
 
three months
 
or longer
 
if the
 
FDA requests
 
or the
 
NDA or
 
BLA sponsor
 
otherwise provides
additional information or clarification regarding information already
 
provided in the submission before the PDUFA
 
goal date.
After the NDA or BLA submission is accepted for filing, the FDA reviews the NDA or BLA
 
to determine, among other things, whether
the proposed product is safe and effective for
 
its intended use, and whether the
 
product is being manufactured in accordance with
 
cGMP
to assure and preserve the
 
product’s identity,
 
strength, quality and purity.
 
The FDA may refer applications
 
for novel drug or biological
products or drug or
 
biological products which present difficult questions
 
of safety or efficacy to
 
an advisory committee, typically a
 
panel
that includes clinicians and
 
other experts, for
 
review, evaluation and a recommendation as
 
to whether the
 
application should be approved
and
 
under
 
what
 
conditions.
 
The
 
FDA
 
is
 
not
 
bound
 
by
 
the
 
recommendations
 
of
 
an
 
advisory
 
committee,
 
but
 
it
 
considers
 
such
recommendations
 
carefully
 
when
 
making
 
decisions.
 
During
 
the
 
drug
 
approval
 
process,
 
the
 
FDA
 
also
 
will
 
determine
 
whether
 
a
 
risk
evaluation and mitigation strategy, or REMS is necessary to ensure that the benefits of the drug outweigh its risks and to assure the safe
use
 
of
 
the
 
drug.
 
The
 
REMS could
 
include
 
medication
 
guides, physician
 
communication
 
plans,
 
assessment
 
plans
 
and/or
 
elements
 
to
assure
 
safe
 
use,
 
such
 
as restricted
 
distribution
 
methods,
 
patient
 
registries
 
or
 
other
 
risk
 
minimization
 
tools.
 
The FDA
 
determines
 
the
requirement for a
 
REMS, as well as
 
the specific REMS
 
provisions, on a
 
case-by-case basis. If
 
the FDA concludes
 
a REMS is needed,
the
 
sponsor
 
of
 
the NDA
 
or BLA
 
must
 
submit
 
a proposed
 
REMS; the
 
FDA will
 
not
 
approve
 
the NDA
 
or
 
BLA without
 
a
 
REMS,
 
if
required.
Before approving an NDA or BLA, the FDA will inspect the facilities at which the product is manufactured. The FDA will not approve
the product unless it
 
determines that the manufacturing processes
 
and facilities are in
 
compliance with cGMP requirements
 
and adequate
to assure consistent
 
production of
 
the product
 
within required specifications.
 
The FDA requires
 
vaccine manufacturers
 
to submit data
supporting
 
the
 
demonstration
 
of
 
consistency
 
between
 
manufacturing
 
batches,
 
or
 
lots.
 
The
 
FDA
 
works
 
together
 
with
 
vaccine
manufacturers to develop a lot
 
release protocol, the tests conducted on
 
each lot of vaccine post-approval. Additionally, before approving
an NDA or
 
BLA, the FDA
 
will typically inspect the
 
sponsor and one
 
or more clinical
 
sites to assure
 
that the clinical
 
trials were conducted
in
 
compliance
 
with
 
IND
 
study
 
requirements
 
and
 
with
 
GCPs.
 
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.
The NDA
 
or BLA
 
review and
 
approval process
 
is lengthy
 
and difficult
 
and the
 
FDA may
 
refuse to
 
approve an
 
NDA or
 
BLA if
 
the
applicable regulatory
 
criteria are
 
not satisfied
 
or may
 
require additional
 
clinical data
 
or other
 
data and
 
information. Even
 
if such
 
data
and
 
information
 
is submitted,
 
the FDA
 
may
 
ultimately
 
decide
 
that the
 
NDA or
 
BLA does
 
not satisfy
 
the criteria
 
for
 
approval.
 
Data
obtained from clinical
 
trials are not always
 
conclusive and the
 
FDA may interpret
 
data differently
 
than we interpret
 
the same data. An
approval
 
letter
 
authorizes
 
commercial
 
marketing
 
of
 
the
 
drug
 
with
 
specific
 
prescribing
 
information
 
for
 
specific
 
indications,
 
while
 
a
complete response
 
letter indicates
 
that the
 
review cycle
 
of the
 
application is
 
complete and
 
the application
 
will not
 
be approved
 
in its
present form. The complete response letter usually describes all of
 
the specific deficiencies in the NDA or BLA identified by the
 
FDA.
The deficiencies identified may
 
be minor,
 
for example, requiring labeling
 
changes, or major,
 
for example, requiring additional
 
clinical
trials. Additionally, the complete response letter may include
 
recommended actions that the applicant might
 
take to place the
 
application
in a condition
 
for approval. If
 
a complete response
 
letter is issued,
 
the applicant
 
may either submit
 
new information,
 
addressing all of
the deficiencies identified in the letter, or withdraw
 
the application.
If a product
 
receives regulatory approval,
 
the approval may be
 
significantly limited to
 
specific diseases and
 
dosages or the
 
indications
for use may
 
otherwise be limited,
 
which could restrict
 
the commercial value
 
of the product. Further,
 
the FDA may require
 
that certain
contraindications, warnings or precautions be included in
 
the product labeling. In addition,
 
the FDA may require
 
post-marketing clinical
trials, sometimes referred to as Phase 4 clinical trials, which are designed to further assess a product’s safety and effectiveness and
 
may
require testing and
 
surveillance programs to
 
monitor the safety
 
of approved products
 
that have been
 
commercialized. 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
The
 
FDA is
 
authorized
 
to designate
 
certain
 
products
 
for
 
expedited
 
development
 
or review
 
if
 
they
 
are intended
 
to address
 
an
 
unmet
medical
 
need
 
in
 
the
 
treatment
 
of
 
a
 
serious
 
or
 
life-threatening
 
disease
 
or
 
condition.
 
These
 
programs
 
include
 
fast
 
track
 
designation,
breakthrough therapy designation and priority review designation.
The FDA has a fast track program
 
that is intended to expedite or facilitate
 
the process for reviewing new drugs
 
and biologics that meet
certain criteria. Specifically, new drugs
 
and biologics are eligible for fast track designation if they are intended to treat a serious or life-
threatening condition
 
and preclinical or
 
clinical data demonstrate
 
the potential
 
to address unmet
 
medical needs
 
for the condition.
 
Fast
41
track designation
 
applies to
 
the combination
 
of the
 
product and
 
the specific
 
indication for
 
which it
 
is being
 
studied. The
 
sponsor can
request the FDA to designate the product for fast track status any time before receiving NDA or BLA approval, but ideally no later than
the pre-NDA or pre-BLA meeting.
Additionally,
 
a
 
drug
 
or
 
biologic
 
may
 
be
 
eligible
 
for
 
designation
 
as
 
a
 
breakthrough
 
therapy
 
if
 
the
 
product
 
is
 
intended,
 
alone
 
or
 
in
combination with one or more other drugs or biologics, to treat a serious or life-threatening condition and preliminary clinical evidence
indicates
 
that
 
the
 
product
 
may
 
demonstrate
 
substantial
 
improvement
 
over
 
currently
 
approved
 
therapies
 
on
 
one
 
or
 
more
 
clinically
significant endpoints. The
 
benefits of breakthrough
 
therapy designation include
 
the same
 
benefits as fast
 
track designation, plus
 
intensive
guidance from the FDA to facilitate an efficient drug development
 
program.
Any product
 
submitted to
 
the FDA
 
for marketing,
 
including under
 
a fast
 
track or
 
breakthrough therapy
 
designation program,
 
may be
eligible for other
 
types of FDA
 
programs intended to
 
expedite development and
 
review, such as priority review
 
and accelerated approval.
Any product is eligible for priority review if it
 
treats a serious or life-threatening condition and, if approved, would provide
 
a significant
improvement
 
in
 
safety
 
and
 
effectiveness
 
compared
 
to
 
available
 
therapies.
 
Priority
 
review
 
reduces
 
the
 
review
 
time
 
for
 
an
 
initial
 
or
supplemental marketing application by four months.
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. Fast
 
track designation, priority review,
and breakthrough therapy designation do not change the standards for approval
 
but may expedite the development or approval process.
Accelerated Approval Pathway
A product may be eligible
 
for accelerated approval if it treats
 
a serious or life-threatening condition and generally
 
provides a meaningful
advantage over available therapies based on an effect on a surrogate endpoint
 
that is reasonably likely to predict clinical benefit or on a
clinical endpoint
 
that can
 
be measured
 
earlier than
 
irreversible morbidity
 
or mortality
 
("IMM") that
 
is reasonably
 
likely to
 
predict an
effect on
 
IMM or other
 
clinical benefit. As
 
a condition
 
of accelerated approval,
 
the FDA requires
 
that a sponsor
 
of a drug
 
or biologic
receiving
 
accelerated
 
approval
 
subsequently
 
provide
 
additional
 
data
 
confirming
 
the
 
anticipated
 
clinical
 
benefit,
 
for
 
example
 
by
performing adequate and well-controlled post-marketing clinical trials. If clinical benefit is not confirmed, accelerated approval may be
revoked.
 
In addition, as part of the Consolidated Appropriations Act for
 
2023, Congress provided FDA additional statutory authority to
 
mitigate
potential risks
 
to patients
 
from continued
 
marketing of
 
ineffective drugs
 
previously granted
 
accelerated approval.
 
Under these
 
recent
amendments
 
to the
 
FDCA, the
 
agency may
 
require a
 
sponsor of
 
a product
 
granted
 
accelerated approval
 
to have
 
a confirmatory
 
trial
underway prior
 
to approval.
 
The sponsor
 
must also
 
submit progress
 
reports on
 
a confirmatory
 
trial every
 
six months
 
until the
 
trial is
complete, and
 
such reports
 
will be
 
published on
 
FDA’s
 
website. Failure
 
to conduct
 
required post-approval
 
studies, or
 
to confirm
 
the
predicted clinical
 
benefit of
 
the product
 
during post-marketing
 
studies, allows
 
the FDA
 
to withdraw
 
approval of
 
the drug
 
or biologic.
Congress also
 
recently
 
amended the
 
law to
 
give FDA
 
the option
 
of using
 
expedited procedures
 
to withdraw
 
product
 
approval if
 
the
sponsor’s confirmatory trial fails to verify the claimed clinical benefits
 
of the product.
Granting of an EUA
The Commissioner
 
of the
 
FDA, under
 
delegated authority
 
from the
 
Secretary of
 
the U.S.
 
Department of
 
Health and
 
Human Services
(“DHHS”)
 
may,
 
under
 
certain
 
circumstances,
 
issue
 
an
 
Emergency
 
Use
 
Authorization,
 
or
 
EUA
 
that
 
would
 
permit
 
the
 
use
 
of
 
an
unapproved drug product or unapproved use of an approved drug product. Before an EUA may be issued, the Secretary must declare an
emergency based on one of the following grounds:
•
 
a
 
determination
 
by
 
the
 
Secretary
 
of
 
the
 
Department
 
of
 
Homeland
 
Security
 
that
 
there
 
is
 
a
 
domestic
 
emergency,
 
or
 
a
significant potential for a domestic emergency, involving a heightened risk of attack with a specified biological, chemical,
radiological or nuclear agent or agents;
•
 
a determination by the Secretary of the Department of
 
Defense that there is a military emergency, or a significant potential
for a military
 
emergency, involving a heightened risk to
 
U.S. military forces
 
of attack with
 
a specified biological, chemical,
radiological or nuclear agent or agents; or
•
 
a determination by the
 
Secretary of the DHHS that
 
a public health emergency
 
that affects, or has
 
the significant potential
to affect, national
 
security and that involves
 
a specified biological, chemical,
 
radiological or nuclear agent
 
or agents, or a
specified disease or condition that may be attributable to such agent or
 
agent.
In order to be the subject of an EUA, the FDA Commissioner
 
must conclude that, based on the totality of scientific evidence
 
available,
it is
 
reasonable
 
to believe
 
that the
 
product
 
may be
 
effective
 
in diagnosing,
 
treating or
 
preventing a
 
disease attributable
 
to the
 
agents
42
described above,
 
that the product’s
 
potential benefits
 
outweigh its potential
 
risks and that
 
there is no
 
adequate approved alternative
 
to
the product.
Although an EUA cannot be issued until after
 
an emergency has been declared by the Secretary
 
of DHHS, the FDA strongly encourages
an entity with a possible candidate product,
 
particularly one at an advanced stage of
 
development, to contact the FDA center responsible
for the candidate product before a determination
 
of actual or potential emergency. Such an entity may submit a
 
request for consideration
that includes data
 
to demonstrate that,
 
based on the
 
totality of scientific
 
evidence available, it
 
is reasonable to
 
believe that the
 
product
may
 
be effective
 
in diagnosing,
 
treating
 
or preventing
 
the
 
serious or
 
life-threatening
 
disease
 
or
 
condition.
 
This
 
is called
 
a
 
pre-EUA
submission and
 
its purpose
 
is to
 
allow FDA
 
review considering
 
that during
 
an emergency,
 
the time
 
available for
 
the submission
 
and
review of an EUA request may be severely limited.
Post-Approval Requirements
Any drug
 
or biological
 
products for
 
which we
 
or our collaborators
 
receive FDA
 
approvals are
 
subject to
 
continuing regulation
 
by the
FDA, includi
 
ng,
 
among
 
other things,
 
record-keeping
 
requirements, reporting
 
of adverse
 
experiences
 
with the
 
product, providing
 
the
FDA with updated
 
safety and efficacy
 
information, product sampling
 
and distribution requirements,
 
complying with certain
 
electronic
records and
 
signature requirements
 
and complying
 
with FDA
 
promotion and
 
advertising requirements,
 
which include,
 
among others,
standards
 
for
 
direct-to-consumer
 
advertising,
 
promoting
 
drugs for
 
uses or
 
in patient
 
populations
 
that are
 
not described
 
in the
 
drug’s
approved
 
labeling
 
(known
 
as
 
“off-label
 
use”),
 
industry-sponsored
 
scientific
 
and
 
educational
 
activities,
 
and
 
promotional
 
activities
involving the internet.
Failure to
 
comply with
 
FDA requirements
 
can have
 
negative consequences,
 
including adverse
 
publicity,
 
enforcement letters
 
from the
FDA,
 
mandated
 
corrective
 
advertising
 
or
 
communications
 
with
 
doctors,
 
and
 
civil
 
or
 
criminal
 
penalties.
 
Although
 
physicians
 
may
prescribe legally available drugs for off-label uses, manufacturers
 
may not market or promote such off-label uses.
Manufacturers
 
of
 
our
 
product
 
candidates
 
are
 
required
 
to
 
comply
 
with
 
applicable
 
FDA manufacturing
 
requirements
 
contained
 
in
 
the
FDA’s
 
cGMP
 
regulations.
 
cGMP
 
regulations
 
require,
 
among
 
other
 
things,
 
quality
 
control
 
and
 
quality
 
assurance
 
as
 
well
 
as
 
the
corresponding maintenance of
 
records and documentation.
 
Following approval, the FDA continues
 
to monitor vaccine quality
 
through
real-time monitoring of lots by requiring manufacturers to submit certain
 
information for each vaccine lot. Vaccine
 
manufacturers may
only distribute a lot
 
following release by the
 
FDA. Drug manufacturers and
 
other entities involved in
 
the manufacture and distribution
of
 
approved
 
drugs
 
are
 
required
 
to
 
register
 
their
 
establishments
 
with
 
the
 
FDA and
 
certain
 
state agencies,
 
and
 
are
 
subject to
 
periodic
unannounced inspections by the FDA and certain state
 
agencies for compliance with cGMP and other laws.
 
Accordingly, manufacturers
must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance. Discovery
of problems with a product after approval may result in restrictions on a product, manufacturer
 
or holder of an approved NDA or BLA,
including withdrawal
 
of the
 
product from
 
the market.
 
In addition,
 
changes to
 
the manufacturing
 
process generally
 
require prior
 
FDA
approval before being implemented, and other types of changes to the approved product, such as adding new indications and additional
labeling claims, are also subject to further FDA review and approval.
U.S. Patent-term Extension
Depending upon the timing, duration and specifics of
 
FDA approval of our product candidates,
 
some of our U.S. patents may be
 
eligible
for limited patent term extension under the Drug Price Competition and Patent Term
 
Restoration Act of 1984, commonly referred to as
the Hatch-Waxman
 
Amendments to
 
the FDCA.
 
The Hatch-Waxman
 
Amendments
 
permit extension
 
of the
 
patent
 
term of
 
up to
 
five
years
 
as compensation
 
for
 
patent
 
term
 
lost during
 
product
 
development
 
and
 
FDA regulatory
 
review
 
process.
 
Patent-term
 
extension,
however,
 
cannot extend
 
the remaining
 
term of
 
a patent
 
beyond a
 
total of
 
14 years
 
from the
 
product’s
 
approval date.
 
The patent-term
extension period is
 
generally one-half the
 
time between the effective
 
date of an IND
 
and the submission
 
date of an
 
NDA or BLA plus
the time between the submission date of an NDA or
 
BLA and the approval of that application, except
 
that the review period is reduced
by any time
 
during which the applicant
 
failed to exercise
 
due diligence. Only
 
one patent applicable
 
to an approved drug
 
is eligible for
the extension and
 
the application for
 
the extension must
 
be submitted prior
 
to the expiration
 
of the patent.
 
The U.S. Patent
 
and Trademark
Office, or USPTO,
 
in consultation with the
 
FDA, reviews and approves
 
the application for any patent
 
term extension or restoration.
 
In
the future, we
 
may apply for
 
extension of patent
 
term for our
 
currently owned or
 
licensed patents to
 
add patent life
 
beyond its current
expiration date,
 
depending on
 
the expected
 
length of
 
the clinical trials
 
and other factors
 
involved in
 
the filing of
 
the relevant
 
NDA or
BLA.
 
 
U.S. Foreign Corrupt Practices Act
 
In general, the Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, prohibits
 
offering to pay, paying, promising
 
to pay, or
authorizing
 
the payment
 
of money
 
or anything
 
of value
 
to a
 
foreign
 
official
 
in order
 
to influence
 
any act
 
or decision
 
of the
 
foreign
official in
 
his or her
 
official capacity
 
or to secure
 
any other improper
 
advantage in order
 
to obtain or
 
retain business for
 
or with, or
 
in
order to direct business to, any person. The prohibitions apply not only to payments made to “any foreign official,” but also those made
to “any foreign political party or official thereof,” to “any candidate for foreign
 
political office” or to any person, while knowing that all
or a portion of
 
the payment will be
 
offered, given, or
 
promised to anyone
 
in any of the
 
foregoing categories. “Foreign
 
officials” under
43
the FCPA include officers or employees of
 
a department, agency, or instrumentality
 
of a foreign
 
government. The term
 
“instrumentality”
is broad and can include state-owned or state-controlled entities.
 
Importantly, United States authorities
 
that enforce the FCPA,
 
including the Department of Justice, deem most health care professionals
and other employees
 
of foreign hospitals,
 
clinics, research facilities
 
and medical schools
 
in countries with
 
public health care
 
or public
education systems to be “foreign officials” under the FCPA.
 
When we interact with foreign health care professionals and researchers in
testing and marketing our products abroad,
 
we must have policies and procedures in place
 
sufficient to prevent us and agents
 
acting on
our behalf
 
from providing
 
any bribe,
 
gift or
 
gratuity,
 
including excessive
 
or lavish
 
meals, travel
 
or entertainment
 
in connection
 
with
marketing our future
 
products and services or securing
 
required permits and approvals
 
such as those needed
 
to initiate clinical trials in
foreign jurisdictions.
 
The FCPA
 
also obligates
 
companies whose
 
securities are
 
listed in
 
the United
 
States to
 
comply with
 
accounting
provisions requiring the maintenance of books and records that
 
accurately and fairly reflect all transactions of the
 
corporation, including
international subsidiaries, and the development and maintenance of an adequate system of internal accounting controls for international
operations. The Securities and Exchange Commission is involved with the books
 
and records provisions of the FCPA.
Regulation in Europe and Other Regions
In addition
 
to regulations
 
in the
 
United
 
States, we
 
and
 
our collaborators
 
are subject
 
to a
 
variety
 
of regulations
 
in other
 
jurisdictions
governing, among other things, clinical trials and any commercial sales and distribution
 
of our products.
Whether
 
or not
 
we or
 
our collaborators
 
obtain
 
FDA approval
 
for
 
a product,
 
we must
 
obtain the
 
requisite
 
approvals
 
from regulatory
authorities
 
in
 
foreign
 
countries prior
 
to
 
the
 
commencement
 
of
 
clinical
 
trials or
 
marketing
 
of
 
the
 
product
 
in
 
those
 
countries.
 
Certain
countries outside
 
of the
 
United States
 
have a
 
similar process
 
that requires
 
the submission
 
of a
 
clinical trial
 
application much
 
like the
IND
 
prior
 
to
 
the
 
commencement
 
of
 
human
 
clinical
 
trials.
 
In
 
the
 
European
 
Union,
 
for
 
example,
 
a
 
CTA
 
must
 
be
 
submitted
 
to
 
each
country’s
 
national health
 
authority and
 
an independent
 
ethics committee, much
 
like the FDA
 
and IRB, respectively.
 
Once the CTA
 
is
approved in accordance with a country’s
 
requirements, clinical trial development may proceed.
The requirements and process governing the conduct
 
of clinical trials, product licensing, pricing and reimbursement
 
vary from country
to country.
 
In all
 
cases, the
 
clinical trials
 
are conducted
 
in accordance
 
with GCPs and
 
the applicable
 
regulatory requirements
 
and the
ethical principles on human subjects research that have their origin in
 
the Declaration of Helsinki.
To
 
obtain regulatory
 
approval of
 
an investigational
 
drug or
 
biological product
 
under European
 
Union regulatory
 
systems, we
 
or our
strategic partners must
 
submit a marketing
 
authorization application. The
 
application in the European
 
Union is similar to
 
that required
in the United States, with the exception of, among other things, country-specific
 
document requirements.
For other
 
countries outside
 
of the European
 
Union, such as
 
countries in
 
Asia, Europe
 
and Latin America,
 
the requirements
 
governing
the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In all cases, again, the clinical
trials are conducted in accordance with GCPs
 
and the applicable regulatory requirements and the ethical principles that
 
have their origin
in the Declaration of Helsinki.
Employees and Human Capital Resources
As of December 31, 2022,
 
we employed 87 full-time
 
employees and 2 part-time
 
employees. Of these 87
 
full-time employees, 83
 
were
located in the United States, 2 were located in Ireland, 1 was located in
 
Taiwan and 1 was located in the UK.
 
As of March 15, 2023, we
employed 76 full-time
 
employees and 1
 
part-time employee.
 
Of these 76
 
full-time employees,
 
72 were located
 
in the United
 
States, 2
were located in Ireland, 1 was located in Taiwan and 1 was located in the UK.
 
None of our employees are represented by a labor union
or are party to a collective bargaining agreement,
 
and we have had no labor-related work stoppages.
 
Compensation, Benefits, Recruitment and Retention Strategy
We aim to focus on attracting, motivating and retaining
 
talented employees with relevant experience who
 
can contribute to the sustained
performance of the Company and its day-to-day operations.
We believe our total compensation package helps recruit and retain our employees. We strive to provide compensation and benefits that
are competitive to market and create
 
incentives to attract and retain employees. Our
 
compensation package includes market-competitive
pay,
 
broad-based
 
stock grants,
 
health
 
care and
 
401(k) plan
 
benefits,
 
paid
 
time off
 
and family
 
leave,
 
among
 
others. We
 
also provide
annual incentive bonus
 
opportunities that are
 
tied to both
 
company performance as
 
well as individual
 
performance to foster
 
a pay-for-
performance culture.
Scientific Advisory Board
We have assembled a highly qualified scientific advisory board composed of advisors who have deep expertise in
 
the fields of biologics
and vaccine development, as well as in the relevant therapeutic areas for our
 
product candidates.
44
Immunology & Vaccinology
●
Thomas P.
 
Monath, M.D.
●
Wayne Koff,
 
Ph.D.
●
Stanley A. Plotkin, M.D.
Neurology
●
Brad Boeve, M.D.
●
Richard Mohs, Ph.D.
●
Jeffrey Cummings, M.D.
●
Eric Reiman, M.D.
●
Nick Fox, M.D.
●
Stephen D. Silberstein, M.D.
Cardiovascular
●
Kausik K. Ray, M.D.
●
Stephen Nicholls, Ph.D.
●
Frederick Raal, Ph.D.
●
Dirk von Lewinski, M.D.
●
Thomas Fleming, Ph.D.
●
Parviz Ghahramani, Ph.D.
 
45
Item 1A. Risk Factors.
 
Investing in our Class A
 
common stock involves a high degree
 
of risk.
 
The following information sets forth risk
 
factors that could cause
our actual results to differ materially from those contained in forward-looking statements we have made in this Annual Report on Form
10-K
 
and
 
those
 
we
 
may
 
make
 
from
 
time
 
to
 
time.
 
You
 
should
 
carefully
 
consider
 
the
 
risks described
 
below,
 
in
 
addition
 
to
 
the
 
other
information contained
 
in this Report
 
and our other
 
public filings, before
 
you decide to
 
purchase shares of
 
our Class A
 
common stock.
Our business, financial
 
condition or results
 
of operations could
 
be harmed by
 
any of these
 
risks. The risks
 
and uncertainties described
below are not the
 
only ones we face.
 
Additional risks not presently
 
known to us or
 
other factors not perceived
 
by us to
 
present significant
risks to our business at this time also may impair our business operations.
 
Summary Risk Factors
Our business is
 
subject to a
 
number of risks, including
 
risks that may
 
prevent us from achieving
 
our business objectives or
 
may adversely
affect our business, financial condition, results of operations and prospects. These risks are discussed more fully under Part II, Item 1A.
“Risk Factors.” The following is a summary of some of the principal risks we face:
 
•
 
clinical drug development
 
involves a lengthy and expensive
 
process, and if our
 
pre-clinical development or clinical
 
trials
are prolonged or delayed or do not achieve expected results, we may be unable
 
to commercialize our product candidates;
 
•
 
we depend on intellectual property licensed from UBI and its affiliates, the termination of which could result in the loss of
significant rights;
 
•
 
even if we obtain regulatory approval of, or commercialize, any of our product candidates in one
 
or more jurisdictions, we
may never obtain approval for, or commercialize
 
,
 
our product candidates in other jurisdictions;
 
•
 
after receipt
 
of regulatory
 
approval for
 
a product
 
candidate, our
 
products will
 
remain subject
 
to regulatory
 
scrutiny and
post-marketing
 
requirements, which
 
may include
 
burdensome post-approval
 
trial or
 
risk management
 
requirements that
may
 
adversely
 
impact
 
the
 
financial
 
results
 
of
 
any
 
future
 
commercialization
 
efforts
 
or
 
cause
 
us
 
to
 
choose
 
not
 
to
commercialize the product candidate;
 
•
 
if we
 
are able
 
to commercialize
 
any product
 
candidate, the
 
successful commercialization
 
of such
 
product candidate
 
will
depend
 
on
 
the
 
extent
 
governmental
 
authorities,
 
private
 
health
 
insurers
 
and
 
other
 
third-party
 
payors
 
provide
 
coverage,
adequate reimbursement levels and favorable pricing policies;
 
•
 
the manufacture of peptide-based medicines is complex and manufacturers
 
often encounter difficulties in production;
 
•
 
we have no history of commercializing pharmaceutical products, which may make it difficult to evaluate the prospects for
our future viability;
 
•
 
the regulatory landscape that
 
will govern our
 
product candidates is
 
uncertain, and changes in
 
regulatory requirements could
result in delays or discontinuation of development of our product candidates or
 
unexpected costs;
 
•
 
developments by competitors may render our products or technologies obsolete or non-competitive or may reduce
 
the size
of our markets;
 
•
 
our capital resources may
 
not be sufficient to
 
successfully complete the development
 
and commercialization of our
 
product
candidates, which could delay,
 
limit, reduce or terminate our development or commercialization efforts;
 
•
 
we have incurred significant losses since inception, and we expect to incur losses for the foreseeable future
 
and may never
achieve or maintain profitability;
 
•
 
conflicts of interest and disputes exist and may further
 
arise between us and UBI and its affiliates, and
 
these conflicts and
disputes might ultimately be resolved in a manner unfavorable to us;
•
 
we will need to expand our organization, and we
 
may experience difficulties in managing this growth, which could
 
disrupt
our operations;
 
•
 
the
 
dual-class
 
structure
 
of
 
our
 
common
 
stock
 
and
 
the
 
Voting
 
Agreement
 
(as
 
defined
 
below)
 
will
 
have
 
the
 
effect
 
of
concentrating voting power, which will significantly
 
limit your ability to influence significant corporate decisions;
 
46
•
 
we rely on contract manufacturers for the manufacture of raw materials
 
for our research programs, pre-clinical studies and
clinical trials and we
 
do not have long-term contracts
 
with many of these
 
parties, which could impact our
 
ability to develop
and commercialize our products;
 
•
 
undetected errors or defects in our production could harm our reputation
 
or expose us to product liability claims;
 
•
 
we rely on
 
in-licensed intellectual property
 
and technology,
 
and the loss
 
of such rights,
 
our licensors’ inability
 
or refusal
to enforce or defend
 
such rights, and any requirement
 
to pay amounts under
 
current or future agreements
 
could harm our
business;
 
•
 
the
 
degree of
 
protection
 
afforded
 
by our
 
intellectual
 
property
 
rights is
 
uncertain
 
because
 
such rights
 
offer
 
only limited
protection and may not adequately protect our rights or permit us to gain or keep a competitive
 
advantage;
 
•
 
we have previously
 
identified and remediated
 
material weaknesses, in
 
our internal control
 
over financial reporting
 
and if
we
 
are
 
unable
 
to
 
maintain
 
an
 
effective
 
system
 
of
 
internal
 
control
 
over
 
financial
 
reporting,
 
or
 
if
 
we
 
discover
 
material
deficiencies in
 
the future,
 
we may
 
not be
 
able to
 
accurately report
 
our financial
 
results or
 
prevent fraud,
 
and as
 
a result,
shareholders
 
could lose
 
confidence in
 
our financial
 
and other
 
public reporting,
 
which would
 
harm our
 
business and
 
the
trading price of our Class A common stock;
 
•
 
cyberattacks
 
or
 
other
 
failures
 
in
 
our
 
or
 
our
 
third-party
 
vendors’,
 
contractors’
 
or
 
consultants’
 
telecommunications
 
or
information
 
technology
 
systems
 
could
 
result
 
in
 
information
 
theft,
 
compromise,
 
or
 
other
 
unauthorized
 
access,
 
data
corruption and significant disruption of our business
 
operations, and could harm our reputation and subject
 
us to liability,
lawsuits and actions from governmental authorities; and
 
•
 
we are
 
subject to
 
privacy,
 
tax, anti-corruption
 
and other
 
stringent laws,
 
regulations, policies
 
and contractual
 
obligations
across multiple jurisdictions and changes in, or our failure to comply with, such laws,
 
regulations, policies and contractual
obligations could adversely affect our business, financial
 
condition, results of operations and prospects.
Risks Related to the Discovery and Development of Product Candidates
 
Clinical drug development
 
involves a
 
lengthy and expensive
 
process with uncertain
 
timelines and
 
uncertain outcomes,
 
and results
of earlier studies and trials may not be predictive of future results. If our pre-clinical development or clinical trials are prolonged or
delayed,
 
or if
 
we do
 
not or
 
cannot achieve
 
the results
 
we expect,
 
we may
 
be unable
 
to obtain
 
required regulatory
 
approvals,
 
and
therefore be unable to commercialize our product candidates on a timely basis or at
 
all.
Our business is
 
dependent on
 
the successful development,
 
regulatory approval
 
and commercialization
 
of product
 
candidates based on
our
 
Vaxxine
 
Platform.
 
If
 
we
 
and
 
our
 
collaborators
 
are
 
unable
 
to
 
obtain
 
approval
 
for
 
and
 
effectively
 
commercialize
 
our
 
product
candidates, our
 
business would
 
be significantly
 
harmed. Even
 
if we
 
complete the
 
necessary pre-clinical
 
studies and
 
clinical trials,
 
the
regulatory
 
approval
 
process
 
is
 
expensive,
 
time-consuming
 
and
 
uncertain,
 
and
 
we
 
may
 
not
 
be
 
able
 
to
 
obtain
 
approvals
 
for
 
the
commercialization of any product candidates we may develop.
 
Changes in regulatory approval policies, changes in or the enactment
 
of
additional statutes
 
or regulations,
 
or changes
 
in regulatory
 
review processes,
 
may cause delays
 
in the
 
approval of
 
a particular
 
product
candidate or
 
rejection of
 
an application
 
for a
 
particular product
 
candidate. We
 
have not
 
obtained regulatory
 
approval for
 
any product
candidate to date,
 
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.
 
Any regulatory approval we
 
ultimately obtain may be
 
limited or subject to restrictions,
including labeling
 
requirements, or
 
post-approval commitments
 
that render
 
the approved
 
product not
 
commercially viable.
 
While our
enzyme-linked
 
immunosorbent assay
 
(“ELISA”)
 
test has
 
received an
 
EUA from
 
the FDA,
 
there can
 
be no
 
assurance that
 
any of
 
our
product candidates will receive an EUA or regulatory approval
 
or that there will not be changes
 
in formulation, whether required by any
regulatory
 
authority
 
or
 
at
 
our
 
determination
 
for
 
operational
 
or
 
scientific
 
reasons,
 
affecting
 
the
 
use
 
of
 
our
 
products.
 
Further,
 
some
countries may not rely on an EUA or regulatory approval issued by another jurisdiction, and we may be required
 
to seek separate EUAs
or regulatory approval from different regulatory authorities in different jurisdictions. See “Risk Factors—Even
 
if we obtain approval of
any
 
of our
 
product
 
candidates
 
in
 
one
 
jurisdiction,
 
we
 
may never
 
obtain
 
approval
 
for or
 
commercialize
 
any
 
of our
 
products
 
in
 
other
jurisdictions, which would limit our ability to realize their full market potential.”
 
To
 
obtain the requisite
 
regulatory approvals to
 
market and sell
 
any of our
 
product candidates, we
 
must demonstrate through
 
extensive
pre-clinical studies and clinical trials that our products are safe and effective in humans. Clinical testing is
 
expensive and can take many
years to complete, and its outcome
 
is inherently uncertain. Failure can occur
 
at any time during the clinical trial process.
 
The results of
pre-clinical studies and early clinical trials of our product candidates may not be
 
predictive of the results of later-stage clinical trials and
results from post-hoc
 
data analysis may not
 
be predictive of
 
final results and
 
may not support
 
product approval.
 
Product candidates in
later
 
stages
 
of
 
clinical
 
trials may
 
fail
 
to
 
show
 
the desired
 
safety
 
and
 
efficacy
 
characteristics
 
despite
 
having
 
progressed
 
through
 
pre-
clinical
 
studies
 
and
 
initial
 
clinical
 
trials.
 
For
 
example,
 
an
 
EUA
 
for
 
UB-612
 
was
 
denied
 
by
 
the
 
TFDA
 
in
 
August
 
2021
 
because
 
the
neutralizing antibody response
 
generated by UB-612,
 
as compared
 
to a
 
designated adenovirus vectored
 
vaccine, did not
 
meet the
 
TFDA’s
specified evaluation
 
criteria.
 
If results
 
from our
 
clinical trials
 
differ from
 
previous reports
 
or market
 
expectations, such
 
as a
 
potential
47
development of
 
market expectations
 
that COVID-19
 
boosters or
 
vaccines be
 
developed specifically
 
to address
 
certain variants
 
which
we
 
fail
 
to
 
satisfy,
 
or
 
if
 
we
 
fail
 
to
 
obtain
 
a
 
required
 
regulatory
 
approval,
 
the
 
price
 
of
 
our
 
Class
 
A
 
common
 
stock
 
could
 
decrease
substantially. Several
 
companies in the biopharmaceutical
 
industry have suffered
 
significant setbacks in advanced
 
clinical trials due to
lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier
 
trials. Our ongoing and future clinical trials may
not be successful.
Further,
 
while
 
we
 
have
 
conducted
 
limited
 
head-to-head
 
comparisons
 
in
 
pre-clinical
 
studies
 
of
 
UB-313
 
and
 
VXX-401,
 
we
 
have
 
not
conducted a head-to-head
 
comparison of any
 
competing products to
 
any of our
 
chronic disease product
 
candidates in any
 
clinical trial
to date. We have compared the
 
published data for certain
 
of our competitors’ products
 
to the clinical
 
trial results of certain
 
of our product
candidates. Accordingly,
 
the value
 
of comparisons
 
of our
 
product candidates
 
to any
 
alternative products
 
in this report
 
may be
 
limited
because they are not derived from a head-to-head clinical trial, rather they are from trials that were conducted under different protocols,
at different sites,
 
with different patient
 
populations, at different
 
times and results
 
were analyzed using
 
non-standardized assays performed
internally or by different clinical
 
research organizations (“CROs”). Without
 
head-to-head data, we will be unable
 
to make comparative
claims for our product candidates, if
 
any such product candidate is approved. Future
 
clinical trials may not confirm the comparisons
 
or
analyses we have made to date.
Clinical trials must be conducted in accordance with applicable regulatory authorities’ legal requirements, regulations or guidelines and
are
 
subject
 
to oversight
 
by these
 
governmental
 
agencies
 
as well
 
as Institutional
 
Review Boards
 
(“IRBs”)
 
at
 
the
 
medical
 
institutions
where the clinical
 
trials are conducted.
 
In addition, clinical
 
trials must be conducted
 
with supplies of
 
our product candidates
 
produced
in
 
accordance
 
with
 
current
 
good
 
manufacturing
 
practices
 
(“cGMP”)
 
and
 
other
 
legal
 
and
 
regulatory
 
requirements.
 
Defects
 
in
manufacturing
 
of
 
a
 
clinical
 
trial
 
batch
 
or
 
a
 
failure
 
of
 
a
 
batch
 
to
 
meet
 
all quality
 
control
 
test
 
specifications
 
could
 
result
 
in
 
delays
 
to
initiation
 
of our
 
clinical
 
trials.
 
We
 
depend
 
on medical
 
institutions
 
and
 
CROs to
 
conduct
 
our
 
clinical
 
trials in
 
compliance
 
with
 
good
clinical
 
practice
 
(“GCP”),
 
and
 
other
 
applicable
 
laws
 
and
 
regulations.
 
Failure
 
to
 
follow
 
and
 
document
 
adherence
 
to
 
such
 
laws
 
and
regulations may
 
lead to
 
significant delays
 
in the
 
availability of
 
product for
 
our clinical
 
trials, result
 
in the
 
termination of
 
or a
 
clinical
hold being
 
placed on
 
one or
 
more of
 
our clinical
 
trials, or
 
delay or
 
prevent submission
 
or approval
 
of marketing
 
applications for
 
our
product candidates.
To the extent our CROs fail to enroll participants for
 
our clinical trials, fail to conduct the
 
trial in accordance with the trial
 
protocol GCP
or are
 
delayed for
 
a significant
 
time in
 
the execution
 
of trials,
 
including
 
achieving full
 
enrollment, we
 
may be
 
affected
 
by increased
costs, program
 
delays or
 
both, which
 
may harm
 
our business
 
and
 
delay
 
our
 
ability to
 
seek approval
 
for our
 
product
 
candidates. For
example,
 
due
 
in part
 
to an
 
error by
 
the CRO
 
responsible
 
for administering
 
blinded placebo
 
and active
 
doses to
 
trial subjects,
 
which
reduced the confidence
 
of subsequently collected
 
data, we decided
 
to discontinue a
 
Phase 2a LTE trial for
 
UB-311. In that case,
 
however,
we determined that we had collected sufficient data on UB-311’s
 
tolerability and immunogenicity.
 
The completion of clinical trials
 
for our clinical product
 
candidates may be delayed, suspended or
 
terminated because of many factors,
including but not limited to:
•
 
the delay or refusal of regulators or IRBs to authorize us to commence a clinical trial
 
at a prospective trial site;
•
 
changes in regulatory requirements, policies and guidelines;
•
 
delays or failure to reach agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which
can be subject to extensive negotiation and may vary significantly among
 
different CROs and trial sites;
•
 
delays in patient enrollment and variability in the number and types of patients
 
available for clinical trials;
•
 
negative or
 
inconclusive results,
 
which may
 
require us
 
to conduct
 
additional pre-clinical
 
or clinical
 
trials or
 
to abandon
product candidates that we expect to be promising;
•
 
delays in manufacturing and control of clinical trial materials;
•
 
shortages of materials required for the production of our product candidates;
•
 
disruptions from events surrounding the Russia-Ukraine conflict
•
 
the timing, scope and effectiveness of U.S. and international
 
governmental, regulatory,
 
fiscal, monetary and public health
responses to the COVID-19 pandemic;
•
 
safety or tolerability
 
concerns causing us
 
to suspend or
 
terminate a trial
 
if it is
 
determined that
 
the participants are
 
being
exposed to unacceptable health risks;
48
•
 
lower than anticipated retention rates of patients and volunteers in clinical trials and difficulty in maintaining contact with
patients after treatment, resulting in incomplete data;
•
 
failure of us, our CROs or clinical trial sites to comply with regulatory requirements;
•
 
failure of our CROs or clinical trial sites to meet their contractual
 
obligations to us in a timely manner,
 
or at all, deviating
from the clinical trial protocol or dropping out of a trial;
•
 
delays relating to adding new clinical trial sites;
•
 
delays in establishing necessary pre-clinical or clinical data;
•
 
the occurrence of unexpected severe or serious product-related adverse
 
events in a clinical trial;
•
 
the quality or stability of the product candidate falling below acceptable standards;
•
 
the inability to produce or obtain sufficient quantities of the
 
product candidate to complete clinical trials on time,
 
or delays
in sufficiently developing, characterizing or controlling
 
a manufacturing process suitable for clinical trials;
•
 
supply chain constraints and inflationary pressures;
•
 
the lack of adequate funding to continue the clinical trial;
•
 
developments
 
observed
 
in
 
trials
 
conducted
 
by
 
competitors
 
for
 
related
 
technology
 
that
 
raises
 
general
 
concerns
 
from
regulatory authorities about risk to patients of similar vaccine technology;
•
 
the determination that a product candidate will not be producible in relevant quantities
 
at the manufacturing stage;
•
 
the failure of regulatory authorities such as the FDA, MHRA or TGA to approve our manufacturing processes or facilities
or those of contract manufacturers with which we contract for clinical and commercial
 
supplies; and
•
 
the transfer
 
of manufacturing processes
 
to larger-scale
 
facilities operated
 
by contract manufacturers
 
or by us,
 
and delays
or failure by our contract manufacturers or us to make any necessary changes to
 
such manufacturing process.
In addition,
 
pre-clinical and
 
clinical data
 
are often
 
susceptible to
 
varying interpretations
 
and analyses
 
and results
 
from post-hoc
 
data
analysis
 
may
 
not
 
be
 
predictive
 
of
 
final
 
results
 
and
 
may
 
not
 
support
 
product
 
approval.
 
Many
 
companies
 
that
 
believed
 
their
 
product
candidates performed
 
satisfactorily in
 
pre-clinical studies
 
and clinical
 
trials have
 
nonetheless failed
 
to obtain
 
marketing approval
 
for
their product candidates. Regulatory authorities have substantial discretion in the approval process and in determining when or whether
regulatory approval
 
will be obtained
 
for any of
 
our product candidates.
 
Additionally,
 
the FDA typically
 
does not accept
 
post-hoc data
analyses
 
as support
 
for
 
regulatory
 
approval.
 
Even
 
if
 
we
 
believe
 
the
 
data
 
collected
 
from
 
clinical
 
trials of
 
our
 
product
 
candidates
 
are
promising, such data
 
may not be sufficient
 
to support approval by
 
regulatory authorities. Regulatory
 
authorities may disagree
 
with the
design or implementation of our clinical
 
trials and may disagree with
 
our interpretation of data from pre-clinical
 
studies or clinical trials.
In some instances, there can be significant variability in safety or efficacy results between different 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, adherence to the dosing
 
regimen and other trial
 
procedures and the rate of
 
dropout among clinical trial participants.
 
Further,
none
 
of
 
our
 
trials
 
to
 
date
 
of
 
UB-311
 
have
 
been
 
large
 
enough
 
to
 
determine
 
whether
 
their
 
assessments
 
of
 
efficacy
 
were
 
statistically
significant. Therefore, we are
 
able to report
 
potential trends on
 
such measures, but
 
we will
 
not be able
 
to make more
 
definitive statements
about
 
the
 
efficacy
 
of
 
our
 
product
 
candidates
 
until
 
we
 
complete
 
clinical
 
trials
 
that
 
are
 
adequately
 
powered
 
to
 
demonstrate
 
statistical
significance of clinically meaningful results.
Moreover, for AD,
 
given the difficulties in assessing
 
whether a product candidate is disease-modifying
 
in terms of interrupting disease
pathology and delaying cognitive decline,
 
we plan to include in our
 
trial designs for UB-311 biomarker endpoints and, if
 
our trial results
warrant, may apply
 
for regulatory approval
 
based on biomarker
 
data. While the
 
FDA recently approved
 
aducanumab based on biomarker
data, there is no assurance that the FDA will accept biomarker data for other product
 
candidates, including UB-311, in the future.
 
Even if
 
we obtain
 
approval
 
of
 
any
 
of our
 
product
 
candidates
 
in one
 
or
 
more
 
jurisdictions,
 
we may
 
never obtain
 
approval
 
for or
commercialize any
 
of our
 
products in
 
other jurisdictions,
 
which would
 
limit our
 
ability to
 
realize the
 
full market
 
potential
 
of our
product candidates.
To
 
market
 
any
 
products,
 
we
 
must
 
establish
 
and
 
comply
 
with
 
numerous
 
and
 
varying
 
regulatory
 
requirements
 
in
 
different
 
countries
regarding safety and efficacy and obtain relevant approvals to market
 
our product candidates. As discussed in another risk factor above
49
(“
Clinical drug
 
development involves
 
a lengthy
 
and expensive
 
process…
”) an
 
EUA for
 
UB-612 was
 
denied by
 
the TFDA
 
in August
2021. Approval by a
 
foreign regulatory authority in any
 
other jurisdiction does not ensure
 
approval by comparable regulatory authorities
in other countries or jurisdictions, including approval by the FDA in the United States. The failure to
 
obtain approval in one jurisdiction
may delay or otherwise negatively
 
impact our ability to obtain approval elsewhere.
 
In addition, clinical trials conducted in
 
one country
may
 
not
 
be
 
accepted
 
by
 
regulatory
 
authorities
 
in
 
other
 
countries.
 
Approval
 
procedures
 
vary
 
among
 
countries
 
and
 
even
 
if
 
we
 
have
obtained
 
approval
 
in
 
one
 
country,
 
approval
 
in
 
other
 
countries
 
can
 
involve
 
additional
 
product
 
testing
 
and
 
validation
 
and
 
additional
administrative review periods.
Seeking
 
regulatory
 
approvals
 
in
 
different
 
countries
 
could
 
result
 
in
 
additional
 
and
 
unexpected
 
costs
 
for
 
us,
 
including
 
as
 
a
 
result
 
of
additional required pre-clinical studies or clinical trials which would be costly and time-consuming.
 
Satisfying regulatory requirements
is costly,
 
time-consuming, uncertain
 
and may be
 
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. Apart from our ELISA test,
which
 
has
 
been
 
approved
 
for
 
sale
 
by
 
the
 
FDA
 
through
 
an
 
EUA,
 
we
 
do
 
not
 
have
 
any
 
product
 
candidates
 
approved
 
for
 
sale
 
in
 
any
jurisdiction, including international
 
markets. We
 
do not have experience
 
in obtaining regulatory approval
 
in international markets, and
we
 
will
 
be
 
relying
 
on
 
our
 
collaboration
 
partners
 
such
 
as
 
UBIA
 
to
 
assist
 
us
 
in
 
this
 
process.
 
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.
Interim, “top-line” 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 also subject
 
to audit and verification
 
procedures that could result
 
in material changes in
 
the
final data.
From time to time,
 
we may publicly disclose
 
preliminary or top-line data from
 
our pre-clinical studies and
 
clinical trials, which are
 
based
on a preliminary analysis
 
of then-available data, and
 
the results and related findings
 
and conclusions are subject
 
to change following a
more comprehensive review of the data related to the particular study
 
or trial. We also may 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
 
top-line
 
or
 
preliminary
 
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. Top-line 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, top-line data should be viewed with
 
caution until the final data are available.
From time
 
to time,
 
we may
 
also disclose
 
interim data
 
from our
 
pre-clinical studies
 
and clinical
 
trials. 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
 
or
 
as
 
patients
 
from
 
our
 
clinical
 
trials continue
 
other
 
treatments
 
for
 
their
 
disease.
Adverse
 
differences
 
between
 
preliminary
 
or
 
interim
 
data
 
and
 
final
 
data
 
could
 
significantly
 
harm
 
our
 
business
 
prospects.
 
Further,
disclosure of interim data by us or by our competitors could result in volatility
 
in the price of our Class A common stock.
For instance,
 
in the fourth
 
quarter of 2022
 
we announced conclusions
 
from an end-of-treatment
 
analysis of Part
 
B of our
 
Phase 1 trial
of UB-312 in PD patients, and top-line results of our Phase 3 trial of
 
UB-612.
 
These conclusions remain subject to change following a
more comprehensive
 
review of
 
the data,
 
or following
 
additional data
 
which from
 
the same
 
respective trials
 
or programs
 
that support
different conclusions.
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
 
the
 
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 material or otherwise appropriate information to include in our
disclosure.
If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed and result in
increased costs and longer development periods or otherwise be adversely affected.
We
 
will be
 
required
 
to identify
 
and enroll
 
a sufficient
 
number of
 
patients for
 
our planned
 
clinical trials.
 
Trial
 
participant
 
enrollment
could be
 
limited in
 
future trials
 
given
 
that many
 
potential participants
 
may be
 
ineligible because
 
of pre-existing
 
conditions, medical
treatments or other reasons.
 
For example, the next
 
phase of our UB-311
 
development could be affected
 
by worldwide effects resulting
from the
 
Russia-Ukraine conflict
 
and other
 
geopolitical factors.
 
We
 
may not
 
be able
 
to initiate
 
or continue
 
clinical trials
 
required by
applicable
 
regulatory authorities
 
or any
 
of our
 
other product
 
candidates
 
that we
 
pursue if
 
we are
 
unable to
 
locate and
 
enroll
 
enough
eligible patients or volunteers to participate in these clinical trials. Patient
 
enrollment is affected by other factors, as
 
well, including the
incidence
 
and
 
severity
 
of the
 
disease
 
under
 
investigation;
 
the
 
design
 
of
 
the
 
clinical
 
trial
 
protocol;
 
the
 
size and
 
nature
 
of
 
the
 
patient
population;
 
the
 
eligibility
 
criteria
 
for
 
the
 
trial
 
in
 
question;
 
the
 
perceived
 
risks
 
and
 
benefits
 
of
 
the
 
product
 
candidate
 
under
 
trial;
 
the
perceived safety
 
and tolerability
 
of the product
 
candidate; the proximity
 
and availability of
 
clinical trial sites
 
for prospective
 
patients;
the availability
 
of competing
 
therapies and
 
clinical trials;
 
effects of
 
the COVID-19
 
pandemic on
 
our clinical
 
trial sites;
 
our ability
 
to
50
monitor patients adequately
 
during and after
 
treatment; patient referral
 
practices of physicians; clinicians’
 
and patients’ perceptions
 
as
to the
 
potential advantages
 
of the
 
drug being
 
studied in
 
relation to
 
other available
 
therapies, including
 
standard-of-care and
 
any new
drugs that may be approved for the indications we are investigating; and efforts
 
to facilitate timely enrollment in clinical trials.
We
 
also may
 
encounter
 
difficulties
 
in identifying
 
and enrolling
 
such patients
 
with a
 
stage of
 
disease appropriate
 
for our
 
ongoing or
future clinical
 
trials. In
 
addition, the
 
process of
 
finding and
 
diagnosing patients
 
may prove
 
costly.
 
Our inability
 
to enroll
 
a sufficient
number of
 
patients for
 
any of
 
our clinical
 
trials would
 
result in
 
significant delays
 
or may
 
require us
 
to abandon
 
one or
 
more clinical
trials.
Even if
 
we obtain
 
regulatory approval
 
for a
 
product candidate,
 
our products
 
will remain
 
subject to
 
regulatory scrutiny
 
and post-
marketing requirements.
Any regulatory approvals that we may receive for our product candidates will
 
require the submission of reports to regulatory authorities
and ongoing surveillance to
 
monitor the safety and
 
efficacy of the product
 
candidate, may contain significant
 
limitations related to use
restrictions for
 
specified age gro
 
ups, warnings,
 
precautions or
 
contraindications, and
 
may include
 
burdensome post-approval
 
study or
risk management
 
requirements. For
 
example, the
 
FDA may
 
require a
 
Risk Evaluation
 
and Mitigation
 
Strategy (“REMS”)
 
to approve
our
 
product
 
candidates,
 
which
 
could
 
entail
 
requirements
 
for
 
a
 
medication
 
guide,
 
physician
 
training
 
and
 
communication
 
plans
 
or
additional elements
 
to ensure
 
safe use,
 
such as
 
restricted distribution
 
methods, patient
 
registries and
 
other risk
 
minimization tools.
 
In
addition, if one
 
of our product
 
candidates is approved
 
in the
 
United States or
 
abroad, 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.
 
Manufacturers
 
and
 
manufacturers’
 
facilities
 
are
 
required
 
to
comply
 
with extensive
 
requirements by
 
regulatory authorities,
 
including
 
ensuring that
 
quality control
 
and manufacturing
 
procedures
conform to cGMP regulations. As such, we and our contract manufacturers will be subject to continual review and inspections to assess
compliance with cGMP and adherence to commitments
 
made in any 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.
If a
 
regulatory authority such
 
as the
 
FDA discovers previously
 
unknown problems with
 
a product, such
 
as adverse
 
events of
 
unanticipated
severity
 
or
 
frequency,
 
or
 
problems
 
with
 
product
 
quality
 
or
 
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:
 
issue
 
warning
 
letters;
 
impose
 
civil
 
or
 
criminal
 
penalties;
 
suspend
 
or
 
withdraw
regulatory approval; suspend any of
 
our clinical trials; refuse to approve
 
pending applications or supplements to
 
approved applications
submitted
 
by
 
us;
 
impose
 
restrictions
 
on
 
our
 
operations,
 
including
 
closing
 
our
 
contract
 
manufacturers’
 
facilities;
 
or
 
seize
 
or
 
detain
products, or require a product recall.
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. Further,
 
if a regulatory authority
 
identifies previously unknown
 
problems with our platform,
 
any or
all of our product candidates may also be affected.
Furthermore, the burden of these requirements may outweigh any benefit or revenue that we could generate from product sales. Even if
we obtain
 
regulatory approval
 
for a
 
product candidate
 
,
 
compliance with
 
the many
 
post-approval regulations
 
may be
 
so costly
 
that it
becomes
 
financially
 
prudent
 
to
 
abandon
 
the
 
product
 
or
 
sell
 
ownership
 
of
 
the
 
underlying
 
intellectual
 
property
 
at
 
prices
 
that
 
are
 
not
sufficient to recoup our investment in developing the product.
 
Moreover, the policies of 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.
We have no history of commercializing pharmaceutical products, which
 
may make it difficult to
 
evaluate the prospects for our
 
future
viability.
We commenced operations through
 
UNS and
 
COVAXX in 2014 and 2020,
 
respectively, and as Vaxxinity in March
 
2021. Our operations
to date
 
have been
 
limited to
 
organizing
 
and staffing
 
Vaxxinity,
 
business planning,
 
raising capital,
 
developing our
 
Vaxxine
 
Platform,
identifying
 
and
 
testing
 
potential
 
product
 
candidates
 
and
 
conducting
 
clinical
 
trials.
 
We
 
have
 
a
 
limited
 
track
 
record
 
of
 
successfully
conducting late-stage clinical trials, obtaining marketing approvals, manufacturing a commercial-scale product
 
or arranging for a third-
party
 
to
 
do
 
so
 
on
 
our
 
behalf,
 
or
 
conducting
 
sales
 
and
 
marketing
 
activities
 
necessary
 
for
 
successful
 
product
 
commercialization.
Accordingly,
 
you should consider
 
our prospects considering
 
the costs, uncertainties,
 
delays and difficulties
 
frequently encountered
 
by
51
companies in the early stages of development, especially clinical-stage biopharmaceutical companies such as ours. Any predictions you
make about our
 
future success or
 
viability may not
 
be as accurate
 
as they could
 
be if we had
 
a longer operating
 
history or a
 
history of
successfully developing and commercializing pharmaceutical products.
We
 
may
 
encounter
 
unforeseen
 
expenses,
 
difficulties,
 
complications,
 
delays
 
and
 
other
 
known
 
or
 
unknown
 
factors
 
in
 
achieving
 
our
business objectives. We will eventually need to
 
transition from a
 
company with a
 
development focus to a
 
company capable of
 
supporting
commercial activities. We
 
may not be successful in such a transition.
We
 
expect our
 
financial condition
 
and operating
 
results to
 
continue to
 
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 quarterly or
annual periods as indications of future operating performance.
Our product candidates
 
may cause undesirable
 
side effects that
 
could delay or
 
prevent their regulatory
 
approval, limit the
 
commercial
profile of an approved label or result in significant negative consequences following
 
regulatory approval, if any.
Undesirable
 
side
 
effects
 
that
 
may
 
be
 
caused
 
by
 
our
 
product
 
candidates
 
could
 
cause
 
us,
 
our
 
collaboration
 
partners
 
or the
 
regulatory
authorities
 
to
 
interrupt,
 
delay
 
or
 
halt
 
clinical
 
trials and
 
could
 
result
 
in
 
a more
 
restrictive
 
label
 
or
 
the delay
 
or
 
denial
 
of
 
approval
 
by
regulatory authorities. Results of our
 
trials could reveal a
 
high and unacceptable severity and
 
prevalence of side effects. In
 
such an event,
our trials could be
 
suspended or terminated and regulatory
 
authorities could order us to
 
cease further development of
 
or deny approval
of our
 
product candidates
 
for any
 
or all
 
targeted
 
indications. The
 
product-related
 
side effects
 
could
 
affect
 
patient
 
recruitment
 
or the
ability of enrolled
 
patients to complete
 
the trial or
 
result in potential
 
product liability
 
claims. Any of
 
these occurrences
 
may harm
 
our
business, financial condition, results of operations and prospects significantly.
Clinical trials assess a sample
 
of the potential patient
 
population. With a
 
limited number of patients
 
and duration of exposure,
 
rare and
severe side effects of
 
our product candidates
 
may only be
 
uncovered with a
 
significantly larger number of
 
patients exposed to
 
the product
candidate. If our product candidates receive an EUA or regulatory approval and we or others identify undesirable side effects caused by
such product candidates (or
 
any other similar products)
 
after such approval, a
 
number of potentially significant
 
negative consequences
could result, including:
•
 
regulatory authorities may withdraw or limit their approval of such
 
product candidates and require us to take our approved
product(s) off the market;
•
 
regulatory authorities may require the addition of labeling statements, such as a “boxed” warning or a contraindication, or
submission of field alerts to physicians and pharmacies;
•
 
we may be required to create a medication guide outlining the risks of such
 
side effects for distribution to patients;
•
 
we may be required to change the way such product candidates are distributed or administered, conduct additional clinical
trials or change the labeling of the product candidates;
•
 
actual or potential drug-related side effects could negatively affect patient recruitment or
 
the ability of enrolled patients to
complete a trial for our products or product candidates;
•
 
market
 
acceptance
 
of
 
our
 
products
 
by
 
patients
 
and
 
physicians
 
may
 
be
 
reduced
 
and
 
sales
 
of
 
the
 
product
 
may
 
decrease
significantly;
•
 
regulatory
 
authorities
 
may
 
require
 
a
 
REMS
 
plan
 
to
 
mitigate
 
risks,
 
which
 
could
 
include
 
medication
 
guides,
 
physician
communication plans,
 
or elements to
 
assure safe use,
 
such as restricted
 
distribution methods,
 
patient registries
 
and other
risk minimization tools;
•
 
we may be subject to regulatory investigations and government enforcement actions;
•
 
we may decide or be required to remove such product candidates from
 
the marketplace;
•
 
we could be sued and potentially held liable for injury caused to individuals exposed
 
to or taking our product candidates;
•
 
sales of the product(s) may decrease substantially; and
•
 
our reputation may suffer.
52
Any of
 
these events
 
could prevent
 
us from
 
achieving or
 
maintaining market
 
acceptance of
 
the affected
 
product candidates
 
and could
substantially increase
 
the costs
 
of commercializing
 
our product
 
candidates, if
 
approved, and
 
therefore could
 
have a
 
material adverse
effect on our business, financial condition, results of operations
 
and prospects.
The regulatory landscape that will
 
govern our product candidates
 
is uncertain. Regulations that impact
 
our product candidates are
still
developing,
 
and changes
 
in regulatory
 
requirements could
 
result in
 
delays or
 
discontinuation
 
of development
 
of our
 
product
candidates or unexpected costs in obtaining regulatory approval.
The regulatory requirements
 
to which our product
 
candidates will be subject
 
are complex and
 
uncertainties exist. Even with
 
respect to
more established vaccine products, the regulatory landscape is still evolving, especially as it relates to novel adjuvants in vaccines, such
as
 
CpG1,
 
which
 
we
 
use
 
at
 
low
 
concentration
 
in
 
our
 
product
 
candidates.
 
Although
 
regulatory
 
authorities
 
decide
 
whether
 
individual
clinical trial protocols may proceed, the review process and determinations of other reviewing bodies can impede or delay the initiation
of a
 
clinical trial,
 
even if
 
another regulatory
 
authority has
 
reviewed the
 
trial and
 
authorizes its
 
initiation. The
 
FDA, for
 
example, can
place an IND on clinical hold even if other regulatory agencies have provided a favorable review.
 
In addition, adverse developments in
clinical trials involving novel adjuvants in vaccines, such as CpG1, conducted
 
by others may cause regulatory authorities to change the
requirements for approval of any of our product candidates.
Complex regulatory environments exist
 
in other jurisdictions in which
 
we might consider seeking regulatory approvals
 
for our product
candidates, further complicating
 
the regulatory landscape.
 
For example,
 
in the
 
European Union a
 
special committee called
 
the Committee
for Advanced Therapies
 
was established within the
 
European Medicines Authority
 
in accordance with Regulation
 
(EC) No 1394/2007
on
 
advanced-therapy
 
medicinal
 
products
 
(“ATMPs”),
 
to
 
assess
 
the
 
quality,
 
safety
 
and
 
efficacy
 
of
 
ATMPs,
 
and
 
to
 
follow
 
scientific
developments in the field.
These various regulatory review committees and advisory groups and new or revised guidelines that they promulgate from time to time
may lengthen the
 
regulatory review process,
 
require us to perform
 
additional studies or
 
analyses, 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. We
 
may face
 
even more
 
cumbersome and
 
complex regulations
 
than those
emerging for
 
novel adjuvants.
 
Furthermore, even
 
if our
 
product candidates
 
obtain required
 
regulatory approvals,
 
such approvals
 
may
later be withdrawn because of changes in regulations or the interpretation of
 
regulations by applicable regulatory authorities.
Even if we receive regulatory
 
approval to market any of
 
our product candidates, we will
 
be subject to ongoing obligations and
 
continued
regulatory review, which may materially adversely affect
 
our business, financial condition, results of operations and prospects. Further,
other
 
jurisdictions
 
may
 
consider
 
our
 
product
 
candidates
 
to be
 
new
 
drugs,
 
not biologics
 
or
 
medicinal
 
products,
 
and
 
require
 
different
marketing applications.
 
Even if a
 
regulatory authority
 
approves any
 
of our product
 
candidates, the
 
manufacturing processes,
 
labeling,
packaging, distribution,
 
product sampling,
 
adverse event
 
reporting, storage,
 
advertising, marketing,
 
promotion and
 
recordkeeping for
the product
 
will be
 
subject to
 
extensive and
 
ongoing regulatory
 
requirements. These
 
requirements include
 
submissions of
 
safety and
other post-marketing information and
 
reports and registration, as well as
 
continued compliance with cGMPs and
 
GCPs for any clinical
trials that we conduct post-approval, all of which may result
 
in significant expense and limit our ability to commercialize such products.
There also are
 
continuing, annual program
 
user fees for
 
any marketed products.
 
In the United States,
 
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 contract 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 contract manufacturers
that we may
 
decide to use.
 
Accordingly, manufacturers must continue to
 
expend time, money
 
and effort in
 
production and quality
 
control
to maintain compliance with cGMP and other aspects of regulatory compliance.
Any regulatory approvals
 
that we receive
 
for our product candidates
 
may also be subject
 
to limitations on the
 
approved indicated uses
for which the
 
product may be marketed
 
or to the conditions
 
of approval, or
 
contain requirements for
 
potentially costly post-marketing
testing and surveillance to monitor the safety and efficacy of the product. For example, the FDA has the authority to require a REMS as
part of a BLA
 
or after approval, which may
 
impose further requirements or restrictions
 
on the distribution or
 
use of an approved
 
product,
such
 
as
 
limiting
 
prescribing
 
to
 
certain
 
physicians
 
or
 
medical
 
centers
 
that
 
have
 
undergone
 
specialized
 
training,
 
limiting
 
treatment
 
to
patients who meet certain
 
safe-use criteria and requiring
 
treated patients to enroll in
 
a registry.
 
Later discovery of previously
 
unknown
problems
 
with
 
a
 
product,
 
including
 
adverse
 
events
 
of
 
unanticipated
 
severity
 
or
 
frequency,
 
or
 
with
 
our
 
contract
 
manufacturers
 
or
manufacturing processes, or failure to comply with regulatory requirements
 
may result in, among other things:
•
 
restrictions on the marketing or manufacturing of the product,
 
withdrawal of the product from the market, or voluntary
 
or
mandatory product recalls;
•
 
fines, warning letters, untitled letters or holds on clinical trials;
53
•
 
refusal by regulatory
 
authorities to approve
 
pending applications or
 
supplements to approved
 
applications, or suspension
or revocation of product approvals;
•
 
requirements
 
to
 
conduct
 
additional
 
clinical
 
trials,
 
change
 
our
 
product
 
labeling
 
or
 
submit
 
additional
 
applications
 
or
application supplements;
•
 
product seizure or detention, or refusal to permit the import or export of products;
•
 
mandated modification of promotional materials and labeling and
 
the issuance of corrective information;
•
 
consent decrees, corporate integrity agreements, debarment or exclusion
 
from federal healthcare programs;
•
 
the
 
issuance
 
of
 
safety
 
alerts,
 
Dear
 
Healthcare
 
Provider
 
letters,
 
press
 
releases
 
and
 
other
 
communications
 
containing
warnings or other safety information about the product; or
•
 
injunctions or the imposition of civil or criminal penalties.
In addition, regulatory policies may change or additional government regulations or legislation may be enacted that could prevent, limit
or delay regulatory
 
approval of our
 
product candidates,
 
particularly in
 
countries where
 
elections may result
 
in changes in
 
government
administration. If we
 
fail to comply
 
with existing requirements,
 
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 regulatory approval
that we
 
may have
 
obtained
 
or face
 
regulatory or
 
enforcement
 
actions,
 
which may
 
materially adversely
 
affect our
 
business, financial
condition, results of operations and prospects.
The FDA
 
strictly regulates
 
the promotional
 
claims that
 
may be made
 
about prescription
 
products in
 
the United States.
 
In particular,
 
a
product may not
 
be promoted for
 
uses that are not
 
approved by the
 
FDA as reflected in
 
the product’s
 
approved labeling. If
 
we receive
marketing approval
 
for a
 
product candidate,
 
physicians may
 
nevertheless prescribe
 
it to
 
their patients
 
in a
 
manner that
 
is inconsistent
with the approved label. If we are found to have promoted such off-label uses, we may become subject to significant liability. The FDA
and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to
have improperly
 
promoted off
 
-label uses
 
may be
 
subject to
 
significant sanctions
 
.
 
Federal and
 
state government
 
agencies have
 
levied
large civil and criminal
 
fines against companies for
 
alleged improper promotion and
 
has enjoined several companies
 
from engaging in
off-label
 
promotion.
 
The
 
FDA
 
has
 
also
 
requested
 
that
 
companies
 
enter
 
into
 
consent
 
decrees
 
or
 
permanent
 
injunctions
 
under
 
which
specified promotional conduct is changed or curtailed.
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 significantly
 
and adversely affect
our ability to commercialize our product candidates.
A
 
breakthrough
 
therapy
 
designation
 
or
 
fast
 
track
 
designation
 
by
 
the
 
FDA
 
for
 
a
 
product
 
candidate
 
may
 
not
 
lead
 
to
 
a
 
faster
development or regulatory review
 
or approval process, and
 
it would not
 
increase the likelihood that
 
the product candidate will
 
receive
marketing approval.
In 2022 the FDA
 
granted fast track designation
 
to UB-311. We
 
may in the future
 
seek a fast track designation
 
for other of our product
candidates, or
 
a breakthrough
 
therapy designation
 
for any
 
of our
 
product candidates.
 
A breakthrough
 
therapy is
 
defined as
 
a product
candidate that is
 
intended, alone or
 
in combination with
 
one or
 
more other drugs,
 
to treat
 
a serious or
 
life-threatening disease or
 
condition,
and preliminary clinical evidence indicates that the product candidate may demonstrate substantial improvement over existing therapies
on one or more clinically significant endpoints,
 
such as substantial treatment effects observed early in
 
clinical development. For product
candidates that
 
have been
 
designated as
 
breakthrough therapies,
 
interaction and
 
communication between
 
the FDA
 
and the
 
sponsor of
the trial
 
can help
 
to identify the
 
most efficient path
 
for clinical
 
development while minimizing
 
the number
 
of patients
 
placed in ineffective
control regimens. Product candidates designated as breakthrough therapies by the FDA are also eligible for priority review if supported
by clinical data at the time of the submission of the BLA.
Designation
 
as a
 
breakthrough
 
therapy is
 
within the
 
discretion of
 
the FDA.
 
Accordingly,
 
even if
 
we believe
 
that one
 
of our
 
product
candidates meets the criteria for
 
designation as a breakthrough therapy,
 
the FDA may disagree and instead
 
determine not to make such
designation. In any
 
event, the
 
receipt of
 
a breakthrough therapy
 
designation for a
 
product candidate may
 
not result in
 
a faster
 
development
process, review or approval compared
 
to product candidates considered for approval
 
under conventional FDA procedures and
 
it would
not assure ultimate approval by
 
the FDA. In addition, even
 
if one or more of our
 
product candidates qualify as breakthrough
 
therapies,
the FDA may later
 
decide that the product
 
candidate no longer meets
 
the conditions for qualification
 
or it may
 
decide that the time
 
period
for FDA
 
review or
 
approval will
 
not be
 
shortened. Further,
 
certain of
 
our product
 
candidates, including
 
UB-612, are
 
not eligible
 
for
breakthrough therapy designation, and we will be unable to take advantage
 
of such designation for such product candidates.
54
Fast track designation
 
is designed to facilitate
 
the development and
 
expedite the review of
 
therapies to treat
 
serious conditions and
 
fill
an
 
unmet
 
medical
 
need.
 
Programs
 
with
 
fast
 
track
 
designation
 
may
 
benefit
 
from
 
early
 
and
 
frequent
 
communications
 
with
 
the
 
FDA,
potential priority review
 
and the ability to submit
 
a rolling application for
 
regulatory review.
 
Fast track designation
 
applies to both the
product
 
candidate and
 
the specific
 
indication for
 
which
 
it is
 
being studied.
 
However,
 
even if
 
one or
 
more of
 
our product
 
candidates
qualify for fast track designation, we
 
may not be able to
 
meet the criteria of the
 
fast track designation, or if our
 
clinical trials are delayed,
suspended or terminated, or put on clinical hold due to unexpected adverse events or issues with clinical supply, we will not receive the
benefits associated
 
with the
 
fast track
 
program. Furthermore,
 
fast track
 
designation does
 
not change
 
the standards
 
for approval.
 
Fast
track designation alone does not
 
guarantee qualification for the FDA’s
 
priority review procedures.
 
Fast track designation also does not
guarantee our product candidate will be approved in a timely manner,
 
if at all.
We
 
plan to
 
seek approval
 
of certain
 
product candidates
 
through the
 
use of
 
an accelerated
 
approval pathway.
 
If we
 
are unable
 
to
obtain
 
such
 
approval,
 
we
 
may
 
be
 
required
 
to
 
conduct
 
additional
 
pre-clinical
 
studies
 
or
 
clinical
 
trials
 
beyond
 
those
 
that
 
we
contemplate, which
 
could increase
 
the expense
 
of obtaining,
 
and delay
 
the receipt
 
of, necessary
 
marketing approvals.
 
Even if
 
our
product candidates receive accelerated approval from regulatory authorities, if our confirmatory
 
trials do not verify clinical benefit,
or if
 
we do
 
not comply
 
with rigorous
 
post-marketing
 
requirements, such
 
regulatory authorities
 
may seek
 
to withdraw
 
accelerated
approval.
We are developing certain product
 
candidates for the
 
treatment of serious
 
or life-threatening conditions, including
 
UB-311, and therefore
may decide to seek approval
 
of such product candidates under
 
the FDA’s
 
accelerated approval pathway.
 
A product may be eligible
 
for
accelerated
 
approval
 
if
 
it is
 
designed
 
to
 
treat
 
a
 
serious
 
or
 
life-threatening
 
disease
 
or
 
condition
 
and
 
generally
 
provides
 
a
 
meaningful
advantage over available therapies upon a determination that the
 
product candidate has an effect on a surrogate endpoint or
 
intermediate
clinical endpoint
 
that is
 
reasonably likely
 
to predict
 
clinical benefit.
 
The FDA
 
considers a
 
clinical benefit
 
to be
 
a positive
 
therapeutic
effect
 
that is
 
clinically meaningful
 
in the
 
context of
 
a given
 
disease, such
 
as irreversible
 
morbidity or
 
mortality.
 
For the
 
purposes of
accelerated approval,
 
a surrogate
 
endpoint is
 
a marker,
 
such as a
 
laboratory measurement,
 
radiographic image,
 
physical sign
 
or other
measure that
 
is thought
 
to predict
 
clinical benefit
 
but is
 
not itself
 
a measure
 
of clinical
 
benefit. An
 
intermediate clinical
 
endpoint is
 
a
clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality that is reasonably likely to predict an
effect on irreversible morbidity or mortality or other clinical benefit.
The accelerated approval pathway may be used
 
in cases in which the advantage
 
of a new drug over
 
available therapy may not be a direct
therapeutic
 
advantage but
 
is a
 
clinically important
 
improvement from
 
a patient
 
and public
 
health perspective.
 
If granted,
 
accelerated
approval is usually
 
contingent on the
 
sponsor’s agreement to
 
conduct, in a
 
diligent manner, additional post-approval
 
confirmatory studies
to verify and describe the
 
drug’s clinical benefit. If the sponsor fails
 
to conduct such studies in
 
a timely manner, or if such
 
post- approval
studies fail to validate the drug’s predicted
 
clinical benefit, the FDA may withdraw its approval of the drug on an expedited basis.
If we decide
 
to submit a
 
BLA seeking accelerated
 
approval or receive
 
an expedited regulatory
 
designation for our
 
product candidates,
there can be
 
no assurance that
 
such submission or
 
application will be
 
accepted or that
 
any expedited development,
 
review or approval
will be granted on a timely basis, or at all. Failure to obtain accelerated approval or
 
any other form of expedited development, review or
approval for a product candidate would result in a longer time period to commercialization of such product candidate,
 
if any, and could
increase the cost of development of such product candidate, which could harm
 
our competitive position in the marketplace.
 
Because we are developing product candidates for the treatment or prevention
 
of diseases in which there is little clinical experience
using new technologies, there is increased risk that the FDA or other foreign
 
regulatory authorities may not consider the endpoints
of our clinical trials to provide clinically meaningful results and that these results may
 
be difficult to analyze.
As we are developing
 
novel treatments and preventative
 
measures for diseases in which
 
we believe there is
 
limited clinical experience
with new endpoints and
 
methodologies, there is heightened
 
risk that the applicable
 
regulatory authorities 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. It is
difficult to determine
 
how long it will
 
take, if ever,
 
or how much it
 
will cost to obtain
 
regulatory approvals for
 
our product candidates
in the
 
United States
 
or other
 
jurisdictions, if
 
ever.
 
Further, approvals
 
by one
 
regulatory authority
 
may not
 
be indicative
 
of what
 
other
regulatory authorities may require for approval.
During the regulatory review process, we
 
will need to identify success
 
criteria and endpoints such that
 
regulatory authorities will be able
to determine the
 
clinical efficacy and
 
safety profile of any
 
product candidates we
 
may develop. Because
 
our initial focus is
 
to identify
and develop product
 
candidates to treat
 
or prevent diseases
 
in which there
 
is little clinical
 
experience using new
 
technologies, there is
heightened risk that regulatory authorities may not consider the clinical trial endpoints that we propose to provide clinically meaningful
results. In addition, the resulting clinical data and results may be difficult
 
to analyze.
In the United
 
States, the FDA also
 
weighs the benefits
 
of a product against
 
its risks, and the
 
FDA may view
 
the efficacy results
 
in the
context of safety as
 
not being supportive of
 
regulatory approval. Foreign regulatory authorities
 
may make similar comments
 
with respect
to these endpoints and data.
 
Any product candidate we may
 
develop will be based on
 
a novel technology that
 
makes it difficult to predict
the time and cost of development and of subsequently obtaining regulatory
 
approval.
55
We and our collaboration partners have conducted and intend to conduct additional clinical trials for selected product candidates at
sites outside the United States, and for any of our product candidates for which we seek approval in the United States, the FDA may
not accept data from trials conducted in such locations or may require additional U.S.-based
 
trials.
We
 
and our
 
collaboration partners have
 
conducted, currently
 
are conducting
 
and intend in
 
the future to
 
conduct, clinical trials
 
outside
the United States, including but not limited to Australia, Belgium, Netherlands,
 
Panama, Philippines and Taiwan
 
.
Although the FDA may accept data from
 
clinical trials conducted outside the United States,
 
acceptance of these data is subject
 
to certain
conditions imposed by the FDA. For
 
example, the clinical trial must be conducted
 
by qualified investigators in accordance with
 
GCPs,
and the FDA must be able to validate the trial data through an on-site inspection, if necessary.
 
Generally, the patient population for any
clinical trial conducted outside of the United States must be representative of the population for which we
 
intend to seek approval in the
United States. There
 
can be no assurance
 
that the FDA will
 
accept data from
 
trials conducted outside
 
of the United
 
States. If the FDA
does not accept the
 
data from any clinical trials
 
that we or our collaboration
 
partners conduct outside the
 
United States, it would likely
result in the need
 
for additional clinical
 
trials, which would be
 
costly and time-consuming
 
and delay or permanently
 
halt our ability to
develop and
 
market these
 
or other
 
product candidates
 
in the
 
United States.
 
In other
 
jurisdictions, there
 
is a
 
similar risk
 
regarding the
acceptability of clinical trial data conducted outside of that jurisdiction.
In addition,
 
there are risks
 
inherent in
 
conducting clinical
 
trials in multiple
 
jurisdictions, inside
 
and outside
 
of the United
 
States, such
as:
•
 
regulatory and
 
administrative requirements
 
of the jurisdiction
 
where the
 
trial is conducted
 
that could
 
burden or limit
 
our
ability to conduct our clinical trials;
•
 
foreign exchange fluctuations;
•
 
manufacturing, customs, shipment and storage requirements;
•
 
cultural differences in medical practice and clinical research; and
•
 
the risk that
 
the patient populations
 
in such trials are
 
not considered representative
 
as compared to
 
the patient population
in the target markets where approval is being sought.
If
 
any
 
of
 
our
 
product
 
candidates
 
receive
 
EUA
 
or
 
regulatory
 
approval,
 
such
 
products
 
may
 
not
 
achieve
 
broad
 
market
 
acceptance
among government agencies, physicians,
 
patients, the medical community
 
and third-party payors, in which case
 
revenue generated
from their sales would be limited.
The
 
commercial
 
success
 
of
 
our
 
product
 
candidates
 
and
 
our
 
ability
 
to
 
generate
 
revenues
 
from
 
our
 
products
 
will
 
depend
 
upon
 
their
acceptance
 
among government
 
agencies, physicians,
 
patients,
 
the medical
 
community,
 
and third-party
 
payors.
 
The degree
 
of market
acceptance of our product candidates will depend on a number of
 
factors, including:
•
 
limitations
 
or
 
warnings
 
contained
 
in
 
the
 
approved
 
labeling
 
for
 
a
 
product
 
candidate
 
and
 
any
 
other
 
product
 
insert
requirements of regulatory authorities;
•
 
changes in the standard of care for the targeted indications for
 
any of our product candidates;
•
 
limitations in the approved clinical indications for our product candidates;
•
 
demonstrated clinical safety and efficacy compared
 
to other products;
•
 
the impact of disease variants, such as the Delta or Omicron variant of SARS-CoV-2,
 
on the efficacy and marketability of
our product candidates targeting such diseases;
•
 
presence of significant adverse side effects, and the prevalence
 
and severity of any side effects;
•
 
sales, marketing and distribution support;
•
 
availability of coverage and extent of reimbursement from managed
 
care plans and other third-party payors;
•
 
timing of market introduction and perceived effectiveness of our
 
products as well as competitive products;
•
 
continued projected growth of the markets in which our products compete;
56
•
 
the degree of cost-effectiveness of our product candidates;
•
 
the impact of past product price increases and limitations on future price
 
increases for our products;
•
 
availability of alternative therapies;
•
 
whether the product
 
is designated under
 
physician treatment guidelines
 
as a first-line
 
therapy or
 
as a second or
 
third-line
therapy for particular diseases;
•
 
whether the product can be used effectively with other therapies to achieve
 
higher response rates;
•
 
adverse publicity about our product candidates or favorable publicity about
 
competitive products;
•
 
if and when we are able to obtain regulatory approvals for indications for our
 
products;
•
 
our ability to establish and maintain a continuous supply of our products for
 
commercial sale;
•
 
potential or perceived advantages or disadvantages of our products
 
over alternative treatments;
•
 
convenience and ease of administration of our products; and
•
 
the effect of current and future healthcare laws.
If any
 
of our product
 
candidates are approved,
 
but do
 
not achieve an
 
adequate level of
 
acceptance by
 
government agencies
 
as well as
physicians, patients and the medical community,
 
we may not generate sufficient
 
revenue from these products, and we
 
may not become
or
 
remain
 
profitable.
 
In
 
addition,
 
efforts
 
to
 
educate
 
the
 
medical
 
community
 
and
 
third-party
 
payors
 
on
 
the
 
benefits
 
of
 
our
 
product
candidates may require significant resources and may never be
 
successful.
We
 
may
 
focus
 
on
 
potential
 
product
 
candidates
 
that
 
may
 
prove
 
to
 
be
 
unsuccessful
 
and
 
such
 
focus
 
may
 
require
 
us
 
to
 
forego
opportunities to develop other product candidates that may prove to
 
be more successful.
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.
 
Furthermore, we
 
have limited
 
financial and
 
personnel
resources
 
and
 
are placing
 
significant
 
focus
 
on the
 
development
 
of our
 
lead product
 
candidates, and
 
as such,
 
we may
 
forgo
 
or delay
pursuit
 
of opportunities
 
with other
 
future product
 
candidates that
 
later prove
 
to have
 
greater commercial
 
potential.
 
Our spending
 
on
current and
 
future research
 
and development
 
programs and
 
other future
 
product candidates
 
for specific
 
indications may
 
not yield
 
any
commercially viable
 
future product candidates
 
and could result
 
in spending on
 
raw materials that cannot
 
be repurposed. As
 
a result of
our resource allocation decisions,
 
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,
 
fail
 
to
 
identify
 
novel
 
product
 
candidates
 
that
 
may
 
be
 
successful,
 
or
 
relinquish
 
valuable
 
rights
 
to
 
such
 
product
 
candidates
through
 
collaboration,
 
licensing
 
or
 
other
 
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, or if the
 
additional product candidates we
 
do identify and develop
 
prove to be
 
ineffective, incapable of being commercialized
on a large scale or
 
otherwise fail to achieve market
 
success, this would adversely impact
 
our business strategy and our
 
financial position.
Risks Related to Our Financial Position and Need for Additional Capital
We
 
cannot
 
assure
 
you
 
of
 
the
 
adequacy
 
of
 
our
 
capital
 
resources
 
to
 
successfully
 
complete
 
the
 
development,
 
and
 
if
 
approved,
commercialization
 
of
 
our product
 
candidates,
 
and a
 
failure to
 
obtain
 
additional
 
capital, could
 
force
 
us to
 
delay,
 
limit, reduce
 
or
terminate one or more of our product development programs or commercialization
 
efforts.
As of
 
December 31, 2022,
 
the Company
 
had $87.9
 
million of
 
highly liquid
 
assets to fund
 
operations, including
 
$33.5 million
 
of cash
and
 
cash
 
equivalents,
 
$53.4
 
million
 
of
 
short-term
 
investments,
 
and
 
a
 
$1.1
 
million
 
restricted
 
cash
 
balance
 
of
 
which
 
$1.0
 
million
 
is
restricted for the reimbursement of certain research and development expenses related to our UB-612 COVID-19 vaccine program. We
believe that we
 
will continue to expend
 
substantial resources for
 
the foreseeable future developing
 
our proprietary product
 
candidates.
These
 
expenditures
 
will
 
include
 
costs
 
associated
 
with
 
research
 
and
 
development,
 
conducting
 
pre-clinical
 
studies
 
and
 
clinical
 
trials,
seeking
 
regulatory
 
approvals,
 
as
 
well
 
as
 
launching
 
and
 
commercializing
 
products
 
approved
 
for
 
sale
 
and
 
costs
 
associated
 
with
manufacturing
 
products. In
 
addition,
 
other unanticipated
 
costs may
 
arise. Because
 
the outcomes
 
of our
 
anticipated
 
clinical trials
 
are
highly
 
uncertain,
 
we
 
cannot
 
reasonably
 
estimate
 
the
 
actual
 
amounts
 
necessary
 
to
 
successfully
 
complete
 
the
 
development
 
and
commercialization of our proprietary product candidates.
57
Our future funding requirements will depend on many factors, including but not
 
limited to:
•
 
the numerous risks and uncertainties associated with developing
 
product candidates and maintaining our platform;
•
 
the number and characteristics of product candidates that we pursue;
•
 
the rate
 
of enrollment,
 
progress, cost
 
and outcomes
 
of our clinical
 
trials, which
 
may or may
 
not meet their
 
primary end-
points;
•
 
the timing of, and cost involved in, conducting non-clinical studies that are regulatory
 
prerequisites to conducting clinical
trials of sufficient duration for successful product registration;
•
 
the cost of manufacturing clinical supply and establishing commercial supply
 
of our product candidates;
•
 
the costs
 
and timing
 
of preparing,
 
filing and
 
prosecuting patent
 
applications, maintaining
 
and enforcing
 
our intellectual
property rights and defending any intellectual property-related claims;
•
 
tax and other
 
compliance costs associated
 
with operating in
 
foreign jurisdictions (including
 
any withholding requirements);
•
 
the
 
timing
 
of,
 
and
 
the
 
costs involved
 
in, obtaining
 
regulatory
 
approvals
 
for
 
our product
 
candidates
 
if clinical
 
trials are
successful;
•
 
the timing of, and costs involved in, conducting post-approval studies that may
 
be required by regulatory authorities;
•
 
the cost of commercialization activities for
 
our product candidates, including product
 
manufacturing, pharmacovigilance,
marketing and distribution of product candidates
 
generated from our platform and any
 
other product opportunity for which
we receive marketing approval in the future;
•
 
the terms and timing of any
 
collaborative, licensing and other arrangements that we are
 
currently party to or may establish,
including any required milestone and royalty payments thereunder
 
and any non-dilutive funding that we may receive;
•
 
the costs
 
involved in preparing,
 
filing, prosecuting, maintaining,
 
defending and enforcing
 
patent claims,
 
including litigation
costs, if any, and the outcome
 
of any such litigation;
•
 
the timing, receipt
 
and amount of sales
 
of, or royalties
 
or milestones on,
 
our future products,
 
if any,
 
including the risk
 
of
potential nonpayment by buyers of our future products, if any;
•
 
the costs to recruit and build the organization including key executives needed to transform to a commercial organization;
and
•
 
the costs of operating as a public company,
 
including hiring additional personnel.
In addition,
 
our operating
 
plan may
 
change as
 
a result
 
of many
 
factors currently
 
unknown to
 
us. As
 
a result
 
of these
 
factors, we
 
may
need additional funds sooner than planned. We
 
expect to finance future cash needs primarily through public or private equity offerings,
strategic collaborations and debt financing. If sufficient funds on acceptable terms are not available
 
when needed, or at all, we could be
forced to significantly reduce
 
operating expenses and delay, limit,
 
reduce or terminate one
 
or more of
 
our product development programs
or
 
commercialization
 
efforts,
 
which
 
would
 
have
 
a
 
negative
 
impact
 
on
 
our
 
business,
 
financial
 
condition,
 
results
 
of
 
operations
 
and
prospects.
We
 
have
 
incurred significant
 
losses since
 
our
 
inception,
 
and we
 
expect
 
to incur
 
losses for
 
the foreseeable
 
future and
 
may
 
never
achieve or maintain profitability.
We
 
have incurred
 
significant losses
 
since our
 
inception. We
 
had net
 
losses of
 
approximately $75.2
 
million, $137.2
 
million and
 
$40.0
million for the years ended December 31, 2022,
 
2021 and 2020, respectively.
 
As of December 31, 2022, our consolidated accumulated
deficit was $304.7 million. Our expectation is that we will
 
continue to incur losses as we continue our research and
 
development of, and
seek regulatory approvals for, our product candidates and maintain and develop new platforms,
 
prepare for and begin to commercialize
any approved
 
product candidates and
 
add infrastructure
 
and personnel to
 
support our product
 
development efforts
 
and operations
 
as a
public company.
 
We
 
have devoted
 
substantially all of
 
our financial
 
resources and
 
efforts to
 
research and
 
development, including
 
pre-
clinical studies and clinical trials
 
and we anticipate that our
 
expenses will continue to increase
 
over the next several years as
 
we continue
these activities. The
 
net losses and
 
negative cash flows
 
incurred to date,
 
together with expected
 
future losses, have
 
had, and may
 
continue
to have, an
 
adverse effect on
 
our working capital.
 
The amount of
 
future net losses
 
will depend, in
 
part, on the
 
rate of future growth
 
of
our expenses and our ability to generate revenue.
58
Because of the
 
numerous risks and
 
uncertainties associated
 
with biopharmaceutical
 
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
 
profitability.
 
For example, our
 
expenses
could increase if we are required by
 
regulatory authorities such as the FDA to
 
perform trials in addition to those that
 
we currently expect
to perform, or
 
if there are
 
any delays in
 
completing our currently
 
planned clinical trials,
 
the partnering process
 
for our proprietary
 
product
candidates or in the development of any of our proprietary product candidates.
Our revenue
 
to date
 
has been
 
generated
 
from the
 
sales of
 
our ELISA
 
test and
 
the sale
 
of an
 
option to
 
negotiate a
 
license with
 
UNS
(which option has
 
expired). Our ability
 
to generate revenue
 
and achieve profitability
 
in the future
 
depends in large
 
part on our
 
ability,
alone or with our collaborators, to achieve milestones and to successfully complete the development of, obtain the necessary regulatory
approvals for,
 
and commercialize,
 
our product
 
candidates and
 
Vaxxine
 
Platform. We
 
may never
 
succeed in
 
these activities
 
and may
never generate revenue from
 
product sales that is significant
 
enough to achieve profitability.
 
Even if we successfully obtain
 
regulatory
approvals to market one or
 
more of our product candidates, our revenues
 
will be dependent, in part, upon
 
the size of the markets in the
territories for which we gain regulatory approval and have commercial rights. If the markets for patient subsets that we are targeting are
not as significant as we estimate, we may
 
not generate significant revenues from sales of such products, if approved. Even
 
if we achieve
profitability in the future,
 
we may not be able to
 
sustain profitability in subsequent
 
periods. Our failure to become
 
or remain profitable
could depress our
 
market value and
 
could impair our
 
ability to raise capital,
 
expand our business,
 
develop other product
 
candidates or
continue our operations. A decline in our value could also cause you to lose all or
 
part of your investment.
Raising additional
 
capital may
 
cause dilution
 
to our
 
shareholders, restrict
 
our operations
 
or require
 
us to
 
relinquish rights
 
to our
technology or product candidates.
We expect our expenses to continue to increase in connection with our planned operations. To the extent that we raise additional capital
through the sale of our Class A common stock, convertible securities
 
or other equity securities, your ownership interest will be diluted,
and the
 
terms of
 
these securities
 
could restrict
 
our operations
 
or include
 
liquidation or
 
other preferences
 
and anti-dilution
 
protections
that could adversely affect your rights as a stockholder.
 
The issuance of additional equity securities, or the possibility of such
 
issuance,
may cause the
 
market price of
 
our Class A
 
common stock to
 
decline. In addition,
 
debt financing, if
 
available, may result
 
in fixed payment
obligations and may involve agreements that
 
include restrictive covenants that limit our
 
ability to take specific
 
actions, such as incurring
additional debt,
 
making capital expenditures,
 
creating liens, redeeming
 
shares or declaring
 
dividends, that
 
could adversely impact
 
our
ability to conduct our
 
business. Securing financing could
 
require a substantial amount
 
of time and attention from
 
our management and
may divert a disproportionate amount of their attention away from day-to-day activities, which may adversely affect our management’s
ability to oversee the development of our product candidates.
If we raise additional funds through collaborations or marketing, distribution or licensing arrangements with third parties, we may have
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 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.
We cannot
 
be certain that additional funding
 
will be available on acceptable terms,
 
or at all. If we are unable
 
to raise additional capital
in sufficient
 
amounts or
 
on terms
 
acceptable to
 
us, we
 
may have
 
to significantly
 
delay,
 
scale back
 
or discontinue
 
the development
 
or
commercialization
 
of our
 
product candidates
 
or other
 
research and
 
development
 
initiatives. Our
 
current or
 
future license
 
agreements
may also be terminated if we are unable to meet the payment or other obligations
 
under the agreements.
Changes in
 
or reinterpretations
 
of tax
 
laws and regulations,
 
including their
 
application to
 
us or our
 
customers as
 
reviewed by
 
the
relevant tax authorities, may have a material adverse
 
effect on our business, results of operations, financial condition
 
and prospects.
We are
 
subject to complex and evolving
 
tax laws and regulations. New
 
income, sales, use or other
 
tax laws, statutes, rules, regulations
or ordinances could be enacted at any
 
time, which could affect the tax treatment of
 
any of our future domestic and
 
foreign earnings. Any
new
 
taxes
 
could
 
adversely
 
affect
 
our
 
domestic
 
and
 
international
 
business
 
operations,
 
and
 
our
 
business
 
and
 
financial
 
performance.
Further,
 
existing tax laws,
 
statutes, rules, regulations
 
or ordinances could
 
be interpreted, changed,
 
modified or applied
 
adversely to us
or our customers.
 
Future changes in
 
applicable tax laws
 
and regulations, or
 
their interpretation and
 
application, could have
 
an adverse
effect on our business, financial conditions, results of operations
 
and prospects.
In addition,
 
our determination
 
of our
 
tax liability
 
is subject
 
to review
 
by applicable
 
tax authorities.
 
Any adverse
 
outcome
 
of
 
such a
review could harm our
 
results of operations, cash
 
flow and overall financial condition.
 
The determination of our tax
 
liabilities requires
significant
 
judgment
 
and,
 
in
 
the
 
ordinary
 
course
 
of
 
business,
 
there
 
are
 
many
 
transactions
 
and
 
calculations
 
where
 
the
 
ultimate
 
tax
determination is complex and uncertain.
59
Our ability
 
to use
 
our net
 
operating loss
 
carryforwards and
 
other tax
 
attributes to
 
offset future
 
taxable income
 
may be
 
subject to
certain limitations.
As of December 31, 2022, we had U.S. federal net operating loss
 
carryforwards (“NOLs”) of $165.1 million, which may be available to
offset future
 
taxable income, if
 
any,
 
and have no
 
expiration date but
 
are limited in
 
their usage to
 
an annual deduction
 
equal to 80%
 
of
annual
 
taxable
 
income.
 
In general,
 
under
 
Sections 382
 
and
 
383
 
of
 
the Internal
 
Revenue
 
Code
 
of 1986,
 
as amended
 
(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 other
 
tax attributes to
offset
 
future
 
taxable
 
income.
 
Our
 
existing
 
NOLs
 
and
 
tax
 
attributes
 
may
 
be
 
subject
 
to
 
limitations
 
arising
 
from
 
previous
 
ownership
changes, and if we
 
undergo future ownership changes, our ability
 
to utilize NOLs and
 
research and tax attributes could
 
be further limited
by Sections 382
 
and 383 of
 
the Code. For
 
these reasons, we
 
may not be
 
able to utilize
 
a portion of
 
our existing NOLs
 
or research and
tax attributes.
Adverse
 
developments
 
affecting
 
financial
 
institutions,
 
companies
 
in
 
the
 
financial
 
services
 
industry
 
or
 
the
 
financial
 
services
industry generally,
 
such as
 
actual events
 
or concerns
 
involving liquidity,
 
defaults or
 
non-performance,
 
could adversely
 
affect
our operations and liquidity.
Actual events involving
 
limited liquidity,
 
defaults, non-performance or
 
other adverse developments
 
that affect financial
 
institutions or
other companies
 
in the financial
 
services industry or
 
the financial services
 
industry generally,
 
or concerns or
 
rumors about any
 
events
of these kinds, have in the past and may in the future
 
lead to market-wide liquidity problems. For example, on
 
March 10, 2023, Silicon
Valley
 
Bank, or
 
SVB, was
 
closed by
 
the California
 
Department of
 
Financial Protection
 
and Innovation,
 
which appointed
 
the Federal
Deposit
 
Insurance
 
Corporation,
 
or
 
the
 
FDIC,
 
as
 
receiver.
 
As
 
of
 
March
 
10,
 
2023,
 
we
 
had
 
approximately
 
11%
 
of
 
our
 
cash
 
and
 
cash
equivalent balances
 
on deposit
 
with SVB.
 
Since then,
 
we have
 
moved substantially
 
all of
 
our cash
 
and cash
 
equivalent deposits
 
that
were at SVB to another major U.S. financial institution.
Although a statement by the
 
U.S. Department of the Treasury, the Federal Reserve and
 
the FDIC stated that
 
all depositors of SVB would
have
 
access to
 
all of
 
their
 
money
 
after
 
only
 
one
 
business
 
day
 
following
 
the
 
date
 
of
 
closure
 
and
 
we
 
and
 
other
 
depositors
 
with
 
SVB
received such access on March
 
13, 2023, uncertainty and liquidity
 
concerns in the broader financial
 
services industry remain. Inflation
and rapid
 
increases in
 
interest rates
 
have led
 
to a decline
 
in the trading
 
value of
 
previously issued
 
government securities
 
with interest
rates below current market
 
interest rates. The
 
U.S. Department of
 
Treasury, FDIC and Federal Reserve Board
 
have announced a
 
program
to provide
 
up to
 
$25 billion
 
of loans
 
to financial
 
institutions secured
 
by such
 
government securities
 
held
 
by financial
 
institutions to
mitigate the risk
 
of potential losses
 
on the sale
 
of such instruments.
 
However, widespread
 
demands for customer
 
withdrawals or other
needs of
 
financial institutions
 
for immediate
 
liquidity may
 
exceed the
 
capacity of
 
such program.
 
There is
 
no guarantee
 
that the
 
U.S.
Department of Treasury, FDIC and Federal Reserve Board will
 
provide access to uninsured
 
funds in the future
 
in the event of
 
the closure
of other banks or financial institutions in a timely fashion or at all.
Our
 
access
 
to
 
our
 
cash
 
and
 
cash
 
equivalents
 
in
 
amounts
 
adequate
 
to
 
finance
 
our
 
operations
 
could
 
be
 
significantly
 
impaired
 
by
 
the
financial institutions
 
with which
 
we have
 
arrangements directly
 
facing liquidity
 
constraints or
 
failures. For
 
example, as
 
we expect
 
to
continue to maintain
 
balances at one
 
or more banks
 
and financial institutions
 
that exceed federally insured
 
limits, in the
 
event of a
 
closure
of any such
 
banks or institutions
 
we may not
 
be able to
 
recover our uninsured
 
balances. Even if
 
the U.S. Department
 
of the Treasury,
the Federal Reserve and the FDIC provide that depositors would have access to all of their balances, there may be a delay in our ability
to access such funds.
 
In addition, investor concerns
 
regarding the U.S. or
 
international financial systems could
 
result in less favorable
commercial financing terms, including
 
higher interest rates
 
or costs and
 
tighter financial and
 
operating covenants, or
 
systemic limitations
on access to credit and liquidity
 
sources, thereby making it more
 
difficult for us to acquire financing
 
on acceptable terms or at all. Any
material decline
 
in available
 
funding or our
 
ability to access
 
our cash
 
and cash equivalents
 
could adversely
 
impact our ability
 
to meet
our operating
 
expenses, result in
 
breaches of our
 
contractual obligations
 
or result in
 
violations of federal
 
or state wage
 
and hour laws,
any of which could have material adverse impacts on our operations and
 
liquidity.
Risks Related to the Manufacturing of Our Product Candidates
The formulation of peptide-based medicines is complex and manufacturers often encounter difficulties in production. If we, UBI or
any
 
of
 
our
 
other
 
contract
 
manufacturers
 
encounter
 
difficulties,
 
our
 
ability
 
to
 
provide
 
product
 
candidates
 
for
 
clinical
 
trials
 
or
products, if approved, to patients or future customers could be delayed
 
or halted.
The
 
formulation
 
of
 
peptide-based
 
medicines
 
is
 
complex
 
and
 
requires
 
significant
 
expertise
 
and
 
capital
 
investment,
 
including
 
the
development
 
of advanced
 
manufacturing techniques
 
and analytics.
 
We
 
are currently
 
dependent on
 
contract manufacturers,
 
including
UBI, its affiliates,
 
CSBioa, Pii, and
 
WuXi STA
 
,
 
to conduct the manufacturing
 
and supply activities for
 
our product candidates and
 
the
underlying
 
component
 
parts,
 
but
 
may
 
choose
 
to
 
conduct
 
these
 
manufacturing
 
activities
 
ourselves
 
in
 
the
 
future.
 
If
 
our
 
contract
manufacturers are unable to manufacture our product candidates in clinical quantities or,
 
when necessary, in commercial quantities
 
and
at
 
sufficient
 
yields,
 
then
 
we
 
will
 
need
 
to
 
identify
 
and
 
reach
 
supply
 
arrangements
 
with
 
additional
 
third
 
parties.
 
Further,
 
our
 
product
candidates may
 
be in competition
 
with other products
 
for access to
 
these facilities and
 
may be subject
 
to delays in
 
manufacture if
 
our
contract manufacturers
 
give other
 
products higher
 
priority.
 
We
 
and our
 
contract manufacturers
 
must comply
 
with cGMP,
 
regulations
60
and guidelines for the manufacturing of our product candidates used in pre-clinical studies and clinical trials and, if approved, marketed
products. If we
 
or our contract
 
manufacturers do not
 
receive any regulatory
 
approvals, or lose
 
existing approvals, required
 
to manufacture
our
 
product
 
candidates,
 
production
 
and
 
fulfilment
 
of
 
orders
 
will
 
be
 
delayed,
 
which
 
may
 
materially
 
adversely
 
affect
 
our
 
business.
Manufacturers
 
of
 
biotechnology
 
products
 
often
 
encounter
 
difficulties
 
in
 
production,
 
particularly
 
in
 
scaling
 
up
 
and
 
validating
 
initial
production. Furthermore,
 
if microbial,
 
viral or other
 
contaminations are
 
discovered in
 
our product
 
candidates or
 
in the manufacturing
facilities
 
where
 
our
 
product
 
candidates
 
are
 
made,
 
such
 
manufacturing
 
facilities
 
may
 
be
 
closed
 
for
 
an
 
extended
 
period
 
of
 
time
 
to
investigate and remedy the
 
contamination. Shortages of raw
 
materials may also
 
extend the period
 
of time required
 
to develop our
 
product
candidates.
Manufacturing
 
these
 
products
 
requires
 
facilities
 
specifically
 
designed
 
for
 
and
 
validated
 
for
 
this
 
purpose
 
and
 
sophisticated
 
quality
assurance
 
and
 
quality
 
control
 
procedures
 
are
 
necessary.
 
Slight
 
deviations
 
anywhere
 
in
 
the
 
manufacturing
 
process,
 
including
 
filling,
labeling, packaging, storage and shipping and quality control and testing, may result in lot failures, product recalls or spoilage.
 
Further,
delays in our clinical trials or in
 
any regulatory approvals may result in the expiration of
 
manufactured product, which could in turn lead
to further
 
delays. When
 
changes are
 
made to
 
the manufacturing
 
process, we
 
may be
 
required to
 
provide pre-clinical
 
and clinical
 
data
showing
 
the
 
comparable
 
identity,
 
strength,
 
quality,
 
purity
 
or
 
potency
 
of
 
the
 
products
 
before
 
and
 
after
 
such
 
changes.
 
The
 
use
 
of
biologically
 
derived ingredients
 
can also
 
lead to
 
allegations
 
of harm,
 
including infections
 
or allergic
 
reactions, or
 
closure of
 
product
facilities due to possible contamination.
In addition,
 
there are
 
risks associated
 
with large
 
scale manufacturing
 
for clinical
 
trials or
 
commercial
 
scale including,
 
among others,
cost overruns, potential problems
 
with process scale-up, process
 
reproducibility, stability issues, compliance with cGMP, lot consistency
and timely availability of
 
raw materials. Even if we
 
obtain marketing approval for any
 
of our product candidates,
 
there is no assurance
that we or our manufacturers will be
 
able to manufacture the approved product
 
to specifications acceptable to regulatory authorities,
 
to
produce it in sufficient quantities to meet the requirements for the
 
potential commercial launch of the product or to meet
 
potential future
demand.
 
If we
 
or our
 
manufacturers are
 
unable to
 
produce sufficient
 
quantities for
 
clinical trials,
 
advance
 
purchase commitments
 
or
commercialization, more
 
generally,
 
our development and
 
commercialization efforts
 
would be impaired,
 
which would have
 
an adverse
effect on our business, financial condition, results of operations
 
and prospects.
We cannot assure
 
you that any disruptions or other issues relating to the manufacture of any of our product candidates will not occur in
the future. Any delay or interruption in the supply of
 
clinical trial supplies could delay the completion of planned clinical trials,
 
increase
the costs
 
associated
 
with maintaining
 
clinical trial
 
programs and,
 
depending
 
upon the
 
period of
 
delay,
 
require us
 
to commence
 
new
clinical trials at
 
additional expense or
 
terminate clinical trials
 
completely.
 
Any adverse developments
 
affecting clinical
 
or commercial
manufacturing
 
of
 
our
 
product
 
candidates
 
or
 
products
 
may
 
result
 
in
 
shipment
 
delays,
 
inventory
 
shortages,
 
lot
 
failures,
 
product
withdrawals or recalls or other interruptions in the supply of our product candidates. We may also have to take inventory write-offs
 
and
incur other
 
charges and
 
expenses for
 
product candidates
 
that fail
 
to meet
 
specifications, undertake
 
costly remediation
 
efforts
 
or seek
more costly manufacturing alternatives. Accordingly, failures or difficulties
 
faced at any level
 
of our supply chain
 
could delay or impede
the development
 
and commercialization
 
of any
 
of our
 
product candidates
 
and could
 
have an
 
adverse effect
 
on our
 
business, financial
condition, results of operations and prospects.
We
 
and our
 
contract manufacturers
 
and suppliers
 
could be
 
subject to
 
liabilities, fines,
 
penalties or
 
other sanctions
 
under federal,
state,
 
local
 
and
 
foreign
 
environmental,
 
health
 
and
 
safety
 
laws
 
and
 
regulations
 
if
 
we
 
or
 
they
 
fail
 
to
 
comply
 
with
 
such
 
laws
 
or
regulations or otherwise incur costs that could have a material adverse effect
 
on our business.
We currently rely on and
 
expect to continue
 
to rely on
 
contract manufacturers for
 
the manufacturing and
 
supply of our
 
product candidates
and custom
 
components.
 
We
 
and these
 
contract manufacturers
 
are subject
 
to various
 
federal, state,
 
local and
 
foreign
 
environmental,
health
 
and
 
safety
 
laws
 
and
 
regulations,
 
including
 
those
 
governing
 
laboratory
 
procedures
 
and
 
the
 
generation,
 
handling,
 
labeling,
transportation, use,
 
manufacture, storage,
 
treatment and disposal
 
of hazardous
 
materials and wastes
 
and worker
 
health and safety.
 
We
do
 
not
 
have
 
control
 
over
 
a
 
manufacturer’s
 
or
 
supplier’s
 
compliance
 
with
 
environmental,
 
health
 
and
 
safety
 
laws
 
and
 
regulations.
Liabilities they incur pursuant to these laws and regulations
 
could result in significant costs or in certain circumstances,
 
an interruption
in operations, any of which could adversely affect our business, financial
 
condition, results of operations and prospects.
With
 
respect to
 
any hazardous
 
materials or
 
waste which
 
we are
 
currently,
 
or in
 
the future
 
will be,
 
generating, handling,
 
transporting,
using, manufacturing, storing,
 
treating or disposing of,
 
we cannot eliminate the
 
risk of contamination or
 
injury from these materials
 
or
waste, including
 
at third-party
 
disposal sites.
 
In the
 
event of
 
such contamination
 
or injury,
 
we could
 
be held
 
liable for
 
any resulting
damages and liability. We
 
also could be subject to significant civil or criminal fines and penalties, cessation of operations, investigation
or remedial
 
costs or
 
other sanctions
 
for failure
 
to comply
 
with applicable
 
environmental, health
 
and safety
 
laws. In
 
addition, we
 
may
incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or
future laws and regulations
 
may impair our research,
 
development or production efforts
 
or otherwise have a material
 
adverse effect on
our business.
61
Undetected errors or defects in our production could harm our reputation or expose us to
 
product liability claims.
Undetected errors and defects in the cGMP materials used in the production of our product candidates could
 
result in a lower quality of
any products we produce,
 
and could give rise to
 
reputational harm to us
 
and to the contract manufacturers
 
with whom we work.
 
If any
such
 
errors
 
or defects
 
are discovered,
 
we may
 
incur
 
significant
 
costs,
 
the attention
 
of our
 
key
 
personnel
 
could
 
be diverted,
 
or other
significant
 
problems
 
may
 
arise. We
 
may
 
also
 
be
 
subject
 
to warranty
 
and
 
liability
 
claims
 
for
 
damages
 
related
 
to errors
 
or
 
defects
 
in
products made with our cGMP
 
materials. In addition, if
 
we do not meet industry or
 
quality standards, if applicable,
 
such products may
be subject
 
to recall.
 
A material
 
liability claim,
 
recall or
 
other occurrence
 
that harms our
 
reputation or
 
decreases market
 
acceptance of
such products could harm our business and operating results.
Risks Related to Our Reliance on UBI, Collaborators and Other Third Parties
Conflicts of interest
 
and disputes have
 
and may arise
 
between us and
 
UBI and its
 
affiliates, and
 
these conflicts and
 
disputes might
ultimately be resolved in a manner unfavorable to us.
UBI is
 
our
 
largest
 
stockholder,
 
the licensor
 
of certain
 
of our
 
intellectual
 
property and
 
is a
 
commercial
 
partner for
 
the Company.
 
In
addition, Dr. Chang Yi
 
Wang, UBI’s
 
founder, holds shares of our common stock.
 
Our co-founders (Mei Mei Hu and Louis Reese), one
of their affiliates and UBI
 
(collectively, our “principal stockholders”), are party to a
 
voting agreement (the “Voting Agreement,”), which
provides Mei
 
Mei Hu with
 
the authority (and
 
irrevocable proxies)
 
to vote the
 
shares of capital
 
stock held
 
by the stockholders
 
party to
the Voti
 
ng Agreement at her
 
discretion on all matters to
 
be voted upon by
 
stockholders.
 
Our CEO, Mei Mei Hu,
 
our Chairman, Louis
Reese and
 
our shareholder
 
and former
 
director James
 
Chui, also
 
serve on
 
and constitute
 
a majority
 
of the
 
board of
 
directors of
 
UBI.
 
UBI’s
 
equity interests
 
in the Company,
 
and the overlapping
 
directorships, could
 
give rise
 
to conflicts
 
of interest,
 
in particular
 
when a
decision could favor the
 
interests of UBI (or its affiliates)
 
or us over the other.
 
Further, we have
 
historically depended heavily on
 
UBI
and its affiliates
 
for our business operations,
 
including the provision of
 
research, development and
 
manufacturing services.
 
While we
have taken steps to separate our operations from those of UBI and currently anticipate taking additional steps to lessen our dependence,
we still have ongoing relationships with
 
UBI and its affiliates. With
 
respect to our UB-612 program,
 
we have partnered with UBIA for
the
 
development
 
of
 
UB-612
 
in Taiwan,
 
UBIP for
 
the
 
formulation-fill-finish
 
services,
 
and
 
UBP as
 
the
 
sole
 
manufacturer
 
of
 
protein.
Relating to our
 
chronic disease pipeline,
 
we continue to
 
work with UBIP
 
and UBIA for
 
the production
 
and testing of
 
clinical material
for our UB-312 program.
Conflicts of
 
interest may
 
arise with
 
respect to
 
existing or
 
possible future
 
commercial arrangements
 
between us
 
and UBI
 
or any
 
of its
affiliates in which the
 
terms and conditions of the
 
arrangements are subject to negotiation
 
or dispute. For example, conflicts
 
of interest
could arise over matters such as:
•
 
disputes over the
 
cost or
 
quality of the
 
manufacturing and testing
 
services provided to
 
us by UBI
 
with respect to
 
our product
candidates;
•
 
the allocation of UBI’s resources as between
 
our business objectives and UBI’s
 
own objectives;
•
 
a
 
decision
 
whether
 
to
 
engage
 
UBI
 
or
 
its
 
affiliates
 
in
 
the
 
future
 
to
 
manufacture,
 
test
 
and
 
supply
 
of
 
additional
 
custom
components or product candidates for us;
•
 
decisions as to which particular product candidates we will commit sufficient
 
development efforts to; or
•
 
business opportunities unrelated to our current products that may be attractive both
 
to us and to the other company.
We
 
also cannot
 
guarantee conflicts
 
of interest
 
will not
 
arise in
 
connection with
 
the negotiation
 
or execution
 
of any
 
future agreement
with UBI, its affiliates or any other related party.
 
Further, we have
 
been advised that there is currently
 
an ongoing dispute within UBI between
 
Dr. Wang
 
and the other four members
 
of
UBI’s board of directors relating to certain corporate governance matters, including the overall management and
 
control of UBI, as well
as its relationship with the Company. Specifically,
 
we have been advised that Dr. Wang
 
attempted to replace the UBI board of directors
in July and August 2021 and asserted that she is the majority shareholder of UBI, which we understand UBI’s other directors dispute as
invalid and incorrect, respectively.
 
This dispute has created
 
risks and uncertainties for
 
us, and this dispute or
 
any resolution of it
 
could
negatively impact us, including, without limitation, by impairing our ability to work with UBI and its affiliates
 
as a commercial partner
in the future and/or otherwise adversely affecting other existing
 
arrangements with or involving UBI or its affiliates. Late
 
in the day on
November 9,
 
2021,
 
counsel
 
to
 
the
 
Company
 
received
 
correspondence
 
on
 
behalf
 
of
 
Dr.
 
Wang
 
(the
 
“Correspondence”).
 
The
Correspondence
 
outlined
 
Dr.
 
Wang’s
 
concerns
 
that the
 
preliminary
 
prospectus
 
for
 
our initial
 
public
 
offering,
 
subject to
 
completion,
dated November 5, 2021 did
 
not accurately describe the relationship
 
between the Company and UBI,
 
namely the Company’s
 
ability to
operate independently
 
from UBI. The
 
Correspondence also relayed
 
Dr. Wang’s
 
concerns that the
 
preliminary prospectus did
 
not fully
describe
 
the
 
disruption
 
to
 
the
 
Company’s
 
business
 
that
 
could
 
result
 
from
 
the
 
abovementioned
 
dispute,
 
including
 
with
 
respect
 
to
intellectual property
 
agreements among
 
the Company
 
and UBI
 
and its
 
affiliates. Various
 
other claims
 
have been
 
made by
 
Dr.
 
Wang
62
regarding
 
UBI’s
 
corporate
 
governance,
 
the
 
operations
 
of
 
the
 
Company
 
and
 
the
 
disclosures
 
for
 
our
 
initial
 
public
 
offering,
 
and
 
the
Company cannot
 
predict the
 
course of this
 
dispute. However,
 
the Company
 
has carefully considered
 
Dr.
 
Wang’s
 
concerns and,
 
based
on the disclosures
 
included in the
 
preliminary prospectus and
 
in the final
 
prospectus for our
 
initial public offering
 
and the Company’s
diligence efforts, the Company remains confident
 
in the appropriateness and accuracy of its disclosures.
We
 
will
 
rely
 
on
 
contract
 
manufacturers
 
for
 
the
 
manufacture
 
of
 
raw
 
materials
 
for
 
our
 
research
 
programs,
 
pre-clinical studies and clinical
 
trials and we do not
 
have long-term contracts with many
 
of these parties. This reliance
 
on contract
manufacturers increases
 
the risk
 
that we
 
will not
 
have sufficient
 
quantities of
 
such materials
 
or product
 
candidates that
 
we may
develop and commercialize, or that such supply will not
 
be available to us at an acceptable cost or on
 
an acceptable timeline, which
could delay, prevent or impair our development
 
or commercialization efforts.
We rely on
 
contract manufacturers, including UBI and its affiliates,
 
for the manufacture of raw materials for our clinical
 
trials and pre-
clinical and clinical
 
development. We
 
do not have a
 
long-term agreement with some
 
of the contract manufacturers
 
we currently use to
provide
 
pre-clinical
 
and
 
clinical
 
raw
 
materials.
 
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
 
pre-clinical
 
studies
 
or
 
clinical
 
trials,
 
and
 
would
 
materially
 
adversely
 
affect
 
our
development and commercialization efforts.
We expect to continue to rely on contract
 
manufacturers for the commercial supply of
 
any of our product
 
candidates for which we obtain
marketing approval, if any. We may be unable to maintain or establish long-term agreements with contract manufacturers or to do so on
acceptable terms.
 
Even if
 
we are
 
able to
 
establish agreements
 
with contract
 
manufacturers, reliance
 
on contract
 
manufacturers entails
additional risks, including:
•
 
the failure
 
of the
 
contract manufacturer to
 
manufacture our product
 
candidates according to
 
our schedule, or
 
at all,
 
including
if our contract manufacturers give greater priority to the supply
 
of other products over our product candidates or otherwise
do not satisfactorily perform according to the terms of the agreements between
 
us and them;
•
 
the reduction or termination of production or deliveries by suppliers, or
 
the raising of prices or renegotiation of terms;
•
 
the termination
 
or nonrenewal
 
of arrangements
 
or agreements
 
by our
 
contract manufacturers
 
at a
 
time that
 
is costly
 
or
inconvenient for us;
•
 
the breach by the contract manufacturers of our agreements with them;
•
 
the failure of contract manufacturers to comply with applicable regulatory
 
requirements;
•
 
the failure of the contract manufacturer to manufacture our product
 
candidates according to our specifications;
•
 
the
 
mislabeling
 
of
 
clinical
 
supplies,
 
potentially
 
resulting
 
in
 
the
 
wrong
 
dose
 
amounts
 
being
 
supplied
 
or
 
active
 
drug
 
or
placebo not being properly identified;
•
 
clinical supplies not being delivered
 
to clinical sites on time, leading
 
to clinical trial interruptions, or of
 
drug supplies not
being distributed to commercial vendors in a timely manner,
 
resulting in lost sales; and
•
 
the misappropriation or unauthorized disclosure of
 
our intellectual property or other
 
proprietary information, including our
trade secrets and know-how.
We
 
do not
 
have complete
 
control over
 
all aspects
 
of the
 
manufacturing process
 
of, and
 
are dependent
 
on, our
 
contract manufacturing
partners
 
for
 
compliance
 
with
 
cGMP
 
regulations
 
for
 
manufacturing
 
both
 
custom
 
components
 
and
 
finished
 
products.
 
Contract
manufacturers may not be able to comply with cGMP regulations or similar regulatory requirements outside of the United States. If our
contract
 
manufacturers
 
cannot
 
successfully
 
manufacture
 
material
 
that
 
conforms
 
to
 
our
 
specifications
 
and
 
the
 
strict
 
regulatory
requirements of applicable
 
regulatory authorities, they
 
will not be able
 
to secure and/or maintain
 
authorization for their manufacturing
facilities. In
 
addition, we
 
do not
 
have full
 
control over
 
the ability
 
of our
 
contract manufacturers
 
to maintain
 
adequate quality
 
control,
quality assurance and qualified
 
personnel. Further, our manufacturing partners may
 
be unable to
 
successfully increase the manufacturing
capacity
 
for any of
 
our product candidates
 
in a timely or
 
cost-effective manner,
 
or at all, and
 
quality issues may
 
arise during any
 
such
scale-up
 
activities. If
 
regulatory authorities
 
do not
 
authorize these
 
facilities for
 
the manufacture
 
of our
 
product candidates
 
or if
 
they
withdraw
 
any
 
such
 
authorization
 
in
 
the
 
future,
 
we
 
may
 
need
 
to
 
find
 
alternative
 
manufacturing
 
facilities,
 
which
 
would
 
significantly
impact our ability to develop, obtain marketing approval for or market our product candidates, if approved. Our failure, or the failure of
our
 
contract
 
manufacturers,
 
to
 
comply
 
with
 
applicable
 
regulations
 
could
 
result
 
in
 
sanctions
 
being
 
imposed
 
on
 
us,
 
including
 
fines,
injunctions, civil penalties, delays,
 
suspension or withdrawal of
 
approvals, license revocation, seizures
 
or recalls of product candidates
or drugs, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our
 
product
candidates or drugs and harm our business and results of operations.
63
We
 
depend
 
on
 
strategic
 
partnerships,
 
collaborations
 
and
 
license
 
agreements
 
in
 
connection
 
with
 
the
 
research,
 
development
 
and
commercialization of our Vaxxine
 
Platform and product candidates. If our existing or future partners, collaborators or licensees do
not perform
 
as expected,
 
if we fail
 
to maintain any
 
of these strategic
 
partnerships, collaborations
 
or license
 
agreements, or
 
if they
are
 
not
 
successful, our
 
ability
 
to
 
commercialize
 
our product
 
candidates
 
successfully and
 
to generate
 
revenues may
 
be materially
adversely affected.
We
 
have
 
established
 
and
 
intend
 
to
 
continue
 
to
 
establish
 
strategic
 
partnerships,
 
collaborations,
 
licensing
 
agreements,
 
or
 
other
arrangements with third parties.
 
For our research, development
 
and commercialization activities, we
 
have depended, and will
 
continue
to depend, on our partners to design and conduct their own clinical studies. As a result, these activities may not be able to be conducted
in the manner or on the time schedule we currently
 
contemplate, which may negatively impact our business operations.
 
While we have
certain contractual rights to information
 
about pre-clinical and clinical developments
 
and results under certain of our
 
collaboration and
license
 
agreements,
 
including
 
our
 
agreements
 
with
 
UBIA
 
and
 
Aurobindo,
 
we
 
cannot
 
be
 
certain
 
that
 
clinical
 
trials
 
conducted
 
in
connection with such collaboration
 
programs will be
 
conducted in a
 
manner consistent with
 
the best interests
 
of our business.
 
In addition,
if any
 
of our
 
partners, collaborators
 
or licensees
 
withdraw support
 
for these
 
programs or
 
proposed products
 
or otherwise
 
impair their
development, our business could be negatively affected.
 
Also, our inability to find
 
a partner for any of
 
our product candidates may result
in our termination of that specific product candidate program or evaluation of a product candidate in a particular
 
indication. Because of
contractual restraints
 
and the limited
 
number of contract
 
manufacturers with the
 
expertise, required regulatory
 
approvals and facilities
to
 
manufacture
 
our
 
product
 
candidates
 
on
 
a
 
commercial
 
scale,
 
replacement
 
of
 
a
 
contract manufacturer
 
may
 
be expensive
 
and
 
time-
consuming and
 
may cause
 
interruptions in
 
the production
 
of our
 
product candidates,
 
which could
 
delay our
 
clinical trials or
 
interrupt
our potential
 
future commercial
 
sales. Even
 
if we
 
find or
 
establish a
 
strategic partner,
 
collaborator or
 
licensee for
 
one or
 
more of
 
our
product candidates, there is no assurance that upon the approval of one or more of such product candidates that such product candidates
will be successfully commercialized.
Furthermore, our licenses
 
and collaboration agreements
 
impose, and any
 
future agreement we
 
enter into may
 
also impose, restrictions
on our ability to license certain of our intellectual property to third parties or to develop or commercialize
 
certain product candidates or
technologies ourselves.
In the future, we may
 
enter into additional collaborations or
 
license agreements to fund our
 
development programs or to gain
 
access to
sales, marketing or
 
distribution capabilities of
 
other parties. While
 
certain of our
 
existing collaboration and
 
license agreements, including
our agreements with Aurobindo, impose development or commercialization obligations
 
on our collaborators or licensees, we cannot be
certain that our collaboration partners
 
will allocate sufficient resources or
 
attention to our collaboration
 
programs, that they will
 
progress
our collaboration
 
programs consistent
 
with the
 
best interests
 
of our
 
business or
 
that they
 
will otherwise
 
meet their
 
obligations under
these agreements
 
in a timely
 
manner or
 
at all. Our
 
existing collaborations
 
and licenses,
 
and any future
 
collaborations and
 
licenses we
enter into, therefore may pose a number of risks, including the following:
•
 
collaborators or licensees
 
may have significant
 
discretion in determining
 
the efforts and
 
resources that they
 
will apply to
developing
 
or
 
commercializing
 
our
 
product
 
candidates,
 
and
 
they
 
may
 
not
 
sufficiently
 
fund
 
the
 
development
 
or
commercialization of a product candidate;
•
 
collaborators and licensees may
 
not perform their obligations as expected
 
by us or by health authorities,
 
such as the FDA
or comparable foreign regulatory authorities;
•
 
collaborators and licensees may
 
dissolve, merge, be bought or
 
may otherwise become unwilling to fulfill
 
the initial terms
of the collaboration with us, or we may be unwilling to continue our arrangement
 
following such an occurrence;
•
 
collaborators and licensees may fail
 
to perform their obligations
 
under their agreements or
 
may be slow in
 
performing their
obligations;
•
 
collaborations and licensees
 
may be terminated
 
for the convenience of
 
the collaborator or licensee
 
and, if terminated, we
could be required to raise additional capital to pursue further development or commercialization of the
 
applicable product
candidates;
•
 
collaborators and licensees may not pursue commercialization of any
 
product candidates that achieve regulatory approval
or may elect not to continue or renew development or commercialization programs
 
based on clinical trial results, changes
in the collaborators’ or
 
licensees’ strategic focus or available
 
funding, or external factors, such
 
as an acquisition, that
 
divert
resources or create competing priorities, or due to the actual or perceived
 
competitive situation in a specific indication;
•
 
collaborators and licensees may delay clinical trials, stop a clinical trial or abandon a product candidate, repeat or conduct
additional clinical trials or may require a new formulation of a product candidate
 
for clinical testing;
64
•
 
collaborators and
 
licensees could independently
 
develop, or develop
 
with third parties,
 
products that compete
 
directly or
indirectly with our products or product candidates if the collaborators believe that competitive products are more likely to
be successfully developed or can be commercialized under terms that are more
 
economically attractive than ours;
•
 
product candidates discovered in collaboration with us may be viewed
 
by our collaborators as competitive with their own
product candidates
 
or products,
 
which may
 
cause collaborators
 
to cease
 
to devote
 
resources to
 
the commercialization
 
of
our product candidates;
•
 
disagreements with collaborators or licensees, including disagreements over proprietary rights, contract interpretation and
breach of contract claims, payment obligations or the preferred course
 
of development, might cause delays or termination
of
 
the
 
research,
 
development
 
or
 
commercialization
 
of
 
products
 
or
 
product
 
candidates,
 
might
 
lead
 
to
 
additional
responsibilities,
 
including
 
financial
 
obligations
 
for
 
us
 
with
 
respect
 
to
 
products
 
or
 
product
 
candidates,
 
or
 
delays
 
or
withholding of payments due to us or might result in litigation or arbitration, any of which would be time- consuming and
expensive, and could
 
limit our ability
 
to execute on
 
our strategies and
 
delay or prevent
 
our ability to
 
devote resources to
other product candidates;
•
 
collaborators or
 
licensees may
 
not properly
 
obtain, maintain,
 
enforce or
 
defend our
 
intellectual property
 
or may
 
use our
proprietary
 
information
 
in
 
such
 
a
 
way
 
that
 
could
 
jeopardize
 
or
 
invalidate
 
our
 
intellectual
 
property
 
or
 
proprietary
information or expose us to potential litigation; and
•
 
collaborators may infringe, misappropriate or
 
otherwise violate the intellectual property
 
of third parties, which
 
may expose
us to litigation and potential liability.
If our collaborations and licenses related to the research, development
 
and commercialization of product candidates do not result in the
successful
 
development
 
and
 
commercialization
 
of
 
our
 
product
 
candidates,
 
or
 
if
 
one
 
of
 
our
 
collaborators
 
or
 
licensees
 
terminates
 
its
agreement with us, we may not receive any future research funding or milestone or royalty payments under the collaboration or license,
and we may be unable to continue the development and commercialization of the product candidate.
 
Further, even if our collaborations
and licenses do result in successful development and commercialization of products, if one of our collaborators breaches its obligations
under its
 
agreement with
 
us or
 
enters bankruptcy
 
or insolvency,
 
there may
 
be a
 
material delay
 
in our
 
receipt of
 
payments under
 
such
agreements, or
 
we may
 
never receive
 
such payments.
 
If we
 
do not
 
receive the
 
payments we
 
expect under
 
these agreements,
 
our own
development and commercialization activities could be delayed
 
or prevented altogether, and we may need
 
to secure additional resources
to develop our proprietary product candidates. Moreover, maintaining our relationships with
 
our collaborators and licensees may divert
significant time and effort of our scientific staff and management team, which may harm our
 
ability to effectively allocate our resources
to
 
multiple
 
internal
 
and
 
other projects.
 
All of
 
the
 
risks
 
relating
 
to
 
product
 
development,
 
regulatory
 
approval
 
and
 
commercialization
described in this report also apply to the activities of our collaborators and
 
licensees.
Additionally,
 
subject to its contractual
 
obligations to us,
 
if one of our
 
collaborators or licensors
 
is involved in
 
a business combination,
merger,
 
acquisition
 
or
 
other
 
similar
 
transaction,
 
the
 
collaborator
 
or
 
licensor
 
might
 
deprioritize
 
or
 
terminate
 
the
 
development
 
or
commercialization of
 
any product candidate
 
licensed to it
 
by us. If
 
one of our
 
collaborators or licensors
 
terminates its agreement
 
with
us, we
 
may be
 
unable to
 
attract new
 
collaborators in
 
a timely
 
manner or
 
at all,
 
which may
 
delay or
 
prevent our
 
ability to
 
develop or
commercialize one or more of our product candidates.
We rely on third parties to conduct our pre-clinical studies and clinical trials and perform other tasks for us. If these third parties do
not successfully
 
carry out
 
their contractual
 
duties, meet
 
expected deadlines,
 
or comply with
 
legal and
 
regulatory requirements,
 
we
may not be able to
 
obtain regulatory approval for
 
or commercialize our product candidates
 
and our business could be
 
substantially
harmed.
We have relied upon and plan to continue to rely upon CROs to execute certain of our pre-clinical and
 
clinical trials, and to monitor and
manage data for our ongoing pre-clinical
 
and clinical programs and to provide
 
us with significant data and other
 
information related to
our projects, pre-clinical studies and clinical trials. If such third parties provide inaccurate, misleading or incomplete data, our business,
financial condition and results of operations and prospects could be materially adversely affected. We
 
have control over limited aspects
of our CROs’
 
activities; nevertheless, we
 
are responsible for,
 
and our reliance
 
on CROs does
 
not relieve us
 
of our responsibilities
 
for,
ensuring that each of
 
our trials is
 
conducted in accordance with the
 
applicable protocol, legal, regulatory, scientific and
 
ethical standards.
We
 
and
 
our CROs
 
and
 
other vendors
 
are required
 
to comply
 
with cGMP,
 
GCP,
 
Good
 
Laboratory
 
Practice (“GLP”)
 
and other
 
laws,
regulations and
 
guidelines enforced
 
by applicable
 
regulatory authorities
 
for all
 
of our
 
product candidates
 
during both
 
pre-clinical and
clinical
 
development.
 
Regulatory
 
authorities
 
enforce
 
these
 
regulations
 
through
 
periodic
 
inspections
 
of
 
study
 
sponsors,
 
principal
investigators, trial sites and other
 
contractors. If we or any
 
of our CROs or vendors
 
fail to comply with applicable
 
regulations, the data
generated in our pre-clinical and
 
clinical trials may be
 
deemed unreliable and regulatory authorities
 
may require us to
 
perform additional
pre-clinical
 
and
 
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
 
all
 
of
 
our
 
clinical
 
trials
 
comply
 
with
 
cGCP
 
regulations
 
or
 
other
applicable laws and regulations.
 
Our failure to
 
comply with applicable
 
laws and regulations
 
may require us
 
to repeat clinical
 
trials, which
would delay the regulatory approval process and require significant additional
 
expenditures, which we may be unable to meet.
65
If any of our
 
relationships with these
 
CROs terminates, we may
 
not be able to
 
enter into arrangements with
 
alternative CROs or
 
do so
on commercially reasonable terms or in a timely manner.
 
We would also incur
 
additional costs and delays while engaging a new CRO,
which we
 
may not
 
be able
 
to engage
 
on commercially
 
reasonable terms
 
or at
 
all. In
 
addition, our
 
CROs are
 
not our
 
employees, and
except for remedies available to us under our agreements with such CROs, we cannot control whether or not they devote sufficient time
and
 
resources
 
to
 
our
 
ongoing
 
pre-clinical
 
and
 
clinical
 
programs.
 
If
 
CROs
 
do
 
not
 
successfully
 
carry
 
out
 
their
 
contractual
 
duties
 
or
obligations,
 
meet
 
expected
 
deadlines,
 
conduct
 
our
 
studies
 
in accordance
 
with
 
regulatory
 
requirements
 
or
 
our
 
stated
 
study
 
plans
 
and
protocols, if they need to be replaced or if the quality or accuracy
 
of the data they obtain is compromised due to the failure to adhere
 
to
our protocols, regulatory requirements,
 
or for other reasons, our clinical
 
trials may be extended, delayed or
 
terminated and we may not
be able to obtain
 
regulatory approval for or
 
successfully commercialize our product candidates
 
in a timely manner or
 
at all. For example,
due to an
 
error by the
 
CRO responsible for
 
administering blinded placebo
 
and active doses
 
to trial subjects,
 
which reduced the
 
confidence
of subsequently collected
 
data, we decided
 
to discontinue a Phase
 
2a LTE
 
trial for UB-311.
 
In that case,
 
however, we
 
determined that
we had collected
 
sufficient data on UB-311’s tolerability and immunogenicity. CROs or
 
any of our
 
other collaborators may
 
also generate
higher costs
 
than anticipated.
 
As a
 
result, our
 
results of
 
operations and
 
the commercial
 
prospects for
 
our product
 
candidates could
 
be
harmed, our costs could increase and our ability to generate revenue
 
could be delayed.
Though we carefully manage our
 
relationships with our CROs, there
 
can be no assurance that
 
we will not encounter challenges
 
or delays
in the
 
future or
 
that these
 
delays or challenges
 
will not have
 
a material
 
adverse impact
 
on our business,
 
financial condition,
 
results of
operations and prospects.
We
 
do not have
 
multiple sources of
 
commercial supply for
 
some of the
 
components used in
 
our product candidates,
 
nor long-term
supply contracts with our
 
existing suppliers, and
 
certain of our suppliers
 
are critical to our
 
production. If we were
 
to lose a critical
supplier or if an approved supplier experiences delays due to raw material constraints, it could have a material adverse effect on our
ability to complete
 
the development of
 
our product candidates.
 
If we obtain
 
regulatory approval for
 
any of our
 
product candidates,
we cannot guarantee that our suppliers will be able to meet our increased demands for
 
supply.
We do not have multiple sources of commercial supply for
 
each of the components used in
 
the manufacturing of our product
 
candidates,
nor do we have long-term supply agreements with all of our component suppliers. Manufacturing suppliers are subject to
 
cGMP quality
and regulatory requirements, covering manufacturing, testing, quality control and record keeping relating to our product candidates and
are
 
subject
 
to
 
ongoing
 
inspections
 
by
 
applicable
 
regulatory
 
authorities.
 
Manufacturing
 
suppliers
 
are
 
also
 
subject
 
to
 
licensing
requirements as well as local, state and federal regulations and regulations in foreign jurisdictions in which they operate. 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 such
 
supply 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 adversely
affect our
 
development and commercialization
 
efforts. Further,
 
if such critical
 
suppliers experience
 
delays in their
 
ability to
 
supply of
components due to limited
 
availability of raw
 
materials or other
 
difficulties which may be
 
beyond our or
 
their control, our
 
manufacturing
efforts may be materially adversely affected.
As part of any marketing approval, regulatory authorities conduct inspections
 
that must be successful prior to the approval of a product
candidate. Failure of manufacturing suppliers to successfully complete these regulatory inspections will result in delays. If supply
 
from
the approved supplier is interrupted, an
 
alternative vendor would need to be
 
qualified through an NDA amendment
 
or supplement, and
this could
 
result
 
in
 
significant
 
disruption
 
in
 
commercial
 
supply.
 
Regulatory
 
authorities
 
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
 
our
 
product
 
candidates
 
or,
 
if
 
we
 
obtain
 
regulatory
 
approval
 
for
 
our
 
product
 
candidates,
 
to
commercialize them.
Risks Related to Our Intellectual Property Rights
We depend on intellectual property
 
licensed from UBI
 
and its affiliates, the
 
termination of which
 
could result in
 
the loss of
 
significant
rights, which would harm our business.
We
 
are dependent
 
on technology,
 
patents, know-how
 
and proprietary
 
information, both
 
our own
 
and those
 
licensed from
 
UBI and
 
its
affiliates. We
 
entered into the Platform
 
License Agreement in August
 
2021 pursuant to which
 
we obtained a worldwide,
 
sublicensable
(subject to
 
certain conditions),
 
perpetual, fully
 
paid-up, royalty-free
 
(i) exclusive
 
license (even
 
as to
 
the Licensors)
 
under all
 
patents
owned or otherwise
 
controlled by
 
the Licensors or
 
their affiliates existing
 
as of the
 
effective date
 
of the Platform
 
License Agreement,
66
(ii) exclusive
 
license (except
 
as to
 
the Licensors)
 
under all
 
patents owned
 
or otherwise
 
controlled by
 
the Licensors
 
or their
 
affiliates
arising after the
 
effective date during
 
the term of the
 
Platform License Agreement,
 
and (iii) non-exclusive
 
license under all know
 
-how
owned
 
or
 
otherwise
 
controlled
 
by
 
the
 
Licensors
 
or
 
their
 
affiliates
 
existing
 
as
 
of
 
the
 
effective
 
date
 
or
 
arising
 
during
 
the
 
term
 
of
 
the
Platform License
 
Agreement, in
 
each of
 
the foregoing
 
cases, to
 
research, develop,
 
make, have
 
made, utilize,
 
import, export,
 
market,
distribute, offer for sale,
 
sell, have sold,
 
commercialize or otherwise
 
exploit peptide-based vaccines in
 
the field of
 
all human prophylactic
and therapeutic uses, except for such vaccines related
 
to human immunodeficiency virus, herpes simplex virus
 
and Immunoglobulin E.
The patents licensed to us
 
under the Platform License Agreement
 
include patents directed to a CpG
 
delivery system, artificial T helper
cell epitopes and
 
certain designer peptides
 
and proteins that
 
are used in
 
our product candidates.
 
Any termination of
 
these licenses will
result in the loss of significant rights and will restrict our ability to develop
 
and commercialize our product candidates.
Our
 
reliance
 
on
 
in-licensed
 
intellectual
 
property
 
and
 
technology
 
results
 
in
 
a
 
number
 
of
 
risks
 
to
 
the
 
development
 
and
commercialization of our product
 
candidates, including the loss
 
of such rights, our
 
licensors’ inability or refusal
 
to enforce or
 
defend
such rights, and the requirement to pay royalties, milestones, and other amounts.
Agreements under
 
which we license
 
intellectual property
 
or technology
 
to or from
 
UBI, its affiliates
 
and from other
 
third parties may
be 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 product candidates. Our business may
 
also
suffer if
 
any current or
 
future licensors fail
 
to abide by
 
the terms of
 
the license, if
 
the licensors fail
 
to enforce licensed
 
patents against
infringing third parties,
 
if the licensed patents
 
or other rights are
 
found to be invalid
 
or unenforceable, or
 
if we are unable to
 
enter into
necessary licenses on
 
acceptable terms or at
 
all. In the event of
 
a bankruptcy by one
 
of our licensors, our
 
intellectual property licenses
could
 
also
 
be
 
affected.
 
For
 
example,
 
while
 
the
 
U.S.
 
Bankruptcy
 
Code
 
allows
 
a
 
licensee
 
to
 
retain
 
its
 
rights
 
under
 
its
 
license
notwithstanding
 
the bankrupt
 
licensor’s
 
rejection of
 
such license,
 
such protections
 
may not
 
be available
 
to us
 
in the
 
event a
 
licensor
declares bankruptcy in
 
a foreign jurisdiction.
 
Our licensors may
 
also own or
 
control intellectual property
 
that has not
 
been licensed to
us and,
 
as a
 
result, we
 
may be
 
subject to
 
claims, regardless
 
of their
 
merit, that
 
we are
 
infringing or
 
otherwise violating
 
the licensors’
rights.
Furthermore, while we cannot currently determine the amount of the royalty obligations
 
we would be required to pay on sales of future
products,
 
if
 
any,
 
the
 
amounts
 
may
 
be
 
significant.
 
The
 
amount
 
of
 
our
 
future
 
royalty
 
obligations
 
will
 
depend
 
on
 
the
 
technology
 
and
intellectual
 
property
 
we use
 
in products
 
that we
 
successfully
 
develop
 
and commercialize,
 
if any.
 
Therefore,
 
even
 
if we
 
successfully
develop and commercialize products, we may be unable to achieve
 
or maintain profitability.
We believe
 
the growth of our business may
 
depend in part on our ability
 
to acquire or in-license additional
 
intellectual property rights,
including to advance
 
our research or allow
 
commercialization of our
 
product candidates. If
 
we are unable to
 
obtain additional licenses
we need to develop
 
and commercialize our product
 
candidates, or if we
 
obtain such licenses and
 
they are terminated, we
 
may be required
to expend considerable time
 
and resources in an attempt
 
to develop or license replacement
 
technology.
 
We may
 
also need to cease use
of the compositions or methods covered by such third-party intellectual property rights, and our ability to license or develop alternative
approaches that do not infringe on such intellectual property rights may entail
 
significant additional costs and development delays, even
if we were able to develop or license such alternatives, which may not be feasible.
The
 
licensing
 
and
 
acquisition
 
of
 
third-party
 
intellectual
 
property
 
rights
 
is
 
a
 
competitive
 
practice,
 
and
 
companies
 
that
 
may
 
be
 
more
established, or have greater resources
 
than we do, may also be pursuing
 
strategies to license or acquire
 
third-party intellectual property
rights that we may consider necessary or attractive in order to commercialize our product
 
candidates. More established companies may
have a competitive advantage over us due to their larger size and cash resources or greater clinical development
 
and commercialization
capabilities. There can be no assurance that we will be able to successfully complete such negotiations and ultimately acquire the rights
to the intellectual
 
property surrounding
 
the additional product
 
candidates that
 
we may seek
 
to acquire. Even
 
if we are
 
able to obtain
 
a
license under such intellectual property rights, any
 
such license may be non-exclusive, which may allow our
 
competitors’ access to the
same technologies licensed to us.
Licensing of intellectual property is of critical importance to
 
our business and involves complex legal, business and scientific issues
 
and
is complicated by the rapid pace of scientific discovery in our industry.
 
Disputes may also arise between us and our licensors regarding
intellectual property subject to a license agreement, including those relating
 
to:
•
 
the scope of rights granted under the license agreement and other interpretation
 
-related issues;
•
 
whether and
 
the extent to
 
which our technology
 
and processes infringe
 
on intellectual property
 
of the licensor
 
that is not
subject to the license agreement;
•
 
our right to sublicense patent and other rights to third parties under
 
collaborative development relationships;
67
•
 
our compliance with reporting, financial or other obligations under the license
 
agreement;
•
 
the amount and timing of payments owed under license agreements; and
•
 
the allocation of ownership of inventions
 
and know-how resulting from
 
the creation or use of intellectual property
 
by our
licensors and by us and our partners.
We
 
may
 
also
 
not
 
be
 
able
 
to
 
fully
 
protect
 
our
 
licensed
 
intellectual
 
property
 
rights
 
or
 
maintain
 
our
 
licenses
 
under
 
our
 
licensing
arrangements. Our existing and future
 
licensors could retain the
 
right to prosecute, maintain,
 
defend and enforce the
 
intellectual property
rights licensed to us, in
 
which case we would
 
depend on the ability and
 
will of our licensors to
 
do so. Our licensors
 
may take different
approaches
 
to prosecuting
 
patents than
 
we would,
 
and
 
it is
 
possible our
 
inability to
 
control such
 
activities could
 
harm our
 
business.
Furthermore, our licensors
 
may determine not
 
to pursue litigation
 
against other companies
 
or may pursue
 
such litigation less
 
aggressively
than we would.
 
We
 
may also rely
 
upon obtaining the
 
consent of our
 
licensors to settle
 
legal claims. If
 
our licensors do
 
not adequately
protect or enforce 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.
If disputes over intellectual property that we have
 
licensed prevent or impair our ability to maintain our
 
current licensing arrangements
on acceptable
 
terms or
 
at all,
 
we may
 
be unable
 
to successfully
 
develop
 
and commercialize
 
the affected
 
product candidates.
 
We
 
are
generally also subject to all of the same risks with respect to protection of intellectual property that we license as we are for intellectual
property that we own,
 
which are described below.
 
If we or our licensors
 
fail to adequately protect
 
this intellectual property,
 
our ability
to develop or commercialize our products could suffer.
Furthermore, our existing license agreements may impose, and we expect that future license agreements will impose, various diligence,
milestone payment,
 
royalty and other
 
obligations on us
 
and if our
 
licensors, licensees or
 
collaborators conclude
 
that we have
 
failed to
comply with our obligations under
 
these agreements, including due
 
to the impact of
 
the COVID-19 pandemic on
 
our business operations
or our use of the intellectual property licensed to us in a manner the licensor believe
 
is unauthorized, or we are subject to a bankruptcy,
we may be required to pay damages and the licensor may have the right to terminate the license. Any of the foregoing could result in us
being unable to develop, manufacture and
 
sell products that are
 
covered by the licensed technology
 
or enable a competitor to
 
gain access
to the
 
licensed technology.
 
We
 
might not
 
have the
 
necessary rights
 
or the
 
financial resources
 
to develop,
 
manufacture or
 
market our
current or future product candidates without the rights granted under our licenses, and the loss of sales or potential sales in
 
such product
candidates could have a material adverse effect on our
 
business, financial condition, results of operations and prospects.
Moreover,
 
our rights
 
to our
 
in-licensed patents
 
and patent
 
applications may
 
depend, in
 
part, on
 
inter-
 
institutional or
 
other operating
agreements between the
 
joint owners of
 
such in-licensed patents
 
and patent applications
 
or the owners
 
of such in-licensed
 
patents and
patent applications and their affiliates. We may not be aware of each
 
party’s rights and obligations under such inter-institutional or other
operating agreements and, as such, the ownership of our in-licensed patents and patent applications may be uncertain. If one or more of
these
 
owners
 
breaches
 
such
 
inter-institutional
 
or
 
other
 
operating
 
agreements,
 
our
 
rights
 
to
 
such
 
in-licensed
 
patents
 
and
 
patent
applications may be adversely affected. In
 
addition, the development of certain of our product candidates may
 
be funded by grants that
impose
 
certain pricing
 
limitations on
 
such product
 
candidates and
 
limit our
 
ability to
 
commercialize such
 
product
 
candidates
 
and
 
to
achieve
 
or
 
maintain
 
profitability.
 
Any
 
of
 
the
 
foregoing
 
could
 
have
 
a
 
material
 
adverse
 
effect
 
on
 
our
 
competitive
 
position,
 
business,
financial conditions, results of operations and prospects.
We
 
may
 
be
 
required
 
to
 
license
 
or
 
obtain
 
rights
 
to
 
use
 
third
 
party
 
intellectual
 
property
 
or
 
technology
 
in
 
connection
 
with
 
the
development and commercialization of our product candidates.
We
 
may
 
not be
 
aware of
 
all technologies
 
developed
 
or under
 
development
 
by third
 
parties, and
 
other
 
pharmaceutical
 
companies
 
or
academic institutions may also have filed or may be planning to file patent applications potentially relevant to our business and product
candidates. The
 
technologies used
 
in connection
 
with the
 
formulations of
 
our product
 
candidates may
 
also be
 
covered by
 
intellectual
property rights held
 
by others. From
 
time to time,
 
in order to
 
avoid infringing these
 
third-party patents, we
 
may be required
 
to license
technology from additional
 
third parties to further
 
develop, manufacture, use,
 
sell or commercialize our
 
product candidates, or that
 
we
otherwise deem
 
necessary for
 
our business
 
operations. We
 
may fail
 
to obtain
 
any such
 
licenses at
 
a reasonable
 
cost or
 
on reasonable
terms, if
 
at all,
 
and as
 
a result
 
we may
 
be unable
 
to develop
 
or commercialize
 
the affected
 
product candidates,
 
and we
 
may have
 
to
abandon development of the relevant research programs or product candidates,
 
which would harm our business.
If we are unable to obtain and maintain intellectual property protection for our products or product candidates, or if the duration or
scope of our
 
intellectual property protection
 
is not sufficiently
 
broad, our ability
 
to commercialize our
 
product candidates successfully
and to compete effectively may be materially adversely affected.
Our success depends on our ability
 
to obtain and maintain patent and
 
other intellectual property protection in the
 
United States and other
countries
 
with respect
 
to our
 
current
 
and future
 
proprietary product
 
candidates. We
 
rely upon
 
a combination
 
of patents,
 
trade
 
secret
68
protection
 
and
 
confidentiality
 
agreements
 
to
 
protect
 
the
 
intellectual
 
property
 
related
 
to
 
our
 
technology,
 
manufacturing
 
processes,
products and
 
product candidates.
 
We,
 
UBI and
 
our other
 
collaborators and
 
licensors have
 
primarily sought
 
to protect
 
our proprietary
positions by
 
filing patent
 
applications in
 
the United
 
States and
 
abroad related
 
to our proprietary
 
technology,
 
manufacturing processes
and product
 
candidates that
 
are important
 
to our business.
 
Despite our
 
or our
 
third party
 
collaborators’ or
 
licensors’ efforts
 
to protect
these proprietary rights, unauthorized parties may be able to obtain and use information that
 
we regard as proprietary. Third parties may
also seek to invalidate our patents or those of our licensors. 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. We could also lose expected revenues under license agreements we
maintain
 
with
 
third
 
parties.
 
If
 
we
 
are
 
unable
 
to
 
obtain
 
or
 
maintain
 
our
 
intellectual
 
property,
 
we
 
may
 
be
 
unable
 
to
 
develop
 
or
commercialize the affected technology and product candidates or could lose revenue, either of which could
 
harm our business, financial
condition, results of operations and prospects significantly.
The patent prosecution process is
 
expensive and time-consuming, and we may
 
not be able to
 
file and prosecute all
 
necessary or desirable
patent applications at a
 
reasonable cost or in
 
a timely manner or
 
in all jurisdictions
 
where protection may be
 
commercially advantageous.
It is also
 
possible that we
 
may fail to
 
identify patentable aspects
 
of our research
 
and development output
 
before it is
 
too late to
 
obtain
patent protection.
 
In addition, we, UBI or our other collaborators and licensors, may only pursue, obtain or maintain patent protection in a limited number
of countries. Because
 
patent applications in
 
the United States,
 
Europe and many
 
other foreign jurisdictions
 
are typically not
 
published
until 18 months after filing, or
 
in some cases not at all,
 
and because publications of discoveries
 
in scientific literature lag behind
 
actual
discoveries, we cannot be
 
certain that we or our
 
licensors were the first to
 
make the inventions claimed
 
in any of our owned
 
or any in-
licensed issued patents
 
or pending patent
 
applications, or
 
that we or
 
our licensors were
 
the first to
 
file for protection
 
of the inventions
set forth in our patents or patent
 
applications. As a result, we may not
 
be able to obtain or maintain protection for
 
certain inventions, and
there
 
can
 
be
 
no
 
assurance
 
that
 
the
 
patents
 
we
 
file,
 
or
 
those
 
that
 
are
 
issued,
 
will
 
not
 
be
 
vulnerable
 
to
 
claims
 
of
 
invalidity
 
or
unenforceability.
Even if
 
patents do
 
successfully issue,
 
our owned
 
or in-licensed
 
patents may
 
not adequately
 
protect our
 
intellectual property,
 
provide
exclusivity
 
for
 
our products
 
or product
 
candidates,
 
prevent
 
others
 
from
 
designing
 
around our
 
claims or
 
otherwise
 
provide
 
us with
 
a
competitive advantage. Competitors
 
may use our technologies
 
in jurisdictions where we
 
have not obtained or
 
are unable to adequately
enforce 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 and Europe.
 
These products may compete with
 
our
products, and our patents or other intellectual property rights may not
 
be effective or sufficient to prevent them from competing with us.
We also 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.
 
In
 
addition,
 
third
 
parties
 
may
 
challenge
 
the
 
validity,
enforceability, ownership, inventorship or scope of any of our patents. Any successful challenge to any of our patents or our in-licensed
patents could
 
deprive us
 
of rights
 
necessary for
 
the successful
 
commercialization
 
of any
 
product candidate
 
that we
 
may develop
 
and
could impair or eliminate our ability to collect future
 
revenues and royalties with respect to such products or product
 
candidates. If any
of our
 
patent
 
applications
 
with
 
respect to
 
our
 
product
 
candidates fail
 
to issue
 
as patents,
 
if
 
their breadth
 
or strength
 
of protection
 
is
narrowed
 
or
 
threatened,
 
or
 
if they
 
fail
 
to
 
provide
 
meaningful
 
exclusivity
 
or
 
competitive
 
position,
 
it could
 
dissuade
 
companies
 
from
collaborating with us or otherwise adversely affect our
 
competitive position.
In addition,
 
patents have
 
a limited
 
lifespan. In
 
the United
 
States, for
 
example, the
 
natural expiration
 
of a
 
patent is
 
generally 20
 
years
after its effective
 
filing date. Various
 
extensions may be available,
 
however, the
 
life of a patent and
 
the protection it affords
 
is limited.
Given the amount of time required for the development, testing, regulatory review
 
and approval of new product candidates, our patents
protecting such candidates might expire before or shortly after such candidates are commercialized. If we encounter delays in obtaining
regulatory approvals, the period of time during which we
 
could market a product under patent
 
protection could be further reduced. Even
if patents covering
 
our product candidates
 
are obtained, once
 
such patents expire,
 
or if such patents
 
are waived or
 
suspended, we may
be vulnerable to competition from
 
similar or biosimilar products.
 
Any expiration, waiver or suspension
 
of our patent or
 
other intellectual
property protection
 
by the U.S.
 
or other
 
foreign governments
 
could lead
 
to the launch
 
of a
 
similar or
 
biosimilar version
 
of one
 
of our
products and would likely result
 
in an immediate and substantial reduction
 
in the demand for our product, which
 
could have a material
adverse effect on our business, financial condition, results of operations
 
and prospects.
We may not be able to protect or enforce our intellectual property rights in all jurisdictions, and
 
we cannot guarantee that the patent
rights we have will prevent others from competing with us.
The
 
patent
 
position
 
of
 
pharmaceutical
 
companies
 
is
 
generally
 
uncertain
 
because
 
it
 
involves
 
complex
 
legal,
 
scientific
 
and
 
factual
considerations
 
for which
 
legal principles
 
remain unsolved.
 
The standards
 
applied by
 
the United
 
States Patent
 
and Trademark
 
Office
(“USPTO”) and foreign patent offices in
 
granting patents are not
 
always applied uniformly or predictably, and can
 
change. Additionally,
the laws
 
of some
 
foreign countries
 
do not
 
protect intellectual
 
property rights
 
to the
 
same extent
 
as the
 
laws of
 
the United
 
States, and
many companies have encountered significant challenges in protecting
 
and defending such rights in foreign jurisdictions. We
 
may face
similar challenges.
 
The legal
 
systems of
 
certain countries,
 
particularly
 
certain developing
 
countries, do
 
not favor
 
the enforcement
 
of
69
patents and
 
other intellectual
 
property rights,
 
particularly those
 
relating to
 
biotechnology,
 
which could
 
make it
 
difficult for
 
us to
 
stop
the
 
infringement,
 
misappropriation
 
or
 
other
 
violation
 
of
 
our
 
patents
 
or
 
other
 
intellectual
 
property,
 
including
 
the
 
unauthorized
reproduction of our manufacturing
 
or other know-how or
 
the marketing of competing
 
products in violation of
 
our intellectual property
rights generally.
 
Any of these outcomes
 
could impair our
 
ability to prevent
 
competition from third
 
parties, which may
 
have a material
adverse effect on our business, financial condition, results
 
of operations and prospects.
Further,
 
the existence
 
of issued
 
patents does
 
not guarantee
 
our right
 
to practice
 
the patented
 
technology or
 
commercialize a
 
patented
product candidate.
 
Third parties
 
may design
 
around our
 
patents, or
 
have or
 
obtain rights
 
to patents
 
which they
 
may use
 
to prevent
 
or
attempt to prevent
 
us from practicing our
 
patented technology or commercializing
 
any of our patented product
 
candidates. As a result,
we could be prevented from selling
 
our products unless we were able
 
to obtain a license under such third-party patents,
 
which may not
be available on commercially reasonable
 
terms or at
 
all. In addition, third
 
parties may seek approval
 
to market their
 
own products similar
to
 
or otherwise
 
competitive
 
with
 
our
 
products
 
and
 
such products
 
may not
 
violate
 
our
 
patent
 
rights.
 
We
 
may
 
also need
 
to assert
 
our
patents against third parties, including by filing lawsuits alleging patent
 
infringement. In any such proceeding, a third party may assert,
and a court or
 
agency of competent jurisdiction may
 
find, our asserted patents
 
to be invalid or
 
unenforceable. Any of the foregoing
 
could
have a material adverse effect on our business, financial condition,
 
results of operations and prospects.
There is a substantial amount of intellectual property litigation in the biotechnology and pharmaceutical industries, and
 
we may become
party to, or
 
threatened with, litigation
 
or other adversarial
 
proceedings regarding
 
intellectual property rights.
 
Proceedings to defend
 
or
enforce our patent rights,
 
whether or not successful
 
and whether or
 
not meritorious, 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 held
 
unenforceable, or interpreted
more narrowly. There can be no assurance that we will have sufficient financial or other resources to file and pursue such claims, which
often last for years before they are
 
concluded. 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,
 
especially
as we gain greater visibility and market exposure
 
as a public company.
 
In addition, our enforcement of our patent rights could
 
provoke
third parties
 
to assert
 
counterclaims against
 
us. Third
 
parties also
 
may raise
 
similar claims
 
before administrative
 
bodies in
 
the United
States or abroad, even outside the context
 
of litigation. We may not prevail in any lawsuits or
 
administrative proceedings that we initiate
and the
 
damages or
 
other remedies
 
awarded, if
 
any,
 
may not
 
be commercially
 
meaningful. If
 
a third
 
party were
 
to prevail
 
on a
 
legal
assertion of invalidity
 
or unenforceability,
 
we could lose
 
part or all
 
of the patent
 
protection on one
 
or more of
 
our product candidates,
which could result in
 
our competitors and other
 
third parties using our
 
technology to compete with
 
us. An adverse outcome
 
in a litigation
or administrative proceeding
 
involving our patents could
 
limit our ability to assert our
 
patents against competitors, affect
 
our ability to
receive royalties or other licensing consideration from
 
our licensees, and may curtail
 
or preclude our ability to
 
exclude third parties from
making, using and
 
selling similar or
 
competitive products. Any
 
of these occurrences
 
could have a
 
material adverse effect
 
on our business,
financial condition,
 
results of operations
 
and prospects.
 
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, acquire or license.
Many countries, including certain
 
countries in Asia, have compulsory
 
licensing laws under which a patent
 
owner may be compelled
 
to
grant licenses to third parties. In
 
addition, many countries 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 such patent.
If we
 
or any
 
of our
 
licensors is
 
forced to grant
 
a license
 
to third
 
parties with respect
 
to any patents
 
relevant to
 
our business,
 
our competitive
position
 
may be
 
impaired,
 
and our
 
business, financial
 
condition, results
 
of operations
 
and prospects
 
may be
 
adversely affected.
 
Our
owned and in-licensed patents may be subject to a reservation of rights by one or more third parties. For example, the research resulting
in certain
 
of our
 
licensors’
 
patents and
 
technology,
 
including
 
patents and
 
technology
 
relating to
 
UB-612,
 
was funded
 
in part
 
by the
Taiwanese government.
 
As a result, the Taiwanese government
 
may have certain rights to such patent rights and technology.
Furthermore, certain of our patents and technology,
 
including patents and technology relating to UB-312, were funded in part by grants
from nonprofit
 
third parties,
 
including the
 
MJFF and
 
CEPI. We
 
are required
 
to fulfill
 
certain contractual
 
obligations with
 
respect to
products
 
created
 
using
 
such
 
grant
 
funding,
 
including
 
certain
 
reporting
 
requirements.
 
If
 
these
 
grant
 
proposals
 
are
 
awarded,
 
or
 
if
 
we
receive
 
funding
 
from
 
other
 
nonprofit
 
third
 
parties
 
in
 
the
 
future,
 
we
 
may
 
be
 
required
 
to fulfill
 
other
 
contractual
 
obligations,
 
such
 
as
publishing the
 
results of our
 
scientific studies, making
 
certain products available
 
at an affordable
 
price in a
 
list of clearly
 
defined low
and
 
lower-middle
 
income
 
countries
 
and
 
ensuring
 
that
 
certain
 
products
 
are
 
available
 
in
 
geographic
 
regions
 
where
 
there
 
has
 
been
 
an
outbreak of an infectious disease at certain reduced economic rates.
If we or our
 
licensors infringe, misappropriate, or otherwise violate intellectual property
 
of third parties, we
 
may face increased costs
or we may be unable to commercialize our product candidates.
Many of our current and former employees, consultants and
 
independent contractors including our senior management, were previously
employed at universities or at other biotechnology or pharmaceutical companies, including some
 
which may be 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
 
these
 
employees,
 
consultants
 
or
independent contractors
 
have used
 
or disclosed
 
intellectual property,
 
including trade
 
secrets or
 
other proprietary
 
information, of
 
such
individual’s current
 
or former employers, or that patents and
 
applications we have filed to protect
 
inventions of these individuals, even
70
those related to one or more of our current or future
 
product candidates, are rightfully owned by their former or concurrent employer. In
addition, while we
 
typically require our employees,
 
consultants and independent
 
contractors who may be
 
involved in the development
of intellectual property
 
to execute agreements
 
assigning such intellectual
 
property to us, we
 
may be unsuccessful
 
in executing such
 
an
agreement with each
 
party who in
 
fact develops intellectual
 
property that we
 
regard as our
 
own, or such
 
agreements may be
 
breached
or alleged
 
to be
 
ineffective, and
 
the assignment
 
may not
 
be self-executing,
 
which may
 
result in
 
claims by
 
or against
 
us related
 
to the
ownership of such intellectual property or may result in such intellectual property
 
becoming assigned to third parties.
Third parties have, and may in the
 
future have, U.S. and non-U.S. issued patents
 
and pending patent applications relating to compounds,
methods of manufacturing
 
compounds or methods
 
of use for
 
the treatment of
 
the disease indications
 
for which we
 
are developing
 
our
product candidates that
 
may cover our product
 
candidates. For example,
 
we are aware of
 
certain third-party U.S.
 
and non-U.S. patents
and patent applications, including those of our competitors,
 
that relate to anti-alpha synuclein binding molecules that may be construed
to cover
 
the technology used
 
in our anti-alpha
 
synuclein vaccine product
 
candidate. We
 
are also aware
 
of certain third-party
 
U.S. and
non-U.S.
 
patents
 
and
 
patent
 
applications,
 
including
 
those of
 
our
 
competitors,
 
that
 
relate to
 
coronavirus
 
vaccines
 
and
 
treatments
 
and
vaccines against other
 
infectious diseases and we
 
expect such third
 
parties to have filed
 
additional patent applications,
 
which have not
yet been published and to file additional patent applications in the future.
In the event that any of these patent rights were asserted against us, we believe that we have defenses against any such action, including
that such patents
 
would not be
 
infringed by our
 
product candidates and/or
 
that such patents are
 
not valid. However,
 
if any such
 
patent
rights were to
 
be asserted against
 
us and our
 
defenses to such
 
assertion were
 
unsuccessful, unless
 
we obtain a
 
license to such
 
patents,
we could be liable
 
for damages, which could
 
be significant and include
 
treble damages and attorneys’
 
fees if we are
 
found to willfully
infringe such
 
patents. We
 
could also
 
be precluded
 
from commercializing
 
any product candidates
 
that were ultimately
 
held to
 
infringe
such patents, any of which could have a material adverse effect on our business,
 
financial condition, results of operations and prospects.
Uncertainties resulting from our participation in patent litigation or
 
other proceedings could have a material adverse
 
effect on our ability
to
 
compete
 
in
 
the
 
marketplace.
 
Furthermore,
 
because
 
of
 
the
 
substantial
 
amount
 
of
 
discovery
 
required
 
in
 
certain
 
jurisdictions
 
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, the perceived value of our product
candidates
 
or intellectual
 
property
 
could be
 
diminished.
 
Accordingly,
 
the market
 
price of
 
our Class
 
A common
 
stock could
 
decline.
Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect
on our business, financial condition, results of operations and prospects.
Changes to
 
the patent
 
law in
 
the United
 
States and
 
other jurisdictions
 
could increase
 
the uncertainties
 
and costs
 
surrounding the
prosecution of our patent applications and the enforcement or defense of our issued patents, thereby impairing our ability to protect
our technologies and product candidates.
As is the case
 
with other biopharmaceutical
 
companies, our success
 
is heavily dependent
 
on intellectual property,
 
particularly patents.
Obtaining and
 
enforcing patents
 
in the
 
biopharmaceutical industry
 
involves both
 
technological and
 
legal complexity
 
and is
 
therefore
costly,
 
time-consuming
 
and inherently
 
uncertain. Changes
 
in either
 
the patent
 
laws or
 
interpretation of
 
the patent
 
laws in
 
the United
States or
 
abroad could
 
increase the
 
uncertainties and
 
costs surrounding
 
the prosecution
 
of patent
 
applications and
 
the enforcement
 
or
defense of
 
issued patents.
 
For example,
 
recent U.S.
 
Supreme Court
 
rulings have
 
narrowed the
 
scope of
 
patent protection
 
available in
certain
 
circumstances
 
and
 
weakened
 
the
 
rights
 
of
 
patent
 
owners
 
in
 
certain
 
situations.
 
Specifically,
 
these
 
decisions
 
stand
 
for
 
the
proposition that patent
 
claims that
 
recite laws
 
of nature are
 
not themselves
 
patentable unless those
 
patent claims have
 
sufficient additional
features
 
that
 
provide
 
practical
 
assurance
 
that
 
the
 
processes
 
are
 
genuine
 
inventive
 
applications
 
of
 
those
 
laws.
 
What
 
constitutes
 
a
“sufficient” additional
 
feature is
 
uncertain. Furthermore,
 
in view
 
of these
 
decisions, since
 
December 2014,
 
the USPTO
 
has published
and continues
 
to publish
 
revised guidelines
 
for patent
 
examiners to
 
apply when
 
examining process
 
claims for
 
patent eligibility.
 
This
combination of
 
events has
 
created uncertainty
 
with respect
 
to the
 
validity and
 
enforceability of
 
patents, even
 
once they
 
are obtained.
Depending on future actions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could
change in
 
unpredictable ways.
 
In addition,
 
the complexity
 
and uncertainty
 
of European
 
and Asian
 
patent laws
 
have also
 
increased in
recent years.
 
Complying with
 
these laws and
 
regulations could
 
have a material
 
adverse effect
 
on our existing
 
patent portfolio and
 
our
ability to protect and enforce our intellectual property in the future.
Obtaining and maintaining our patent protection, including patents licensed from
 
third parties, depends on compliance with various
procedural, documentary, fee payment and other requirements imposed by governmental
 
patent agencies, and our patent protection
could be reduced or eliminated for noncompliance with these requirements.
Periodic maintenance
 
fees, renewal
 
fees, annuity
 
fees and
 
various other
 
governmental fees
 
on patents
 
and patent
 
applications will
 
be
due to
 
be paid
 
to the
 
USPTO and
 
various government
 
patent agencies
 
outside the
 
United States
 
over the
 
lifetime of
 
our patents
 
and
patent applications and any patent rights we may own or license in the future. Additionally,
 
the USPTO and various government patent
agencies
 
outside
 
the
 
United
 
States
 
require
 
compliance
 
with
 
a
 
number
 
of
 
procedural,
 
documentary,
 
fee
 
payment
 
and
 
other
 
similar
provisions during the patent application process. In certain cases, an inadvertent lapse can be cured by payment of a late fee or by other
means in accordance with
 
rules applicable to the
 
particular jurisdiction. However, there are situations
 
in which noncompliance
 
can result
71
in
 
abandonment
 
or
 
lapse
 
of
 
the
 
patent
 
or
 
patent
 
application,
 
resulting
 
in
 
partial
 
or
 
complete
 
loss
 
of
 
patent
 
rights
 
in
 
the
 
relevant
jurisdiction. For example, certain of
 
our patents which include claims
 
utilized in our UB-311 anti-Aβ vaccine product candidate
 
recently
lapsed in certain European and Asian countries due to non-payment of fees. Noncompliance events that could result in abandonment or
lapse of a patent or patent application include failure to respond to official communications within prescribed
 
time limits, non-payment
of
 
fees
 
and
 
failure
 
to
 
properly
 
legalize
 
and
 
submit
 
formal
 
documents.
 
If
 
we
 
or
 
our
 
licensors fail
 
to
 
maintain
 
the
 
patents
 
and
 
patent
applications
 
covering
 
or
 
otherwise
 
protecting
 
our
 
technologies
 
or
 
our
 
product
 
candidates,
 
our
 
competitors
 
may
 
be
 
able
 
to
 
enter
 
the
market with
 
similar or
 
identical products
 
or technology
 
without infringing
 
our patents,
 
which could have
 
a material
 
adverse effect
 
on
our business.
 
In addition,
 
to the
 
extent that
 
we have
 
responsibility for
 
taking any
 
action related
 
to the
 
prosecution or
 
maintenance of
patents or patent applications in-licensed
 
from a third party, any failure
 
on our part to
 
maintain the in-licensed intellectual property
 
could
jeopardize our rights
 
under the relevant
 
license and may
 
have a material
 
adverse effect
 
on our business,
 
financial condition,
 
results of
operations and prospects.
If we do not
 
obtain patent term extensions
 
and data exclusivity
 
for each of
 
our product candidates,
 
our business may be
 
materially
harmed.
Depending upon
 
the timing, duration
 
and specifics of
 
any FDA marketing
 
approval in the
 
United States of
 
any product candidates
 
we
may develop, one
 
or more of our
 
U.S. patents may be
 
eligible for limited patent
 
term extension under the
 
Drug Price Competition
 
and
Patent Term Restoration Action of 1984 (“Hatch-Waxman Amendments”). The Hatch-Waxman
 
Amendments permit a patent extension
term of up to five years as compensation for patent term lost during the FDA regulatory review process. A patent term extension cannot
extend the
 
remaining term
 
of a
 
patent beyond
 
a total
 
of 14
 
years from
 
the date
 
of product
 
approval, only
 
one patent
 
applicable to
 
an
approved drug may be extended and
 
only those claims covering the approved
 
drug, a method for using it,
 
or a method for
 
manufacturing
it may be extended. The
 
length of the patent term
 
extension is typically calculated as
 
one half of the
 
clinical trial period plus the
 
entire
period of time
 
during the review of
 
the NDA or
 
BLA by the
 
FDA, minus any
 
time of delay
 
by the applicant
 
during these periods.
 
We
might not be granted a
 
patent term extension at all,
 
because of, for example, failure
 
to apply within the
 
applicable period, failure to apply
prior to the expiration of relevant patents or otherwise failure to satisfy any
 
of the numerous applicable requirements.
In the
 
European Union,
 
a maximum
 
of five
 
and a
 
half years
 
of supplementary
 
protection can
 
be achieved
 
for an
 
active ingredient
 
or
combinations of active
 
ingredients of a
 
medicinal product protected
 
by a basic
 
patent, if a
 
valid marketing
 
authorization exists (which
must be
 
the first
 
authorization to
 
place the
 
product on
 
the market
 
as a
 
medicinal product)
 
and if
 
the product
 
has not
 
already been
 
the
subject of
 
supplementary protection.
 
Although all
 
countries in
 
Europe must
 
provide supplementary
 
protection certificates,
 
there is
 
no
unified legislation among European countries and
 
so supplementary protection certificates must
 
be applied for and
 
granted on a country-
by-country basis. This can lead
 
to a substantial cost to
 
apply for and receive
 
these certificates, which may vary
 
among countries or not
be provided at all. Further, we may not receive an extension because of, for example, failing to exercise due diligence during the testing
phase or regulatory review
 
process, failing to apply within applicable
 
deadlines, failing to apply prior
 
to expiration of relevant patents,
or otherwise
 
failing to
 
satisfy applicable
 
requirements. Moreover,
 
the length
 
of the extension
 
could be
 
less than we
 
request. If
 
we are
unable to obtain patent term extension or if the term of any such extension is less than we request, our competitors may obtain approval
of competing products earlier than expected following our patent expiration, and our business, financial condition, results of operations
and prospects could be materially harmed.
If we
 
are
 
unable to
 
protect
 
the confidentiality
 
of our
 
proprietary
 
information
 
and trade
 
secrets, the
 
value
 
of our
 
technology
 
and
products could be materially adversely affected.
In addition to patent protection, we also
 
rely on trade secrets and confidentiality agreements
 
to protect other proprietary information that
is not patentable or that we elect
 
not to patent. To maintain the confidentiality of trade secrets and proprietary information, we enter into
confidentiality agreements with our
 
employees, consultants, independent contractors,
 
collaborators, contract manufacturers, CROs and
others upon the commencement of
 
their relationships with us. These agreements
 
require that all confidential information developed
 
by
the individual or entity or made known to the
 
individual or entity by us during the course of
 
the individual’s or entity’s relationship with
us be kept confidential
 
and not disclosed to
 
third parties. Our
 
agreements with employees as
 
well as our personnel
 
policies also generally
provide that any inventions conceived
 
by the individual in the course
 
of rendering services to us shall
 
be our exclusive property or that
we may obtain full
 
rights to such inventions
 
at our election. However,
 
we cannot guarantee that
 
we have entered into
 
such agreements
with each party that may
 
have or has had access to
 
our trade secrets or proprietary technology
 
and processes and cannot guarantee
 
that
individuals with
 
whom we
 
have these
 
agreements will
 
comply with
 
their terms.
 
In the
 
event of
 
unauthorized use
 
or disclosure
 
of our
trade secrets or proprietary information, these agreements, even if obtained, may not provide meaningful protection, particularly for our
trade secrets.
We may not have adequate remedies in the event of unauthorized use
 
or disclosure of our proprietary information in
 
the case of a breach
of
 
any
 
such
 
agreements
 
and
 
our
 
trade
 
secrets
 
and
 
other
 
proprietary
 
information
 
could
 
be
 
disclosed
 
to
 
third
 
parties,
 
including
 
our
competitors. Many
 
of our partners
 
also collaborate
 
with our competitors
 
and other
 
third parties. The
 
disclosure of
 
our trade
 
secrets to
our competitors,
 
or more
 
broadly,
 
would impair
 
our competitive
 
position and
 
may materially
 
harm our
 
business, financial
 
condition,
results of operations and prospects. Costly and time-consuming
 
litigation could be necessary to enforce and determine
 
the scope of our
proprietary
 
rights,
 
and
 
failure
 
to
 
maintain
 
trade
 
secret
 
protection
 
could
 
adversely
 
affect
 
our
 
competitive
 
business
 
position.
 
The
enforceability of confidentiality
 
agreements may vary from
 
jurisdiction to jurisdiction. Courts
 
outside the United States
 
are sometimes
72
less willing
 
to protect
 
proprietary information,
 
technology and
 
know-how.
 
In addition,
 
others may
 
independently discover
 
or develop
substantially
 
equivalent
 
or
 
superior
 
proprietary
 
information
 
and
 
techniques,
 
and
 
the
 
existence
 
of
 
our
 
own
 
trade
 
secrets
 
affords
 
no
protection against such independent discovery.
If our
 
trademarks and
 
trade names
 
are not
 
adequately protected,
 
we may
 
not be
 
able to
 
build name
 
recognition in
 
our markets
 
of
interest and our business, financial condition, results of operations and prospects may
 
be adversely affected.
We rely on our trademarks for
 
name recognition by potential
 
partners and customers in
 
our markets of interest.
 
However, our trademarks
or trade names may be challenged, infringed, circumvented or declared generic or determined
 
to be infringing on other marks. We
 
may
not be
 
able to
 
protect our
 
rights to
 
these trademarks
 
and
 
trade names
 
or may
 
be forced
 
to stop
 
using
 
these names
 
or marks.
 
During
trademark registration
 
proceedings, we
 
may receive
 
rejections that
 
we may
 
be unable
 
to overcome.
 
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
or trademark
 
applications may
 
not survive
 
such proceedings.
 
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, financial
 
condition, results of
 
operations and
 
prospects
may be adversely affected.
Intellectual property rights do not necessarily address all potential threats.
The degree of
 
future protection afforded
 
by our proprietary
 
and intellectual
 
property rights is
 
uncertain because
 
such rights offer
 
only
limited protection and may not adequately protect our rights or permit us to
 
gain or keep our competitive advantage. For example:
•
 
others may be able
 
to develop products
 
that are similar
 
to, or better
 
than, our product candidates
 
in a way
 
that is not
 
covered
by the claims of the patents we license or may own currently or in the future;
•
 
we,
 
or
 
our
 
licensing
 
partners
 
or
 
current
 
or
 
future
 
collaborators,
 
might
 
not
 
have
 
been
 
the
 
first
 
to
 
make
 
or
 
file
 
patent
applications
 
for
 
the
 
inventions
 
covered
 
by
 
issued
 
patents
 
or
 
pending
 
patent
 
applications
 
that
 
we
 
license
 
or
 
may
 
own
currently or in the future;
•
 
we may
 
not have
 
the financial
 
or other
 
resources necessary
 
to enforce
 
a patent
 
infringement or
 
other proprietary
 
rights
violation action;
•
 
we may choose not to file
 
a patent for certain trade secrets
 
or know-how,
 
and a third party may subsequently
 
file a patent
covering such intellectual property;
•
 
our trade
 
secrets or
 
proprietary know-how
 
may be
 
unlawfully disclosed,
 
thereby losing
 
their trade
 
secret or
 
proprietary
status;
•
 
our competitors or other third
 
parties might conduct research and
 
development activities in countries where
 
we do not have
patent
 
rights and
 
then
 
use
 
the information
 
learned from
 
such activities
 
to
 
develop
 
competitive
 
products
 
for
 
sale in
 
our
major commercial markets;
•
 
it is possible that there are prior public disclosures that could invalidate our
 
or our licensors’ patents;
•
 
the patents of
 
third parties or
 
pending or future
 
applications of third
 
parties, if issued,
 
may have an
 
adverse effect on
 
our
business;
•
 
third parties could design around our patents, or independently
 
develop trade secrets that provide them with an advantage
over us;
•
 
any patents that
 
we obtain may
 
not provide us
 
with any competitive
 
advantages or may ultimately
 
be found not
 
to be owned
by us, or to be invalid or unenforceable; or
•
 
we may not develop additional proprietary technologies that are patentable.
Should any of these events occur, they could significantly
 
harm our business, financial conditions, results of operations and prospects.
73
Risks Related to Our Business and Industry
Even if
 
we, or
 
any current
 
or future
 
collaborators,
 
are able
 
to commercialize
 
any product
 
candidate that
 
we or
 
they develop,
 
the
successful commercialization of our product candidates will depend in part on the extent to which governmental authorities, private
health insurers
 
and other
 
third-party payors
 
provide coverage
 
and adequate
 
reimbursement levels
 
and implement
 
pricing policies
favorable
 
for
 
our
 
product
 
candidates.
 
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 revenue.
The healthcare
 
industry is
 
acutely focused
 
on cost
 
containment, both
 
in the
 
United States
 
and elsewhere.
 
Government authorities
 
and
third-party payors have attempted
 
to control costs by limiting coverage
 
and the amount of reimbursement. The
 
insurance coverage and
reimbursement status of
 
newly approved products
 
is uncertain and failure
 
to obtain or maintain
 
adequate coverage and
 
reimbursement
for
 
our product
 
candidates could
 
limit our
 
ability to
 
generate revenue.
 
Our business
 
model is
 
also focused
 
on lowering
 
the cost
 
and
increasing the accessibility of healthcare. Even if we are successful in
 
driving down the cost of healthcare, third- party payors
 
may still
not view our product candidates, if approved, as cost-effective, and coverage and reimbursement may not be available to our patients or
may
 
not
 
be
 
sufficient
 
to
 
allow
 
our
 
products,
 
if
 
any,
 
to
 
be
 
marketed
 
on
 
a
 
competitive
 
basis.
 
If
 
coverage
 
and
 
reimbursement
 
are
 
not
available, or reimbursement is available only to limited
 
levels, patient subpopulations of labeled indications, or otherwise
 
restricted, we,
or any collaborators, may not be able to successfully commercialize our product candidates. Even if coverage is provided, the approved
reimbursement amount may not be high enough
 
to allow us, or any collaborators, to establish or maintain pricing
 
sufficient to realize a
sufficient return on our or their investments. Cost-control initiatives could also
 
cause us to decrease any price we might
 
establish for our
product candidates,
 
which could
 
result in
 
lower than
 
anticipated product
 
revenues. Moreover,
 
eligibility for
 
reimbursement
 
does not
imply that any product will be
 
paid for in all cases or
 
at a rate that covers
 
our costs, including our costs related to
 
research, development,
manufacture,
 
sale and
 
distribution.
 
Reimbursement
 
rates may
 
vary,
 
by way
 
of example,
 
according
 
to the
 
use of
 
the product
 
and the
clinical setting
 
in which
 
it is
 
used. For
 
products administered
 
under the
 
supervision of
 
a physician,
 
obtaining coverage
 
and adequate
reimbursement may be difficult because of the higher costs often associated with administering such drugs. If the prices for our product
candidates, if approved,
 
decrease or if governmental
 
and other third-party payors
 
do not provide adequate
 
coverage or reimbursement,
our business, financial condition, results of operations and prospects will suffer,
 
perhaps materially.
There is significant uncertainty related to the insurance
 
coverage and reimbursement of newly approved products.
 
In the United States,
the CMS,
 
the federal
 
agency responsible
 
for administering
 
the Medicare
 
program, makes
 
the principal
 
decisions about
 
coverage
 
and
reimbursement for new treatments under Medicare. Private
 
payors may follow CMS to
 
a substantial degree. It is
 
difficult to predict what
CMS will decide with
 
respect to reimbursement
 
for novel products such
 
as ours. In addition,
 
certain Affordable Care
 
Act marketplace
and other
 
private payor
 
plans are required
 
to include
 
coverage for
 
certain preventative
 
services, including
 
vaccinations recommended
by the U.S. Centers
 
for Disease Control’s Advisory Committee on Immunization Practices
 
(“ACIP”) without cost share obligations (i.e.,
co-
 
payments,
 
deductibles
 
or
 
co-insurance)
 
for
 
plan
 
members.
 
For
 
Medicare
 
beneficiaries,
 
some
 
of
 
our
 
product
 
candidates
 
may
 
be
covered
 
for
 
reimbursement
 
under
 
either
 
the
 
Part
 
B
 
program
 
or
 
Part
 
D
 
program
 
depending
 
on
 
several
 
criteria,
 
including
 
the
 
type
 
of
vaccine
 
and
 
the
 
beneficiary’s
 
coverage
 
eligibility.
 
If
 
our
 
product
 
candidates,
 
once
 
approved,
 
are
 
reimbursed
 
only
 
under
 
the
 
Part
 
D
program, physicians
 
may be
 
less willing
 
to use
 
our products
 
because
 
of the
 
claims adjudication
 
costs and
 
time related
 
to the
 
claims
adjudication process
 
and collection
 
of copayments
 
associated with
 
the Part
 
D program.
 
If our
 
product candidates,
 
once approved,
 
are
reimbursed only under the Part B
 
program, certain potential drawbacks
 
associated with the Part B program,
 
such as the time and effort
required to seek reimbursement
 
after purchase, may make our
 
product candidates less attractive to
 
clinics or other potential customers.
Outside of Medicare, private
 
insurance is likely
 
to raise similar
 
claims adjudication and copayment
 
considerations, which may also
 
make
our product candidates less attractive to potential customers using private
 
insurance.
Outside the United
 
States, certain countries
 
set prices and
 
reimbursement for pharmaceutical
 
products, with limited
 
participation from
the marketing authorization holders. We cannot be sure that such
 
prices and reimbursement will be acceptable to
 
us or our collaborators.
If the
 
regulatory authorities
 
in these
 
jurisdictions set
 
prices or
 
reimbursement levels
 
that are
 
not commercially
 
attractive for
 
us or
 
our
collaborators,
 
our
 
revenues
 
from
 
sales
 
by
 
us
 
or
 
our
 
collaborators,
 
and
 
the
 
potential
 
profitability
 
of
 
our
 
product
 
candidates,
 
in
 
those
countries would
 
be negatively
 
affected.
 
Additionally,
 
some countries
 
require approval
 
of the
 
sale price
 
of a
 
product before
 
it can
 
be
marketed. In many countries, the pricing
 
review period begins after marketing or product
 
licensing approval is granted. As a
 
result, we
might obtain marketing approval for a product in a particular country, but then may experience delays in the reimbursement approval of
our product or be subject to price regulations that would delay our commercial launch of the product, possibly for lengthy time periods,
which could negatively impact the revenues we are able to generate from the
 
sale of the product in that particular country.
Moreover,
 
an increasing
 
number of
 
countries are
 
taking initiatives
 
to attempt
 
to reduce
 
large budget
 
deficits by
 
focusing cost-cutting
efforts on pharmaceuticals
 
for their state-run
 
healthcare systems. These
 
international price control
 
efforts have impacted
 
all regions of
the world, notably in
 
the European Union. In
 
some countries, in particular
 
in many Member States
 
of the European Union,
 
we may be
required
 
to
 
conduct
 
a
 
clinical
 
trial
 
or
 
other
 
studies
 
that
 
compare
 
the
 
cost-effectiveness
 
of
 
our
 
product
 
candidates
 
to
 
other
 
available
therapies in order to
 
obtain or maintain reimbursement
 
or pricing approval. In
 
addition, publication of discounts
 
by third- party payors
or authorities may lead to further pressure on the prices or reimbursement
 
levels within the country of publication and other countries.
If reimbursement of our products is
 
unavailable or limited in scope
 
or amount, or if pricing is set
 
at unsatisfactory levels, our business,
financial condition, results of operations
 
or prospects could be materially adversely
 
affected. Cost-control initiatives
 
could cause us, or
74
any collaborators,
 
to decrease the
 
price we, or
 
they, might
 
establish for products,
 
which could result
 
in lower than
 
anticipated product
revenues. Further, our competitors have
 
more experience dealing with and contracting with payors for preferred coverage, which could
potentially
 
put
 
us
 
at
 
a
 
competitive
 
disadvantage.
 
An
 
inability
 
to
 
promptly
 
obtain
 
coverage
 
and
 
adequate
 
payment
 
rates
 
from
 
both
government-funded
 
and private
 
payors for
 
any of
 
our product
 
candidates for
 
which we,
 
or any
 
future collaborator,
 
obtain marketing
approval could
 
significantly harm
 
our operating
 
results, our
 
ability to
 
raise capital
 
needed to
 
commercialize products
 
and our
 
overall
financial condition.
Our business
 
and current
 
and future
 
relationships with
 
third-party
 
payors, healthcare
 
professionals and
 
customers in
 
the United
States and elsewhere will be subject to applicable healthcare laws and regulations, which
 
could expose us to significant penalties.
Healthcare
 
providers,
 
physicians
 
and
 
third-party
 
payors
 
in
 
the
 
United
 
States
 
and
 
elsewhere
 
will
 
play
 
a
 
primary
 
role
 
in
 
the
recommendation
 
and
 
prescription
 
of
 
any
 
product
 
candidates
 
for
 
which
 
we
 
obtain
 
marketing
 
approval.
 
Our
 
current
 
and
 
future
arrangements with healthcare professionals, third-party payors and customers expose us to
 
broadly applicable fraud and abuse and other
healthcare laws and regulations, including, without limitation, the federal Anti-Kickback Statute and the federal civil False Claims Act,
that may constrain the business or
 
financial arrangements and relationships through which we
 
conduct clinical research, sell, market and
distribute any products for which we obtain marketing
 
approval. In addition, we may be
 
subject to physician payment transparency laws
and
 
patient
 
privacy
 
regulation
 
by
 
the
 
federal
 
government
 
and
 
by
 
the
 
U.S.
 
states
 
and
 
foreign
 
jurisdictions
 
in
 
which
 
we
 
conduct
 
our
business.
Efforts
 
to ensure
 
that our
 
business arrangements
 
with third
 
parties will
 
comply
 
with applicable
 
healthcare laws
 
and regulations
 
may
involve substantial costs.
 
It is
 
possible that governmental authorities
 
will conclude that
 
our business
 
practices, including our
 
relationships
with
 
physicians
 
and
 
other
 
healthcare
 
providers,
 
some
 
of
 
whom
 
may
 
recommend,
 
purchase
 
or
 
prescribe
 
our
 
product
 
candidate,
 
if
approved,
 
may
 
not
 
comply
 
with
 
current
 
or
 
future
 
statutes,
 
regulations
 
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 these laws
 
or any other governmental
 
regulations that may
 
apply to us, we
 
may
be
 
subject
 
to
 
significant
 
civil,
 
criminal
 
and
 
administrative
 
penalties,
 
including,
 
without
 
limitation,
 
damages,
 
fines,
 
disgorgement,
individual imprisonment, exclusion
 
from participation in government
 
healthcare programs, such as
 
Medicare and Medicaid, additional
reporting requirements and oversight if
 
we become subject to a
 
corporate integrity agreement or similar
 
agreement to resolve allegations
of noncompliance with these laws and the curtailment or restructuring
 
of our operations, which could have a material adverse effect
 
on
our business. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found not to be in
compliance
 
with
 
applicable
 
laws,
 
they
 
may
 
be
 
subject
 
to
 
criminal,
 
civil
 
or
 
administrative
 
sanctions,
 
including
 
exclusions
 
from
participation in government healthcare programs, which could also materially
 
affect our business.
Cyberattacks or
 
other failures
 
in our
 
or our
 
third-party vendors’,
 
contractors’ or
 
consultants’ telecommunications
 
or information
technology
 
systems could
 
result
 
in information
 
theft, compromise,
 
or other
 
unauthorized
 
access, data
 
corruption and
 
significant
disruption
 
of
 
our
 
business
 
operations,
 
and
 
could
 
harm
 
our
 
reputation
 
and
 
subject
 
us
 
to
 
liability,
 
lawsuits
 
and
 
actions
 
from
governmental authorities.
The success of our research and development programs depends on data which is stored and transmitted digitally, the corruption or loss
of which could cause significant setback to one or all of our programs. We face a number of risks related to our use, processing, storage
and security of this critical information, including loss of access, inappropriate use or disclosure, inappropriate modification corruption,
unauthorized access or processing. Because we use third-party vendors and subcontractors
 
to manage our sensitive information, we also
may
 
not
 
have
 
the
 
ability
 
to
 
adequately
 
monitor,
 
audit
 
or
 
modify
 
the
 
security
 
controls
 
over
 
this
 
critical
 
information.
 
Despite
 
the
implementation of security measures, given the size and complexity of our internal information technology (“IT”) systems and those of
our
 
third-party
 
vendors,
 
contractors
 
and
 
consultants,
 
such
 
IT
 
systems
 
are
 
potentially
 
vulnerable
 
to
 
breakdown
 
or
 
other
 
damage
 
or
interruption
 
from
 
service
 
interruptions,
 
system
 
malfunction,
 
natural
 
disasters,
 
terrorism,
 
war,
 
and
 
telecommunication
 
and
 
electrical
failures.
Cyber threats are persistent
 
and constantly evolving.
 
Such threats, which may
 
include ransomware or other
 
malware, phishing attacks,
denial of services attacks, man-in-the-middle attacks
 
and others, have increased in
 
frequency, scope and potential impact in recent
 
years,
which increase the difficulty of detecting and successfully
 
defending against them. We may not be able to anticipate
 
all types of security
threats, and,
 
despite our
 
efforts, we may
 
not be able
 
to implement
 
preventive measures
 
effective against
 
all such security
 
threats. The
techniques used by
 
cyber criminals change frequently,
 
may not be recognized
 
until launched, and
 
can originate from a
 
wide variety of
sources, including outside groups such as external service providers, organized crime affiliates, terrorist organizations or hostile foreign
governments
 
or agencies.
 
There
 
can be
 
no assurance
 
that
 
we or
 
our
 
third-party
 
service
 
providers,
 
contractors
 
or
 
consultants will
 
be
successful
 
in
 
preventing
 
cyberattacks
 
or
 
successfully
 
mitigating
 
their
 
effects.
 
Our
 
IT
 
systems
 
and
 
those
 
of
 
our
 
third-party
 
service
providers,
 
contractors
 
or
 
consultants
 
are
 
additionally
 
vulnerable
 
to
 
security
 
breaches
 
from
 
inadvertent
 
or
 
intentional
 
actions
 
by
 
our
employees,
 
third-party vendors,
 
contractors,
 
consultants, business
 
partners and/or
 
other third
 
parties. These
 
threats pose
 
a risk
 
to the
security of
 
our systems
 
and networks,
 
the confidentiality
 
and the
 
availability,
 
security and
 
integrity of
 
our data,
 
and these
 
risks apply
both to us and to third parties
 
on whose systems we rely for the conduct of
 
our business. If the IT systems of
 
our third-party vendors and
other contractors
 
and consultants
 
become subject
 
to disruptions
 
or security
 
breaches, we
 
may have
 
insufficient
 
recourse against
 
such
75
third parties
 
and we may
 
have to
 
expend significant
 
resources to
 
mitigate the
 
impact of
 
such an event,
 
and to develop
 
and implement
protections to prevent
 
future events of
 
a similar nature
 
from occurring.
 
Any cyberattack or
 
destruction or
 
loss of, unauthorized
 
access
to, processing of,
 
or exfiltration of
 
data could have
 
a material adverse
 
effect on our
 
business, financial condition,
 
results of operations
and prospects. For example, if such an event were to occur and cause interruptions in our operations, or those
 
of our third-party vendors
and other contractors and
 
consultants, it could result in
 
a material disruption or delay
 
of the development of
 
our product candidates. In
addition, we may suffer reputational harm or face litigation or adverse regulatory action as
 
a result of cyberattacks or other data security
breaches, particularly those involving
 
personal information or
 
protected health information,
 
and may incur
 
significant additional expense
to implement
 
further data
 
protection measures.
 
As cyber
 
threats continue
 
to evolve,
 
we may
 
be required
 
to incur
 
material additional
expenses in order to enhance our protective measures or to remediate any
 
information security vulnerability.
We are
 
subject to stringent privacy laws,
 
information security laws, regulations, policies
 
and contractual obligations related
 
to data
privacy and security and changes in such laws, regulations, policies and contractual obligations could
 
adversely affect our business,
financial condition, results of operations and prospects.
We
 
are subject
 
to data
 
privacy
 
and security
 
laws and
 
regulations
 
that apply
 
to the
 
collection, transmission,
 
storage, use,
 
processing,
destruction, retention and security of personal
 
information, which among other things,
 
including additional laws or regulations relating
to
 
health
 
information.
 
The
 
legislative
 
and
 
regulatory
 
landscape
 
for
 
privacy
 
and
 
data
 
protection
 
continues
 
to
 
evolve
 
in
 
jurisdictions
worldwide, and these laws may
 
at times be conflicting. It
 
is possible that these laws may
 
be interpreted and applied
 
in a manner that is
inconsistent with our practices and
 
our efforts to comply
 
with the evolving data protection rules
 
may be unsuccessful. We
 
must devote
significant
 
resources
 
to
 
understanding
 
and
 
complying
 
with
 
this
 
changing
 
landscape.
 
Failure
 
to
 
comply
 
with
 
federal,
 
state
 
and
international laws regarding privacy and security of personal information could expose us to penalties
 
under such laws, orders requiring
that we
 
change our
 
practices, claims
 
for damages
 
or other
 
liabilities, regulatory
 
investigations and
 
enforcement action,
 
litigation
 
and
significant
 
costs for remediation, any of which could adversely affect our
 
business. Even if we are not determined to
 
have violated these
laws,
 
government
 
investigations
 
into
 
these
 
issues
 
typically
 
require
 
the
 
expenditure
 
of
 
significant
 
resources
 
and
 
generate
 
negative
publicity, which have a
 
material adverse effect
 
on our
 
business, financial condition,
 
results of
 
operations and prospects.
 
Failure to comply
with any of these laws and
 
regulations could result in enforcement action against
 
us, including fines, criminal prosecution of employees,
claims
 
for
 
damages
 
by affected
 
individuals
 
and damage
 
to our
 
reputation
 
and
 
loss of
 
goodwill,
 
any
 
of which
 
could have
 
a material
adverse effect on our business, financial condition,
 
results of operations and prospects. Additionally, if we are
 
unable to properly protect
the
 
privacy
 
and
 
security
 
of
 
personal
 
information,
 
including
 
protected
 
health
 
information,
 
we
 
could
 
be
 
found
 
to
 
have
 
breached
 
our
contracts with certain third parties.
There are numerous U.S. federal and state laws
 
and regulations related to the privacy and security of
 
personal information. In particular,
HIPAA,
 
as
 
amended
 
by
 
the
 
Health
 
Information
 
Technology
 
for
 
Economic
 
and
 
Clinical
 
Health
 
Act
 
of
 
2009
 
(“HITECH”)
 
and
 
their
respective implementing regulations, establish
 
privacy and security
 
standards that limit
 
the use
 
and disclosure of
 
individually identifiable
health
 
information,
 
or
 
protected
 
health
 
information,
 
and
 
require
 
the
 
implementation
 
of
 
administrative,
 
physical
 
and
 
technological
safeguards to protect
 
the privacy of
 
protected health information
 
and ensure the
 
confidentiality,
 
integrity and availability
 
of electronic
protected health information. Determining
 
whether protected health information
 
has been handled in
 
compliance with applicable privacy
standards
 
and
 
our
 
contractual
 
obligations
 
can
 
be
 
complex
 
and
 
may
 
be
 
subject
 
to
 
changing
 
interpretation.
 
If
 
we
 
fail
 
to
 
comply
 
with
applicable privacy
 
laws, including
 
applicable HIPAA
 
privacy and
 
security standards,
 
we could
 
face civil
 
and criminal
 
penalties. The
HHS has
 
the discretion to
 
impose penalties
 
without attempting to
 
first resolve
 
violations. HHS
 
enforcement activity can
 
result in
 
financial
liability
 
and
 
reputational
 
harm,
 
and
 
responses
 
to
 
such
 
enforcement
 
activity
 
can
 
consume
 
significant
 
internal
 
resources.
 
Even
 
when
HIPAA
 
does not
 
apply,
 
failing to
 
take appropriate
 
steps to
 
keep consumers’
 
personal information
 
secure can
 
constitute unfair
 
acts or
practices in or affecting commerce and be construed as a violation of Section 5(a) of the Federal Trade Commission
 
Act (the “FTCA”),
15 U.S.C § 45(a). The FTC
 
expects a company’s
 
data security measures to be reasonable
 
and appropriate in light of the
 
sensitivity and
volume of consumer information it holds, the size and complexity of
 
its business, and the cost of available tools to
 
improve security and
reduce vulnerabilities.
 
Individually identifiable
 
health information
 
is considered
 
sensitive data
 
that merits
 
stronger safeguards
 
and the
FTC’s guidance for appropriately securing consumers’ personal information
 
is similar to what is required by the HIPAA Security Rule.
In addition, state
 
attorneys general are authorized
 
to bring civil actions
 
seeking either injunctions
 
or damages in response
 
to violations
that
 
threaten
 
the privacy
 
of state
 
residents.
 
We
 
cannot
 
be sure
 
how
 
these
 
regulations
 
will be
 
interpreted,
 
enforced
 
or applied
 
to our
operations.
 
In addition
 
to the
 
risks associated
 
with
 
enforcement
 
activities and
 
potential
 
contractual
 
liabilities, our
 
ongoing
 
efforts
 
to
comply with evolving laws and
 
regulations at the federal and
 
state level may be
 
costly and require ongoing modifications
 
to our policies,
procedures and systems.
Internationally,
 
laws,
 
regulations
 
and
 
standards
 
in
 
many
 
jurisdictions
 
apply
 
broadly
 
to
 
the
 
collection,
 
transmission,
 
storage,
 
use,
processing, destruction, retention and
 
security of
 
personal information. For
 
example, in the
 
European Union, the
 
collection, transmission,
storage, use, processing, destruction, retention and
 
security of personal data
 
is governed by
 
the provisions of the
 
General Data Protection
Regulation (the “GDPR”) in addition to other applicable laws and
 
regulations. The GDPR came into effect in May 2018, repealing
 
and
replacing the European Union Data Protection Directive, and imposing revised data privacy and security requirements on companies in
relation to the processing
 
of personal data of
 
European Union data subjects.
 
The GDPR, together with
 
national legislation, regulations
and
 
guidelines
 
of
 
the
 
European
 
Union
 
Member
 
States
 
governing
 
the
 
collection,
 
transmission,
 
storage,
 
use,
 
processing,
 
destruction,
retention
 
and
 
security
 
of
 
personal
 
data,
 
impose
 
strict
 
obligations
 
with
 
respect
 
to,
 
and
 
restrictions
 
on,
 
the
 
collection,
 
use,
 
retention,
protection, disclosure, transfer
 
and processing of
 
personal data. The
 
GDPR also imposes strict
 
rules on the
 
transfer of personal data
 
to
76
countries outside the European Union that are
 
not deemed to have protections for
 
personal information, including the United States. The
GDPR authorizes fines
 
for certain violations
 
of up
 
to 4%
 
of the
 
total global annual
 
turnover of
 
the preceding financial
 
year or
 
€20 million,
whichever is greater.
 
Such fines are in addition to
 
any civil litigation claims by
 
data subjects. Separately,
 
Brexit has led and could
 
also
lead to legislative and regulatory
 
changes and may increase our compliance
 
costs. As of January 1, 2021, and
 
the expiry of transitional
arrangements agreed to between
 
the United Kingdom and
 
the European Union, data processing
 
in the United Kingdom
 
is governed by
a United Kingdom version of the GDPR (combining the GDPR and the Data Protection Act 2018), exposing us to two parallel regimes,
each of which authorizes similar fines and other
 
potentially divergent enforcement actions for certain
 
violations. On June 28, 2021, the
European Commission
 
adopted an
 
adequacy decision
 
for the
 
United Kingdom,
 
allowing for
 
the relatively
 
free exchange
 
of personal
information
 
between
 
the
 
European
 
Union
 
and
 
the
 
United
 
Kingdom.
 
Other
 
jurisdictions
 
outside
 
the
 
European
 
Union
 
are
 
similarly
introducing or enhancing privacy and data security laws, rules and regulations, which could increase our compliance costs and the risks
associated with noncompliance. We cannot
 
guarantee that we are, or will be, in compliance with all applicable international regulations
as they are enforced now or as they evolve.
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
 
Health Information Technology
 
for Economic and
 
Clinical Health
Act. We
 
do not believe that we are 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.
 
Even
when HIPAA
 
does not
 
apply,
 
according to
 
the FTC
 
failing to
 
take appropriate
 
steps to
 
keep consumers’
 
personal information
 
secure
constitutes
 
unfair
 
acts or
 
practices in
 
or affecting
 
commerce
 
in violation
 
of
 
the FTCA.
 
The
 
FTC expects
 
a company’s
 
data
 
security
measures
 
to
 
be
 
reasonable
 
and
 
appropriate
 
in
 
light
 
of
 
the
 
sensitivity
 
and
 
volume
 
of
 
consumer
 
information
 
it
 
holds,
 
the
 
size
 
and
complexity of its business, and the cost of available tools to
 
improve security and reduce vulnerabilities. Individually identifiable health
information is considered sensitive data that merits stronger safeguards.
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.
 
As
 
such,
 
we
 
may
 
be
 
subject
 
to
 
state
 
laws,
 
including
 
the
 
CCPA,
requiring notification
 
of affected
 
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 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
 
our
 
contract
 
manufacturers,
 
CROs or
 
other
 
contractors
 
or
 
consultants
 
fail
 
to
 
comply
 
with
 
applicable
 
federal,
 
state
 
or
 
local
regulatory privacy 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. Any of
 
the foregoing could
 
have a material adverse
 
effect on our
 
business, financial
condition, results of operations and prospects.
We
 
face substantial
 
competition, which
 
may result
 
in others
 
discovering, developing
 
or commercializing
 
products before
 
or more
successfully than we do.
The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong
emphasis on proprietary products. We
 
face and will continue to face competition from
 
third parties that use similar platforms and from
third parties focused on developing and commercializing other peptide and peptide-based product candidates. The competition
 
is likely
77
to
 
come
 
from
 
multiple
 
sources,
 
including
 
large
 
and
 
specialty
 
pharmaceutical
 
and
 
biotechnology
 
companies,
 
academic
 
research
institutions, government agencies and public and private research institutions.
Many
 
of
 
our
 
potential
 
competitors,
 
alone
 
or
 
with
 
their
 
strategic
 
partners,
 
have
 
substantially
 
greater
 
financial,
 
technical
 
and
 
other
resources
 
than
 
we
 
do,
 
such
 
as
 
larger
 
research
 
and
 
development,
 
clinical,
 
marketing
 
and
 
manufacturing
 
organizations.
 
Mergers
 
and
acquisitions in the biotechnology
 
and pharmaceutical industries may
 
result in even greater
 
concentration of resources among
 
a smaller
number of competitors. Our commercial opportunity could be
 
reduced or eliminated if 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.
 
Our competitors also
 
may obtain
 
FDA or other
 
regulatory approvals
 
for their products
 
faster or earlier
 
than we may
obtain approval
 
for ours,
 
which could
 
result in
 
our competitors
 
establishing a
 
strong market
 
position before
 
we are
 
able to
 
enter the
market. For example, some of our competitors have already received approval from regulatory authorities for their COVID-19 vaccines
and
 
boosters
 
to address
 
variants
 
of
 
SARS-CoV-2.
 
Additionally,
 
technologies
 
developed
 
by our
 
competitors
 
may
 
render
 
our product
candidates uneconomical or obsolete, and we may not be successful in marketing our product candidates against competitors’ products.
In addition, the
 
availability of our
 
competitors’ products and
 
the lack of complementary
 
products offered
 
by our sales and
 
distribution
team as compared to competitors with more extensive product lines, could limit the
 
demand and the prices we are able to charge for any
products that we may develop and commercialize.
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 expect our product candidates to face
 
intense and increasing competition
as new
 
products
 
enter
 
the relevant
 
markets
 
and
 
advanced technologies
 
become
 
available. We
 
face
 
potential
 
competition
 
from many
different
 
sources,
 
including
 
pharmaceutical,
 
biotechnology
 
and
 
specialty pharmaceutical
 
companies.
 
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
 
and have
 
different business
 
models from
 
us which
 
do not
focus
 
on
 
democratizing
 
healthcare
 
and
 
on
 
lower
 
cost,
 
all of
 
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
product candidates. The
 
global vaccine market
 
is highly concentrated
 
among a small
 
number of multinational
 
pharmaceutical companies:
Pfizer,
 
Merck, GlaxoSmithKline
 
and Sanofi
 
together control
 
most of
 
the global
 
vaccine market.
 
While we
 
are not
 
aware of all
 
of our
competitors’ efforts, there
 
are approximately fifty
 
COVID-19 vaccines currently
 
approved for use in one
 
or more countries around
 
the
world. We also face substantial competition in therapeutic areas outside of COVID-19. For example, the FDA approved aducanumab in
June 2021
 
as the first FDA-approved immunotherapy for AD, and lecanemab
 
in January 2023, and multiple approved products exist in
the fields of migraine
 
and hypercholesterolemia,
 
including products that
 
act on the same
 
therapeutic targets as
 
our vaccine candidates.
In
 
addition,
 
many
 
of
 
our
 
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:
•
 
developing product candidates;
•
 
undertaking pre-clinical testing and clinical trials;
•
 
obtaining BLA approval by the FDA;
•
 
obtaining comparable foreign regulatory approvals of product candidates;
•
 
formulating and manufacturing products;
•
 
launching, marketing and selling products; and
•
 
competing for market share, obtaining reimbursement and securing payor
 
contractors for preferential coverage.
If these competitors
 
access the marketplace
 
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, patients
78
or
 
third-party
 
payors.
 
Hospitals,
 
physicians
 
or
 
patients
 
may
 
conclude
 
that
 
our
 
products
 
are
 
less
 
safe
 
or
 
effective
 
or
 
otherwise
 
less
attractive than 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.
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, pre-clinical 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 or
 
other intellectual
 
property 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.
We
 
are subject to
 
anti-corruption laws, including
 
the U.S. Foreign
 
Corrupt Practices Act
 
(“FCPA”),
 
and similar laws
 
of non-U.S.
jurisdictions where we conduct business. If we fail to comply with these laws, we could be
 
subject to civil or criminal penalties, other
remedial
 
measures, and
 
legal expenses,
 
which could
 
adversely affect
 
our business,
 
financial
 
condition,
 
results of
 
operations
 
and
prospects.
We are currently
 
subject to anti-corruption laws, including the FCPA.
 
The FCPA, the
 
U.K. Bribery Act 2010 and other applicable anti-
bribery and
 
anti-corruption laws
 
generally prohibit
 
us, our
 
employees and
 
intermediaries from
 
bribing, being
 
bribed or
 
making other
prohibited
 
payments
 
to
 
government
 
officials
 
or
 
other
 
persons
 
to
 
obtain
 
or
 
retain
 
business
 
or
 
gain
 
other
 
business
 
advantages.
 
In
furtherance of our
 
goal to democratize healthcare,
 
we intend to distribute
 
any product candidates that
 
are approved or receive
 
an EUA
in various countries around the world, including countries with a heightened corruption risk. This may raise the risk of non-compliance
with anti-corruption laws and other rules and regulations prohibiting bribery and other crimes. We also participate in collaborations and
relationships
 
with
 
third
 
parties
 
whose
 
actions
 
could
 
potentially
 
subject
 
us
 
to
 
liability
 
under
 
the
 
FCPA
 
or
 
other
 
jurisdictions’
 
anti-
corruption laws, which in turn
 
could result in internal and
 
external investigations, associated legal costs
 
and even civil fines
 
and criminal
charges, any of which would divert
 
time and resources away from
 
our core business operations even
 
if we and our
 
employees and agents
do not violate laws and regulations. The FCPA
 
also requires public companies to make and keep books and records
 
that accurately and
fairly
 
reflect the
 
transactions of
 
the corporation
 
and to
 
devise and
 
maintain
 
an adequate
 
system of
 
internal
 
accounting controls.
 
Our
business
 
is
 
heavily
 
regulated
 
and
 
therefore
 
involves
 
significant
 
interaction
 
with
 
public
 
officials,
 
including
 
officials
 
of
 
non-U.S.
governments. Additionally, in many other countries, the health care providers who prescribe pharmaceuticals are (directly or indirectly)
employed
 
by
 
their
 
government,
 
and
 
the
 
purchasers
 
of
 
pharmaceuticals
 
are
 
government
 
entities;
 
therefore,
 
our
 
dealings
 
with
 
these
prescribers and
 
purchasers are
 
subject to
 
regulation under,
 
but not
 
limited to,
 
the FCPA.
 
In recent
 
years, the
 
SEC and
 
Department of
Justice have also increased their FCPA
 
enforcement activities with respect to pharmaceutical companies.
We are in the process of establishing a program to govern the
 
compliance of any potential sales or marketing operations
 
of our products,
should any of them be approved or receive an EUA. To
 
date, we have not had a robust compliance program. We
 
cannot ensure that our
operations to date
 
have complied, and
 
that our future
 
operations will comply, with our
 
compliance program or
 
laws, rules and
 
regulations
governing the sales and marketing
 
of pharmaceutical products, government contracting and
 
other aspects of our
 
business. We have used,
and plan to use, a network of agents in countries around the world to conduct our sales and marketing operations. These agents will not
be our employees,
 
and while we intend
 
to have a robust
 
diligence program in connection
 
with engaging agents,
 
our diligence program
and compliance program may not be sufficient to prevent
 
wrong-doing.
There
 
is also
 
no assurance
 
that we
 
will be
 
completely effective
 
in ensuring
 
our compliance
 
with all
 
applicable anti-corruption
 
laws,
including the FCPA,
 
particularly given the high level of complexity of these laws. We
 
have adopted a code of conduct applicable to all
of our employees and contractors, but it is not always
 
possible to identify and deter misconduct by
 
these parties 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, claims
 
or lawsuits stemming from
 
a failure to comply
 
with such
laws or regulations.
 
If we are
 
not in compliance
 
with the FCPA
 
or other anti-corruption
 
laws, we may
 
be subject to
 
criminal and civil
penalties, disgorgement
 
and other
 
sanctions and
 
remedial measures,
 
and legal
 
expenses, which
 
could have
 
an adverse
 
impact on
 
our
business, financial
 
condition, results of
 
operations and
 
prospects. Similarly,
 
any investigation
 
of any potential
 
violations of the
 
FCPA
or other
 
anti-corruption laws
 
by authorities
 
in the
 
United States
 
or other
 
jurisdictions where
 
we conduct
 
business could
 
also have
 
an
adverse impact on our reputation, business, financial condition, results
 
of operations and prospects.
As a result of our geographically diverse operations, we are more susceptible to
 
certain risks.
We
 
have
 
operation
 
in multiple
 
countries.
 
We
 
have
 
also used,
 
and
 
plan
 
to use,
 
a network
 
of agents
 
in countries
 
around the
 
world
 
to
conduct
 
our sales
 
and marketing
 
operations.
 
If we
 
are unable
 
to manage
 
the risks
 
of our
 
global operations,
 
including fluctuations
 
in
foreign exchange
 
and inflation
 
rates, international
 
hostilities such
 
as the
 
Russia-Ukraine conflict,
 
natural disasters,
 
security breaches,
our ability to
 
supply our
 
product candidates on
 
a timely
 
and large scale
 
basis in
 
local markets, lead
 
times for shipping,
 
accounts receivable
79
collection times,
 
import or
 
export licensing
 
requirements,
 
language barriers,
 
failure to
 
maintain compliance
 
with our
 
clients’ control
requirements
 
and
 
multiple
 
legal and
 
regulatory
 
systems,
 
our
 
results
 
of
 
operations
 
and
 
ability to
 
grow
 
could
 
be
 
materially
 
adversely
affected.
 
In particular,
 
our business
 
and stock
 
price may
 
be affected
 
by fluctuations
 
in foreign
 
exchange rates
 
between currencies
 
in
different jurisdictions in which operate or in which we may have
 
sales in the future.
Certain
 
legal
 
and
 
political
 
risks
 
are
 
also
 
inherent
 
in
 
foreign
 
operations.
 
Foreign
 
sales
 
of
 
our
 
product
 
candidates
 
could
 
be
 
adversely
affected by the imposition of governmental controls, political and economic
 
instability, trade restrictions and changes in tariffs. In many
countries, 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.
 
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 requir
 
e
 
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, results of operations and prospects.
We
 
are
 
exposed
 
to
 
potential
 
product
 
liability
 
and
 
professional
 
indemnity
 
risks
 
that
 
are
 
inherent
 
in
 
the
 
research,
 
development,
manufacturing, marketing and use of pharmaceutical products.
The use of
 
our investigational medicinal
 
products in clinical
 
trials, past sales
 
of our ELISA
 
test and the sale
 
of any approved
 
products
in the
 
future may
 
expose us
 
to liability
 
claims. These
 
claims might
 
be made
 
by patients
 
who use
 
the product,
 
health care
 
providers,
pharmaceutical companies or others selling such products. Any claims against us, regardless of their merit, could be difficult and costly
to defend
 
and could
 
materially adversely
 
affect
 
the market
 
for our
 
product candidates
 
or any
 
prospects for
 
commercialization
 
of our
product candidates.
In addition, regulations vary significantly across jurisdictions regarding
 
the clinical trial sponsor’s responsibility to provide free
 
medical
care and
 
compensation to
 
clinical trial
 
participants who
 
experience an
 
injury or
 
illness during
 
the trial.
 
For example,
 
there is
 
no legal
requirement in the United States for sponsors to provide free medical treatment or compensation to a participant injured during a study;
as a result, sponsors usually agree
 
to pay for the medical care
 
to diagnose and treat participant injuries to
 
the extent related to the clinical
trial and
 
typically do
 
not pay
 
unless the
 
injury is
 
determined to
 
be related
 
to participation
 
in the
 
trial. In
 
contrast, India
 
requires free
medical care
 
until it
 
is established
 
that the
 
injury is
 
not related
 
to the
 
study and
 
compensation for
 
any injury
 
that is
 
determined to
 
be
related
 
to the
 
study.
 
In 2019,
 
India’s
 
Ministry
 
of Health
 
and Family
 
Welfare
 
published
 
the “New
 
Drugs
 
and
 
Clinical
 
Trials
 
Rules,”
which increased a
 
clinical trial sponsor’s
 
liability for injuries
 
related to clinical
 
trial trials. Under
 
the regulation, sponsors
 
are required
to (i)
 
provide “free
 
medical management”
 
to participants
 
that experience
 
an injury
 
that, in
 
the investigator’s
 
opinion, is
 
related to
 
the
study or until
 
it is established
 
that the injury
 
is not related
 
to the study
 
and (ii) “compensate”
 
clinical trial participant
 
s
 
for trial-related
injuries.
 
Clinical
 
trials
 
conducted
 
in
 
jurisdictions
 
with
 
broad
 
compensation
 
and
 
medical
 
care
 
requirements
 
could
 
result
 
in
 
increased
overall research costs and adversely affect our ability to
 
conduct clinical trials.
Although the clinical trial process is designed to identify and assess potential side effects, it is always possible that a product, even after
regulatory approval,
 
may exhibit
 
unforeseen side
 
effects, including
 
rare side
 
effects more
 
likely to
 
be seen
 
in commercial use
 
than in
clinical studies. If any of our product candidates were to cause adverse side effects during clinical trials or after approval of the product
candidate, we may be exposed to substantial liabilities. Physicians and patients
 
may not comply with any warnings that identify known
potential adverse effects and patients who should not use
 
our product candidates.
To
 
cover such
 
liability claims,
 
we purchase
 
clinical trial
 
insurances in
 
the conduct
 
of each
 
of our
 
clinical trials
 
(typically conducted
through our CROs).
 
It is
 
possible that our
 
liabilities could exceed
 
our insurance coverage
 
or that
 
our insurance will
 
not cover
 
all situations
in which a claim against us could be made. We also intend to expand our insurance coverage to include the sale of commercial products
if we receive marketing approval for any of our proprietary products. However, we may not be able to maintain insurance coverage at a
reasonable cost or obtain insurance coverage that will be adequate to satisfy any liability that may arise. If a successful product liability
claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, our assets may not be sufficient
to cover such claims and our business
 
operations could be impaired. Should
 
any of the events described above
 
occur, this could have
 
a
material adverse effect on our business, financial condition,
 
results of operations and prospects, including, but not limited to:
•
 
decreased demand for our future product candidates;
•
 
adverse publicity and injury to our reputation;
•
 
withdrawal of clinical trial participants;
80
•
 
initiation of investigations by regulators;
•
 
costs to defend the related litigation;
•
 
a diversion of management’s
 
time and our resources;
•
 
compensation in response to a liability claim;
•
 
product recalls, withdrawals or labeling, marketing or promotional restrictions;
•
 
loss of revenue;
•
 
exhaustion of any available insurance and our capital resources; and
•
 
the inability to commercialize our products or product candidates.
We could be adversely affected if we are subject to negative publicity. We could also be adversely affected if any of our products or any
similar products distributed by other companies prove to be, or are asserted to be, harmful to patients. Any adverse publicity associated
with illness or other
 
adverse effects resulting
 
from patients’ use
 
or misuse of
 
our products or any
 
similar products distributed
 
by other
companies could have a material adverse impact on our business, financial condition,
 
results of operations or prospects.
If we need to expand our organization, we may experience difficulties in managing this growth, which could disrupt our operations.
If we expand
 
our organization, we
 
may encounter difficulties
 
in managing our
 
growth, which could
 
disrupt our operations.
 
We
 
expect
to experience
 
significant growth
 
in the
 
number of
 
our employees
 
and the
 
scope of
 
our operations,
 
particularly in
 
the areas
 
of clinical
development and regulatory affairs,
 
as well as to support
 
our public company operations. For
 
example, we may build our
 
own focused
sales,
 
distribution
 
and
 
marketing
 
infrastructure
 
to
 
market
 
our
 
product
 
candidates,
 
if
 
approved,
 
in
 
markets
 
around
 
the
 
world,
 
which
involves significant expenses and risks.
 
To manage these 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. Our
 
management
may need to devote a significant amount of its attention to managing these growth activities. 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, retain key employees or identify, recruit
 
and train additional qualified personnel. Our inability
to manage the
 
expansion or relocation
 
of our
 
operations effectively 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 also
 
require significant
 
capital expenditures
 
and may divert
 
financial resources
 
from other
 
projects, such
 
as the development
 
of
additional
 
product
 
candidates.
 
If
 
we
 
are
 
unable
 
to
 
effectively
 
manage
 
our
 
expected
 
growth,
 
our
 
expenses
 
may
 
increase
 
more
 
than
expected, our ability
 
to generate revenues
 
could be reduced
 
and we may
 
not be able
 
to implement our
 
business strategy,
 
including the
successful development and commercialization of our product candidates. Any of the foregoing could have a material adverse effect on
our business, financial condition, results of operations and
 
prospects. 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;
•
 
managing our internal development efforts effectively, including the clinical and
 
regulatory review process for
 
our product
candidates, while complying with our contractual obligations to contractors
 
and other third parties; and
•
 
improving our operational, financial
 
and management controls, reporting
 
systems and procedures. We
 
currently rely,
 
and
for the
 
foreseeable future
 
will continue
 
to rely,
 
in substantial
 
part on
 
certain related
 
parties, independent
 
organizations,
advisors and consultants to provide certain services, including
 
substantially all aspects of regulatory approval, clinical trial
management and
 
manufacturing. There
 
can be no
 
assurance that the
 
services of independent
 
organizations, advisors
 
and
consultants will continue to
 
be available to us on
 
a timely basis when needed,
 
or that we can find
 
qualified replacements.
In addition,
 
if we
 
are unable
 
to effectively
 
manage our
 
outsourced activities
 
or if
 
the quality
 
or accuracy
 
of the
 
services
provided by consultants is compromised for any reason, our clinical
 
trials may be extended, delayed or terminated, and we
may not be able
 
to obtain regulatory approval of
 
our product candidates or otherwise
 
advance our business. There
 
can be
no
 
assurance
 
that
 
we
 
will
 
be
 
able
 
to
 
manage
 
our
 
existing
 
consultants
 
or
 
find
 
other
 
competent
 
outside
 
contractors
 
and
consultants on economically reasonable terms, or at all. If we are not able to effectively expand our organization by hiring
new employees and
 
expanding our groups
 
of consultants and
 
contractors, or we
 
are not able to
 
effectively build
 
out new
facilities to
 
accommodate
 
this expansion,
 
we may
 
not be
 
able to
 
successfully
 
implement
 
the tasks
 
necessary
 
to further
develop
 
and
 
commercialize
 
our
 
product
 
candidates
 
and,
 
accordingly,
 
may
 
not
 
achieve
 
our
 
research,
 
development
 
and
commercialization goals.
81
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.
We only have a limited
 
number of employees to manage and operate our business, which may lead to certain
 
operational issues.
As of
 
March 15, 2023
 
we had 76
 
full-time employees
 
and 1 part
 
-time employee.
 
Our focus on
 
the development
 
of UB-612,
 
UB-312,
UB-313, VXX-401 and other product candidates requires us
 
to manage and operate our business in a highly efficient
 
manner. We
 
have
a
 
limited
 
number
 
of
 
employees upon
 
which
 
we
 
rely
 
to
 
effectively
 
manage
 
and
 
operate
 
our
 
business
 
and
 
we
 
cannot
 
assure you
 
that
operational issues will not arise.
While we intend
 
to identify,
 
recruit, maintain, motivate
 
and integrate additional
 
employees, consultants and
 
contractors to support
 
our
growth, we cannot assure you that we will be able to hire and/or retain adequate staffing levels to develop our product candidates or run
our operations and/or to accomplish all of the objectives that we otherwise would
 
seek to accomplish.
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.
 
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
 
do not
 
carry key
 
person life
 
insurance on
 
any 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. Our agreements with our employees generally
 
provide for at-will employment.
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, 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 Class A 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 Class A
 
our common
 
stock. Our future
 
success also depends
 
on our ability
 
to continue
 
to attract and
 
retain additional
executive officers and other key employees.
If we engage in future acquisitions, joint ventures or strategic collaborations, this may increase our capital requirements, dilute our
stockholders, cause us to incur debt or assume contingent liabilities and subject us to other
 
risks.
We may evaluate various acquisitions
 
and collaborations, including licensing
 
or acquiring complementary
 
products, intellectual
 
property
rights, technologies, or businesses. Any potential acquisition, joint venture,
 
or collaboration may entail numerous risks, including:
•
 
increased operating expenses and cash requirements;
•
 
the assumption of additional indebtedness or contingent liabilities;
•
 
assimilation
 
of
 
operations,
 
intellectual
 
property
 
and products
 
of
 
an acquired
 
company,
 
including
 
difficulties
 
associated
with integrating new personnel;
•
 
the diversion of our
 
management’s attention from our existing product
 
programs and initiatives in
 
pursuing such a strategic
merger or acquisition;
•
 
retention of key
 
employees, the loss
 
of key personnel
 
and uncertainties in
 
our ability to
 
maintain key business
 
relationships;
82
•
 
risks and uncertainties associated with the other party to
 
such a transaction, including the prospects of that party and
 
their
existing products or investigational medicines and regulatory approvals;
 
and
•
 
our inability to generate revenue from acquired technology or
 
products sufficient to meet our objectives in undertaking the
acquisition or even to offset the associated acquisition and
 
maintenance costs.
In addition, if we undertake acquisitions, we may utilize our cash, issue dilutive securities, assume or incur debt obligations, incur large
one-time expenses and acquire intangible assets that could result in significant
 
future amortization expense.
Moreover, we may
 
not be able to locate suitable
 
acquisition or strategic collaboration opportunities,
 
and this inability could impair
 
our
ability to grow or obtain access to technology or products that may be important
 
to the development of our business.
We
 
or
 
the
 
third
 
parties
 
upon
 
whom
 
we
 
depend
 
may
 
be
 
adversely
 
affected
 
by
 
natural
 
disasters
 
or
 
pandemics
 
and
 
our
 
business
continuity and disaster recovery plans may not adequately protect
 
us from a serious disaster.
Natural disasters or
 
pandemics, other than
 
or in addition
 
to COVID-19 and
 
including any potential
 
future waves of
 
COVID-19, could
severely
 
disrupt
 
our
 
operations
 
and
 
have
 
a
 
material
 
adverse
 
effect
 
on
 
our
 
business,
 
results
 
of
 
operations,
 
financial
 
condition
 
and
prospects. For
 
example, our
 
headquarters and
 
main laboratory
 
is located
 
on the
 
Eastern coast
 
of Florida,
 
a location
 
that is at
 
a higher
risk of exposure to hurricanes. If a hurricane
 
or natural disaster causes us to
 
sustain significant damage to our Florida
 
headquarters and
main laboratory,
 
or if we must shut down
 
our operations there for an
 
extended period of time, our business
 
and financial results would
be adversely impacted.
 
If a natural
 
disaster, power
 
outage, pandemic, such
 
as the COVID-19
 
pandemic, 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.
Unstable market and economic conditions have had and may
 
have further serious adverse consequences on our business, financial
condition and share price.
The
 
global
 
economy,
 
including
 
credit
 
and
 
financial
 
markets,
 
has
 
experienced
 
extreme
 
volatility
 
and
 
disruptions,
 
including
 
severely
diminished liquidity and credit availability,
 
declines in consumer confidence, declines in economic growth, increases in unemployment
rates and
 
uncertainty about
 
economic stability.
 
For example,
 
the COVID-19
 
pandemic has
 
resulted in
 
widespread unemployment,
 
an
economic slowdown and extreme volatility in the capital markets. While these
 
effects of COVID-19 have abated as countries, including
the United States, have re-opened and the rate of vaccinations have increased, COVID-19 may cause further disruptions globally.
 
If the
equity and
 
credit markets
 
further deteriorate,
 
it may
 
make any
 
necessary debt
 
or equity
 
financing more
 
difficult to
 
obtain in
 
a timely
manner or on favorable terms, more costly or more dilutive. In
 
addition, there is a risk that one or more of
 
our CROs, suppliers, contract
manufacturers
 
or other
 
third-party
 
providers
 
may
 
not
 
survive
 
an
 
economic
 
downturn,
 
or that
 
industry
 
trends
 
with respect
 
to
 
pricing
models, supply chains and delivery mechanisms, among other things, deviate from our expectations. As a
 
result, our business, results of
operations and price of our Class A common stock may be adversely affected.
Our insurance policies are expensive and protect us
 
only from some business risks, which leaves
 
us exposed to significant uninsured
liabilities.
Though
 
we
 
have
 
insurance
 
coverage
 
for
 
clinical
 
trial
 
product
 
liability,
 
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, auto, renters’, workers’ compensation 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 any
 
of our 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 renters’ 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.
83
Operations as a public company have made it more difficult and more expensive for us to obtain director and officer liability insurance,
and we and have incurred substantially higher costs since becoming a public company. As a result, it has become more expensive for us
to
 
obtain
 
the
 
coverage
 
needed
 
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
 
and cash equivalents
position and results of operations.
The
 
coronavirus
 
pandemic
 
has
 
caused
 
interruptions
 
or
 
delays
 
of
 
our
 
business
 
plan
 
and
 
could
 
continue
 
to
 
adversely
 
affect
 
our
business.
 
The COVID-19
 
pandemic and related
 
federal, state and
 
local government
 
responses to COVID-19
 
and our responses
 
to the pandemic
and such restrictions has and
 
may continue to have
 
a material adverse effect on
 
our business, results of
 
operations, liquidity and financial
condition. Our business has been disrupted and could be further disrupted to the extent our business partners
 
are adversely impacted by
the COVID-19 pandemic.
 
The full extent
 
to which the
 
COVID-19 pandemic will continue
 
to impact our
 
business, development plans,
 
business partners and
 
clinical
trials will depend on future developments, which are highly uncertain and cannot be predicted. To
 
the extent the pandemic continues to
adversely affect our business and financial condition, it
 
may also have the effect of
 
exacerbating many of the other risk
 
factors discussed
herein,
 
which could have a material adverse effect on us.
Due to the vaccination rate, the demand for our COVID-19 product candidate
 
may decrease significantly or disappear entirely.
We are pursuing
 
a path to conditional and provisional approval of UB-612
 
as a heterologous boost (boosting the immunity of a subject
who has already received a different vaccine) in the United Kingdom and Australia, respectively. Other companies have also responded
to the
 
pandemic
 
at a
 
faster pace,
 
and
 
to date
 
approximately
 
fifty
 
COVID-19
 
vaccines are
 
currently
 
in use
 
around the
 
world.
 
As our
competitors
 
continue
 
to
 
develop,
 
receive
 
regulatory
 
approval
 
for
 
and
 
commercialize
 
their
 
own
 
COVID-19
 
vaccines
 
and
 
boosters,
demand for our COVID-19 product candidate may materially decrease
 
or disappear entirely, along with a corresponding decrease in our
potential
 
revenues.
 
Further,
 
the existence
 
and
 
significance
 
of
 
the
 
opportunity
 
to provide
 
COVID-19
 
boosters
 
in
 
the
 
future
 
is highly
uncertain, and there can be no assurance that we will commercially benefit from
 
the development of a COVID-19 booster vaccine.
Risks Related to Our Class A Common Stock
 
An active trading market for our Class A common stock may not continue to be
 
developed or sustained.
Prior to our initial public offering,
 
there was no public market for
 
our Class A common stock.
 
Although our Class A common
 
stock is
now listed on
 
The Nasdaq Global
 
Market, an active
 
trading market for
 
our shares of
 
Class A common
 
stock may never
 
develop or
 
be
sustained.
 
If an
 
active market
 
for our
 
Class A
 
common stock
 
does not
 
develop or
 
is not
 
sustained, it
 
may be
 
difficult for
 
you to
 
sell
shares of our
 
Class A common stock
 
at an attractive price
 
or at all.
 
An inactive market may
 
also impair our ability
 
to raise capital by
selling shares of
 
our common stock,
 
our ability to
 
motivate our employees
 
through equity incentive
 
awards, and our
 
ability to acquire
other companies, products or technologies by using our common stock
 
as consideration for such acquisitions.
The price of our Class A common stock has been volatile and may be further affected by market conditions beyond
 
our control, and
purchasers of our Class A common stock could incur substantial losses.
Our results of operations
 
have fluctuated and are likely
 
to continue to fluctuate
 
in the future. In addition,
 
securities markets worldwide
have experienced, and
 
are likely to continue to
 
experience, significant price
 
and volume fluctuations. This
 
market volatility,
 
as well as
general economic, market
 
or political conditions,
 
could subject the
 
market price of
 
our shares of
 
Class A common
 
stock to wide
 
price
fluctuations
 
regardless of
 
our operating
 
performance,
 
which has
 
caused and
 
could further
 
cause a
 
decline
 
in the
 
market price
 
of our
common stock.
 
Price volatility
 
may be
 
greater if
 
the public
 
float and
 
trading volume
 
of shares
 
of our
 
Class A
 
common stock
 
is low.
Some factors that may cause the market price of our Class A common stock to fluctuate, in addition to the other risks mentioned
 
in this
Report, include:
•
 
our operating and financial performance and prospects;
•
 
our
 
announcements
 
or
 
our
 
competitors’
 
announcements
 
regarding
 
new
 
products
 
or
 
services,
 
enhancements,
 
significant
contracts, acquisitions or strategic investments;
•
 
any delay in our
 
development or regulatory
 
filings for our product
 
candidates and any adverse
 
development or perceived
adverse development with respect to the applicable regulatory authority’s
 
review of such filings;
84
•
 
if any of
 
our product candidates
 
receives an EUA
 
or regulatory approval, the
 
terms of such
 
approval and market acceptance
and demand for such product candidates;
•
 
the success of any efforts to acquire or in-license additional technologies,
 
products or product candidates;
•
 
changes in earnings estimates or recommendations by securities analysts who
 
cover our Class A common stock;
•
 
fluctuations in
 
our financial
 
results or,
 
in the
 
event we
 
provide it
 
from time
 
to time,
 
earnings guidance,
 
or the
 
financial
results or earnings guidance of companies perceived by investors to be
 
similar to us;
•
 
changes
 
in
 
our
 
capital
 
structure,
 
such
 
as
 
future
 
issuances
 
of
 
securities,
 
sales
 
of
 
large
 
blocks
 
of
 
common
 
stock
 
by
 
our
stockholders, including our principal stockholders, or the incurrence of
 
additional debt;
•
 
additions and departure of key personnel;
•
 
any disputes
 
relating to
 
our intellectual
 
property,
 
including any
 
intellectual property
 
infringement lawsuit
 
or opposition,
interference or cancellation proceeding in which we may become involved;
•
 
reputational issues, including reputational issues involving our competitors
 
and their products;
•
 
actions by institutional stockholders;
•
 
changes in general economic and market conditions, including related to
 
the COVID-19 pandemic;
•
 
changes
 
in industry
 
conditions or
 
perceptions
 
or changes
 
in the
 
market
 
outlook
 
for
 
the industry
 
in
 
which
 
we compete,
including changes in the structure of healthcare payment systems; and
•
 
changes in applicable laws, rules or regulations or regulatory actions affecting
 
us or our clients and other dynamics.
These
 
and
 
other
 
factors
 
have
 
caused
 
and
 
may
 
further
 
cause
 
the
 
market
 
price
 
for
 
shares
 
of
 
our
 
Class
 
A
 
common
 
stock
 
to
 
fluctuate
substantially, which may further limit or prevent investors from readily selling their shares
 
of our Class A common stock
 
and negatively
affect the liquidity of our Class A common stock. In addition, in the past, when the market price of
 
a stock has been volatile, holders of
that
 
stock
 
sometimes
 
have
 
instituted securities
 
class
 
action
 
litigation
 
against
 
the
 
company
 
that
 
issued
 
the
 
stock. Securities
 
litigation
against us,
 
regardless of
 
the merits
 
or outcome,
 
could result
 
in substantial
 
costs and
 
divert the
 
time and
 
attention of
 
our management
from the business, which could significantly harm our business, results of operation,
 
financial condition or reputation.
The dual-class structure of
 
our common stock and
 
the Voting
 
Agreement will have the
 
effect of concentrating voting
 
power, which
will significantly limit stockholders’ ability to
 
influence the outcome of matters
 
submitted to our stockholders for
 
approval, including
the election
 
of
 
our board
 
of directors,
 
the adoption
 
of
 
amendments
 
to
 
our Charter
 
and
 
Bylaws and
 
the approval
 
of any
 
merger,
consolidation, sale of all or substantially all of our assets or other major corporate
 
transaction.
Our Class A common
 
stock has one vote
 
per share, and our Class
 
B common stock has
 
ten votes per share.
 
Our principal stockholders
have entered into the
 
Voting
 
Agreement. As of March
 
15, 2023 on a fully
 
diluted basis, Mei Mei Hu, as
 
proxyholder under the
 
Voting
Agreement, controls
 
approximately 65.8% of
 
the total voting
 
power of our
 
outstanding capital stock.
 
The Voting
 
Agreement provides
Mei Mei Hu with the authority (and irrevocable proxies) to direct the
 
vote and vote the shares of capital stock held by the parties to the
voting agreement at her discretion on all matters to be voted upon by stockholders. The voting power covered by the Voting Agreement
may
 
increase
 
over
 
time
 
as the
 
UBI Warrant
 
is exercised
 
and
 
as our
 
principal
 
stockholders
 
exercise
 
or vest
 
equity
 
awards that
 
were
outstanding at the time of the completion
 
of our initial public offering.
 
If all such equity awards held by
 
our principal stockholders had
been exercised or vested and exchanged for shares of common stock and the UBI Warrant had been
 
exercised in full for shares of Class
A common
 
stock as of
 
March 15, 2023,
 
assuming no other
 
equity awards
 
had been exercised
 
or vested,
 
the Voting
 
Agreement would
have covered, in the aggregate as of the completion of our initial public
 
offering, approximately 68.2% of the total voting
 
power of our
outstanding capital stock.
 
As a
 
result, if
 
our principal stockholders
 
retain all
 
or a
 
large portion their
 
common stock, including
 
the common
stock issuable upon
 
the exercise or
 
vesting of
 
such principal stockholders’
 
outstanding equity
 
awards or upon
 
the exercise of
 
the UBI
Warrant,
 
our
 
principal
 
stockholders
 
will
 
be
 
able
 
to
 
significantly
 
influence
 
(if
 
not
 
control)
 
any
 
action
 
requiring
 
the
 
approval
 
of
 
our
stockholders, including
 
the election
 
of our
 
board of
 
directors, the
 
adoption of
 
amendments to
 
our amended
 
and restated
 
certificate of
incorporation (the “Charter”) and our amended
 
and restated bylaws (the “Bylaws”) and the approval
 
of any merger, consolidation, sale
of
 
all or
 
substantially
 
all of
 
our
 
assets or
 
other
 
major
 
corporate
 
transaction.
 
Assuming
 
our
 
principal
 
stockholders
 
retain their
 
equity
interests and the
 
Voting
 
Agreement remains
 
in effect,
 
our principal stockholders
 
will effectively
 
control all
 
such matters submitted
 
to
the stockholders for the foreseeable future.
 
Our principal stockholders will also have
 
the voting power to determine the composition
 
of
our board of directors, which in turn will be able to determine matters affecting
 
us, including, among others:
•
 
any determination with respect to our business direction and policies,
 
including the appointment and removal of officers;
85
•
 
the adoption of amendments to our Charter and Bylaws;
•
 
determinations with respect to mergers, business combinations
 
or disposition of assets;
•
 
compensation and benefit programs and other human resources policy
 
decisions;
•
 
the payment of dividends on our common stock; and
•
 
determinations with respect to tax matters.
Our principal stockholders may have interests that differ from yours and may vote in a way with which you disagree and which may be
adverse to your
 
interests. This concentrated
 
control may have the
 
effect of delaying,
 
preventing or deterring
 
a change in control
 
of the
Company, could deprive our stockholders of an opportunity to receive a premium for their
 
capital stock as part of a sale
 
in the Company
and
 
might
 
ultimately
 
affect
 
the
 
market
 
price
 
of
 
our
 
Class
 
A
 
common
 
stock.
 
In
 
addition,
 
each
 
share
 
of
 
Class
 
B
 
common
 
stock
 
will
automatically convert
 
into one
 
share of
 
Class A
 
common stock
 
upon any
 
transfer,
 
whether or
 
not for
 
value and
 
whether voluntary
 
or
involuntary or by operation of
 
law, except
 
for certain transfers described
 
in our Charter,
 
including, without limitation, certain
 
transfers
for tax and estate planning purposes. Such issuances will be dilutive to
 
holders of our Class A common stock.
 
We are an “emerging growth company” and a “smaller reporting company” and will be
 
able to avail ourselves of reduced disclosure
requirements applicable to
 
emerging growth companies
 
and smaller reporting
 
companies, which could
 
make our Class
 
A common
stock less attractive to investors and adversely affect the market price
 
of our Class A common stock.
We are an “emerging
 
growth company,” as defined
 
in the JOBS Act. We will remain an emerging
 
growth company until the earliest of
(i) the last day of
 
the fiscal year in which
 
we have annual gross revenues
 
of $1.235 billion or more; (ii) the
 
date on which we have
 
issued
more than $1.0 billion
 
in non-convertible debt
 
in the previous
 
three years; (iii)
 
the date we
 
qualify as a
 
“large accelerated
 
filer” under
the Exchange
 
Act, which
 
would occur
 
at the
 
end of
 
a given
 
fiscal year
 
if the
 
market value
 
of our
 
common stock
 
that is
 
held by
 
non-
affiliates
 
is $700 million or more
 
as of the
 
last business day
 
of the second fiscal
 
quarter of such
 
year (and we have
 
been a public
 
company
for at
 
least 12
 
months and
 
have filed
 
one annual
 
report on
 
Form 10-K);
 
and (iv)
 
the last
 
day of
 
the fiscal
 
year ending
 
after the
 
fifth
anniversary of our
 
initial public offering.
 
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:
•
 
not being required to comply with the auditor attestation requirements of Section
 
404 of the Sarbanes-Oxley Act;
•
 
not being
 
required to
 
comply with
 
any requirement
 
that may
 
be adopted
 
by the
 
Public Company
 
Accounting Oversight
Board regarding
 
mandatory audit
 
firm rotation
 
or a
 
supplement to
 
the auditor’s
 
report providing
 
additional information
about the audit and the financial statements;
•
 
being
 
required
 
to provide
 
only
 
two
 
years
 
of audited
 
financial
 
statements
 
in
 
addition
 
to
 
any
 
required
 
unaudited
 
interim
financial statements;
•
 
permitting
 
an
 
extended
 
transition
 
period
 
for
 
complying
 
with
 
new
 
or
 
revised
 
accounting
 
standards,
 
which
 
allows
 
an
emerging
 
growth company
 
to delay
 
the adoption
 
of certain
 
accounting
 
standards until
 
those standards
 
would otherwise
apply to private companies;
•
 
reduced disclosure obligations regarding executive compensation; and
•
 
exemptions
 
from
 
the
 
requirements
 
of
 
holding
 
a
 
nonbinding
 
advisory
 
vote
 
on
 
executive
 
compensation
 
and
 
shareholder
approval of any golden parachute payments not previously approved.
We
 
may
 
choose to
 
take advantage
 
of some,
 
but not
 
all, of
 
the available
 
exemptions.
 
We
 
have elected
 
to use
 
the extended
 
transition
period for new or revised accounting
 
standards during the period in which
 
we remain an emerging growth
 
company. To
 
the extent that
we continue to qualify as a “smaller reporting company,” as such term is defined in Rule 12b-2 under the Exchange
 
Act, after we cease
to qualify as an emerging growth company, we will continue to be permitted to make certain reduced disclosures in our periodic reports
and other documents that we file with the SEC. We cannot predict whether investors will find our Class A common stock less attractive
as a result
 
of our reliance
 
on these exemptions.
 
If some investors
 
find our Class
 
A common stock
 
less attractive as
 
a result, there
 
may
be a less active trading market for our Class A common stock and our stock price
 
may be more volatile.
86
As long
 
as our
 
principal stockholders
 
hold a
 
majority of
 
the voting power
 
of our
 
capital stock,
 
we may
 
rely on certain
 
exemptions
from the corporate governance requirements of the Nasdaq available for
 
“controlled companies.”
We
 
are
 
a
 
“controlled
 
company”
 
within
 
the
 
meaning
 
of
 
the
 
corporate
 
governance
 
requirements
 
of
 
the
 
Nasdaq
 
because
 
our
 
principal
stockholders will continue to hold more than 50% of the voting power
 
of our outstanding shares of capital stock as a result of our dual-
class
 
common
 
stock
 
structure
 
and
 
the
 
Voting
 
Agreement.
 
A
 
controlled
 
company
 
may
 
elect
 
not
 
to
 
comply
 
with
 
certain
 
corporate
governance
 
requirements of
 
the Nasdaq.
 
Accordingly,
 
our board
 
of directors
 
will not
 
be required
 
to have
 
a majority
 
of independent
directors
 
and
 
our
 
Compensation
 
Committee
 
and
 
Nominating
 
and
 
Governance
 
Committee
 
will
 
not
 
be
 
required
 
to
 
meet
 
the
 
director
independence
 
requirements
 
to
 
which
 
we
 
would
 
otherwise
 
be
 
subject
 
until
 
such
 
time
 
as
 
we
 
cease
 
to
 
be
 
a
 
“controlled
 
company.”
Accordingly,
 
you will not
 
have certain of the
 
protections afforded
 
to stockholders of
 
companies that are subject
 
to all of the
 
corporate
governance requirements of the Nasdaq.
Your percentage ownership in us may be diluted by
 
future issuances of capital stock,
 
which could reduce your
 
influence over matters
on which stockholders vote.
Pursuant to our Charter
 
and Bylaws, our board
 
of directors has the
 
authority, without
 
action or vote of
 
our stockholders, to
 
issue all or
any part of our authorized but unissued shares of common stock, including shares issuable upon the
 
exercise of options, or shares of our
authorized but
 
unissued preferred
 
stock. Issuances
 
of shares
 
of common
 
stock or
 
shares of
 
voting preferred
 
stock would
 
reduce your
influence over matters
 
on which our stockholders
 
vote and, in the
 
case of issuances
 
of shares of preferred
 
stock, would likely result
 
in
your interest in us being subject to the prior rights of holders of that preferred stock.
Future sales of a substantial number of shares of our Class A common stock may
 
depress the price of our shares.
If our stockholders
 
sell a large number
 
of shares of our
 
Class A common stock,
 
or if we issue
 
a large number
 
of shares of our
 
Class A
common
 
stock
 
in
 
connection
 
with
 
future
 
acquisitions,
 
financings
 
or
 
other
 
circumstances,
 
the
 
market
 
price
 
of
 
shares
 
of
 
our
 
Class
 
A
common stock could decline significantly.
 
Moreover, the perception in the
 
public market that our stockholders might sell shares of
 
our
Class A common
 
stock could depress
 
the market price of
 
those shares. In
 
addition, sales of
 
a substantial number of
 
shares of our
 
common
stock by our principal stockholders could adversely affect the market
 
price of our Class A common stock.
We
 
do not
 
anticipate declaring
 
or paying
 
regular dividends
 
on our
 
Class A
 
common stock
 
in the near
 
term, and
 
any indebtedness
could limit our ability to pay dividends on our Class A common stock.
We have never declared and do not anticipate declaring or paying
 
regular cash dividends on our Class
 
A common stock in the near term.
We currently
 
intend to use our future earnings, if any, to pay any debt obligations,
 
to fund our growth and develop our business and for
general corporate purposes. Therefore, you are not likely to receive any cash dividends on
 
your Class A common stock in the near term,
and the success of an investment in shares of our Class A common stock will depend upon any future appreciation in their value, which
is not certain to
 
occur. There is no guarantee that shares of
 
our Class A common stock
 
will appreciate in value or even
 
maintain the price
at which they are initially
 
offered. Any future
 
declaration and payment
 
of cash dividends or other
 
distributions of capital will
 
be at the
discretion of our board of
 
directors and the payment
 
of any future cash dividends
 
or other distributions of capital
 
will depend on many
factors, including our financial
 
condition, earnings, cash needs,
 
regulatory constraints, capital requirements
 
(including requirements of
our subsidiaries) and any other factors that our board of
 
directors deems relevant in making such a determination. We cannot assure you
that we
 
will establish
 
a dividend
 
policy or
 
pay cash
 
dividends in
 
the future
 
or continue
 
to pay
 
any cash
 
dividend if
 
we do
 
commence
paying cash dividends pursuant to a dividend policy or otherwise.
Our Charter designates courts in the State of Delaware as the sole and exclusive forum for certain types of
 
actions and proceedings
that may be
 
initiated by our
 
stockholders, and
 
also provide that
 
the federal district
 
courts will be
 
the exclusive forum
 
for resolving
any complaint
 
asserting a
 
cause of
 
action arising
 
under the
 
Securities Act,
 
each of
 
which could
 
limit our
 
stockholders’
 
ability to
choose the judicial forum for disputes with us or our directors, officers,
 
stockholders or employees.
Our Charter provides that, subject to limited exceptions, the Court of Chancery for the State
 
of Delaware or other specified courts in the
State of Delaware will be the sole and exclusive forum to the fullest extent of the law for:
•
 
any derivative action or proceeding brought on our behalf;
•
 
any action asserting a
 
claim of breach of
 
a fiduciary duty owed by
 
any of our directors,
 
officers or other
 
employees to us
or our stockholders;
•
 
any action
 
asserting a
 
claim against
 
us arising
 
pursuant to
 
any provision
 
of the
 
Delaware General
 
Corporation Law
 
(the
“DGCL”), our Charter or our Bylaws;
•
 
any action to interpret, apply,
 
enforce or determine the validity of our Charter or Bylaws; and
87
•
 
any other action asserting a claim against us that is governed by the internal affairs
 
doctrine.
Our Charter also provides
 
that the federal district
 
courts of the United
 
States of America will
 
be the exclusive forum
 
for the resolution
of
 
any
 
complaint
 
asserting
 
a
 
cause
 
of
 
action
 
against
 
us
 
or any
 
of
 
our
 
directors,
 
officers,
 
employees
 
or
 
agents and
 
arising
 
under
 
the
Securities Act. However, Section 22
 
of the Securities
 
Act provides that
 
federal and state
 
courts have concurrent
 
jurisdiction over lawsuits
brought pursuant to the
 
Securities Act or the rules and
 
regulations thereunder.
 
To the
 
extent the exclusive forum provision
 
restricts the
courts in which claims arising under the Securities Act may
 
be brought, there is uncertainty as to whether a court would enforce
 
such a
provision. We
 
note that
 
investors cannot
 
waive compliance
 
with the
 
federal securities
 
laws and
 
the rules
 
and regulations
 
thereunder.
This provision does not apply to claims brought under the Exchange 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 these provisions. These provisions may limit
 
a stockholder’s ability to bring a claim in a judicial forum
 
that it finds
favorable
 
for disputes
 
with us
 
or our
 
directors, officers
 
or other
 
employees,
 
which may
 
discourage
 
such lawsuits
 
against
 
us and
 
our
directors, officers and employees. Alternatively,
 
if a court were to find these provisions of our Charter inapplicable to, or
 
unenforceable
in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such
matters in other jurisdictions, which could adversely affect
 
our business or financial condition.
Delaware law and provisions in our Charter and
 
Bylaws might discourage, delay or prevent a change
 
in control of the Company or
changes in our management and, therefore, depress the trading price of our Class A common
 
stock.
Provisions of
 
our Charter
 
and Bylaws
 
and of
 
state law
 
may delay,
 
deter,
 
prevent or
 
render more
 
difficult a
 
takeover attempt
 
that our
stockholders might consider in their best interests, including the following
 
provisions:
•
 
our
 
dual-class
 
common
 
stock
 
structure
 
and
 
the
 
Voting
 
Agreement,
 
which
 
provide
 
our
 
principal
 
stockholders
 
with
 
a
majority of the voting power
 
of our capital stock will
 
enable our principal stockholders to
 
influence the outcome of matters
submitted to our
 
stockholders for approval
 
even if they
 
own significantly less
 
than a majority
 
of the number
 
of shares of
our outstanding common stock;
•
 
our Charter does not provide for cumulative voting in the election of directors;
•
 
vacancies on our board of directors may be filled only by our board of directors
 
and not by stockholders;
•
 
our
 
stockholders
 
may
 
act
 
by
 
written
 
consent
 
only
 
so
 
long
 
as
 
the
 
Voting
 
Agreement
 
is
 
in
 
effect
 
and
 
our
 
principal
stockholders hold a majority of the voting power of then-outstanding shares
 
of our capital stock;
•
 
a special meeting of our stockholders may only be called by the chairperson of
 
our board of directors, our Chief Executive
Officer, our President, a majority
 
of our board
 
of directors or, so
 
long as the
 
Voting
 
Agreement is in
 
effect and our principal
stockholders hold a majority of the voting power of then-outstanding shares
 
of our capital stock, our stockholders;
•
 
amendments
 
to
 
certain
 
provisions
 
of
 
our
 
Charter
 
and
 
stockholder-proposed
 
amendments
 
to
 
our
 
Bylaws
 
require
 
the
affirmative vote
 
of the holders
 
of at least
 
66 2/3% in
 
voting power of
 
all the then
 
outstanding shares of
 
our capital stock
entitled to vote thereon at any time
 
the Voting
 
Agreement is not in effect or our
 
principal stockholders do not hold, in the
aggregate, a majority of the voting power of then-outstanding shares of
 
our capital stock;
•
 
our Charter authorizes
 
our board of directors,
 
subject to the limitations
 
imposed by Delaware
 
law or the
 
Nasdaq’s listing
rules, without any
 
further vote or
 
action by our stockholders,
 
to issue preferred
 
stock in one or
 
more series and
 
to fix the
designations, powers, preferences, limitations and rights of the shares of
 
each series; and
•
 
advance notice procedures apply
 
for stockholders to
 
nominate candidates for election
 
as directors or
 
to bring matters
 
before
an annual meeting of stockholders.
Such provisions or laws may prevent our stockholders from
 
receiving the benefit from any premium to the market
 
price of our Class A
common stock
 
offered by
 
a bidder
 
in a takeover
 
context. Even
 
in the
 
absence of
 
a takeover attempt,
 
the existence
 
of these provisions
may adversely affect the prevailing
 
market price of our Class A common
 
stock if they are viewed as discouraging
 
takeover attempts in
the future.
Provisions
 
in
 
our
 
Charter
 
and
 
Bylaws,
 
including
 
the
 
dual-class
 
structure
 
of
 
our
 
common
 
stock,
 
might
 
discourage
 
or
 
prevent
institutional investors from purchasing or holding our Class A common stock, and, therefore, depress the trading price of
 
our Class
A common stock.
Our governance structure and our Charter may negatively affect the
 
decision by certain institutional investors to purchase or hold
 
shares
of
 
our
 
Class
 
A
 
common
 
stock.
 
The
 
holding
 
of
 
low-voting
 
stock,
 
such
 
as
 
our
 
Class
 
A
 
common
 
stock,
 
may
 
not
 
be
 
permitted
 
by
 
the
88
investment policies of certain institutional investors or may be less attractive to the portfolio managers of certain institutional investors.
In addition, in July 2017, FTSE Russell and Standard & Poor’s announced that they would cease to allow
 
most newly public companies
utilizing dual-
 
or multi-class
 
capital structures
 
to be
 
included in
 
their indices.
 
Affected indices
 
include the
 
Russell 2000
 
and the
 
S&P
500, S&P MidCap
 
400 and S&P
 
SmallCap 600, which together
 
make up the
 
S&P Composite 1500. Our
 
dual-class common stock capital
structure may make
 
us ineligible for inclusion
 
in any of these and
 
certain other indices, and
 
as a result, mutual
 
funds, exchange-traded
funds
 
and other
 
investment
 
vehicles that
 
attempt
 
to passively
 
track
 
these indices
 
would
 
not
 
invest in
 
our
 
stock. These
 
policies
 
may
depress our valuation compared to those of other similar companies that are
 
included in such indices.
If securities
 
or industry
 
analysts do
 
not publish
 
research or
 
publish inaccurate
 
or unfavorable
 
research about
 
us, our business
 
or
our market, or
 
if they change
 
their recommendation regarding
 
our Class A common
 
stock adversely,
 
the trading price
 
and trading
volume of our Class A common stock could decline.
The trading
 
market for
 
our Class
 
A common
 
stock will
 
depend in
 
part on
 
the research
 
and reports
 
that securities
 
or industry
 
analysts
publish about us, our business, our market or our competitors. If no or few securities or industry analysts cover us, the price and trading
volume of
 
our Class
 
A common
 
stock likely
 
would be
 
negatively impacted.
 
If one
 
or more
 
of the
 
securities or
 
industry analysts
 
who
cover us downgrade our Class A common stock or publish inaccurate or unfavorable research about us, the trading price of our Class A
common
 
stock would
 
likely decline.
 
If analysts
 
publish target
 
prices for
 
our Class
 
A common
 
stock that
 
are below
 
our then-current
public price of our
 
Class A common
 
stock, it could
 
cause the trading
 
price of our
 
Class A common stock
 
to decline significantly. Further,
if
 
one
 
or
 
more of
 
these
 
analysts cease
 
coverage
 
of the
 
Company
 
or fail
 
to
 
publish
 
reports on
 
us
 
regularly,
 
demand
 
for
 
our
 
Class A
common stock could decrease, which might cause our Class A common
 
stock trading price and trading volume to decline.
General Risk Factors
We
 
incur increased costs
 
as a result
 
of operating as
 
a public company,
 
and our management
 
is required to
 
devote substantial time
to new compliance initiatives.
As a public company,
 
and particularly after we are no longer an
 
“emerging growth company” or
 
“smaller reporting company,”
 
we will
incur significant legal,
 
accounting and other expenses
 
that we did not
 
incur as a private
 
company.
 
In addition, the Sarbanes-Oxley
 
Act
and
 
rules
 
subsequently
 
implemented
 
by
 
the
 
SEC
 
and
 
the
 
Nasdaq
 
impose
 
various
 
requirements
 
on
 
public
 
companies,
 
including
establishment and maintenance of effective disclosure and financial controls
 
and corporate governance practices. Our management and
other personnel need to devote a substantial amount of
 
time to these compliance initiatives. Moreover,
 
these rules and regulations have
increased our legal and financial compliance costs and will make some
 
activities more time- consuming and costly.
 
For example, these
rules and regulations have made it more difficult and more expensive
 
for us to obtain director and officer liability insurance.
Pursuant to Section
 
404, we are
 
required to furnish
 
a report by
 
our management on
 
our internal control
 
over financial reporting, including
an attestation report on internal control over financial reporting
 
issued by our independent registered public accounting firm.
 
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
 
are engaged
 
in a
 
process to
 
document and
 
evaluate our
 
internal control
 
over financial
 
reporting, which
 
is both
 
costly and
challenging. Further,
 
despite our
 
efforts, there
 
is a
 
risk that
 
neither we
 
nor our
 
independent registered
 
public accounting
 
firm will
 
be
able to
 
conclude within
 
the prescribed
 
timeframe that
 
our internal
 
control over
 
financial reporting
 
is effective
 
as required
 
by Section
404.
 
This
 
could
 
result
 
in
 
an
 
adverse
 
reaction
 
in
 
the
 
financial
 
markets
 
due
 
to
 
a
 
loss
 
of
 
confidence
 
in
 
the
 
reliability
 
of
 
our
 
financial
statements. In addition, if we are not able to continue to meet these requirements,
 
we may not be able to remain listed on the Nasdaq.
Our independent
 
registered public
 
accounting firm
 
may not
 
be able
 
to certify
 
as to
 
the effectiveness
 
of our
 
internal controls
 
over
financial reporting, which could have a significant and adverse effect
 
on our business and reputation.
As a public company,
 
we are now required to comply
 
with the SEC’s rules
 
implementing Sections 302 and
 
404 of the Sarbanes-Oxley
Act, which will require management to certify financial and
 
other information in our quarterly and annual reports and provide an
 
annual
management
 
report
 
on
 
the
 
effectiveness
 
of
 
internal
 
control
 
over
 
financial
 
reporting.
 
However,
 
we
 
are
 
not
 
required
 
to
 
have
 
our
independent
 
registered
 
public
 
accounting
 
firm
 
formally
 
assess
 
our
 
internal
 
controls
 
for
 
as long
 
as
 
we
 
remain
 
an
 
“emerging
 
growth
company” as defined in the JOBS Act.
When formally evaluating
 
our internal controls
 
over financial reporting,
 
we have identified
 
and may identify
 
further 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
 
of the
 
Sarbanes-Oxley Act.
 
In addition,
 
if we
 
fail to
 
achieve and
 
maintain the
 
adequacy of
 
our internal
 
controls, as
 
such
standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing
basis that
 
we have
 
effective internal
 
controls over
 
financial reporting
 
in accordance
 
with Section
 
404 of
 
the Sarbanes-Oxley
 
Act. We
cannot be certain as to the timing of completion of our evaluation, testing and any remediation actions or the impact of the
 
same on our
operations.
 
If we
 
are not
 
able to
 
implement the
 
requirements
 
of
 
Section 404
 
of the
 
Sarbanes-Oxley
 
Act
 
in a
 
timely manner
 
or with
adequate compliance, our
 
independent registered public
 
accounting firm may
 
issue an
 
adverse opinion due
 
to ineffective internal
 
controls
over financial
 
reporting, and
 
we may
 
be subject
 
to sanctions
 
or investigation
 
by regulatory
 
authorities, such
 
as the
 
SEC. As
 
a result,
 
 
89
there could
 
be a negative
 
reaction in
 
the financial
 
markets due
 
to a
 
loss of confidence
 
in the reliability
 
of our
 
financial statements.
 
In
addition, we may
 
be required to incur
 
additional costs in improving
 
our internal control
 
system and the
 
hiring of additional
 
personnel.
Any such action could have a significant and adverse effect on our business and reputation, which could negatively affect our
 
results of
operations or cash flows.
Further, we believe
 
that any disclosure controls
 
and procedures or internal 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 facts 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.
We
 
have
 
in
 
the
 
past
 
identified
 
material
 
weaknesses
 
in
 
our
 
internal
 
control
 
over
 
financial
 
reporting,
 
which
 
have
 
since
 
been
remediated. If we
 
are unable to
 
develop and maintain
 
an effective system
 
of internal control
 
over financial reporting,
 
or if we
 
discover
material deficiencies
 
in the future,
 
we may
 
not be
 
able to accurately
 
report our
 
financial results
 
or prevent
 
fraud, and
 
as a
 
result,
shareholders
 
could lose
 
confidence in
 
our financial
 
and other
 
public reporting,
 
which would
 
harm our
 
business and
 
the trading
price of our Class A common stock.
Effective internal controls over financial
 
reporting are necessary for us to provide reliable financial
 
reports and, together with adequate
disclosure
 
controls
 
and
 
procedures,
 
are
 
designed
 
to
 
prevent
 
fraud.
 
Any
 
failure
 
to
 
implement
 
required
 
new
 
or
 
improved
 
controls,
 
or
difficulties
 
encountered
 
in
 
their
 
implementation,
 
could
 
cause
 
us
 
to
 
fail
 
to
 
meet
 
our
 
reporting
 
obligations.
 
A
 
material
 
weakness
 
is
 
a
deficiency or a
 
combination of deficiencies
 
in internal control
 
over financial reporting
 
such that there is
 
a reasonable possibility
 
that a
material misstatement of our financial statements will not be prevented
 
or detected on a timely basis.
 
During the
 
preparation of
 
our audited
 
consolidated financial
 
statements for
 
the year
 
ended December
 
31, 2021,
 
we identified
 
certain
errors
 
in
 
our
 
previously
 
issued financial
 
statements
 
that
 
were
 
determined
 
not
 
to be
 
material.
 
Further,
 
as disclosed
 
in Item
 
4
 
of our
Quarterly Reports on Form 10-Q during
 
2022, we identified material weaknesses
 
in the design and operation of
 
our internal control over
financial
 
reporting
 
relating
 
to
 
maintaining
 
and
 
performing
 
our
 
financial
 
close
 
process,
 
ensuring
 
that
 
formal
 
processes
 
exist
 
for
identifying, analyzing and accounting for complex, non-routine transactions and proper segregation of duties
 
and responsibilities within
our finance department.
 
We have invested resources
 
and taken
 
measures to improve
 
internal control over
 
financial reporting to
 
remediate
the control deficiencies that led to these material
 
weaknesses. Although we have successfully remediated
 
these material weaknesses, we
cannot assure you that we will be able to successfully remediate other material weaknesses that we may discover additional weaknesses
in the future. If
 
we are unable to
 
successfully prevent or remediate
 
any future issues or
 
if the design and
 
operation of our internal
 
controls
fails, it could result in material misstatements or omissions in our financial
 
statements and potentially require us to restate our financial
statements, which may result in the trading value of our Class A common stock being
 
materially adversely affected.
If
 
our
 
estimates
 
or
 
judgments
 
relating
 
to
 
our
 
critical
 
accounting
 
policies
 
are
 
based
 
on
 
assumptions
 
that
 
change
 
or
 
prove
 
to
 
be
incorrect,
 
our operating
 
results
 
could
 
fall
 
below
 
our publicly
 
announced
 
guidance
 
or
 
the expectations
 
of
 
securities
 
analysts
 
and
investors, resulting in a decline in the market price of our Class A common stock.
The
 
preparation
 
of
 
financial
 
statements
 
in
 
conformity
 
with
 
U.S.
 
generally
 
accepted
 
accounting
 
principles
 
(“GAAP”)
 
requires
management
 
to
 
make
 
estimates
 
and
 
assumptions
 
that
 
affect
 
the
 
amounts
 
reported
 
in
 
our
 
consolidated
 
financial
 
statements
 
and
accompanying notes. We base our
 
estimates on historical experience and on various other assumptions that we believe to be reasonable
under the circumstances, the results of which form
 
the basis for making judgments about the
 
carrying values of assets, liabilities, equity,
revenue and expenses that are not readily apparent from other sources. If our assumptions change or if actual circumstances differ from
our
 
assumptions,
 
our
 
operating
 
results
 
may
 
be
 
adversely
 
affected
 
and
 
could
 
fall
 
below
 
our
 
publicly
 
announced
 
guidance
 
or
 
the
expectations of securities analysts and investors, resulting in a decline
 
in the market price of our Class A common stock.
 
Item 1B. Unresolved Staff Comments.
 
None.
 
Item 2. Properties.
 
Facilities
Our principal executive offices
 
are located in Merritt
 
Island, Florida,
 
where we sublease approximately
 
9,900 square feet of
 
office and
lab space
 
from Space
 
Florida.
 
In April
 
2022, we
 
entered into
 
a facility
 
lease agreement
 
for 4,419
 
square feet
 
of office
 
space in
 
New
York,
 
New York,
 
which will expire
 
in March 2029.
 
We
 
do not
 
currently own
 
any real property.
 
We
 
believe that
 
our current
 
facilities
are adequate
 
to meet
 
our immediate
 
needs and
 
believe that
 
we should
 
be able
 
to renew
 
each of
 
our leases
 
and subleases
 
without
 
an
adverse impact on our
 
operations. In addition, we
 
believe that if we require
 
additional office space
 
or manufacturing facilities, we
 
will
be able to obtain additional facilities on commercially reasonable terms.
 
 
90
Item 3. Legal Proceedings.
 
From time
 
to time we
 
are a party
 
to various
 
litigation matters
 
incidental to
 
the conduct
 
of our business.
 
We
 
are not presently
 
party to
any
 
legal proceedings
 
the resolution
 
of which
 
we believe
 
would
 
have a
 
material
 
adverse effect
 
on our
 
business, prospects,
 
financial
condition, liquidity, results
 
of operation, cash flows or capital levels.
 
Item 4. Mine Safety Disclosures.
 
The disclosure required by this item is not applicable.
 
 
 
 
91
PART
 
II
 
Item 5. Market for Registrant’s Common Equity,
 
Related Stockholder Matters and Issuer Purchases of Equity
 
Securities.
Market Price for the Common Stock
Our Class A
 
common stock
 
is listed on
 
the Nasdaq
 
Global Market
 
under the
 
symbol “VAXX
 
.” As of
 
March 15, 2023,
 
the number
 
of
shares
 
of
 
our
 
Class
 
A
 
common
 
stock
 
outstanding
 
was
 
112,188,911
 
held
 
by
 
approximately
 
81
 
shareholders
 
of
 
record,
 
not
 
including
shareholders whose shares are held in securities position listings.
 
Our Class B common stock is not listed on any exchange nor traded on any public market. As of
 
March 15, 2023, the number of shares
of our Class B common stock outstanding was 13,874,132 held by
 
approximately 4 shareholders of record.
Dividends
We
 
have never declared
 
or paid, and do
 
not anticipate declaring
 
or paying in
 
the foreseeable future,
 
any cash dividends
 
on our capital
stock. Any future determination to declare and pay cash dividends will be
 
at the discretion of our board of directors in accordance
 
with
applicable laws
 
and will
 
depend on,
 
among other
 
things, our
 
financial condition,
 
results of
 
operations, cash
 
requirements, contractual
restrictions and such
 
other factors as
 
our board of
 
directors deems relevant.
 
Our ability to
 
pay dividends may
 
also be limited
 
by covenants
of any future outstanding indebtedness we or our subsidiaries incur.
Issuer Purchases of Equity Securities
 
We did not
 
repurchase any shares during the years ended December 31, 2022 and 2021.
Unregistered Sales of Equity Securities
There were no unregistered sales of equity securities during the fourth quarter
 
of 2022.
Use of Proceeds
On November 15, 2021, the Company closed its IPO, as discussed in Note 1 of our consolidated financial statements for the year ended
December 31, 2022.
 
The aggregate net
 
proceeds to us
 
from the offering,
 
after deducting underwriting
 
discounts and commissions
 
and
other offering expenses
 
payable by us, were
 
approximately $71.1 million.
 
The proceeds from
 
our IPO have been
 
invested primarily in
U.S. Treasury
 
securities and money
 
market accounts. There
 
has been no
 
material change in
 
the expected use
 
of the net
 
proceeds from
our IPO as described in our prospectus filed pursuant to Rule 424(b)(4) under the Securities Act with the
 
SEC on November 12, 2021.
Item 6. [Reserved].
 
Item 7. Management’s Discussion and Analysis of Financial
 
Condition and Results of Operations.
 
The following discussion and analysis of our financial condition and
 
results of operations should be read
 
together with our
consolidated financial statements and related
 
notes and other financial information appearing elsewhere in
 
this Report. We
 
intend for
this discussion to provide you with information
 
that will assist you in understanding our consolidated financial statements,
 
the
changes in key items in those consolidated financial statements from
 
year to year and the primary factors that accounted for those
changes.
Some of the information contained in this discussion and analysis or set forth elsewhere
 
in this Report, including information
with respect to our plans and strategy for our business and related
 
financing, includes forward-looking statements that
 
involve risks,
uncertainties and assumptions. See the section of this Report titled “Special Note
 
Regarding Forward-Looking
 
Statements” for a
discussion of forward-looking statements. As a result
 
of many factors, including those factors set forth in the “Risk Factors” section of
this Report, our actual results could differ
 
materially from management’s
 
expectations and the results described in or implied
 
by the
forward-looking statements contained
 
in the following discussion and analysis.
Overview
Vaxxinity
 
is engaged in the development of
 
rationally designed prophylactic and
 
therapeutic vaccines to combat
 
chronic disorders and
infectious diseases with large patient populations and
 
unmet medical needs. While vaccines
 
have traditionally been unable to effectively
and
 
safely combat
 
such disorders,
 
we believe
 
our platform
 
could overcome
 
the traditional
 
hurdles facing
 
vaccines
 
in this
 
area.
 
Our
Vaxxine
 
Platform relies
 
on a synthetic
 
peptide vaccine
 
technology first
 
developed by
 
UBI and
 
subsequently refined
 
over the
 
last two
decades. We
 
believe our
 
vaccines have
 
the potential
 
to combat
 
conditions that
 
have not
 
yet been
 
successfully treated,
 
or which
 
have
primarily been addressed with
 
monoclonal antibodies (mAbs) which,
 
while generally effective,
 
are extremely costly and
 
cumbersome,
and
 
thus
 
have
 
limited
 
accessibility.
 
Our
 
pipeline
 
primarily
 
consists
 
of
 
five
 
programs
 
focused
 
on
 
chronic
 
disease,
 
spanning
92
neurodegenerative disorders in
 
addition to other
 
neurology and cardiovascular
 
indications. Given the globa
 
l
 
COVID-19 pandemic and
our Vaxxine
 
Platform’s
 
applicability to
 
infectious disease,
 
we are also
 
opportunistically advancing
 
a product candidate
 
that addresses
SARS-CoV-2.
We separated our business
 
from UBI
 
through two separate
 
transactions: a
 
spin-out from UBI
 
in 2014
 
of operations focused
 
on developing
chronic
 
disease
 
product
 
candidates
 
that
 
resulted
 
in
 
UNS,
 
and
 
a
 
second
 
spin-out
 
from
 
UBI
 
in
 
2020
 
of
 
operations
 
focused
 
on
 
the
development of a
 
COVID-19 vaccine that
 
resulted in COVAXX.
 
On February 2,
 
2021, Vaxxinity
 
was incorporated for
 
the purpose of
reorganizing
 
and
 
combining UNS
 
and
 
COVAXX
 
and
 
did
 
so
 
on
 
March
 
2, 2021
 
through
 
the
 
Reorganization.
 
In connection
 
with
 
the
Reorganization, (i) all outstanding shares of UNS and COVAXX
 
preferred stock and common stock were contributed to Vaxxinity
 
and
exchanged for
 
an aggregate of
 
57,702,458 shares
 
of our Class A
 
common stock, 10,999,149
 
shares of our
 
Class B common
 
stock and
58,175,751
 
shares of our Series A preferred stock, (ii) the
 
outstanding options to purchase shares of UNS and COVAXX common stock
were terminated
 
and substituted
 
with options
 
to purchase
 
an aggregate
 
of 19,712,504
 
shares of
 
our Class
 
A common
 
stock, (iii)
 
the
outstanding warrant to
 
purchase shares of COVAXX
 
common stock was
 
cancelled and exchanged
 
for a warrant that
 
is exercisable for
112,373
 
shares of
 
our Class
 
A common
 
stock, and
 
(iv) the
 
outstanding
 
Convertible Notes
 
and
 
the Related
 
Note were
 
contributed
 
to
Vaxxinity
 
and the former holders of such notes received an aggregate of
4,047,344
 
shares of our Series A preferred stock. As a result of
the Reorganization,
 
COVAXX
 
and UNS became
 
our wholly-owned
 
subsidiaries. All shares
 
of our Series
 
A preferred stock
 
converted
into shares of
 
our Class A
 
common stock concurrently with the
 
closing of our initial
 
public offering. The Reorganization was
 
determined
to be a common control transaction, so the carrying values of all contributed assets and assumed liabilities remained unchanged and the
financial information
 
for all
 
periods in
 
this section
 
of the
 
financial statements
 
presented prior
 
to the
 
Reorganization
 
are presented
 
on
consolidated basis. Unless the context requires otherwise, in this section we use the terms “Vaxxinity,”
 
“we,” “us” and “our” to refer to
our operations (including through UNS and COVAXX)
 
both prior to and after the Reorganization.
Since our spin-out transactions
 
from UBI, we have
 
focused on organizing
 
and staffing our business,
 
business planning, raising
 
capital,
developing
 
our
 
Vaxxine
 
Platform,
 
identifying
 
and
 
testing
 
potential
 
product
 
candidates
 
and
 
conducting
 
clinical
 
trials.
 
We
 
have
 
also
developed a SARS CoV-2
 
antibody ELISA test, which received an EUA from the FDA in January 2021.
Our current pipeline consists of six programs from early to
 
late-stage development, including five programs focused on chronic disease:
UB-311,
 
our leading
 
neurology product
 
candidate, which
 
targets AD;
 
UB-312, which
 
targets PD
 
and other
 
synucleinopathies; VXX-
301, an
 
anti-tau product
 
candidate which
 
has the
 
potential to
 
address multiple
 
neurodegenerative conditions,
 
including AD;
 
UB-313,
which
 
targets
 
CGRP
 
to
 
prevent
 
migraines;
 
and
 
VXX-401,
 
which
 
targets
 
PCSK9
 
to
 
reduce
 
LDL
 
cholesterol,
 
a
 
risk
 
factor
 
for
atherosclerotic
 
heart
 
disease.
 
Through
 
our
 
Vaxxine
 
Platform,
 
we
 
believe
 
we
 
may
 
be
 
able
 
to
 
address
 
a
 
wide
 
range
 
of
 
other
 
chronic
diseases,
 
including
 
chronic
 
diseases that
 
are
 
or
 
could
 
potentially be
 
successfully
 
treated
 
by
 
mAbs,
 
which
 
increasingly
 
dominate
 
the
treatment paradigm but remain accessible only to a small proportion of patients who
 
could potentially benefit from them.
In addition
 
to our
 
chronic disease
 
pipeline, given
 
our Vaxxine
 
Platform’s
 
applicability to
 
infectious disease
 
and the
 
ongoing need
 
for
vaccines to address SARS-CoV-2, we are advancing an infectious disease
 
product candidate, UB-612, as a heterologous booster against
COVID-19.
 
We
 
have
 
reported
 
topline
 
results
 
of
 
a
 
pivotal
 
Phase
 
3
 
trial
 
of
 
UB-612,
 
and
 
have
 
completed
 
rolling
 
submissions
 
for
conditional/provisional authorization with regulatory authorities in the United
 
Kingdom and Australia, respectively,
 
in March of 2023.
 
To
 
date, our revenue
 
has been generated
 
from the modest
 
sales of our
 
ELISA test and
 
the sale of
 
an option to
 
negotiate a license
 
with
UNS (which option
 
has expired). As
 
a result,
 
our ability to
 
generate revenue sufficient to
 
achieve profitability will
 
depend on the
 
eventual
regulatory approval, and
 
commercialization of one
 
or more of
 
our product candidates.
 
We have not yet
 
obtained any regulatory
 
approvals
for our product candidates or conducted sales and marketing activities for
 
our product candidates.
We have principally funded our operations through
 
financing transactions. Through December 31, 2022, we received gross proceeds of
$306.4
 
million
 
in
 
connection with
 
various
 
financial
 
instruments,
 
including
 
the
 
sale of
 
preferred
 
and
 
common
 
stock, the
 
issuance
 
of
promissory notes (including convertible promissory notes
 
(“Convertible Notes”)), and the entry
 
into simple agreements for future
 
equity
(“SAFEs”).
 
Costs associated with research and development are the most significant component of our expenses. These costs can vary greatly from
period to period depending on the timing
 
of various trials for our
 
product candidates. We expect our allocated research and development
costs and
 
general
 
and
 
administrative
 
expenses
 
could
 
increase
 
over
 
time if
 
we expand
 
the number
 
of product
 
candidates that
 
we
 
are
advancing and
 
incur increased
 
costs as
 
a result
 
of operating
 
as a
 
public company.
 
Further,
 
we anticipate
 
incurring greater
 
selling and
marketing expenses if we commercialize any of our product candidates in the future. Our product candidates are
 
in clinical stage or pre-
clinical stage development.
 
We
 
have generated limited
 
revenue to date,
 
and have incurred significant
 
operating losses since
 
inception.
Net losses were $75.2
 
million and $137.2 million
 
for the years ended
 
December 31, 2022 and 2021,
 
respectively.
 
As of December 31,
2022,
 
we had an accumulated deficit of $304.7 million. We
 
anticipate
our expenses and capital requirements may increase over time in
connection with expanding our operations,
 
which could include:
•
continuing pre-clinical studies, existing clinical trials, or initiating new
 
clinical trials for product candidates UB-312, UB-313,
VXX-401, UB-612, and other product candidates;
93
•
hiring additional
 
clinical, quality
 
control, medical,
 
scientific and
 
other technical
 
personnel to
 
support additional
 
clinical and
research and development programs;
•
expanding operational, financial and management systems
 
and infrastructure, expanding our facilities
 
and increasing personnel
to support operations;
•
undertaking actions to meet the requirements and demands of being
 
a public company;
•
maintaining, expanding and protecting our intellectual property portfolio;
•
seeking regulatory approvals for any product candidates that successfully complete
 
clinical trials, including UB-612; and
•
undertaking pre-commercialization activities to establish sales, marketing
 
and distribution capabilities for any product
candidates for which we may receive regulatory approval in regions where
 
we elect to commercialize products on our own or
jointly with third parties.
As of
 
the date
 
of this
 
Report, we
 
expect our
 
existing cash
 
and cash
 
equivalents will
 
be sufficient
 
to fund
 
our operating
 
expenses and
capital expenditure requirements
 
for at least the
 
next 12 months. We
 
also believe that cash
 
and cash equivalents will
 
enable us to fund
our operating expenses and capital expenditure requirements into mid-2024. Thereafter, our viability will be dependent on our ability to
raise additional capital to finance operations, to successfully commercialize
 
our product candidates,
 
or to enter into collaborations with
third parties for
 
the development of
 
our product candidates.
 
If we are
 
unable to do
 
any of the
 
foregoing, we would
 
be forced to
 
delay,
limit, reduce or terminate our product
 
candidate development or future commercialization
 
efforts. Our estimates are
 
based on a variety
of assumptions that
 
may prove to
 
be wrong, and
 
we could exhaust
 
our available capital
 
resources sooner than
 
expected. See “—
 
Liquidity
and Capital Resources.”
 
Business Update Regarding COVID-19 Pandemic
In March
 
2020, the
 
World
 
Health Organization
 
declared the
 
COVID-19
 
outbreak
 
a pandemic.
 
The onset
 
of the
 
pandemic led
 
to our
institutional
 
prioritization
 
of
 
COVID-19
 
vaccine
 
development
 
efforts,
 
which
 
correlated
 
with
 
a
 
relative
 
decline
 
in
 
research
 
and
development expenditures for our chronic disease product candidates. To date, our operations have not been negatively impacted by the
COVID-19 pandemic in
 
a material manner. While
 
the pandemic has
 
subsided around the
 
world since 2020,
 
we cannot
 
predict the
 
specific
extent, duration
 
or full
 
impact that
 
future outbreaks
 
associated with
 
new variants
 
of the
 
COVID-19
 
virus may
 
have on
 
our financial
condition
 
and
 
operations.
 
Potential impacts
 
could
 
include delays
 
of the
 
development
 
of clinical
 
supply
 
materials,
 
and
 
enrollment
 
of
patients in our
 
studies may be delayed
 
or suspended, as hospitals
 
and clinics in
 
areas where we are
 
conducting trials may
 
need to shift
resources to
 
cope with
 
COVID-19 and
 
may limit
 
access or
 
close clinical
 
facilities. Additionally,
 
if our
 
trial participants
 
are unable
 
to
travel to our clinical study sites
 
as a result of quarantines or other restrictions
 
resulting from COVID-19 outbreaks, we
 
may experience
higher drop-out rates or delays in our clinical studies. The
 
impact of the COVID-19 pandemic on our financial performance will depend
on future developments, including the duration and spread of future outbreaks and related
 
governmental advisories and restrictions. The
impact of
 
future outbreaks
 
on the financial
 
markets and
 
the overall
 
economy are
 
also highly
 
uncertain and
 
cannot be
 
predicted. If
 
the
financial markets and/or the overall economy are impacted for an
 
extended period, our results may be materially adversely
 
affected. See
“Risk Factors—Risks Related to Our Business and Industry—The ongoing
 
coronavirus pandemic has caused interruptions or delays of
our business plan. Delays caused by the coronavirus pandemic may have a significant
 
adverse effect on our business.”
Components of Our Consolidated Results of Operations
Revenue
 
We recorded no revenues for the year ended December 31, 2022. Revenue for the year ended December 31, 2021 was $0.1 million, and
consisted of
 
commercial sales
 
of our
 
ELISA tests.
 
We
 
do not
 
expect to
 
generate any
 
meaningful revenue
 
unless and
 
until we
 
obtain
regulatory approval of and commercialize or out-license our product candidates,
 
and we do not know when, or if, this will occur. If our
development efforts
 
for our product
 
candidates are successful
 
and result in
 
commercialization, we may
 
generate additional revenue
 
in
the future from a combination
 
of product sales or payments
 
from collaboration or license agreements
 
that we have entered into
 
or may
enter
 
into
 
with
 
third
 
parties.
 
See
 
Risk
 
Factors—Risks
 
Related
 
to
 
the
 
Discovery
 
and
 
Development
 
of
 
Product
 
Candidates.
 
We
 
have
incurred significant losses
 
since our inception.
 
We
 
expect to incur losses
 
for the foreseeable future
 
and may never achieve
 
or maintain
profitability.
 
Cost of Revenue
 
We recorded no cost of revenue for the year ended December 31, 2022.
 
Cost of revenue for the year ended December 31, 2021 consists
of kit production costs consisting of materials, labor and overhead expenses directly related to ELISA tests
 
sold and the costs of expired
ELISA tests, which are not available for commercial sale.
 
94
If our development
 
efforts in respect
 
of our current
 
pipeline of product
 
candidates are successful and
 
result in regulatory
 
approval, we
expect our
 
cost of revenue
 
will increase in
 
relative proportion
 
to the level
 
of our revenue
 
as we commercialize
 
the applicable
 
product
candidate. We
 
expect that
 
cost of
 
revenue will
 
increase in
 
absolute dollars
 
as and
 
if our
 
revenue grows
 
and will
 
vary from
 
period to
period as a percentage of revenue.
 
Research and Development Expenses
 
The design, initiation and execution of candidate discovery and development programs of our potential future product candidates is key
to our
 
success and
 
involves significant
 
expenses. Prior
 
to initiating
 
these programs,
 
project teams
 
incorporating individuals
 
from the
essential disciplines within Vaxxinity scope out the activities, timing, requirements, inclusion and exclusion
 
criteria and the primary and
secondary endpoints. Once we have decided to proceed,
 
our Vaxxine
 
Platform enables the iteration of drug candidates in the discovery
phase through rapid, rational design
 
and formulation. After we have
 
identified drug candidates, the costs
 
of scaling the formulation from
research grade
 
to clinical
 
grade, then
 
to commercial
 
grade, typically
 
consumes significant
 
resources. In
 
addition, to
 
internal research
and development, we utilize service providers, including related parties, to
 
complete activities we lack the internal resources to handle.
Research and development expenses consist primarily of costs incurred
 
for research activities, including drug discovery efforts
 
and the
development of our product candidates. We
 
expense research and development costs as incurred, which include:
•
expenses incurred to conduct the necessary preclinical studies and clinical
 
trials required to obtain regulatory approval;
•
expenses incurred under agreements with CROs that are primarily engaged in
 
the oversight and conduct of our clinical trials,
preclinical studies and drug discovery efforts and contract
 
manufacturers that are primarily engaged to provide preclinical
and clinical drug substance and product for our research and development programs;
•
other costs related to acquiring and manufacturing materials in connection
 
with our drug discovery efforts and preclinical
studies and clinical trial materials, including manufacturing validation
 
batches;
 
•
costs related to investigative sites and consultants that conduct our clinical
 
trials, preclinical studies and other scientific
development services;
•
employee-related expenses, including salaries and benefits, travel and
 
stock-based compensation expense for employees
engaged in research and development functions;
•
costs related to compliance with regulatory requirements; and
•
facilities-related costs, depreciation and other expenses, which include
 
rent and utilities.
We
 
recognize
 
external
 
development
 
costs
 
based
 
on
 
an
 
evaluation
 
of
 
the
 
progress
 
to
 
completion
 
of
 
specific
 
tasks
 
using
 
information
provided to us by
 
service providers. This process
 
involves reviewing open contracts and
 
purchase orders, communicating with
 
personnel
to identify services that
 
have been performed on
 
our behalf and
 
estimating the level
 
of service performed and
 
the associated cost
 
incurred
for the service when we have not yet been invoiced or otherwise notified of actual costs. Any 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.
Such amounts are expensed as the related goods are delivered or the related services are performed, or until it is no longer expected that
the goods will be delivered,
 
or the services rendered, at which point the net remainder is expensed.
We continue to work with related parties for
 
the advancement of our research and development programs, including for manufacturing,
quality control, testing, validation,
 
supply services, as well as the
 
winding down of some previously
 
initiated clinical initiatives. While
this related party work has significantly diminished over the last year, and we expect this trend to continue, we are still reliant on UBIA
to provide
 
certain manufacturing-related
 
data that
 
will be
 
needed for
 
inclusion in
 
our regulatory
 
applications for
 
UB-612. During
 
the
years
 
ended
 
December 31,
 
2022
 
and
 
2021,
 
related
 
party
 
expenses
 
were
 
approximately
 
6%
 
and
 
29%
 
of
 
our
 
operating
 
expenses,
respectively.
 
Where appropriate,
 
we allocate
 
our third-party
 
research
 
and development
 
expenses on
 
a program-by-program
 
basis. These
 
expenses
primarily
 
relate
 
to
 
outside
 
consultants,
 
CROs,
 
contract
 
manufacturers
 
and
 
research
 
laboratories
 
in
 
connection
 
with
 
pre-clinical
development, process
 
development, manufacturing
 
and clinical
 
development activities.
 
We
 
do not
 
allocate our
 
internal costs,
 
such as
employee costs,
 
costs associated
 
with our discovery
 
efforts, laboratory
 
supplies and
 
facilities, including
 
depreciation or
 
other indirect
costs, to
 
specific programs because
 
these costs often
 
relate to platform
 
development, to multiple
 
programs simultaneously or
 
to discovery
of new
 
programs, and
 
any such
 
allocation would
 
necessarily involve
 
significant estimates
 
and judgments
 
and, accordingly,
 
would be
imprecise. When we
 
refer to the
 
research and development
 
expenses associated with
 
a specific program,
 
these refer exclusively
 
to the
allocated
 
third-party
 
expenses
 
associated
 
with
 
that
 
product
 
candidate.
 
All
 
other
 
research
 
and
 
development
 
costs
 
are
 
referred
 
to
 
as
unallocated costs.
95
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.
 
Additionally,
 
greater
 
research
 
and
development overhead is required to support
 
broader and more rapid
 
development of our Vaxxine Platform and new product candidates.
As a result, we expect that our research and development expenses could increase if we continue our existing and planned clinical trials
and conduct
 
increased pre-clinical
 
and clinical
 
development activities,
 
including submitting
 
regulatory filings
 
for product
 
candidates,
and focus more generally on the development of our chronic disease product
 
candidates.
At this
 
time, we
 
cannot reasonably
 
estimate or know
 
the nature,
 
timing and
 
costs of
 
the efforts
 
that will be
 
necessary to
 
complete the
pre-clinical and clinical development of any of our
 
product candidates or when, if ever,
 
material net cash inflows may commence from
any of our product candidates.
General and Administrative Expenses
 
General
 
and
 
administrative
 
expenses
 
consist
 
primarily
 
of
 
salaries
 
and
 
benefits,
 
travel
 
and
 
stock-based
 
compensation
 
expense
 
for
personnel
 
in
 
executive,
 
business
 
development,
 
finance,
 
human
 
resources,
 
legal,
 
information
 
technology,
 
public
 
relations,
communications and
 
administrative functions.
 
General and administrative
 
expenses also include
 
insurance costs and
 
professional fees
for
 
legal,
 
patent,
 
consulting,
 
investor
 
and
 
public
 
relations,
 
accounting
 
and
 
audit
 
services
 
and
 
other
 
general
 
operating
 
expenses
 
not
otherwise classified as research and development expenses. We
 
expense general and administrative costs as incurred.
In the event UB-612 obtains regulatory approval and we subsequently commence commercialization of this product, we expect general
and administrative
 
expenses will
 
increase. We
 
will continue
 
to incur
 
public company-related
 
expenses, including
 
services associated
with maintaining compliance with Nasdaq listing and SEC requirements, director and officer liability insurance and investor and public
relations costs.
Other Expense (Income)
 
Interest Expense
 
Interest expense consists
 
of (i) interest expense
 
recognized on the note
 
payable entered into during
 
June 2020 for the
 
acquisition of an
airplane (the
 
“2025 Note”),
 
(ii) interest
 
expense accrued
 
on the related
 
party promissory
 
note, (iii)
 
interest expense
 
recognized on
 
the
Convertible
 
Notes
 
and
 
(iv)
 
interest expense
 
recognized
 
on other
 
promissory
 
notes,
 
including
 
$0.1
 
million
 
borrowed
 
from
 
our
 
Chief
Executive Officer (the “Executive
 
Note”) and a related party Convertible
 
Note payable for $2.0 million in aggregate
 
proceeds that was
received in three tranches (the
 
“2018 Related Notes”). The Executive
 
Note was repaid in
 
full in August 2021
 
and the 2018
 
Related Notes
were converted into Series A preferred stock concurrently with the Reorganization.
Interest Income
Interest income consists of income earned on our cash and cash equivalents,
 
money market holdings, and short-term investments.
 
Change in Fair Value
 
of Convertible Notes, SAFEs and Series A-1 Warrant
 
Liability
 
We
 
issued a series
 
of Convertible Notes
 
during the years
 
ended December 31,
 
2018 through 2021,
 
a series of SAFEs
 
during the
 
years
ended December 31, 2020 and 2021,
 
and warrants to purchase shares of our Series A-1 preferred
 
stock (“Series A-1 Warrants”)
 
during
the year ended December 31, 2020, each of which were measured and accounted for at fair value. We remeasured
 
the fair value of each
of
 
the
 
Convertible
 
Notes,
 
SAFEs
 
and
 
Series
 
A-1
 
Warrants
 
at
 
each
 
reporting
 
date
 
and
 
recognize
 
changes
 
in
 
the
 
fair
 
value
 
in
 
our
consolidated statements of operations.
 
Inputs to the calculation of fair
 
value generally include market and acquisition
 
comparable(s) as
well as other variables. In
 
connection with the Reorganization, all outstanding
 
Convertible Notes, SAFEs, and
 
Series A-1 Warrants were
exchanged
 
for
 
shares
 
of
 
Series
 
A
 
preferred
 
stock,
 
which
 
were
 
subsequently
 
exchanged
 
into
 
shares
 
of
 
Class
 
A
 
common
 
stock
 
upon
closing of the IPO in November 2021.
Loss on Foreign Currency
 
Translation, Net
 
Our foreign
 
subsidiaries, which are
 
wholly-owned by Vaxxinity,
 
use the U.S.
 
dollar as their
 
functional currency
 
and maintain records
in
 
the
 
local
 
currency.
 
Nonmonetary
 
assets
 
and
 
liabilities
 
are
 
remeasured
 
at
 
historical
 
rates
 
and
 
monetary
 
assets
 
and
 
liabilities
 
are
remeasured at exchange rates in
 
effect at the end
 
of the reporting period. Income
 
statement accounts are remeasured at
 
average exchange
rates for the reporting
 
period. The resulting gains or
 
losses are included in
 
foreign currency (losses) gains in
 
the consolidated financial
statements.
Provision for Income Taxes
 
We have not recorded any significant amounts related to income tax but have reserved $0.7 million of unrecognized tax
 
benefits against
NOLs. We have not
 
recorded any income tax benefits for the majority of our net losses we incurred
 
to date.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
96
We
 
account for
 
income taxes
 
using the
 
asset and
 
liability method,
 
which requires
 
the recognition of
 
deferred tax
 
assets and
 
liabilities
for the expected future tax consequences of events that have been included
 
in the consolidated financial statements or our tax returns.
 
Deferred tax assets and liabilities are
 
determined based on the difference between the
 
financial statement carrying amounts and tax basis
of existing assets and liabilities and for loss and credit carryforwards, which are measured using the enacted tax rates and laws in effect
in the years in which the differences are expected to reverse. The realization of our deferred tax assets is dependent upon the generation
of future taxable
 
income, the amount
 
and timing of which
 
are uncertain. Valuation
 
allowances are provided,
 
if, based upon the
 
weight
of available evidence, it is more likely than not that some or all
 
of the deferred tax assets will not be realized. As of December 31, 2022,
we continue to
 
maintain a full
 
valuation allowance
 
against all of
 
our deferred tax
 
assets based on
 
evaluation of all
 
available evidence.
We
 
file income
 
tax returns in
 
the U.S. federal
 
and state jurisdictions
 
and may become
 
subject to income
 
tax audit and
 
adjustments by
related tax authorities.
 
Our tax return
 
periods (for entities then
 
in existence) for
 
U.S. federal income
 
taxes for the tax
 
years since 2017
remain open to examination under the statute of limitations
 
by the Internal Revenue Service and state jurisdictions. We
 
record
 
reserves
for potential
 
tax payments
 
to various
 
tax authorities
 
related to
 
uncertain tax
 
positions, if
 
any.
 
The nature
 
of uncertain
 
tax positions
 
is
subject
 
to
 
significant
 
judgment
 
by
 
management
 
and
 
subject
 
to
 
change,
 
which
 
may
 
be
 
substantial.
 
These
 
reserves
 
are
 
based
 
on
 
a
determination of
 
whether and how
 
much a tax
 
benefit taken by
 
us in our
 
tax filings or
 
positions is more
 
likely than
 
not to be
 
realized
following the resolution of any potential contingencies related to the tax benefit. We
 
develop our assessment of uncertain tax positions,
and the associated
 
cumulative probabilities, using
 
internal expertise and assistance
 
from third-party experts.
 
As additional information
becomes
 
available,
 
estimates
 
are
 
revised
 
and
 
refined.
 
Differences
 
between
 
estimates
 
and
 
final
 
settlement
 
may
 
occur
 
resulting
 
in
additional tax
 
expense. Potential
 
interest and
 
penalties associated
 
with such uncertain
 
tax positions is
 
recorded as
 
a component
 
of our
provision for income taxes.
 
Factors Affecting the Comparability of Our Consolidated Results of
 
Operations
 
On March 2, 2021, Vaxxinity entered into the Contribution
 
and Exchange Agreement, pursuant to
 
which the outstanding equity interests
of
 
UNS
 
and
 
COVAXX
 
were
 
contributed
 
to
 
Vaxxinity
 
in
 
return
 
for
 
equity
 
interests
 
in
 
Vaxxinity,
 
resulting
 
in
 
UNS
 
and
 
COVAXX
becoming wholly owned subsidiaries of Vaxxinity.
 
Accordingly, all share and per share amounts prior to the Reorganization
 
have been
adjusted to reflect the Reorganization. In addition, we formed COVAXX,
 
and commenced our COVAXX business,
 
on March 23, 2020.
As a result,
 
the historical financial
 
information between
 
March 23, 2020
 
and March 2,
 
2021 described
 
in this Annual
 
Report refers
 
to
the combined historical financial information of UNS and COVAXX. Our operations for the year ended December 31, 2022 reflects the
operations of Vaxxinity
 
and its subsidiaries. Our
 
operations for the
 
year ended December
 
31, 2021 reflects
 
the operations of
 
UNS and
COVAXX
 
businesses on a consolidated basis
 
for the period from January
 
1, 2021 to March
 
1, 2021 and of Vaxxinity and its subsidiaries
for the remainder of that twelve-month period. See Note 1 to our consolidated financial statements included elsewhere
 
in this Form 10-
K filing.
 
Consolidated Results of Operations
The following is a summary of our consolidated results of operations
 
:
 
Years
 
Ended December 31,
2022 vs. 2021
(In thousands)
2022
2021
Change $
Change %
Revenue
$
—
$
66
$
(66)
(100)
%
Cost of revenue
—
1,937
(1,937)
(100)
%
Gross (loss) profit
 
—
(1,871)
1,871
(100)
%
Operating expenses:
Research and development
47,627
71,379
(23,752)
(33)
%
General and administrative
28,352
51,825
(23,473)
(45)
%
Total operating
 
expenses
75,979
123,204
(47,225)
(38)
%
Loss from operations
 
(75,979)
(125,075)
49,096
(39)
%
Other (income) expense:
Interest and other expense
514
840
(326)
(39)
%
Interest and other income
(1,259)
(9)
(1,250)
13,889
%
Change in fair value of convertible notes
—
2,667
(2,667)
(100)
%
Change in fair value of simple agreement for future equity
—
8,365
(8,365)
(100)
%
Change in fair value of warrant liability
—
214
(214)
(100)
%
(Gain) loss on foreign currency translation, net
(12)
23
(35)
(152)
%
Other (income) expense
(757)
12,100
(12,857)
(106)
%
Net loss
$
(75,222)
$
(137,175)
$
61,953
(45)
%
97
Comparison of the Years
 
Ended December 31, 2022 and 2021
Revenue
 
We did not record any revenues for the
 
year ended December 31, 2022. Total revenue was $0.1 million
 
for the year ended
 
December 31,
2021.
 
All revenues
 
were due
 
to sales
 
of our
 
ELISA tests.
 
We
 
are not
 
actively pursuing
 
commercialization
 
of our
 
ELISA tests
 
at this
time.
Gross Margin
All gross
 
margin and comparable
 
decreases were due
 
to sales
 
of our ELISA
 
tests. Gross
 
margin was zero
 
for the
 
year ended
 
December 31,
2022.
 
The gross
 
margin
 
for the
 
year ended
 
December 31, 2021
 
was negative,
 
however the
 
sales volume
 
was de
 
minimis. During
 
the
year ended December 31, 2021, we wrote off,
 
to cost of revenue, $1.9 million in expired ELISA tests that had no commercial value.
Research and Development Expenses
Research
 
and
 
development
 
expenses
 
were
 
$47.6
 
million
 
and
 
$71.4
 
million
 
for
 
the
 
years
 
ended
 
December 31,
 
2022
 
and
 
2021,
respectively.
 
The $23.8 million
 
decrease was comprised
 
of a $38.3
 
million decrease in
 
allocated costs (i.e.,
 
costs that can be
 
directly attributed
 
to a
specific clinical program),
 
offset by a $14.6
 
million increase in unallocated
 
costs. The decrease in allocated
 
costs was primarily due
 
to
a decrease
 
of $47.7
 
million in
 
costs related
 
to our
 
UB-612 Covid
 
vaccine program,
 
including a
 
$1.8 million
 
expense in
 
2022 for
 
raw
materials
 
acquired
 
by
 
UBP,
 
a
 
related
 
party
 
contract
 
manufacturer.
 
See
 
Note
 
17,
 
“Commitments
 
and
 
Contingencies”,
 
for
 
more
information
 
about
 
this
 
expense.
 
The
 
decrease
 
in
 
allocated
 
costs
 
was
 
offset
 
by
 
increases
 
in
 
spend
 
of
 
$4.7
 
million
 
on
 
our
 
VXX-401
hypercholesterolemia program,
 
$2.1 million on
 
our UB-313 CGRP program,
 
and $0.5 million on
 
our UB-312 PD
 
program. The $14.6
million increase in unallocated costs was driven by increased salaries and personnel-related costs of $9.6 million, including stock-based
compensation expense of $1.8 million, a $3.2
 
million increase in rent, lab supplies, logistics
 
and travel costs, and a $1.8
 
million increase
in external professional services supporting research and development
 
activities across the pipeline.
General and Administrative Expenses
General
 
and
 
administrative
 
expenses
 
were
 
$28.4
 
million
 
and
 
$51.8
 
million
 
for
 
the
 
years
 
ended
 
December 31,
 
2022
 
and
 
2021,
respectively.
 
The $23.5
 
million decrease
 
was primarily
 
due to
 
a decrease
 
of $23.6
 
million in
 
stock-based compensation
 
expense; we
recorded a $23.1 million expense in 2021 related to performance-based grants that vested upon the successful completion of our IPO in
November 2021.
 
There were also
 
decreases of
 
$0.7 million
 
in legal
 
spend, and
 
$1.0 million
 
in consulting
 
spend versus
 
the prior
 
year
when we were
 
preparing for our
 
initial public offering
 
,
 
and $0.8 million
 
in spending on
 
external recruiters. These
 
cost decreases were
partially offset by an increase in director and officer
 
insurance expense of $3.0 million in 2022 versus 2021.
Interest and Other Expense
Interest
 
and
 
other
 
expense
 
was
 
$0.5
 
million
 
and
 
$0.8
 
million
 
for
 
the
 
years
 
ended
 
December 31,
 
2022
 
and
 
2021,
 
respectively.
 
The
decrease was due to the conversion of Convertible Notes for Series A preferred
 
stock in connection with the Reorganization.
 
Interest and Other Income
Interest
 
and
 
other
 
income
 
on
 
cash
 
and
 
short-term
 
investments
 
was
 
$1.3
 
million
 
and
 
less
 
than
 
$0.1
 
million
 
for
 
the
 
years
 
ended
December 31, 2022 and 2021, respectively.
Change in Fair Value
 
of Convertible Notes, SAFEs and Series A-1 Warrant
 
Liability
The
 
$2.7
 
million
 
change
 
in fair
 
value
 
of
 
the Convertible
 
Notes
 
recognized
 
during
 
the year
 
ended
 
December 31,
 
2021
 
related
 
to the
revaluation of the Convertible Notes
 
upon conversion to equity.
 
The $8.6 million change in
 
fair value of SAFEs recognized
 
during the
year
 
ended December
 
31, 2021
 
related
 
to insight
 
into the
 
pricing of
 
Vaxxinity’s
 
next stock
 
issuance at
 
a higher
 
valuation.
 
The $0.2
million change in fair value of Series A-1 Warrants recognized during the year ended December 31, 2021 related to an increase in
 
value
of the Series A-1 preferred stock.
 
In connection with the Reorganization, all outstanding Convertible Notes,
 
SAFEs and Series A-1 Warrants
 
were exchanged into shares
of Series A preferred
 
stock, which were
 
subsequently exchanged
 
into shares of
 
Class A common
 
stock upon the
 
closing of the
 
IPO in
November 2021 as described in Note 9 to our consolidated financial statements
 
included elsewhere in this Report.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
98
(Gain) Loss on Foreign Currency Translation, Net
 
The
 
net
 
gain
 
(loss)
 
of
 
foreign
 
currency
 
translation
 
reflects
 
de
 
minimis
 
fluctuations
 
in
 
the
 
foreign
 
exchange
 
rate
 
for
 
the
 
year
 
ended
December 31, 2022 compared to the year ended December 31, 2021.
 
 
Liquidity and Capital Resources
Sources of Liquidity
 
We have generated limited
 
revenue from sales of our ELISA tests and have not yet obtained regulatory approval for or commercialized
any
 
of
 
our
 
product
 
candidates,
 
which
 
are
 
in
 
various
 
phases
 
of
 
pre-clinical
 
and
 
clinical
 
development.
 
We
 
have
 
financed
 
operations
primarily through the issuance
 
of common stock, convertible
 
preferred stock, borrowings under
 
promissory notes (including Convertible
Notes) and the execution of SAFEs. Through December 31, 2022, we received gross proceeds of $306.4
 
million in connection with the
issuance of various financial instruments, including
 
the sale of preferred and
 
common stock, the issuance of
 
promissory notes (including
Convertible Notes), and the execution of SAFEs. In addition,
 
we also generated revenue from the sale of an
 
option to negotiate a license
with UNS (which
 
option has expired)
 
and the sales of
 
ELISA tests in 2020
 
and 2021. At December
 
31, 2022, we had
 
$33.5 million in
cash
 
and
 
cash
 
equivalents,
 
$53.4
 
million
 
of
 
short-term
 
investments,
 
and
 
a
 
$1.1
 
million
 
restricted
 
cash
 
balance,
 
compared
 
to
 
$145.1
million as of
 
December 31, 2021. The
 
decrease in cash
 
and cash equivalents
 
balances for the periods
 
reported are primarily
 
due to the
factors described under “Cash Flows” below.
Cash Flows
The following table provides information regarding our cash flows for the years
 
ended December 31, 2022 and 2021 (in thousands):
 
December 31,
2022
2021
Balance Sheet Data:
Cash and cash equivalents
$
33,475
$
144,885
Short-term investments, net
53,352
—
Restricted cash
1,095
172
Total assets
106,399
166,673
Total liabilities
44,222
38,054
Total stockholders' equity
$
62,177
$
128,619
Years
 
Ended December 31,
2022
2021
Statement of Cash Flow Data:
 
Net cash used in operating activities
$
(55,928)
$
(80,990)
 
Net cash used in investing activities
(54,392)
(1,318)
 
Net cash used in financing activities
(167)
196,167
Net increase (decrease) in cash, cash equivalents and restricted cash
$
(110,487)
$
113,859
Operating Activities
Net cash used in operating activities for the year ended December 31, 2022 was $55.9 million, primarily due to a $75.2 million net loss,
offset by a favorable $9.8 million change in operating assets and liabilities and total non-cash items of $9.5 million. The favorable
 
cash
flow impact from changes
 
in net operating assets and
 
liabilities was primarily due to
 
$9.0 million related to
 
accrued expense, accounts
payable and
 
other liabilities
 
and $3.3
 
million in
 
prepaid expenses
 
for UB-612
 
production, partially
 
offset by
 
$2.4 million
 
in amounts
due to related parties. The primary non-cash adjustments to
 
net loss included addbacks of $8.7 million of
 
stock-based compensation and
$1.7 million in depreciation,
 
offset by a reduction of $1.0 million for amortization of discounts on
 
short-term investments.
Net cash
 
used in
 
operating activities
 
for the
 
year ended
 
December 31, 2021
 
was $81.0
 
million, primarily
 
due to
 
a $137.2
 
million net
loss, offset
 
by a favorable
 
$12.9 million
 
change in
 
operating assets and
 
liabilities and
 
total non-cash
 
items of $43.3
 
million. The cash
flow impact from changes in net operating assets and liabilities were primarily due to $11.4 million in amounts due to related parties as
well as
 
$3.9 million
 
related to accrued
 
expense, accounts
 
payable and
 
other liabilities.
 
These increases
 
were offset
 
by $4.7
 
million in
prepaid expenses
 
for UB-612
 
production. The
 
primary non-cash
 
adjustments to
 
net loss
 
included an
 
$11.2
 
million change
 
in the
 
fair
market value of financial instruments as well as $30.4
 
million of stock-based compensation and $1.1 million in depreciation.
 
99
Investing Activities
Net cash used in
 
investing activities totaled $54.4
 
million for the year
 
ended December 31, 2022.
 
The cash used in
 
investing activities
consisted primarily of the net impact of the acquisition and redemption of short-term investments, and the acquisition
 
of laboratory and
computer equipment, and leasehold improvements.
 
Net cash
 
used in
 
investing activities
 
totaled $1.3
 
million for
 
the year
 
ended December 31,
 
2021. The
 
cash used
 
in investing
 
activities
consisted primarily of the acquisition of equipment.
 
Financing Activities
Net cash
 
used by
 
financing activities
 
was $0.2
 
million for
 
the year ended
 
December 31, 2022.
 
We
 
repaid $0.4
 
million in relation
 
to a
note payable and received $0.3 million from the exercise of stock options.
Net cash provided by financing activities totaled $196.2 million for the
 
year ended December 31, 2021. We raised capital to support our
operations
 
through
 
the
 
issuance of
 
Class A
 
common
 
stock in
 
the
 
IPO,
 
with net
 
proceeds of
 
$71.1
 
million,
 
the
 
issuance prior
 
to the
Reorganization of SAFEs and
 
Convertible Notes, with net
 
proceeds of $2.9
 
million and $2.0
 
million, respectively,
 
as well as
 
the issuance
of Series
 
B convertible
 
preferred stock,
 
with net
 
proceeds of
 
$122.8 million.
 
We
 
also repaid
 
$2.0 million
 
in relation
 
to a Convertible
Note, $0.1 million in relation to a note payable with
 
related party, $0.3 million in repayment for Paycheck Protection Program, and $0.4
million in relation to a note payable entered into for the acquisition of an airplane.
Funding Requirements
We
 
have generated
 
approximately $3.7
 
million in revenue
 
since inception
 
and have
 
incurred net
 
losses in each
 
reporting period
 
since
inception. We
 
do not expect to
 
generate any meaningful
 
revenue unless and
 
until we obtain regulatory
 
approval of and
 
commercialize
our product
 
candidates,
 
or enter
 
into collaboration
 
or licensing
 
deals with
 
one or more
 
third-party strategic
 
partners. We
 
do not
 
know
when, or if, this will occur. If we do not receive regulatory approval for any of our product candidates, or if we receive approval but our
commercialization results
 
fall short of
 
our expectations, we
 
will continue
 
to incur significant
 
losses for the
 
foreseeable future,
 
and we
expect the losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates and begin to
commercialize any approved products.
As of the date of this Annual Report, we expect our existing cash and cash equivalents will be sufficient to fund our operating expenses
over the next 12 months. As of December 31, 2022, other than our 2025
 
Note and the 2022 Promissory Note, we have no material debt
obligations.
We have
 
based our projections of operating capital
 
requirements on assumptions that may
 
prove to be incorrect, and we may
 
use all of
our available capital resources sooner than we expect. Our future capital
 
requirements will depend on many factors, which include:
•
the scope, number, progress, initiation,
 
duration, cost, results and timing of pre-clinical programs and nonclinical
 
studies of
our current or future product candidates;
•
the outcomes and timing of regulatory reviews, approvals or othe
 
r
 
actions;
•
the timing and manner in which we manufacture our pre-clinical and clinical
 
drug material, the terms on which we can have
such manufacturing completed, and the extent to which we undertake commercialization
 
of any drug products, if approved;
•
the extent to which we establish sales, marketing, medical affairs
 
and distribution infrastructure to commercialize any product
candidates;
•
the timing and extent to which we expand our operational, financial and management
 
systems and infrastructure, and
facilities;
 
•
the timing and extent to which we increase our personnel to support operations,
 
including necessary increases in headcount to
conduct and expand our clinical trials, commercialize any approved products and support
 
our operations as a public
company;
•
the number of patent applications we must file and claims we must defend in order
 
to maintain, expand and protect our
intellectual property portfolio, and the costs of preparing, filing and prosecuting
 
patent applications, maintaining and
protecting
 
our intellectual property rights;
•
our ability to obtain marketing approval for our product candidates;
 
100
•
our ability to establish and maintain additional licensing, collaboration or
 
similar arrangements on favorable terms and
whether and to what extent we retain development or commercialization responsibilities
 
under any new licensing,
collaboration or similar arrangement;
•
the success of any other business, product or technology that we acquire or in
 
which we invest;
 
 
•
our ability to maintain, expand and defend the scope of our intellectual property
 
portfolio;
•
the current and potential impacts of the COVID-19 pandemic on our
 
business;
 
•
the costs of acquiring, licensing or investing in businesses, product candidates
 
and technologies;
 
 
•
market acceptance of our product candidates, to the extent any are approved for
 
commercial sale; and
 
•
the effect of competing technological and market developments.
Until such time, if ever, as we
 
can generate positive cash flows from operations,
 
we expect to finance our cash needs through public
 
or
private equity offerings, strategic collaborations and debt financing. To the extent that we raise additional capital through the sale
 
of our
Class A common
 
stock, convertible securities or
 
other equity securities,
 
shareholders’ ownership interest
 
will be diluted and
 
the terms
of these securities
 
could include liquidation
 
or other preferences
 
and anti-dilution protections.
 
In addition, debt
 
financing, if available,
may
 
result in
 
fixed
 
payment
 
obligations
 
and
 
may
 
involve agreements
 
that include
 
restrictive
 
covenants
 
that limit
 
our
 
ability to
 
take
specific actions, such as incurring additional debt, making capital expenditures, creating liens, redeeming shares or declaring dividends.
If we raise additional
 
funds through strategic collaborations
 
or marketing, distribution
 
or licensing arrangements
 
with third parties, we
may have 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
 
when
 
needed,
 
we
 
may
 
be
 
required
 
to
 
delay,
 
limit,
 
reduce
 
or
terminate our product
 
candidate development or
 
future commercialization efforts
 
or grant rights to
 
third parties to develop
 
and market
product candidates that we would otherwise prefer to develop and market
 
ourselves.
 
Contract Research and Manufacturing Organizations
We
 
recorded accrued
 
expenses of
 
$4.3 million
 
and $4.5
 
million in our
 
balance sheet
 
for expenditures
 
incurred by
 
CROs and
 
contract
manufacturers as of December 31, 2022 and 2021, respectively.
 
Tax
 
-Related Obligations
We have reserved $0.7 million of unrecognized
 
tax benefits against NOLs.
 
Additionally, as of December 31, 2022 and 2021,
 
we accrued
$0.2 million and $0.2 million, respectively,
 
in interest and penalties related to prior year tax filings.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and do not
 
currently have, any off-balance sheet arrangements, as defined in
 
the rules and
regulations of the SEC.
 
Critical Accounting Policies and Estimates
The preparation of financial statements
 
in accordance with GAAP requires
 
management to make estimates and
 
assumptions that affect
the amounts
 
reported in
 
our consolidated
 
financial statements
 
and accompanying
 
notes. Management
 
bases its estimates
 
on historical
experience, market and other conditions, and various other assumptions it believes to be reasonable. Although these estimates are based
on management’s best knowledge of current events and actions that may impact us in the future, the estimation process is, by its nature,
uncertain given that
 
estimates depend on
 
events over which
 
we may not
 
have control. In
 
addition, if our
 
assumptions change, we
 
may
need to revise
 
our estimates, or
 
take other corrective
 
actions, either of
 
which may also
 
have a
 
material effect on
 
our consolidated financial
statements. Significant estimates contained
 
within these consolidated financial
 
statements include, but are
 
not limited to, the estimated
fair
 
value
 
of
 
our
 
common
 
stock,
 
convertible
 
notes
 
payable
 
and
 
SAFEs,
 
stock-based
 
compensation,
 
warrant
 
liabilities,
 
income
 
tax
valuation
 
allowance and
 
the accruals
 
of research
 
and development
 
expenses. We
 
base our
 
estimates on
 
historical experience,
 
known
trends and other market-specific or other
 
relevant factors that we
 
believe to be reasonable under the
 
circumstances. On an ongoing basis,
management evaluates its estimates,
 
as there are changes in facts
 
and circumstances. If market
 
and other conditions change from
 
those
that we anticipate, our consolidated financial statements may be materially
 
affected.
While our
 
significant accounting
 
policies are
 
described in
 
more detail
 
in the
 
notes to
 
our consolidated
 
financial statements
 
appearing
elsewhere in this
 
Annual Report, we believe
 
that the following
 
critical accounting policies and
 
estimates have a
 
higher degree of inherent
uncertainty and require our most significant judgments.
101
Accrued Research and Development Expenses
As part of the process of preparing our consolidated financial statements,
 
we are required to estimate accrued research and development
expenses.
 
As we
 
advance
 
our
 
programs,
 
we
 
anticipate
 
more
 
complex
 
clinical
 
studies
 
resulting
 
in
 
greater
 
research
 
and development
expenses, which will
 
place even greater emphasis
 
on the accrual. This
 
process involves reviewing
 
open contracts and purchase
 
orders,
communicating with
 
our applicable
 
personnel to
 
identify services
 
that have
 
been performed
 
on our
 
behalf and
 
estimating the
 
level of
service performed
 
and the associated
 
cost incurred for
 
the service when
 
we have not
 
yet been invoiced
 
or otherwise notified
 
of actual
costs. In the past years, UBI and its affiliated companies performed and administered a significant amount of research and development
work on our
 
behalf.
 
Having UBI and
 
its affiliated
 
company act as
 
intermediaries added
 
to the complexity
 
of determining appropriate
accruals,
 
and
 
we have
 
largely moved
 
away from
 
this model.
 
Certain accruals
 
and
 
amounts owed
 
to the
 
UBI entities
 
are still
 
under
review, and these amounts may
 
change as a result of this review.
The
 
majority
 
of
 
our
 
service
 
providers
 
invoice
 
in
 
arrears
 
for
 
services
 
performed,
 
on
 
a
 
pre-determined
 
schedule
 
or
 
when
 
contractual
milestones are met; however, some require advance payments. We
 
make estimates of accrued expenses as of each balance sheet date in
the consolidated financial statements
 
based on facts and circumstances
 
known to us at that
 
time. We
 
periodically confirm the accuracy
of the estimates with
 
the service providers and
 
make adjustments if necessary. Examples of estimated
 
accrued research and development
expenses include fees paid to:
•
vendors, including research laboratories, in connection with pre-clinical
 
development activities;
•
CROs and investigative sites in connection with pre-clinical studies and
 
clinical trials; and
•
contract manufacturers in connection with drug substance and drug
 
product formulation of pre-clinical studies and clinical
trial materials.
We
 
base our
 
expenses related
 
to pre-clinical
 
studies and
 
clinical trials
 
on our
 
estimates of
 
the services
 
received and
 
efforts expended
pursuant to quotes and contracts with multiple
 
research institutions and CROs that supply, conduct and manage
 
pre-clinical studies and
clinical trials on our behalf.
 
The financial terms of these
 
agreements are subject to negotiation,
 
vary from contract to
 
contract and may
result
 
in
 
uneven
 
payment
 
flows.
 
There
 
may
 
be
 
instances
 
in
 
which
 
payments
 
made
 
to
 
our
 
vendors
 
will
 
exceed
 
the
 
level
 
of
 
services
provided and result
 
in a prepayment
 
of the expense.
 
Payments under some
 
of these contracts
 
depend on factors
 
such as the
 
successful
enrollment of patients
 
and the completion of
 
clinical trial milestones. In
 
accruing service fees, we
 
estimate the time period
 
over which
services will be performed
 
and the level of
 
effort to be
 
expended in each period.
 
If the actual timing
 
of the performance of
 
services or
the level
 
of effort
 
varies from
 
the estimate,
 
it adjusts
 
the accrual
 
or the
 
prepaid expense
 
accordingly.
 
Although we
 
do not
 
expect our
estimates to
 
be materially
 
different from
 
amounts actually
 
incurred, our
 
understanding of
 
the status
 
and timing
 
of services performed
relative to the actual status and timing of services performed may vary and may result in reporting amounts
 
that are too high or too low
in any particular period. To
 
date, our estimated accruals have not differed materially from actual costs incurred
 
.
Stock-Based Compensation
We measure all stock-based awards granted to employees, directors and non-employees based on their fair
 
value on the date of the
 
grant
and recognize the corresponding compensation expense of those awards over the requisite service period, which is
 
generally the vesting
period of the respective award.
 
Forfeitures are accounted for as
 
they occur.
 
We grant
 
stock options and restricted stock
 
awards that are
subject to service vesting conditions.
We
 
classify stock-based
 
compensation
 
expense in
 
our consolidated
 
statements of
 
operations in
 
the same
 
manner in
 
which the
 
award
recipient’s payroll costs are classified
 
or in which the award recipient’s
 
service payments are classified.
We estimate the fair value of each stock
 
option grant using the Black-Scholes
 
option-pricing model, which requires the use
 
of subjective
assumptions
 
that
 
could
 
materially
 
impact
 
the
 
estimation
 
of
 
fair
 
value
 
and
 
related
 
compensation
 
expense
 
to
 
be
 
recognized.
 
These
assumptions include (i) the expected volatility of our stock
 
price, (ii) the periods of time over
 
which recipients are expected to hold their
options prior to exercise (expected lives), (iii) expected dividend yield on our common stock, and (iv) risk-free interest rates, which
 
are
based
 
on
 
quoted
 
U.S.
 
Treasury
 
rates
 
for
 
securities
 
with
 
maturities
 
approximating
 
the
 
options’
 
expected
 
lives.
 
Developing
 
these
assumptions requires the use of judgment. Both prior to and after the IPO, we lacked company-specific historical and implied
 
volatility
information.
 
Therefore,
 
we
 
estimate
 
our
 
expected
 
stock
 
volatility
 
based
 
on
 
the
 
historical
 
volatility
 
of
 
a
 
publicly
 
traded
 
set
 
of
 
peer
companies. The expected term of the Company’s options has been determined
 
utilizing the “simplified” method for awards that qualify
as “plain-vanilla” options. The expected term of options granted to non-employees
 
is equal to the contractual term of the option award.
The expected dividend yield is
 
zero as we have
 
never paid dividends and do
 
not currently anticipate paying any
 
in the foreseeable future.
Determination of the Fair Value
 
of Common Stock
Before there was a public market for our common stock, the estimated fair value of common stock was determined by its most recently
available third-party valuations of
 
common stock. These third-party
 
valuations were performed in
 
accordance with the
 
guidance outlined
102
in
 
the
 
American
 
Institute
 
of Certified
 
Public
 
Accountants’
 
Accounting
 
and
 
Valuation
 
Guide,
 
Valuation
 
of Privately
 
-Held-Company
Equity Securities Issued as Compensation. Our common stock valuations
 
were prepared using an option pricing method (“OPM”). The
OPM treats common stock and preferred stock as call options on
 
the total equity value of a company,
 
with exercise prices based on the
value thresholds at which the allocation among the various holders
 
of a company’s securities changes. Under
 
this method, the common
stock
 
has
 
value
 
only
 
if
 
the
 
funds
 
available
 
for
 
distribution
 
to
 
stockholders
 
exceeded
 
the
 
value
 
of
 
the
 
preferred
 
stock
 
liquidation
preferences at the
 
time of the
 
liquidity event,
 
such as a
 
strategic sale or
 
a merger.
 
A discount for
 
lack of marketability
 
of the common
stock is then applied to arrive at an indication of value for the common stock.
 
In addition to considering the
 
results of these third-party
 
valuations, our board of directors
 
considered various objective and
 
subjective
factors to determine the fair value of our common stock as of each grant date, including:
•
the prices at which we sold shares of preferred stock and the superior rights and preferences
 
of the preferred stock relative to
our common stock at the time of each grant;
•
the progress of our research and development programs, including the status and
 
results of pre-clinical studies and clinical
trials for our product candidates;
•
our stage of development and commercialization and our business strategy;
•
external market conditions affecting the biopharmaceutical
 
industry and trends within the biopharmaceutical industry;
•
our financial position, including cash on hand, and our historical and forecasted
 
performance and results of operations;
•
the lack of an active public market for our common stock and our preferred
 
stock;
•
the likelihood of achieving a liquidity event, such as an initial public offering
 
or our sale in light of prevailing market
conditions; and
•
the analysis of initial public offerings and the market performance
 
of similar companies in the biopharmaceutical industry.
The assumptions
 
underlying these
 
valuations represented
 
management’s
 
best estimate,
 
which involved
 
inherent uncertainties
 
and the
application of management’s judgment. As a result, if we had used significantly different assumptions or estimates, the fair value of our
common stock and our stock-based compensation expense could
 
have been materially different.
Once a public trading
 
market for our common
 
stock has been established
 
for a sufficient
 
period of time, it
 
will no longer be
 
necessary
to estimate the fair
 
value of our
 
common stock in
 
connection with our
 
accounting for granted
 
stock options and
 
other such awards
 
we
may grant, as the fair value of our common stock will be determined based on
 
the quoted market price of our common stock.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
103
Awards Granted
The following table sets forth information on stock options awarded to employees
 
and board members since January 1, 2019:
Grant Date
Number of
shares subject
to award
Per share
exercise price
of options
Per share fair value
of common stock on
grant date
Per share estimated
fair value of award
on grant date
December 30, 2019
1,139,717
$0.57
$0.64
$0.40
August 22, 2020
1,984,553
$1.21
$1.65
$0.75
August 24, 2020
521,406
$1.21
$1.65
$0.75
September 2, 2020
160,161
$0.57
$1.43
$1.18
January 26, 2021
9,043,916
$4.12
$4.12
$2.26
February 11, 2021
1,404,291
$4.01
$4.01
$2.53
June 16, 2021
690,266
$4.81
$4.81
$3.59
July 16, 2021
282,776
$4.81
$4.81
$3.63
July 28, 2021
562,605
$10.07
$10.07
$7.47
November 11, 2021
1,499,085
$13.00
$13.00
$9.77
January 3, 2022
183,238
$5.96
$5.96
$4.47
March 1, 2022
25,662
$4.99
$4.99
$3.73
March 31, 2022
94,186
$4.30
$4.30
$3.22
April 1, 2022
32,900
$4.30
$4.30
$3.24
May 1, 2022
14,600
$6.95
$6.95
$5.26
June 1, 2022
27,700
$4.22
$4.22
$3.21
June 21, 2022
645,935
$2.09
$2.09
$1.54
July 1, 2022
2,300
$1.57
$1.57
$1.36
August 1, 2022
3,900
$1.92
$1.92
$1.46
August 8, 2022
20,000
$2.27
$2.27
$1.73
September 1, 2022
54,500
$2.48
$2.48
$1.90
October 3, 2022
254,600
$2.04
$2.04
$1.57
November 1, 2022
12,300
$1.40
$1.40
$1.10
December 1, 2022
15,400
$2.38
$2.38
$1.90
Simple Agreement for Future
 
Equity
During the year ended December 31, 2021, we entered into SAFEs. The SAFEs
 
were not mandatorily redeemable, nor did they require
us
 
to
 
repurchase
 
a
 
fixed
 
number
 
of
 
shares.
 
We
 
determined
 
that
 
the
 
SAFEs
 
contained
 
a
 
liquidity
 
event
 
provision
 
that
 
embodied
 
an
obligation indexed to the fair value of the equity shares and
 
could require us to settle the SAFE obligation by transferring assets
 
or cash.
Our SAFEs represented
 
a recurring measurement that
 
is classified within Level
 
3, discussed and defined
 
in Note 2 to our
 
consolidated
financial
 
statements
 
included
 
elsewhere
 
in
 
this
 
Report,
 
of
 
the
 
fair
 
value
 
hierarchy
 
wherein
 
fair
 
value
 
is
 
estimated
 
using
 
significant
unobservable inputs, including
 
an estimate of the
 
number of months to
 
a liquidity event, volatility
 
rates and the estimation
 
of the most
likely conversion feature for converting the SAFE.
The fair value of the SAFEs
 
on the date of issuance was
 
determined to equal the proceeds we
 
received. The value of the SAFEs
 
on the
date of conversion
 
into Series A
 
preferred stock
 
was determined to
 
be equal to
 
the fair value
 
of the Series
 
A preferred
 
stock issued in
connection with the Reorganization.
Convertible Notes
Beginning in 2018, we issued Convertible Notes that
 
bore simple interest at annual rates
 
ranging from 4.8% to 6%. All
 
unpaid principal,
together with
 
the accrued
 
interest thereon,
 
for the
 
Convertible Notes
 
were payable
 
upon the
 
event of
 
default or
 
upon maturity,
 
which
ranged from one to three years. The Convertible Notes contained a number of
 
provisions addressing automatic and optional conversion,
events
 
of
 
default
 
and
 
prepayment
 
provisions.
 
We
 
determined
 
that
 
a
 
portion
 
of
 
the
 
Convertible
 
Notes
 
contained
 
a
 
liquidity
 
event
provision, requiring them
 
to be measured and
 
accounted for at fair
 
value at each
 
reporting date. We
 
determined the Convertible
 
Notes
requiring a measurement to fair value represented
 
a recurring measurement that was classified within Level 3, disclosed
 
and defined in
Note 4 to our consolidated financial statements included elsewhere in this Annual Report, of the fair value hierarchy
 
wherein fair value
is estimated using significant unobservable inputs.
 
104
Coalition for Epidemic Preparedness
 
(“CEPI”) Grant
In April 2022, we entered into an agreement with the Coalition for Epidemic
 
Preparedness Innovations (“CEPI”) whereby CEPI
agreed to provide funding of up to $9.3 million to co-fund a Phase 3 clinical trial of
 
our UB-612 COVID-19 vaccine candidate as a
heterologous – or ‘mix-and-match’ – booster dose. The Phase 3 trial, which began
 
in early 2022, is evaluating the ability of UB-612 to
boost COVID-19 immunity against the original strain and multiple variants
 
of concern including Omicron - in people aged 16 years or
older, who have been previously immunized
 
with an authorized COVID-19 vaccine.
We will also be performing
 
further manufacturing scale-up work to enable readiness for potential commercialization.
 
Under the terms
of the agreement with CEPI, if successful, a portion of the released doses of the commercial
 
product will be delivered to the COVID-
19 Vaccines
 
Global Access (“COVAX”)
 
consortium for distribution to developing countries at low cost.
Cash payments received in advance under the CEPI Funding Agreement are restricted as to their use until expenditures contemplated in
the funding agreement are incurred. As funds are received they are included within restricted cash offset
 
by a corresponding short-term
accrued liability.
 
We
 
recognize payments
 
from CEPI
 
as a
 
reduction of
 
research and
 
development expenses,
 
in the
 
same period
 
as the
expenses that the grant is intended to reimburse are incurred.
Taiwan
 
Centers for Disease Control Grant
UBIA, which is responsible for applying for
 
and managing grants on our behalf, was
 
awarded a grant by the Taiwan Centers for Disease
Control (“TCDC”) for COVID-19
 
vaccine development. The
 
grant provides that costs
 
incurred to complete the
 
two phases of
 
the clinical
trial will be reimbursed
 
based on the achievement
 
of certain milestones as
 
defined in the agreement.
 
We
 
are entitled to reimbursement
under the TCDC
 
grant. At each
 
reporting date,
 
we assess the
 
status of all
 
of the activities
 
involved in
 
completing the
 
clinical study
 
in
relation
 
to
 
the
 
milestones.
 
We
 
account
 
for
 
the
 
amounts
 
that
 
have
 
been
 
received
 
from
 
the TCDC
 
to
 
reimburse
 
costs
 
incurred
 
on
 
the
clinical study
 
and not
 
expected to
 
be refunded
 
back to
 
the TCDC
 
as contra
 
research and
 
development expenses
 
in the
 
accompanying
consolidated statements of operations.
Item 7A. Quantitative and Qualitative Disclosures About
 
Market Risk.
 
We
 
are exposed
 
to market
 
risk in
 
the ordinary
 
course of
 
our business.
 
These risks
 
primarily relate
 
to foreign
 
currency,
 
inflation and
changes in interest rates.
 
Inflation Risk
Inflation generally
 
may affect
 
us by increasing
 
our cost of
 
labor, clinical
 
trial costs, and
 
other outsourced
 
activities. To
 
date, inflation
has not had a material impact on our business, but if
 
the global inflationary trends continue, we expect appreciable
 
increases in clinical
trial,
 
selling,
 
labor,
 
and
 
other
 
operating
 
costs.
 
If
 
our
 
costs
 
were
 
to
 
become
 
subject
 
to
 
significant
 
inflationary
 
pressures,
 
this
 
would
adversely affect our business, financial condition
 
and results of operations.
Foreign Currency Exchange
 
Risk
 
We
 
have
 
limited
 
exposure
 
to
 
foreign
 
currency
 
exchange
 
risk
 
as
 
most
 
of
 
our
 
operating
 
activities
 
are
 
primarily
 
denominated
 
in
 
U.S.
dollars. We believe actual foreign
 
exchange gains and
 
losses did not
 
have a significant
 
impact on our
 
results of operations
 
for any periods
presented herein. The results of the analysis based on our financial position as of December 31, 2022, indicated that a hypothetical 10%
increase or decrease in applicable foreign currency exchange rates would not
 
have a material effect on our financial results.
Interest Rate Risk
 
We
 
are exposed to
 
market risk related
 
to changes in
 
interest rates. As
 
of December 31,
 
2022 and 2021,
 
our cash equivalents
 
consisted
of
 
interest-bearing
 
checking
 
accounts
 
and
 
money
 
market
 
accounts.
 
We
 
issued
 
Convertible
 
Notes,
 
which
 
Convertible
 
Notes
 
were
exchanged for Series A preferred stock in connection with the Reorganization. The Convertible Notes bore simple interest at the annual
rates ranging from
 
4.8% to 6%, with
 
redemption terms payable
 
at the earlier
 
of one year,
 
or upon the
 
event of default. In
 
addition, the
Convertible Notes contained provisions addressing automatic and optional
 
conversion. Given the redemption of the Convertible Notes,
and the short-term nature and fixed interest rate, we believe there
 
is no material exposure to interest rate risk. The
 
2025 Note we entered
into for the year ended December
 
31, 2020 bears a fixed annual
 
interest rate of 3.4% and matures
 
in June 2025. Additionally,
 
the 2022
Promissory Note we
 
entered into for the
 
year ended December 31,
 
2022 bears a
 
fixed annual interest
 
rate of 7.0%
 
and matures in
 
October
2026. Given that
 
the 2025 Note
 
and the 2022
 
Promissory Note bear
 
fixed rates of
 
interest, we believe
 
there is no
 
material exposure to
interest rate risk. The results
 
of the analysis based on our
 
financial position as of December 31,
 
2022, indicated that a hypothetical
 
100
basis point increase or decrease in risk-free rates would not have a material
 
effect on our financial results.
105
Our measurement of
 
interest rate risk involves
 
assumptions that are
 
inherently uncertain and,
 
as a result, cannot
 
precisely estimate the
impact of
 
changes in interest
 
rates on net
 
interest revenues.
 
Actual results may
 
differ from
 
simulated results due
 
to balance
 
growth or
decline and
 
the timing,
 
magnitude, and
 
frequency of
 
interest rate
 
changes, as
 
well as
 
changes in
 
market conditions
 
and management
strategies, including changes in asset and liability mix.
 
 
106
Item 8. Financial Statements and Supplementary Data
 
VAXXINITY,
 
INC.
INDEX TO FINANCIAL STATEMENTS
Audited Consolidated Financial Statements as of and for the years ended
 
December 31, 2022 and 2021
 
 
(PCAOB ID:
32
)
107
108
109
110
112
113
107
REPORT OF INDEPENDENT REGISTERED
 
PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Vaxxinity,
 
Inc. Merritt Island, Florida
Opinion on the Consolidated Financial Statements
We have audited
 
the accompanying consolidated balance sheets of Vaxxinity,
 
Inc. and Subsidiaries (collectively the “Company”) as of
December 31, 2022
 
and 2021,
 
the related
 
consolidated statements
 
of operations,
 
convertible preferred
 
stock and
 
stockholders’ equity
(deficit), and cash flows
 
,
 
for each of the
 
two years in the
 
period ended December 31,
 
2022, and the related
 
notes (collectively referred
to as the “financial statements”).
In our opinion, the consolidated financial
 
statements present fairly,
 
in all material respects, the financial position
 
of the Company as of
December 31,
 
2022 and
 
2021, and
 
the results
 
of
 
their operations
 
and
 
their cash
 
flows for
 
each of
 
the two
 
years in
 
the period
 
ended
December 31, 2022, in conformity with U.S. generally accepted accounting
 
principles.
Basis for Opinion
The Company’s
 
management is responsible
 
for these consolidated
 
financial statements. Our
 
responsibility is to
 
express an opinion
 
on
the Company’s
 
consolidated
 
financial statements.
 
We
 
are a
 
public
 
accounting
 
firm registered
 
with the
 
Public Company
 
Accounting
Oversight Board
 
(United States)
 
(“PCAOB”) and
 
are required
 
to be independent
 
with respect
 
to the
 
Company in
 
accordance with
 
the
U.S. federal securities laws and the applicable rules and regulations of the
 
Securities and Exchange Commission and the PCAOB.
We conducted
 
our audits in accordance with the
 
standards of the PCAOB. Those standards require
 
that we plan and perform the audits
to obtain
 
reasonable assurance
 
about whether
 
the consolidated
 
financial statements
 
are free
 
of material
 
misstatement, whether
 
due to
error or
 
fraud. The
 
Company is
 
not required
 
to have,
 
nor were
 
we engaged
 
to perform,
 
an audit
 
of its
 
internal control
 
over financial
reporting. As part
 
of our
 
audits, we are
 
required to
 
obtain an
 
understanding of
 
internal control
 
over financial
 
reporting but
 
not for
 
the
purpose
 
of
 
expressing
 
an
 
opinion
 
on
 
the
 
effectiveness
 
of
 
the
 
Company’s
 
internal
 
control
 
over
 
financial
 
reporting.
 
Accordingly,
 
we
express no such opinion.
Our audits
 
of the consolidated
 
financial statements
 
included performing procedures
 
to assess the
 
risks of material
 
misstatement of
 
the
consolidated financial statements, whether due to error or
 
fraud, and performing procedures that respond
 
to those risks. Such procedures
included examining, on a test basis, evidence regarding
 
the amounts and disclosures in the consolidated financial statements.
 
Our audit
also included evaluating the accounting principles
 
used and significant estimates made
 
by management, as well as
 
evaluating the overall
presentation
 
of
 
the
 
consolidated
 
financial
 
statements.
 
Our
 
audit
 
also
 
included
 
performing
 
such
 
other
 
procedures
 
as
 
we
 
considered
necessary in the circumstances. We
 
believe that our audits provide a reasonable basis for our opinion.
We have served
 
as the Company’s auditor since 2018.
/s/
Armanino LLP
San Ramon, California
March 27, 2023
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
108
VAXXINITY,
 
INC.
CONSOLIDATED
 
BALANCE SHEETS
(in thousands, except share and per share amounts)
December 31,
2022
2021
Assets
Current assets:
Cash and cash equivalents
$
33,475
$
144,885
Short-term investments
53,352
—
Restricted cash
1,095
172
Amounts due from related parties
414
393
Prepaid expenses and other current assets
5,551
8,851
Total current assets
93,887
154,301
Property and equipment, net
12,512
12,372
Total assets
$
106,399
$
166,673
Liabilities
 
and stockholders’ equity
Current liabilities:
Accounts payable
$
5,295
3,192
Amounts due to related parties
12,772
19,407
Accrued expenses and other current liabilities
11,370
4,519
Notes payable
391
376
Notes payable to related party
1,113
—
Total current liabilities
30,941
27,494
Other liabilities:
Notes payable, net of current portion
9,933
10,323
Notes payable to related party, net of current portion
3,112
—
Other long-term liabilities
236
237
Total liabilities
44,222
38,054
Commitments and contingencies (Note 17)
(nil)
(nil)
Preferred stock: $
0.0001
 
par value,
50,000,000
 
shares authorized at December 31, 2022 and 2021
—
—
Stockholders’ equity:
Class A common stock, $
0.0001
 
par value;
1,000,000,000
 
shares authorized,
112,182,750
 
and
111,518,094
 
shares issued and
outstanding at December 31, 2022 and 2021, respectively
278
278
Class B common stock, $
0.0001
 
par value;
100,000,000
 
shares authorized,
13,874,132
 
and
13,874,132
 
shares issued and
outstanding at December 31, 2022 and 2021, respectively
—
—
Additional paid-in capital
366,799
357,822
Accumulated other comprehensive income (loss)
(197)
—
Accumulated deficit
(304,703)
(229,481)
Total stockholders’ equity
62,177
128,619
Total liabilities and stockholders’ equity
$
106,399
$
166,673
The accompanying notes are an integral part
 
of the consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
109
VAXXINITY,
 
INC.
CONSOLIDATED STATEMENTS
 
OF OPERATIONS
(in thousands, except share and per share amounts)
Years
 
Ended December 31,
2022
2021
Revenue
$
—
$
66
Cost of revenue
—
1,937
Gross (loss) profit
 
—
(1,871)
Operating expenses:
Research and development
47,627
71,379
General and administrative
28,352
51,825
Total operating expenses
75,979
123,204
Loss from operations
 
(75,979)
(125,075)
Other (income) expense:
Interest and other expense
514
840
Interest and other income
(1,259)
(9)
Change in fair value of convertible notes
—
2,667
Change in fair value of simple agreement for future equity
—
8,365
Change in fair value of warrant liability
—
214
(Gain) loss on foreign currency translation, net
(12)
23
Other (income) expense
(757)
12,100
Loss before income taxes
(75,222)
(137,175)
Provision for income taxes
—
—
Net loss
$
(75,222)
$
(137,175)
Net loss per share, basic and diluted
$
(0.60)
$
(1.79)
Weighted average
 
common shares outstanding, basic and diluted
 
125,939,050
76,586,842
Other comprehensive loss:
Unrealized loss (gain) on investments
197
—
Other comprehensive loss
$
197
$
—
The accompanying notes are an integral part
 
of the consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
110
VAXXINITY,
 
INC.
CONSOLIDATED STATEMENTS
 
OF CONVERTIBLE PREFERRED STOCK
(in thousands, except share amounts)
Convertible Preferred Stock
Series Seed
Series Seed-1
Series Seed-2
Series A-1
Series A-2
Series A
Series B
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Total
Balance at December 31, 2020
7,831,528
$
10,383
22,876,457
$
20,903
14,615,399
$
11,315
1,871,511
$
4,640
6,307,690
$
15,234
—
$
—
—
$
—
$
62,475
Exchange of Series Seed, Series Seed-1, Series Seed-2, Series
A-1 and Series A-2 for Series A
(7,831,528)
(10,383)
(22,876,457)
(20,903)
(14,615,399)
(11,315)
(1,871,511)
(4,640)
(6,307,690)
(15,234)
53,502,585
62,475
—
—
—
Conversion of convertible notes to Series A preferred stock,
net of debt issuance costs
—
—
—
—
—
—
—
—
—
—
3,624,114
27,545
—
—
27,545
Conversion of notes payable with related parties to Series A
convertible preferred
—
—
—
—
—
—
—
—
—
—
423,230
2,205
—
—
2,205
Conversion of Simple Agreement for Future Equity to Series A
convertible preferred
—
—
—
—
—
—
—
—
—
—
4,539,060
35,600
—
—
35,600
Conversion of warrant liability
 
to Series A convertible
preferred
—
—
—
—
—
—
—
—
—
—
134,106
614
—
—
614
Issuance of Series B convertible preferred stock, net of
issuance costs of $
133
—
—
—
—
—
—
—
—
—
—
—
—
15,365,574
122,791
122,791
Conversion of Series A and Series B to Class A common stock
concurrently with initial public offering
—
—
—
—
—
—
—
—
—
—
(62,223,095)
(128,439)
(15,365,574)
(122,791)
(251,230)
Balance at December 31, 2021
—
$
—
—
$
—
—
$
—
—
$
—
—
$
—
—
$
—
—
$
—
$
—
The accompanying notes are an integral part
 
of the consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
111
VA
XXINITY,
 
INC.
CONSOLIDATED STATEMENTS
 
OF STOCKHOLDERS’ EQUITY (DEFICIT)
(in thousands, except share amounts)
Stockholders’ Deficit
Common Stock
Common Stock-Class A
Common Stock-Class B
Treasury Stock
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Additional Paid-
in Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Stockholders’
Equity (Deficit)
Balance at December 31, 2020
—
$
—
60,360,523
$
272
10,999,149
$
—
(3,169,093)
$
(23)
$
4,682
$
—
$
(92,306)
$
(87,375)
Issuance of common stock upon exercise of stock options
—
—
186,202
—
—
—
—
—
170
—
—
170
Vesting of restricted stock
—
—
15,405
—
—
—
—
—
—
—
—
—
Reclassification of Class A common stock to Class B common stock
—
—
(2,874,983)
—
2,874,983
—
—
—
—
—
—
—
Issuance of common stock upon stock grant
—
—
485,836
—
—
—
—
—
103
—
—
103
Retirement of treasury stock upon reorganization
—
—
(3,169,093)
—
—
—
3,169,093
23
(23)
—
—
—
Proceeds from initial public offering, net of offering expenses of $
13913
—
—
6,537,711
1
—
—
—
—
71,076
—
—
71,077
Exercise of warrants concurrently with initial public offering
—
—
112,373
—
—
—
—
—
177
—
—
177
Conversion of Series A and Series B to Class A common stock concurrently with
initial public offering
—
—
49,864,120
5
—
—
—
—
251,225
—
—
251,230
Stock-based compensation expense
—
—
—
—
—
—
—
—
30,412
—
—
30,412
Net loss
—
—
—
—
—
—
—
—
—
—
(137,175)
(137,175)
Balance at December 31, 2021
—
$
—
111,518,094
$
278
13,874,132
$
—
—
$
—
$
357,822
$
—
$
(229,481)
$
128,619
Issuance of common stock upon exercise of stock options
—
—
664,656
—
—
—
—
—
263
—
—
263
Stock-based compensation expense
—
—
—
—
—
—
—
—
8,714
—
—
8,714
Unrealized loss on investments
—
—
—
—
—
—
—
—
—
(197)
—
(197)
Net loss
—
—
—
—
—
—
—
—
—
—
(75,222)
(75,222)
Balance at December 31, 2022
—
$
—
112,182,750
$
278
13,874,132
$
—
—
$
—
$
366,799
$
(197)
$
(304,703)
$
62,177
The accompanying notes are an integral part
 
of the consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
112
VAXXINITY,
 
INC.
CONSOLIDATED STATEMENTS
 
OF CASH FLOWS
(in thousands)
Years Ended December 31,
2022
2021
Cash flows from operating activities:
Net loss
$
(75,222)
$
(137,175)
Adjustments to reconcile net loss to net cash used in operating
 
activities:
Depreciation expense
1,684
1,102
Amortization of debt issuance costs
53
261
Amortization of discount on short-term investments
(1,022)
—
Stock-based compensation expense
8,714
30,412
Non-cash consulting expense
—
280
Non-cash loss on disposal
43
Change in fair value of convertible notes
—
2,667
Change in fair value of warrant liability
—
214
Change in fair value of simple agreement for future equity
—
8,365
Change in operating assets and liabilities:
Accounts receivable
—
26
Amounts due from related parties
(21)
(31)
Prepaid expenses and other current assets
3,300
(4,704)
Deferred offering costs
—
2,254
Accounts payable
2,103
2,174
Amounts due to related parties
(2,410)
11,402
Accrued expenses and other current liabilities
6,851
1,775
Other long-term liabilities
(1)
(12)
 
Net cash used in operating activities
(55,928)
(80,990)
Cash flows from investing activities:
Purchase of short-term investments
(107,526)
—
Redemption of short-term investments
55,000
—
Purchase of property and equipment
(1,866)
(1,318)
 
Net cash used in investing activities
(54,392)
(1,318)
Cash flows from financing activities:
Proceeds from initial public offering, net of offering expenses of $
13,913
—
71,077
Proceeds from issuance of convertible note payable
—
2,000
Repayment of convertible notes payable
—
(2,000)
Repayment of notes payable
(430)
(414)
Repayment of note payable with related party
—
(100)
Proceeds from issuance of Series B convertible preferred stock,
 
net of issuance costs
—
122,791
Proceeds from issuance of simple agreement for future equity
—
2,900
 
Repayment of Paycheck Protection Program
—
(257)
 
Proceeds from exercise of stock options
263
170
 
Net cash (used in) provided by financing activities
$
(167)
$
196,167
Change in cash, cash equivalents and restricted cash
(110,487)
113,859
Cash, cash equivalents and restricted cash at beginning of period
145,057
31,198
Cash, cash equivalents and restricted cash at end of period
34,570
145,057
Supplemental Disclosure
Cash paid for interest
$
367
$
581
Noncash Financing Activities
Conversion of amounts due to related party into note payable
$
4,225
$
—
Conversion of Series A and Series B to Class A common
 
stock concurrently with initial public offering
$
—
$
251,230
Exchange of Series Seed, Series Seed-1, Series Seed-2, Series
 
A-1 and Series A-2 for Series A
$
—
$
62,475
Conversion of simple agreement for future equity into Series A
 
preferred stock
$
—
$
35,600
Conversion of convertible notes into Series A preferred stock
$
—
$
27,545
Conversion of notes payable with related party to Series A
 
convertible preferred
$
—
$
2,205
Conversion of warrant liability into Series A preferred stock
$
—
$
614
Cashless exercise of warrant into Class A common stock
 
concurrently with initial public offering
$
—
$
177
Retirement of treasury stock upon reorganization
$
—
$
23
The accompanying notes are an integral part
 
of the consolidated financial statements.
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED
 
FINANCIAL STATEMENTS
 
113
1. Nature of the Business
Vaxxinity,
 
Inc.,
 
a
 
Delaware
 
corporation
 
(“Vaxxinity
 
,”
 
and
 
together
 
with
 
its
 
subsidiaries,
 
the
 
“Company”),
 
was
 
formed
 
through
 
the
combination of
 
two separate businesses
 
that originated
 
from United Biomedical,
 
Inc. (“UBI”)
 
in two separate
 
transactions: a
 
spin-out
from UBI in
 
2014 of
 
operations focused on
 
developing chronic disease
 
product candidates that
 
resulted in United
 
Neuroscience (“UNS”),
and a second spin-out
 
from UBI in 2020 of
 
operations focused on the
 
development of a COVID-19
 
vaccine that resulted in
 
C19 Corp.
(“COVAXX”).
 
On February 2, 2021,
 
Vaxxinity
 
was incorporated for the
 
purpose of reorganizing
 
and combining UNS and
 
COVAXX
and on March 2, 2021, did so by
 
acquiring all of the outstanding equity interests
 
of UNS and COVAXX
 
pursuant to a contribution and
exchange
 
agreement
 
(the
 
“Contribution
 
and
 
Exchange
 
Agreement”)
 
whereby
 
the
 
existing
 
equity
 
holders
 
of
 
UNS
 
and
 
COVAXX
contributed their equity interests in each of UNS and COVAXX
 
in exchange for equity in Vaxxinity
 
(the “Reorganization”).
The Company is a
 
biotechnology company currently focused on
 
developing product candidates for human
 
use in the fields
 
of neurology,
pain, cardiovascular diseases
 
and coronaviruses utilizing
 
its “Vaxxine Platform”—a synthetic peptide
 
vaccine technology first
 
developed
by
 
UBI
 
and
 
subsequently
 
refined
 
over
 
the
 
last
 
two
 
decades.
 
The
 
Company
 
is
 
engaged
 
in
 
the
 
development
 
of
 
rationally
 
designed
prophylactic and therapeutic vaccines to combat common chronic diseases with large global unmet
 
medical need. The Company is also
developing a heterologous booster
 
vaccine for SARS-Cov-2.
 
UBI is a
 
significant shareholder of the
 
Company and, therefore,
 
considered
a related party.
The Company
 
is subject
 
to risks and
 
uncertainties common
 
to early-stage
 
companies in
 
the biotechnology
 
industry including,
 
but not
limited
 
to,
 
uncertainty
 
of
 
product
 
development
 
and
 
commercialization,
 
lack
 
of
 
marketing
 
and
 
sales
 
history,
 
development
 
by
 
its
competitors of new
 
technological innovations, dependence on
 
key personnel, market
 
acceptance of products,
 
product liability, protection
of proprietary technology,
 
ability to raise additional
 
financing, and compliance
 
with government regulations. If
 
the Company does not
successfully commercialize any of its
 
product candidates, it will
 
be unable to generate
 
recurring product revenue or
 
achieve profitability.
The
 
Company’s
 
product
 
candidates
 
are
 
in
 
development
 
and
 
will
 
require
 
significant
 
additional
 
research
 
and
 
development
 
efforts,
including extensive pre-clinical and clinical testing and
 
regulatory approval prior to commercialization. These efforts require significant
amounts of
 
additional capital, adequate
 
personnel and infrastructure
 
and extensive compliance
 
-reporting capabilities.
 
There can be
 
no
assurance that
 
the Company’s
 
research and
 
development will
 
be successfully
 
completed, that
 
adequate protection
 
for the
 
Company’s
intellectual property
 
will be
 
obtained, that
 
any products
 
developed will
 
obtain necessary
 
government regulatory
 
approval or
 
that any
approved products will be commercially viable.
 
Even if the Company’s product development efforts are
 
successful, it is uncertain when,
if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in
technology and is dependent upon the services of its employees and consultants.
Contribution and Exchange Agreement
On March
 
2, 2021,
 
in accordance
 
with the
 
Contribution and
 
Exchange Agreement,
 
(i) all
 
outstanding shares
 
of UNS
 
and COVAXX
preferred stock and
 
common stock were
 
contributed to Vaxxinity and exchanged for
 
like shares
 
of stock in
 
Vaxxinity,
 
(ii) the outstanding
options to
 
purchase shares
 
of UNS and
 
COVAXX
 
common stock
 
were terminated
 
and substituted
 
with options
 
to purchase
 
shares of
common stock in Vaxxinity,
 
(iii) the outstanding warrant to purchase shares of COVAXX
 
common stock was cancelled and exchanged
for a warrant to acquire common stock in Vaxxinity
 
and (iv) each outstanding Reorganization Convertible Note (as defined below) was
contributed to Vaxxinity
 
and the holders of such notes received Series A preferred stock in Vaxxini
 
ty. In particular:
•
Each UNS common share and convertible preferred share was exchanged
 
for
0.2191
 
shares of Vaxxinity
 
common stock or
Series A preferred stock, as applicable;
•
Each share of COVAXX
 
common and convertible preferred stock was exchanged for
3.4233
 
shares of Vaxxinity
 
common
stock or Series A preferred stock, as applicable (and prior to the closing of the Reorganization,
 
all the holders of outstanding
COVAXX
 
SAFEs agreed to convert such SAFEs into shares of Series A-3 preferred
 
stock of COVAXX,
 
which shares were
then exchanged for shares of Vaxxinity’s
 
Series A preferred stock);
•
The Reorganization Convertible Notes were exchanged
 
for an aggregate of
4,047,344
 
shares of Vaxxinity’s
 
Series A
preferred stock; and
•
Each outstanding option of both UNS and COVAXX
 
to purchase common shares of UNS or COVAXX
 
was terminated and
substituted with an option to purchase shares of Class A common stock of
 
Vaxxinity.
 
Each outstanding UNS option was
exchanged based on a conversion ratio of
0.2191
. Each outstanding COVAXX
 
option was exchanged based on a conversion
ratio of
3.4233
.
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED
 
FINANCIAL STATEMENTS
 
114
All parties
 
to the
 
Contribution
 
and
 
Exchange
 
Agreement
 
intend that
 
the contribution
 
of outstanding
 
equity interests
 
to Vaxxinity
 
in
exchange
 
for Vaxxinity’s
 
common stock
 
and preferred
 
stock will
 
be treated
 
as an
 
integrated transaction
 
for U.S.
 
federal income
 
tax
purposes that is governed by Section 351(a) of the Internal Revenue Code of
 
1986, as amended.
The Reorganization
 
was determined
 
to be a
 
common control
 
transaction, so
 
the carrying
 
values of all
 
contributed assets
 
and assumed
liabilities
 
remained
 
unchanged
 
and
 
the
 
financial
 
information
 
for
 
all
 
periods
 
in
 
the
 
financial
 
statements
 
presented
 
prior
 
to
 
the
Reorganization are presented on a consolidated basis.
Reverse Stock Split
 
On October 29,
 
2021, the
 
Company effectuated
 
a reverse stock
 
split of 1-for-
1.556
 
(the “Stock Split”)
 
of the Company’s
 
Class A and
Class B common
 
stock pursuant to
 
an amendment to
 
the Company’s
 
Amended and Restated
 
Certificate of Incorporation
 
approved by
the Company’s
 
board of directors
 
and stockholders.
 
As a result
 
of the Stock
 
Split, the Company
 
also adjusted the
 
share and per
 
share
amounts
 
associated
 
with
 
its
 
options
 
and
 
warrants
 
to
 
purchase
 
shares
 
of
 
its
 
common
 
stock.
 
These
 
consolidated
 
financial
 
statements
including the notes have been retroactively adjusted to reflect the Stock Split for all periods presented. Any fractional shares that would
have resulted from the Stock Split have been rounded down to the
 
nearest whole share.
 
Initial Public Offering
On November 15, 2021, the Company closed its IPO of
6,000,000
 
shares of Class A common stock at a public offering price of $
13.00
per share. On
 
November 18, 2021
 
the Company held
 
a subsequent closing for
 
the issuance of an
 
additional
537,711
 
shares of Class A
common stock pursuant
 
to a
 
30-day option granted
 
to the
 
underwriters to purchase
 
up to an
 
additional
900,000
 
shares of Class
 
A common
stock at
 
the IPO
 
price, less
 
underwriting
 
discounts and
 
commissions. The
 
aggregate net
 
proceeds to
 
the Company
 
from the
 
offering,
after deducting underwriting discounts
 
and commissions and
 
other offering expenses payable
 
by the Company, was approximately
 
$
71.1
million. Upon the closing
 
of the IPO, all previously
 
outstanding shares of the Company’s
 
redeemable convertible preferred
 
stock were
automatically converted at the same ratio used for the Stock Split (1-for-
1.556
) into shares of its Class A common stock.
Liquidity
As of
 
December 31, 2022,
 
the Company
 
had $
87.9
 
million of
 
highly liquid
 
assets to fund
 
operations, including
 
$
33.5
 
million of
 
cash
and
 
cash
 
equivalents,
 
$
53.4
 
million
 
of
 
short-term
 
investments,
 
and
 
a
 
$
1.1
 
million
 
restricted
 
cash
 
balance
 
of
 
which
 
$
1.0
 
million
 
is
restricted for the reimbursement of
 
certain research and development expenses
 
related to our UB-612 COVID-19
 
vaccine program. To
date, the Company has primarily financed its operations through the
 
sale of convertible preferred stock and common stock, borrowings
under promissory
 
notes (including
 
Convertible Notes),
 
a portion of
 
which has been
 
raised from
 
related party entities,
 
and grants
 
from
foundations
 
such
 
as
 
the
 
Coalition
 
of
 
Epidemic
 
Preparedness
 
Innovations
 
(CEPI)
 
and
 
the
 
Michael
 
J.
 
Fox
 
Foundation
 
(MJFF).
 
The
Company has experienced
 
significant negative cash flows
 
from operations since inception,
 
and incurred a net
 
loss of $
75.2
 
million for
the year ended
 
December 31, 2022. Net
 
cash used in
 
operating activities
 
for the year
 
ended December 31, 2022
 
was $
55.9
 
million. In
addition, as of
 
December 31, 2022, the
 
Company has an
 
accumulated deficit of
 
$
304.7
 
million. The Company
 
expects to incur
 
substantial
operating
 
losses
 
and
 
negative
 
cash
 
flows
 
from
 
operations
 
for
 
the
 
foreseeable
 
future.
 
As
 
of
 
the
 
date
 
these
 
financial
 
statements
 
were
available to
 
be issued,
 
the Company
 
expects its existing
 
cash and
 
cash equivalents
 
to be
 
sufficient to
 
fund its
 
operating expenses
 
and
capital expenditure requirements for at least the next 12 months.
Unless and
 
until the
 
Company is
 
able to
 
obtain regulatory
 
approval for,
 
and generate
 
significant revenues
 
from commercialization
 
of
our product candidates, the
 
Company will need to seek
 
additional capital in order
 
to continue to fund future
 
research and development
activities.
 
This
 
may
 
occur
 
through
 
strategic
 
alliances,
 
licensing
 
arrangements,
 
grants
 
and/or
 
future
 
public
 
or
 
private
 
debt
 
or
 
equity
financings. Additional funding may not be available on
 
terms the Company finds acceptable or at
 
all. If the Company is unable
 
to obtain
sufficient
 
capital to
 
continue
 
to advance
 
its programs,
 
the Company
 
would be
 
forced to
 
delay,
 
limit, reduce
 
or terminate
 
its product
development
 
or
 
future
 
commercialization
 
efforts
 
or
 
grant
 
rights
 
to
 
third
 
parties
 
to
 
develop
 
and
 
market
 
product
 
candidates
 
that
 
the
Company would otherwise prefer to develop and market itself.
The accompanying consolidated
 
financial statements have been
 
prepared on a going
 
concern basis, which contemplates
 
the realization
of
 
assets
 
and
 
satisfaction
 
of
 
liabilities
 
in
 
the
 
ordinary
 
course
 
of
 
business.
 
The
 
consolidated
 
financial
 
statements
 
do
 
not
 
include
 
any
adjustments relating to the recoverability and classification of
 
recorded asset amounts or the amounts and
 
classification of liabilities that
might result from the outcome of the uncertainties described above.
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED
 
FINANCIAL STATEMENTS
 
115
Impact of COVID-19 Pandemic
In March 2020, the World Health Organization declared
 
the outbreak of a COVID-19 pandemic. The COVID-19 pandemic is evolving,
and to date, has led to
 
the implementation of various responses, including government-imposed quarantines, travel
 
restrictions and other
public health safety measures.
While the
 
pandemic
 
has significantly
 
subsided since
 
2020, the
 
Company
 
continues to
 
monitor how
 
COVID-19 outbreaks
 
associated
with new variants impact all aspects of its business, including our operations and the operations of its customers, suppliers, vendors and
business partners.
 
The extent
 
to which
 
COVID-19 impacts
 
the Company’s
 
business, results
 
of operation
 
and financial
 
condition will
depend on future
 
developments, which are
 
highly uncertain and
 
cannot be
 
predicted with confidence,
 
such as
 
the duration
 
of the outbreak,
new information
 
that may emerge
 
concerning the
 
severity of COVID-19
 
or the effectiveness
 
of actions to
 
contain COVID-19
 
or treat
its impact,
 
among others.
 
If the
 
Company or
 
any of
 
the third
 
parties with
 
whom the
 
Company engages,
 
however,
 
were to
 
experience
shutdowns or other
 
business disruptions, its
 
ability to conduct
 
its business in
 
the manner and
 
on the timelines
 
presently planned
 
could
be materially
 
and negatively
 
affected,
 
which could
 
have a
 
material adverse
 
impact on
 
its business,
 
results of
 
operation and
 
financial
condition.
The Company
 
has not
 
incurred impairment
 
losses in
 
the carrying
 
values of
 
its assets
 
as a
 
result of
 
the COVID-19
 
pandemic and
 
the
Company
 
is
 
not
 
aware
 
of
 
any
 
specific
 
related
 
event
 
or
 
circumstance
 
that
 
would
 
require
 
it
 
to
 
revise
 
estimates
 
reflected
 
in
 
these
consolidated financial statements.
2. Summary of Significant Accounting Policies
Basis of presentation
The accompanying consolidated
 
financial statements have
 
been prepared using
 
generally accepted accounting
 
principles in the United
States of America (GAAP) and pursuant to the
 
rules and regulations of the United States
 
Securities and Exchange Commission (“SEC”)
for financial reporting. The consolidated financial statements for the periods presented include the accounts of UNS and COVAXX that
were parties to the Contribution and Exchange Agreement. All share and per share amounts, as originally recorded by each entity,
 
have
been converted to
 
a number
 
of shares
 
and per share
 
amounts using
 
the conversion ratios
 
determined under the
 
Contribution and Exchange
Agreement and the Stock Split ratio.
 
Foreign currency translation
The
 
Company’s
 
consolidated
 
financial
 
statements
 
are
 
prepared
 
in
 
U.S.
 
dollars.
 
Its
 
foreign
 
subsidiaries
 
use
 
the
 
U.S.
 
dollar
 
as
 
their
functional
 
currency and
 
maintain their
 
records in
 
the local
 
currency.
 
Nonmonetary
 
assets and
 
liabilities are
 
re-measured at
 
historical
rates and monetary assets and liabilities are re-measured at exchange rates in effect at the end of the reporting period. Income statement
accounts are re-measured
 
at average
 
exchange rates
 
for the
 
reporting period. The
 
resulting gains
 
or losses
 
are included in
 
foreign currency
(losses) gains in the consolidated statements of operations.
Segment information
Operating segments
 
are defined
 
as components
 
of an
 
entity for
 
which separate
 
financial information
 
is available
 
and that
 
is regularly
reviewed by
 
the Chief
 
Operating
 
Decision Maker
 
(“CODM”) in
 
deciding how
 
to allocate
 
resources to
 
an individual
 
segment and
 
in
assessing performance. The
 
Company’s CODM
 
is its Chief Executive
 
Officer (“CEO”). The
 
Company has determined
 
that it operates
as a single operating segment and has one reportable segment.
Use of estimates
The preparation of consolidated financial statements in accordance with GAAP requires the Company’s management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of expenses during the reporting period. Significant estimates contained
within these consolidated financial
 
statements include, but are not limited
 
to, the estimated fair value of the
 
Company’s common
 
stock
and
 
convertible
 
notes
 
payable,
 
simple
 
agreements
 
for
 
future
 
equity,
 
warrant
 
liabilities,
 
stock-based
 
compensation,
 
prepaid
 
expense
recognition, income tax valuation
 
allowance and the accruals of research
 
and development expenses. The Company
 
bases its estimates
on historical
 
experience, known
 
trends and
 
other market-specific
 
or other
 
relevant factors
 
that it
 
believes to
 
be reasonable
 
under the
circumstances. On an ongoing basis, management evaluates its estimates, as
 
there are changes in facts and circumstances. Actual results
may differ materially from those estimates or assumptions.
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED
 
FINANCIAL STATEMENTS
 
116
Related party transactions
The
 
Company
 
has
 
a
 
policy
 
governing
 
related
 
party
 
transactions
 
that
 
defines
 
related
 
parties,
 
and
 
assigns
 
oversight
 
responsibility
 
for
related party transactions to the Company's Audit
 
Committee. The Audit Committee reviews in advance
 
related party transactions, and
considers
 
multiple
 
factors,
 
including
 
the proposed
 
aggregate value
 
of the
 
transaction,
 
or,
 
in the
 
case of
 
indebtedness,
 
the amount
 
of
principal that would
 
be involved, the
 
benefits to the
 
Company of the
 
proposed transaction, the
 
availability of other
 
sources of comparable
products or services, and an assessment of whether the proposed transaction is on terms that are comparable to the terms available to or
from, as the case may be, unrelated third parties. Under
 
the policy, related party transactions
 
are approved only if the Audit Committee
determines in good faith that the transaction is not inconsistent with the interests of
 
the Company and its shareholders.
Cash and cash equivalents
The Company considers all highly liquid investments with an
 
original maturity of three months or less at the time of initial purchase
 
to
be
 
cash
 
equivalents,
 
including
 
balances
 
held
 
in
 
the
 
Company’s
 
money
 
market
 
accounts.
 
The
 
Company
 
maintains
 
its
 
cash
 
and
 
cash
equivalents with financial institutions, in which balances from time to time may exceed the
 
U.S. federally insured limits. The objectives
of the Company’s
 
cash management policy are
 
to safeguard and preserve funds to
 
maintain liquidity sufficient
 
to meet the Company’s
cash flow requirements, and to attain a market rate of return.
Restricted cash
As of
 
December
 
31, 2022
 
and 2021
 
a deposit
 
of $
1.1
 
million
 
and $
0.2
 
million, respectively,
 
was restricted
 
from withdrawal.
 
These
restrictions related to cash payments received in advance under the CEPI Funding Agreement and securing credit card obligations as of
December 31, 2022 and securing credit card obligations as of December 31, 2021. These balances are included in restricted cash on the
accompanying consolidated balance sheets.
Short Term
 
Investments
The
 
Company
 
determines
 
the
 
appropriate
 
classification
 
of
 
its
 
investments
 
at
 
the
 
time
 
of
 
purchase.
 
Currently,
 
all
 
of
 
the
 
Company’s
investments are
 
classified as
 
available-for-sale in
 
accordance with
 
ASC Topic
 
320. The
 
Company classifies
 
investments available
 
to
fund
 
current
 
operations
 
as
 
current
 
assets
 
on
 
its
 
consolidated
 
balance
 
sheets.
 
Investments
 
are
 
classified
 
as
 
long-term
 
assets
 
on
 
the
consolidated balance sheets if (i) the Company has the intent and ability to hold the investments for a period of at least one year and (ii)
the contractual maturity date of the investments is greater than one year.
Available-for-sale
 
investments are recorded at fair value, with unrealized gains
 
or losses included in accumulated other comprehensive
income
 
or
 
loss.
 
Realized
 
gains
 
and
 
losses,
 
interest
 
income
 
earned
 
on
 
the
 
Company’s
 
cash,
 
cash
 
equivalents
 
and
 
investments,
 
and
amortization or accretion of
 
discounts and premiums on investments
 
are included within other
 
income (expense) on the
 
accompanying
consolidated statements of operations.
Available-for-sale
 
debt securities are reviewed for possible impairment at least quarterly,
 
or more frequently if circumstances arise that
may indicate impairment.
 
When the fair
 
value of the
 
securities declines below
 
the amortized cost
 
basis, impairment is
 
indicated and it
must be determined whether it is other than temporary. Impairment is considered to be other than temporary if the Company: (i) intends
to sell the security, (ii) will
 
more likely than not
 
be forced to sell
 
the security before recovering its
 
cost, or (iii) does
 
not expect to recover
the security’s amortized cost basis.
 
If the decline
 
in fair value
 
is considered other than
 
temporary, the cost basis of
 
the security is adjusted
to its fair market value
 
and the
 
realized loss is reported
 
in earnings. Subsequent increases or
 
decreases in fair value are
 
reported within
equity as accumulated other comprehensive income on the accompanying
 
consolidated statement of stockholder’s equity (deficit).
The Company did
no
t record any such impairments during the year ended December 31, 2022 and 2021.
Concentration of credit risk
Financial instruments that potentially
 
expose the Company
 
to concentrations of
 
credit risk consist
 
primarily of cash
 
and cash equivalents.
Cash equivalents
 
are occasionally
 
invested in
 
money market
 
accounts.
 
The Company
 
maintains each
 
of its
 
cash balances
 
with high-
quality and accredited financial institutions and accordingly, such funds are not exposed to unusual credit risk beyond the normal credit
risk associated with commercial banking relationships. The Company maintains a
 
portion of its cash and cash
 
equivalent balances in the
form of a money market account with a financial institution that management
 
believes to be creditworthy.
 
The Company is dependent on contract manufacturers, several of whom
 
are considered to be related parties, for manufacturing, quality
control, testing, validation and supply services, including production, research and development
 
and clinical activities. The Company’s
future revenue as well as research and development programs could be adversely affected by a significant supply interruption by one or
more of its contract manufacturers.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED
 
FINANCIAL STATEMENTS
 
117
Leases
At
 
inception
 
of
 
a
 
contract,
 
the
 
Company
 
determines
 
whether
 
an
 
arrangement
 
is
 
or
 
contains
 
a
 
lease.
 
For
 
all
 
leases,
 
the
 
Company
determines the classification as either operating leases or financing leases. Operating leases are included in Operating lease right-of-use
assets and Operating lease liabilities in our consolidated balance sheets.
Lease recognition occurs
 
at the commencement date
 
and lease liability amounts
 
are based on the present
 
value of lease payments
 
over
the lease term. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will
exercise that
 
option. If
 
a lease
 
does not
 
provide information
 
to determine
 
an implicit
 
interest rate,
 
the Company
 
uses its
 
incremental
borrowing rate in determining the
 
present value of lease payments. Right-of-use
 
(ROU) assets represent the Company’s
 
right to use an
underlying asset
 
for the
 
lease term,
 
and lease
 
liabilities represent
 
the Company’s
 
obligation to
 
make lease
 
payments under
 
the lease.
ROU assets
 
also include
 
any lease
 
payments made
 
prior to
 
the commencement
 
date and
 
exclude lease
 
incentives received.
 
Operating
lease expense is recognized
 
on a straight-line
 
basis over the
 
lease term. The
 
depreciable life of
 
assets and leasehold
 
improvements are
limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Lease agreements
with both lease and non-lease components, are generally accounted for together as a single lease component. The Company has
 
elected
to
 
apply
 
the
 
practical
 
short-term
 
expedient
 
to
 
leases
 
with
 
a
 
lease
 
term
 
of
 
12
 
months
 
or
 
less,
 
which
 
does
 
not
 
subject
 
the
 
leases
 
to
capitalization.
Property and equipment
Property and
 
equipment are
 
stated at cost,
 
less accumulated
 
depreciation. Depreciation
 
is computed on
 
the straight-line basis
 
over the
estimated useful life of the assets.
The estimated useful life of property and equipment is as follows:
Estimated
 
Useful
 
Life
Airplane
15 years
Facilities
5 years
Furniture and fixtures
5 years
Vehicles
5 years
Laboratory and computer equipment
3 years
Software
3 years
Leasehold improvements
Shorter of the useful life of improvement or the remaining lease term
Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any
resulting gain
 
or loss is
 
included in gain
 
or loss
 
from operations.
 
Expenditures for
 
repairs and
 
maintenance are
 
charged to
 
expense as
incurred
.
Impairment of long-lived assets
Long-lived
 
assets,
 
comprised
 
of
 
property
 
and
 
equipment,
 
are
 
tested
 
for
 
recoverability
 
whenever
 
events
 
or
 
changes
 
in
 
business
circumstances
 
indicate
 
that
 
the
 
carrying
 
amount
 
of
 
the
 
assets
 
may
 
not
 
be
 
fully
 
recoverable.
 
Factors
 
that
 
the
 
Company
 
considers
 
in
deciding
 
when
 
to
 
perform
 
an
 
impairment
 
review
 
include
 
significant
 
underperformance
 
of
 
the
 
business
 
in
 
relation
 
to
 
expectations,
significant negative
 
industry or economic
 
trends and significant
 
changes or planned
 
changes in the
 
use of the
 
assets. If an
 
impairment
review
 
is
 
performed
 
to
 
evaluate
 
a
 
long-lived
 
asset
 
for
 
recoverability,
 
the
 
Company
 
compares
 
forecasts
 
of
 
undiscounted
 
cash
 
flows
expected
 
to
 
result
 
from
 
the
 
use and
 
eventual
 
disposition
 
of the
 
long-lived
 
asset to
 
its carrying
 
value.
 
An
 
impairment
 
loss would
 
be
recognized when estimated undiscounted future cash flows expected to result from the use of an asset are less than its carrying amount.
The impairment loss
 
would be based
 
on the excess of
 
the carrying value
 
of the impaired asset
 
over its fair
 
value, determined based
 
on
discounted cash flows. To
 
date, the Company has not recorded any impairment losses or disposals on long-lived
 
assets.
Deferred offering costs
The Company capitalizes certain legal, audit, accounting and
 
other third-party fees that are directly associated with
 
an in-process capital
financing effort
 
as deferred
 
offering costs
 
until such
 
financing is
 
consummated. After
 
consummation of
 
the financing,
 
these costs are
recorded
 
as
 
a
 
reduction
 
of
 
additional
 
paid-in
 
capital
 
generated
 
as
 
a
 
result
 
of
 
the
 
financing.
 
Should
 
the
 
financing
 
be
 
abandoned,
 
the
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED
 
FINANCIAL STATEMENTS
 
118
deferred offering
 
costs are
 
expensed immediately
 
as a
 
charge to
 
operating expenses
 
in the
 
accompanying
 
consolidated statements
 
of
operations.
 
Fair value measurements
Certain assets and
 
liabilities are carried
 
at fair value
 
under U.S. GAAP. Fair value is
 
defined as the
 
exchange price that would
 
be received
for an asset or
 
paid to transfer a
 
liability (an exit price)
 
in the principal or
 
most advantageous market for
 
the asset or
 
liability in an
 
orderly
transaction between market
 
participants on the measurement
 
date. Valuation
 
techniques used to measure
 
fair value must maximize
 
the
use
 
of observable
 
inputs
 
and minimize
 
the use
 
of unobservable
 
inputs.
 
Financial
 
assets and
 
liabilities
 
carried
 
at fair
 
value
 
are
 
to be
classified and disclosed in one of the following three levels of the fair value hierarchy,
 
of which the first two are considered observable
and the last is considered unobservable:
Level 1—Quoted prices in active markets that are identical assets or liabilities.
Level 2—Observable inputs
 
(other than Level 1
 
quoted prices), such as
 
quoted prices in active
 
markets for similar
 
assets or liabilities,
quoted
 
prices in
 
markets that
 
are not
 
active for
 
identical
 
or similar
 
assets or
 
liabilities, or
 
other inputs
 
that are
 
observable
 
or can
 
be
corroborated by observable market data.
Level 3—Unobservable inputs
 
that are supported
 
by little or no
 
market activity that
 
are significant to determining
 
the fair value of
 
the
assets or liabilities, including pricing models, discounted cash flow methodologies
 
and similar techniques.
Prior to the conversion in accordance with the Contribution and Exchange Agreement, the majority of the Company’s convertible notes
and all of the simple agreement for future equity (“SAFE”) and warrant liabilities were carried at fair
 
value and were classified as Level
3 liabilities.
Convertible notes payable
The Company
 
issued convertible
 
notes payable
 
at various
 
times from
 
2014 to
 
2021. The Company
 
accounts for
 
the convertible
 
notes
payable at fair value in accordance with ASC 480, Distinguishing Liabilities
 
from Equity (“ASC 480”). The notes payable with related
parties are
 
accounted for
 
as straight
 
debt under
 
ASC 470,
 
Debt (“ASC
 
470”). The
 
Company has
 
elected to
 
separate interest
 
expense
from the full
 
change in fair
 
value of the
 
convertible notes. Debt
 
issuance costs incurred
 
by the Company
 
are amortized to interest
 
expense
over the term of the convertible notes using the effective interest method
 
in the accompanying consolidated statements of operations.
On March 2, 2021, each convertible note that was outstanding was exchanged
 
for shares of Series A preferred stock (see Note 9).
Debt issuance costs
The Company
 
records debt
 
issuance costs
 
as a
 
reduction to
 
the carrying
 
value of
 
the debt.
 
The debt
 
discounts are
 
amortized over
 
the
term of the debt using the effective interest method
 
and recognized as interest expense in the accompanying consolidated
 
statements
 
of
operations.
Simple Agreement for Future Equity—SAFE
The Company accounts
 
for SAFEs at fair
 
value in accordance
 
with ASC 480.
 
The SAFEs are subject
 
to revaluation at the
 
end of each
reporting period, with changes in fair value recognized in the accompanying
 
consolidated statements of operations.
On March 2, 2021, each SAFE
 
that was outstanding was converted into shares
 
of the Company’s Series A preferred stock (see Note
 
12).
Classification of convertible preferred stock
The Company records
 
all convertible preferred
 
stock at
 
its original
 
issuance price, less
 
direct and incremental
 
issuance costs,
 
as stipulated
by its terms. The Company’s convertible preferred stock is classified outside of stockholders’ deficit because the holders of such shares
have liquidation rights in the event of a deemed liquidation that, in certain situations,
 
are not solely within the control of the Company.
All shares
 
of the
 
Company’s
 
Series A
 
and Series
 
B preferred
 
stock converted
 
into shares
 
of the
 
Company’s
 
Class A
 
common
 
stock
concurrently with the closing of the initial public offering (see
 
Note 11).
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED
 
FINANCIAL STATEMENTS
 
119
Revenue recognition
The Company accounts for revenue in accordance with ASC Topic 606,
 
Revenue from Contracts With Customers (“ASC 606”). Under
ASC 606, an entity recognizes
 
revenue when its customer
 
obtains control of promised goods
 
or services, in an amount
 
that reflects the
consideration that the entity
 
expects to be
 
entitled to in
 
exchange for those
 
goods or services.
 
The Company applies ASC
 
606 to contracts
with customers only when it is probable that the entity will collect
 
the consideration to which it is entitled in exchange for the
 
goods or
services it transfers to the customer.
The Company
 
assesses the goods
 
or services promised
 
within each contract
 
and determines those
 
that are performance
 
obligations by
evaluating
 
whether
 
each
 
promised
 
good
 
or
 
service
 
is
 
distinct.
 
This
 
assessment
 
involves
 
subjective
 
determinations
 
and
 
requires
management to make judgments about the individual promised goods or services, the intended benefit of the contract and whether each
good or
 
service is
 
separately identifiable
 
from the
 
other aspects
 
of the
 
contractual
 
relationship.
 
If a
 
promised
 
good or
 
service is
 
not
distinct, an entity is required to combine that good or service with other promised goods or services until it identifies a
 
bundle of goods
or services that is distinct.
If the consideration promised in
 
a contract includes a variable
 
amount, the Company estimates the
 
amount of consideration to
 
which it
will be
 
entitled in
 
exchange
 
for transferring
 
the promised
 
goods
 
or services
 
to a
 
customer.
 
The Company
 
determines the
 
amount of
variable consideration by using the most likely amount
 
method and applies the constraint on variable consideration,
 
which requires the
amount included in the transaction price to
 
be constrained to the amount for which
 
it is probable that a significant
 
reversal of cumulative
revenue recognized
 
will not
 
occur.
 
At the
 
end of
 
each subsequent
 
reporting period,
 
the Company
 
re-evaluates the
 
estimated variable
consideration included in the transaction price and any related constraint, and if necessary, adjusts its estimate of the overall transaction
price.
The Company recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when
(or as) each performance
 
obligation is satisfied, either at
 
a point in time
 
or over time, and, if
 
over time, recognition is based
 
on the use
of an output or input method.
 
For its sales of ELISA tests, the Company recognizes revenue once control
 
is transferred upon delivery to the customer.
Coalition for Epidemic Preparedness (“CEPI”) grant
In April
 
2022, the
 
Company entered
 
into an
 
agreement with
 
the Coalition
 
for Epidemic
 
Preparedness Innovations
 
(“CEPI”) whereby
CEPI has
 
agreed to
 
provide
 
funding of
 
up to
 
$
9.3
 
million to
 
co-fund a
 
Phase 3
 
clinical trial
 
of Vaxxinity’s
 
next generation
 
UB-612
COVID-19 vaccine candidate
 
as a heterologous
 
– or ‘mix-and-match’
 
– booster dose. The
 
Phase 3 trial, which
 
began in early
 
2022, is
evaluating the
 
ability of
 
UB-612 to
 
boost COVID-19
 
immunity against
 
the original
 
strain and
 
multiple variants
 
of concern
 
including
Omicron - in people aged 16 years or older, who
 
have been previously immunized with an authorized COVID-19 vaccine.
Cash payments received in advance under the CEPI Funding Agreement are restricted as to their use until expenditures contemplated in
the funding agreement are incurred. As funds are received they are included within restricted cash offset
 
by a corresponding short-term
accrued
 
liability.
 
The Company
 
recognizes
 
payments
 
from CEPI
 
as a
 
reduction
 
of research
 
and development
 
expenses,
 
in
 
the same
period as the expenses that the grant is intended to reimburse are incurred.
Taiwan
 
Centers for Disease Control grant
United
 
Biomedical,
 
Inc.,
 
Asia
 
(“UBI-Asia”),
 
a
 
related
 
party
 
through
 
common
 
ownership
 
which
 
is
 
responsible
 
for
 
applying
 
for
 
and
managing
 
grants
 
on
 
the
 
Company’s
 
behalf,
 
was
 
awarded
 
a
 
grant
 
by
 
the
 
Taiwan
 
Centers
 
for
 
Disease
 
Control
 
(“Taiwan
 
CDC”)
 
for
COVID-19 vaccine development. UBI-Asia contracted with the Company to conduct
 
a two-phase clinical trial of a COVID-19 vaccine
candidate in Taiwan.
 
The grant provides that costs incurred to complete the two phases of
 
the clinical trial will be reimbursed based on
the achievement
 
of certain
 
milestones as
 
defined in
 
the agreement.
 
At each
 
reporting date,
 
the Company
 
assesses the status
 
of all
 
the
activities involved in completing the clinical trials in relation
 
to the milestones. The Company accounts for the
 
amounts that have been
received from
 
the Taiwan
 
CDC to reimburse
 
costs incurred
 
on the
 
clinical trials
 
and not
 
expected to
 
be refunded
 
back to
 
the Taiwan
CDC as contra research and development expenses in the accompanying
 
consolidated statements of operations.
Research and development
Research
 
and
 
development
 
expenses
 
include
 
employee
 
related
 
costs,
 
consulting,
 
contract
 
research,
 
depreciation,
 
rent,
 
stock-based
compensation and other corporate costs attributable to research and development
 
activities and are expensed as incurred.
The Company has entered into various research, development and
 
manufacturing contracts, some of which are with related parties (see
Note 19).
 
These agreements
 
are generally
 
cancelable by
 
either party,
 
and related payments
 
are recorded
 
as research
 
and development
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED
 
FINANCIAL STATEMENTS
 
120
expenses as incurred. The
 
Company records accruals for
 
estimated ongoing research costs.
 
When evaluating the adequacy
 
of the accrued
liabilities, the
 
Company analyzes
 
progress of
 
the studies
 
or trials,
 
including the
 
phase or
 
completion of
 
events, invoices
 
received and
contracted costs. The Company’s
 
historical accrual estimates have not been materially different
 
from the actual costs.
Patent costs
Patent-related costs incurred in
 
connection with filing
 
and prosecuting patent
 
applications are expensed
 
as incurred due
 
to the uncertainty
relating to the recovery of the expenditure. Amounts incurred are classified as general
 
and administrative expenses.
Stock-based compensation
The Company measures all
 
stock-based awards granted to
 
employees, directors and non-employees
 
based on the fair value on
 
the date
of grant and
 
recognizes compensation expense
 
of those awards
 
over the requisite
 
service period, which
 
is generally the vesting
 
period
of the respective award. Forfeitures are accounted for as they occur.
The Company
 
classifies stock-based
 
compensation expense
 
in its
 
consolidated statements
 
of operations
 
in the
 
same manner
 
in which
the award recipient’s payroll costs are
 
classified or in which the award recipient’s
 
service payments are classified.
Prior to
 
the Company's
 
IPO in
 
November 2021,
 
there was
 
no public
 
market for
 
the Company’s
 
common stock
 
and the
 
estimated fair
value of its common stock was determined by its most recently
 
available third-party valuations of common stock.
 
There are significant
judgments
 
and
 
estimates
 
inherent
 
in
 
the
 
determination
 
of
 
the
 
fair
 
value
 
of
 
the
 
Company’s
 
common
 
stock.
 
These
 
estimates
 
and
assumptions include a
 
number of objective
 
and subjective factors,
 
including external market
 
conditions, the prices
 
at which the
 
Company
sold shares of
 
preferred securities, the
 
superior rights and
 
preferences of securities
 
senior to the
 
common securities at
 
the time of,
 
and
the likelihood of, achieving a
 
liquidity event, such as an IPO
 
or sale. Significant changes to the
 
key assumptions used in the valuations
could result in different fair values of common stock
 
at each valuation date.
The fair value of each
 
restricted stock award is estimated
 
on the date of grant
 
based on the fair value
 
of the Company’s
 
common stock
on that
 
same date.
 
The fair
 
value of
 
each option
 
grant is
 
estimated on
 
the date of
 
grant using
 
the Black-Scholes
 
option pricing
 
model
(“Black-Scholes”),
 
which
 
requires
 
inputs
 
based
 
on
 
certain
 
subjective
 
assumptions,
 
including
 
the
 
expected
 
stock
 
price
 
volatility,
 
the
expected term of
 
the award, the
 
risk-free interest rate
 
and expected dividends.
 
The Company, both prior
 
to and after
 
the IPO in
 
November
2021, lacks sufficient
 
company-specific historical
 
and implied volatility
 
information for its
 
stock, and therefore
 
estimates its expected
stock volatility based
 
on the historical
 
volatility of a
 
publicly traded set
 
of peer companies
 
and expects to
 
continue to do
 
so until such
time as it has adequate historical data regarding the
 
volatility of its own traded stock price.
 
The expected term of the Company’s options
has been determined utilizing
 
the “simplified” method for
 
awards that qualify as “plain-vanilla”
 
options. The expected term
 
of options
granted to non-employees
 
is equal to the
 
contractual term of the
 
option award. The risk-free
 
interest rate is determined
 
by reference to
the U.S. Treasury yield curve in effect at the time of grant of the award for
 
time periods approximately equal to the expected term of the
award. Expected
 
dividend yield
 
is based
 
on the
 
fact that
 
the Company
 
has never
 
paid cash
 
dividends on
 
common stock
 
and does
 
not
expect to pay any cash dividends in the foreseeable future.
Performance-based options
The Company accounts for performance-based
 
options according to the ASC 718,
 
Compensation – Stock Compensation ("ASC
 
718"),
which are subject to different accounting depending on whether they meet
 
the definition of performance conditions, market conditions,
or other conditions. The conditions present in the
 
Company's grants contain both performance and market conditions. The
 
effect of each
condition
 
is
 
reflected
 
in
 
the
 
grant-date
 
fair
 
value
 
and
 
the
 
performance-based
 
options
 
are
 
measured
 
considering
 
the
 
probability
 
of
satisfying the performance
 
and market conditions.
 
The Company has used
 
a Monte Carlo Simulation
 
Model to calculate the
 
fair value
of the
 
performance condition
 
(the completion
 
of the
 
IPO) and
 
market condition
 
(the 25%
 
higher value
 
after the
 
IPO condition).
 
The
performance condition
 
was determined
 
to not be
 
probable at the
 
time of the
 
grant date,
 
and the recognition
 
of compensation
 
cost was
deferred
 
until the
 
IPO was
 
consummated
 
in November
 
2021. The
 
recognition of
 
expense for
 
the portion
 
of the
 
grant-date fair
 
value
assigned to the market condition will be recognized as expense according to
 
the derived service period in the valuation model.
 
Income taxes
The Company
 
accounts for
 
income taxes according
 
to the ASC 740,
 
Income Taxes
 
(“ASC 740”) using
 
the asset and
 
liability method,
which requires
 
the recognition
 
of deferred
 
tax assets
 
and liabilities
 
for the
 
expected future
 
tax consequences
 
of events
 
that have
 
been
recognized
 
in
 
the
 
consolidated
 
financial
 
statements
 
or
 
in
 
the
 
Company’s
 
tax
 
returns.
 
Deferred
 
taxes
 
are
 
determined
 
based
 
on
 
the
difference between
 
the financial statement
 
and tax basis
 
of assets and
 
liabilities using enacted
 
tax rates in
 
effect in
 
the years in
 
which
the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The
Company
 
assesses the
 
likelihood
 
that its
 
deferred
 
tax assets
 
will be
 
realized
 
and, to
 
the extent
 
it believes,
 
based upon
 
the
 
weight of
available evidence, that it is more
 
likely than not that all
 
or a portion of the
 
deferred tax assets will not
 
be realized, a valuation allowance
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED
 
FINANCIAL STATEMENTS
 
121
is established through a charge to income tax expense. In evaluating its ability to recover its deferred tax assets, the Company considers
all available positive and negative evidence, including projected future taxable income, prudent and feasible tax planning strategies and
recent financial operations.
The
 
Company
 
accounts
 
for
 
uncertainty
 
in
 
income
 
taxes
 
recognized
 
in
 
the
 
consolidated
 
financial
 
statements
 
by
 
applying
 
a
 
two-step
process to
 
determine the
 
amount of
 
tax benefit
 
to be
 
recognized. First,
 
the tax
 
position must
 
be evaluated
 
to determine
 
the likelihood
that it
 
will be
 
sustained upon
 
external examination
 
by the
 
taxing authorities.
 
If the
 
tax position
 
is deemed
 
more-likely-than-not to
 
be
sustained, the tax position is then assessed to determine the amount of benefit to recognize in the consolidated financial statements. The
amount of the benefit that
 
may be recognized is
 
the largest amount that
 
has a greater than
 
50% likelihood of being realized
 
upon ultimate
settlement. To
 
the extent the
 
Company determines
 
that such tax
 
positions will not
 
be sustained,
 
the provision
 
for income taxes
 
would
include
 
the effects
 
of any
 
resulting income
 
tax reserves,
 
or unrecognized
 
tax benefits,
 
that are
 
considered
 
appropriate as
 
well as
 
the
related net interest and penalties.
Net loss per share
Basic earnings
 
per common
 
share is
 
computed by
 
dividing net
 
income
 
(loss) by
 
the weighted-average
 
number of
 
shares of
 
common
stock outstanding
 
during the
 
period. Diluted
 
earnings per
 
common share
 
is computed
 
by dividing
 
net income
 
(loss) by
 
the weighted-
average number of
 
shares of common
 
stock outstanding during
 
the period, plus
 
the potential dilutive
 
effect of other
 
securities if those
securities were converted or exercised. During periods in which the Company incurs net losses, both basic and diluted loss per common
share
 
is
 
calculated
 
by
 
dividing
 
the
 
net
 
loss
 
by
 
the
 
weighted-average
 
shares
 
of
 
common
 
stock
 
outstanding
 
and
 
potentially
 
dilutive
securities
 
are
 
excluded
 
from
 
the
 
calculation
 
because
 
their
 
effect
 
would
 
be
 
antidilutive.
 
For
 
purpose
 
of
 
this
 
calculation,
 
outstanding
options, unvested restricted stock and convertible preferred stock are
 
considered potential dilutive common stock and
 
are excluded from
the computation of net loss per share if their effect is anti-dilutive.
The Company’s
 
convertible
 
preferred
 
stock contractually
 
entitles the
 
holders
 
of such
 
shares to
 
participate
 
in dividends
 
but does
 
not
contractually require the holders of such shares to participate in losses of the Company.
 
Accordingly, in periods in which the Company
reports
 
a net
 
loss, such
 
losses are
 
not allocated
 
to such
 
participating
 
securities. In
 
periods in
 
which
 
the Company
 
reports a
 
net loss,
diluted net loss per share is the same as basic net loss per
 
share attributable to common stockholders, since dilutive
 
common shares are
not assumed to be outstanding if their effect is anti-dilutive.
Emerging growth company status
The Company is an “emerging growth company” (“EGC”),
 
as defined in the Jumpstart Our Business Startups Act (“JOBS Act”) and is
permitted to and
 
plans to take advantage
 
of certain exemptions
 
from various reporting
 
requirements that are
 
applicable to other
 
public
companies that are not EGCs. The Company may take advantage of these exemptions until it is no longer an EGC under Section 107 of
the
 
JOBS Act,
 
which
 
provides
 
that
 
an
 
EGC can
 
take
 
advantage
 
of the
 
extended
 
transition
 
period afforded
 
by the
 
JOBS Act
 
for
 
the
implementation of new
 
or revised accounting standards.
 
The Company has elected
 
to avail itself of the
 
extended transition period
 
and,
therefore, as long as
 
the Company remains
 
an EGC, it will not
 
be subject to new
 
or revised accounting
 
standards at the same
 
time that
they become applicable to other public companies that are not EGCs.
 
Reclassifications
The Company reclassified certain prepaid expenses from prepaid materials and supplies to clinical prepayments within the
 
consolidated
balance
 
sheet
 
to provide
 
more current
 
information
 
on
 
the components
 
of
 
this account.
 
Prior
 
year
 
amounts
 
have
 
been
 
reclassified
 
to
conform to
 
the current year
 
presentation.
 
Additionally,
 
certain expenses were
 
reclassified between the
 
research and development
 
and
general and administrative expenses within the consolidated statements
 
of operations. These changes have no impact on our previously
reported consolidated net loss, financial position or net increase in cash, cash equivalents, and restricted cash.
 
Prior year amounts were
not reclassified to conform to the current year presentation in the consolidated
 
statements of operations.
Recently issued accounting pronouncements
 
From time
 
to time,
 
new accounting
 
pronouncements are
 
issued by
 
the FASB
 
or other
 
standard setting
 
bodies and
 
are adopted
 
by the
Company
 
as
 
of
 
the
 
specified
 
effective
 
date.
 
Unless
 
otherwise
 
discussed,
 
the
 
Company
 
believes
 
that
 
the
 
impact
 
of
 
recently
 
issued
standards that are not yet effective will not have a material impact on
 
its financial position or results of operations upon adoption.
Recently adopted accounting standards
In
 
July
 
2018,
 
the
 
FASB
 
issued
 
ASU
 
No.
 
2018-11,
 
Leases
 
(Topic
 
842):
 
Targeted
 
Improvements
 
(“ASU
 
2018-11”).
 
ASU
 
2018-
11provided
 
an
 
alternative
 
method
 
in
 
addition
 
to
 
the
 
modified
 
retrospective
 
transition
 
method
 
for
 
ASU
 
No.
 
2016-02,
 
Leases:
Amendments
 
to the
 
FASB
 
Accounting
 
Standards Codification
 
(“ASU 2016-02”),
 
issued in
 
February 2016.
 
Under ASU
 
2018-11,
 
an
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED
 
FINANCIAL STATEMENTS
 
122
entity may elect
 
to initially apply
 
the new lease
 
standard at the
 
adoption date and
 
recognize a cumulative-effect adjustment
 
to the
 
opening
balance of retained
 
earnings in the
 
period of adoption.
 
Under ASU 2016-02,
 
a lease is
 
required to recognize
 
assets and liabilities
 
with
lease
 
terms
 
of more
 
than
 
twelve months.
 
ASU 2016-02
 
is effective
 
for nonpublic
 
business entities
 
and
 
public
 
entities eligible
 
to be
smaller reporting
 
companies for fiscal years beginning after December 15, 2021.
 
The Company
 
adopted the
 
new standard
 
on January
 
1, 2022
 
using the
 
modified retrospective
 
approach. The
 
Company has
 
elected to
apply the
 
transition method
 
that allows companies
 
to continue
 
applying the
 
guidance under the
 
lease standard
 
in effect
 
at that time
 
in
the comparative
 
periods presented
 
in the
 
financial statements
 
and recognize
 
a cumulative-effect
 
adjustment to
 
the opening
 
balance of
accumulated deficit on the date of adoption. The Company has elected to combine lease components (for example fixed rent payments)
with non-lease
 
components (for
 
example, common-area
 
maintenance costs)
 
on our
 
facility,
 
lab equipment
 
and CRO
 
embedded lease
asset classes.
 
The Company
 
also elected
 
the “package
 
of practical
 
expedients”, which
 
permits the
 
Company not
 
to reassess under
 
the
new standard
 
the Company’s
 
prior conclusions
 
about lease
 
identification,
 
lease classification
 
and initial
 
direct costs.
 
In addition,
 
the
Company
 
also
 
elected
 
the
 
short-term
 
lease
 
practical
 
expedients
 
allowed
 
under
 
the
 
standard.
 
Lastly,
 
the
 
Company
 
did
 
not
 
elect
 
the
practical expedient allowing the use-of-hindsight which would require
 
the Company to reassess the lease term of its leases based on all
facts and circumstances through the effective date.
 
Results for reporting
 
period beginning after
 
January 1, 2022
 
are presented under
 
the new standard,
 
while prior period
 
amounts are not
adjusted
 
and
 
continue
 
to
 
be
 
reported
 
under
 
the
 
accounting
 
standards
 
in
 
effect
 
for
 
the
 
prior
 
period.
 
Upon
 
adoption
 
of the
 
new
 
lease
standard, on January 1, 2022, the Company did not enter into any leases subject to ASC 842 and did not capitalize a ROU asset or lease
liability.
3. Short Term
 
Investments
As of December 31, 2022, the Company’s
 
short-term investments consist of the following (in thousands):
As of December 31, 2022
Amortized Cost
Unrealized
Gains (Losses),
Net
Recorded Basis
U.S. Treasury Securities
$
53,549
$
(197)
$
53,352
Total
$
53,549
$
(197)
$
53,352
4. Fair Value
 
Measurements
The Company's money
 
market accounts and
 
short-term investments are
 
shown at fair
 
value based on
 
unadjusted quoted market
 
prices
in active markets for identical assets.
The value for the Convertible
 
Notes, SAFE and warrant
 
liability balances during 2021
 
were based on significant inputs
 
not observable
in
 
the
 
market,
 
which
 
represents
 
a
 
Level
 
3
 
measurement
 
within
 
the
 
fair
 
value
 
hierarchy.
 
In
 
accordance
 
with
 
the
 
Contribution
 
and
Exchange Agreement, on March 2, 2021 the Convertible Notes, SAFEs and warrants
 
were all converted into Series A preferred stock.
The following
 
table presents
 
information about
 
the Company’s
 
financial instruments
 
measured at
 
fair value
 
on a
 
recurring basis
 
and
indicate the level of the fair value hierarchy used to determine such fair
 
values (in thousands):
December 31, 2022
Level 1
Level 2
Level 3
Total
Assets:
Short-term investments
$
53,352
$
—
$
—
$
53,352
Money market account
27,724
—
—
27,724
Total assets
$
81,076
$
—
$
—
$
81,076
December 31, 2021
Level 1
Level 2
Level 3
Total
Assets:
Money market account
$
139,794
$
—
$
—
$
139,794
Total assets
$
139,794
$
—
$
—
$
139,794
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED
 
FINANCIAL STATEMENTS
 
123
During the years ended December 31, 2022 and 2021, there were
no
 
transfers between Level 1, Level 2 and Level 3.
 
Convertible Notes
During
 
the
 
year
 
ended
 
December 31,
 
2021,
 
the
 
Company
 
issued
 
Convertible
 
Notes.
 
In
 
accordance
 
with
 
ASC
 
480,
 
a
 
portion
 
of
 
the
Convertible Notes
 
were required
 
to be
 
measured and
 
accounted for
 
at fair
 
value at each
 
reporting date.
 
The Company
 
determined the
Convertible Notes requiring
 
a measurement to fair
 
value represent a recurring
 
measurement that is classified
 
within Level 3 of
 
the fair
value hierarchy wherein fair value is estimated using significant unobservable
 
inputs.
 
Convertible Notes requiring a measurement to fair value are as follows (in
 
thousands):
 
Convertible
Notes
Balance at December 31, 2020
$
24,680
Issuance of convertible notes
2,000
Repayments
(2,000)
Change in fair value
2,667
Amortization of issuance costs
217
Accrued interest
 
168
Interest paid
(187)
Conversion to Series A preferred stock
(27,545)
Balance at December 31, 2021
$
—
The
 
fair
 
value
 
of
 
the
 
Convertible
 
Notes
 
was
 
estimated
 
using
 
a
 
straight
 
debt
 
and
 
conversion
 
feature
 
valuation
 
model
 
consisting
 
of
probability assumptions on multiple conversion scenarios, discount rates and
 
interest rates.
 
In accordance with the
 
Contribution and Exchange Agreement,
 
on March 2, 2021, the
 
Convertible Notes were converted into
 
Series A
preferred stock.
 
Simple Agreement for Future Equity—SAFE
During the
 
year ended
 
December 31, 2021,
 
the Company
 
executed SAFE
 
arrangements.
 
The fair
 
value of
 
the SAFEs
 
on the
 
date of
issuance was
 
determined to equal
 
the proceeds received
 
by the
 
Company. The value of
 
the SAFEs
 
on the date
 
of conversion into
 
preferred
stock was determined
 
to be equal
 
to the fair
 
value of the
 
preferred stock issued,
 
or $
35.6
 
million during
 
the year ended
 
December 31,
2021.
 
The following table sets forth a summary of the
 
activities of the SAFE arrangements, which represents a
 
recurring measurement that is
classified within Level 3 of the fair value hierarchy wherein
 
fair value is estimated using significant unobservable inputs (in thousands):
 
SAFE
Liability
Balance at December 31, 2020
$
24,335
Change in fair value
8,365
Issuance of SAFEs
2,900
Conversion to Series A preferred stock
(35,600)
Balance at December 31, 2021
$
—
In accordance
 
with the Contribution
 
and Exchange
 
Agreement, on March
 
2, 2021,
 
the SAFEs were
 
converted into
 
Series A preferred
stock.
 
Warrants to Purchase Series
 
A-1 Convertible Preferred Stock & Common Stock
In connection with the 2020 Series A-1 convertible preferred stock (“Series
 
A-1 preferred”) financing transactions, the Company issued
fully
 
vested warrants
 
to purchase
205,970
 
shares of
 
Series A-1
 
preferred.
 
The warrants
 
were issued
 
to advisors
 
as consideration
 
for
assistance with
 
the sale
 
and issuance
 
of the
 
Series A-1
 
preferred. The
 
warrants were
 
determined to
 
represent issuance
 
costs and
 
were
recorded as a reduction in the proceeds received from the sale.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED
 
FINANCIAL STATEMENTS
 
124
The warrants were issued to
 
advisors of the company and represented
 
non-variable contingently redeemable
 
instruments.
 
As such, the
warrants were accounted for as liabilities and adjusted to fair value at each reporting
 
period.
 
The warrants are exercisable on the date of issuance and
 
have an exercise price of $
0.003
 
per share and a contractual term of
ten years
.
In December 2020, warrants were exercised for
71,862
 
shares of Series A-1 at $
0.003
 
per share, resulting in cash proceeds of less than
$
1,000
.
 
As
 
of
 
December
 
31,
 
2020,
 
warrants
 
to
 
purchase
134,106
 
shares
 
of
 
Series
 
A-1
 
preferred
 
were
 
outstanding.
 
The
 
Company
continued to re-measure
 
the fair value of
 
the liability associated
 
with the warrant
 
to purchase shares of
 
Series A-1 preferred
 
at the end
of
 
each
 
reporting
 
period
 
until
 
the
 
Reorganization,
 
when
 
the
 
warrant
 
converted
 
into
 
Series
 
A
 
preferred
 
stock
 
and
 
subsequently,
 
in
connection with the IPO, converted into Class A common stock.
The
 
following
 
table
 
sets
 
forth
 
a
 
summary
 
of
 
the
 
activity
 
of
 
the
 
warrant
 
liability
 
which
 
represented
 
a
 
recurring
 
measurement
 
that
 
is
classified within Level 3 of the fair value hierarchy wherein fair
 
value is estimated using significant unobservable inputs (in thousands):
Warrant
Liability
Balance at December 31, 2020
$
400
Change in fair value
214
Conversion to warrants for shares of Series A preferred stock
(614)
Balance at December 31, 2021
$
—
5. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following (in thousands):
December 31,
2022
2021
Clinical prepayments
$
2,679
$
612
Prepaid insurance
1,870
3,510
Prepaid materials and supplies
248
3,517
Deposits
232
869
Other
522
343
$
5,551
$
8,851
Clinical
 
prepayments
 
consisted
 
of
 
amounts
 
paid
 
in
 
advance
 
to
 
clinical
 
research
 
organizations
 
(“CROs”)
 
for
 
expenses
 
related
 
to
 
our
clinical trials, primarily UB-612,
 
and included $
1.9
 
million on deposit as of
 
December 31, 2022 that will
 
be credited against final
 
UB-
612 trial expenses. The remaining clinical prepayment amounts are
 
amortized to expense as earned by the CRO and clinical trial sites.
 
Prepaid
 
insurance
 
consisted
 
primarily
 
of
 
$
1.6
 
million
 
and $
3.3
 
million
 
for
 
the
 
unamortized
 
portion
 
of
 
the
 
Company’s
 
annual
 
D&O
insurance fee as of December 31, 2022 and 2021, respectively.
 
 
Prepaid materials and
 
supplies consisted of
 
amounts paid in advance
 
related to the procurement
 
and/or production of
 
materials for use
in the Company’s clinical trials, primarily UB-612. Amounts held by related parties totaled $
0.2
 
million at December 31, 2022 and $
3.5
million at December 31, 2021.
 
 
Deposits consist of amounts
 
held by the Company’s aircraft management
 
company and the leaseholder
 
for the Florida lab. Other
 
prepaid
expenses and current
 
assets consist of
 
various sales tax
 
credits and receivables
 
totaling $
0.3
 
million and $
0.3
 
million, as of
 
December
31, 2022 and 2021, respectively and other prepaid expenses incurred
 
in the normal course of business.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED
 
FINANCIAL STATEMENTS
 
125
6. Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
December 31,
2022
2021
Airplane
$
11,983
$
11,983
Laboratory and computer equipment
3,146
1,831
Leasehold improvements
403
—
Software
415
168
Facilities, furniture and fixtures
37
85
Vehicles
87
87
Construction in progress
65
199
Total property
 
and equipment
16,136
14,353
Less: accumulated depreciation
(3,624)
(1,981)
Property and equipment, net
$
12,512
$
12,372
Depreciation expense for the years ended December 31, 2022 and 2021
 
was $
1.7
 
million and $
1.1
 
million, respectively.
 
7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in
 
thousands):
December 31,
2022
2021
Accrued external research and development
$
6,904
$
1,501
Accrued bonuses
2,568
2,294
Accrued professional fees and other
1,722
692
Accrued interest
176
32
$
11,370
$
4,519
8. Other Long-Term
 
Liabilities
Other long-term liabilities consisted of the following (in thousands):
December 31,
2022
2021
Accrued tax provision
$
236
$
236
Accrued rent
—
1
$
236
$
237
As of
 
December 31, 2022
 
and 2021, approximately
 
$
0.2
 
million of
 
the accrued tax
 
provision relates
 
to penalties and
 
interest the
 
Company
may be subject to paying for late filing fees related to a foreign
 
subsidiary. The
 
Company expects these amounts to be forgiven
 
but has
accrued for them until the statute of limitations expires and it is appropriate to write them off.
9. Convertible Notes Payable
Beginning in April 2018, the Company issued several Convertible Notes, some of which were issued to related
 
parties. The Convertible
Notes bore
 
simple interest
 
at annual
 
rates ranging
 
from
4.8
% to
6
%. All
 
unpaid principal,
 
together with
 
the accrued
 
interest thereon,
were payable
 
upon an
 
event of
 
default
 
or upon
 
maturity,
 
which
 
ranged
 
from one
 
to three
 
years.
 
The Convertible
 
Notes contained
 
a
number of provisions addressing automatic and optional conversion,
 
events of default, and prepayment provisions.
The Company
 
accounted for
 
the Convertible
 
Notes at
 
fair value,
 
in accordance
 
with ASC
 
480, with
 
any changes
 
in fair
 
value being
included in other (income)
 
expense, net in the accompanying statements of operations.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED
 
FINANCIAL STATEMENTS
 
126
In
 
accordance
 
with
 
the
 
Contribution
 
and
 
Exchange
 
Agreement,
 
on
 
March
 
2,
 
2021
 
each
 
Reorganization
 
Convertible
 
Note
 
that
 
was
outstanding was
 
exchanged for
 
shares of
 
Series A
 
preferred stock,
 
as set forth
 
in the
 
applicable Convertible
 
Note agreements
 
and the
Contribution and Exchange Agreement.
 
During the year ended
 
December 31, 2021, the Company
 
recognized interest expense of
 
$
0.2
 
million related to the
 
Convertible Notes.
In
 
addition,
 
during
 
the
 
year
 
ended
 
December 31,
 
2021,
 
the
 
Company
 
recognized
 
a
 
change
 
in
 
fair
 
value
 
of
 
$
2.7
 
million
 
in
 
the
accompanying consolidated statements of operations related to the Convertible
 
Notes.
 
The following table shows the activity of the Convertible Notes (in thousands):
Convertible Notes
Principal Amount Payable
Change in Fair Value
Accrued Interest
Issuance
Conversion
to
Standard
Related
Party
Standard
Related
Party
Standard
Related
Party
Costs
Series A
Balance
December 31, 2020
$
7,710
$
10,510
$
1,972
$
3,848
$
674
$
183
$
(217)
$
—
$
24,680
Additions
—
2,000
812
1,855
58
110
—
—
4,835
Settlements
(2,000)
—
—
—
(187)
—
—
—
(2,187)
Amortization
—
—
—
—
—
—
217
—
217
Conversion of Convertible
Notes to Series A preferred
stock
(5,710)
(12,510)
(2,784)
(5,703)
(545)
(293)
—
(27,545)
(27,545)
December 31, 2021
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
(27,545)
$
—
10. Notes Payable
Notes Payable with Related Parties
In December 2018,
 
the Company entered
 
into related party convertible
 
notes payable (the “2018
 
Related Notes” and together
 
with the
Convertible Notes, the “Reorganization Convertible
 
Notes”) for $
2.0
 
million in aggregate proceeds,
 
received in three tranches.
 
The 2018
Related
 
Notes
 
bore
 
simple
 
interest
 
at
 
an
 
annual
 
rate
 
of
5
%
 
and
 
contain
 
a
 
number
 
of
 
provisions
 
addressing
 
events
 
of
 
default
 
and
prepayment. In accordance with the Contribution and Exchange Agreement, on March 2, 2021, the 2018 Related Notes were converted
into Series A preferred stock.
 
During
 
the year
 
ended December
 
31, 2021,
 
the Company
 
recognized
 
interest expense
 
of less
 
than $
0.1
 
million on
 
the 2018
 
Related
Notes.
2019 Executive Note
In November 2019, the Company borrowed $
0.1
 
million from its Chief Executive Officer (the “2019 Executive Note”). No formal loan
agreement was
 
executed. However,
 
the Company
 
has elected to
 
accrue interest
 
at an annual
 
rate of
5
%, consistent with
 
the terms
 
and
conditions of the Convertible Notes and 2018 Related Notes, which
 
was the closest benchmark the Company could evaluate. The 2019
Executive Note was repaid in August 2021.
 
The activity of the 2018 Related Notes and 2019 Executive Note is as follows (in thousands):
 
2018 Related Notes and 2019 Executive Note
Related Party
Principal
Accrued
Interest
Balance
December 31, 2020
$
2,100
$
194
$
2,294
Accrued interest
—
19
19
Repayment
(100)
—
(100)
Interest paid
—
(8)
(8)
Conversion
(2,000)
(205)
(2,205)
December 31, 2021
$
—
$
—
$
—
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED
 
FINANCIAL STATEMENTS
 
127
Note Payable—Airplane
In connection with
 
the acquisition of
 
an airplane, the Company
 
entered into a note
 
payable agreement (the
 
“2025 Note”) in
 
June 2020
for $
11.5
 
million, with an annual interest rate of
3.4
% and a maturity date of June 9,
 
2025. Principal and interest payments are
 
payable
monthly in the amount
 
of $
0.07
 
million with a
 
final payment of $
9.4
 
million at maturity. The 2025 Note
 
is guaranteed by the
 
co-founders
of the Company. In addition, the Company
 
incurred debt issuance costs of $
0.3
 
million, which are being amortized over the term of the
loan. There are no financial covenants associated with the 2025 Note.
 
The carrying value of the 2025 Note is as follows (in thousands):
 
December 31,
2022
2021
Principal
$
10,455
$
10,883
Unamortized debt issuance cost
(131)
(184)
Carrying amount
10,324
10,699
Less: current portion
(391)
(376)
Note payable, net of current portion and debt issuance cost
$
9,933
$
10,323
As of December 31, 2022, the remaining principal payments for
 
the 2025 Note, are as follows (in thousands
):
 
Amount
2023
$
444
2024
458
2025
9,553
$
10,455
Interest expense
 
associated with
 
the 2025
 
Note was
 
$
0.4
 
million and
 
$
0.4
 
million for
 
the years
 
ended December
 
31, 2022
 
and 2021,
respectively. As of December 31, 2022,
 
accrued interest of less than $
0.1
 
million was included in accrued expenses and other liabilities
in the accompanying consolidated balance sheets.
Note Payable—Paycheck Protection Program
The Company
 
applied for
 
and received
 
a loan,
 
which is
 
in the
 
form of
 
a note
 
dated May
 
5, 2020,
 
from HSBC
 
Bank USA,
 
National
Association (“HSBC”)
 
in the aggregate
 
amount of approximately
 
$
0.3
 
million (the “PPP
 
Loan”), pursuant
 
to the Paycheck
 
Protection
Program (“PPP”).
 
The PPP,
 
established as
 
part of
 
the Coronavirus
 
Aid, Relief
 
and Economic
 
Security Act
 
(“CARES Act”),
 
provides
for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. As of
December 31, 2021, there were no events of default under the PPP Loan.
 
The Company paid off the PPP Loan in full, including all accrued
 
but unpaid interest to the repayment date, in August 2021.
Promissory Note with Related Party
In October 2022, the Company entered into a related party unsecured promissory note (the “2022 Promissory Note”) with UBI for $
4.2
million. The
 
2022 Promissory
 
Note accrues
 
interest at
7.0
% per
 
annum and
 
is due
October 1, 2026
. The
 
2022 Promissory
 
Note was
issued
 
to
 
satisfy
 
accounts
 
payable
 
to
 
UBI totaling
 
$
4.2
 
million.
 
As of
 
December 31,
 
2022 the
 
outstanding
 
principal
 
under
 
the 2022
Promissory Note was
 
$
4.2
 
million. During the
 
year ended December 31,
 
2022 the Company
 
incurred less than
 
$
0.1
 
million in interest
expense and
no
 
interest was paid related to the Promissory Note.
The carrying value of the 2022 Promissory Note is as follows (in thousands):
 
December 31,
2022
Principal
$
4,225
Less: current portion
(1,113)
Note payable, net of current portion
$
3,112
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED
 
FINANCIAL STATEMENTS
 
128
As of December 31, 2022, the remaining principal payments for
 
the 2022 Promissory Note, are as follows (in thousands):
Amount
2023
$
1,113
2024
1,029
2025
1,103
2026
980
$
4,225
11.
 
Convertible Preferred Stock
In connection with
 
the Reorganization, each
 
UNS convertible preferred share
 
was exchanged for
0.2191
 
shares of Vaxxinity
 
preferred
stock and
 
each share of
 
COVAXX
 
convertible preferred
 
stock was exchanged
 
for
3.4233
 
shares of Vaxxinity
 
preferred stock.
 
During
the first
 
and second
 
quarters of
 
2021, the
 
Company raised
 
gross proceeds
 
of $
122.8
 
million in
 
connection with
 
its Series
 
B preferred
stock financing. The
 
Company issued a total
 
of
15,365,574
 
shares at a price
 
of $
8.00
 
per share. All shares
 
of the Company’s
 
Series B
preferred stock converted
 
into shares
 
of the Company’s Class
 
A common stock
 
concurrently with
 
the closing
 
of the
 
initial public offering.
 
As of
 
December 31, 2022
 
and 2021,
 
Vaxxinity’s
 
Amended and
 
Restated Certificate
 
of Incorporation
 
authorized
50,000,000
 
shares of
preferred stock with a par value of $
0.0001
 
per share. There were
no
 
shares of preferred stock outstanding as of December 31, 2022 and
2021.
The table
 
below details
 
the Company's Class
 
A common
 
stock which
 
was issued upon
 
conversion of
 
Series A
 
and Series B
 
preferred
stock concurrently
 
with the closing
 
of the IPO
 
in November 2021.
 
The common stock
 
issued upon conversion
 
reflects the application
of the stock split described in Note 1.
As of December 31, 2021
Issuance Dates
Shares Issued and
Outstanding Prior to IPO
Class A Common Stock
Issued
Upon IPO Conversion
Series A preferred stock
March 2021
62,223,095
39,989,083
Series B preferred stock
March 2021
5,441,863
3,497,338
Series B preferred stock
June 2021
9,923,711
6,377,699
77,588,669
49,864,120
12. Simple Agreement for Future Equity—SAFE
During the
 
years ended December
 
31, 2021 and
 
2020, the Company
 
executed SAFE arrangements.
 
The SAFEs were
 
not mandatorily
redeemable,
 
nor
 
did
 
they
 
require
 
the
 
Company
 
to
 
repurchase
 
a
 
fixed
 
number
 
of
 
shares.
 
The
 
Company
 
determined
 
that
 
the
 
SAFEs
contained a
 
liquidity event
 
provision that
 
embodied an
 
obligation indexed
 
to the fair
 
value of
 
the Company’s
 
equity shares
 
and could
require the Company to settle the
 
SAFE obligation by transferring assets or
 
cash. For this reason, the Company recorded
 
the SAFEs as
a liability
 
under ASC
 
480 and
 
re-measured
 
the fair
 
value at
 
the end
 
of each
 
reporting period,
 
with changes
 
in fair
 
value reported
 
in
earnings.
In
 
March
 
2020,
 
the
 
Company
 
issued
 
a
 
SAFE
 
(“SAFE
 
1”)
 
for
 
$
0.4
 
million,
 
which
 
converted
 
into
463,162
 
shares
 
of
 
Series
 
Seed-2
convertible preferred stock at
$
0.7773
 
per share in April 2020.
 
In June, July,
 
and August 2020, the Company
 
issued a series of SAFEs
(“SAFE 2”) for $
14.7
 
million, which converted into
6,307,690
 
shares of Series A-2 convertible preferred stock (“Series A-2 preferred”)
at
$
2.3241
 
per share in August 2020.
The Company determined the fair value of the SAFE 2 investment on the date of conversion and recognized the difference between the
fair value on the date of conversion and the initial fair value of SAFE 2 investment
 
in the consolidated statements of operations.
 
In December 2020,
 
the Company issued
 
a series of SAFEs
 
(collectively,
 
“SAFE 3”) for
 
$
24.3
 
million. In January
 
2021, the Company
issued additional SAFEs for $
2.9
 
million which had the same terms as SAFE 3. Key provisions of SAFE 3 are as follows:
Equity Financing
—Upon initial closing
 
of a qualified
 
financing of at
 
least $
50.0
 
million, SAFE 3 will
 
automatically convert
 
into the
greater of (1) the number of shares of SAFE 3 preferred stock equal to the purchase amount divided by the
 
SAFE 3 price, defined as the
price per share equal to the
 
post-money valuation divided by all shares
 
outstanding, all convertible securities, all issued, outstanding
 
and
promised options,
 
and the unissued
 
option pool,
 
or (2)
 
the number
 
of shares of
 
SAFE 3 preferred
 
stock equal
 
to the purchase
 
amount
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED
 
FINANCIAL STATEMENTS
 
129
divided by the
 
discount price, defined
 
as the price per
 
share of the
 
standard preferred stock
 
sold in a qualified
 
financing multiplied
 
by
eighty percent (80%).
Liquidity Event
—If there is a
 
liquidity event, as
 
defined, before the
 
termination of SAFE 3,
 
SAFE 3 will automatically
 
be entitled to
receive a
 
portion of
 
proceeds, subject
 
to the
 
liquidation priority
 
set forth
 
in the
 
agreement, due
 
and payable
 
immediately prior
 
to, or
concurrent with, the consummation of such liquidity event, equal to the greater of (i) the purchase amount or (ii) the amount payable on
the number of shares of common stock equal to the purchase amount divided
 
by the liquidity price, as outlined in the agreements.
Dissolution Event
—If there is a dissolution
 
event, as described in
 
the agreements, before the termination
 
of SAFE 3, the investor will
automatically
 
be entitled,
 
subject to
 
the liquidation
 
priority set
 
forth
 
in the
 
agreement,
 
to receive
 
a portion
 
of proceeds
 
equal
 
to the
purchase amount, due and payable to the investor immediately prior to the consummation
 
of the dissolution event.
Termination
—SAFE 3 will automatically
 
terminate immediately following
 
the earliest to occur
 
of: (i) the issuance
 
of capital stock to
the investor
 
pursuant to
 
the automatic
 
conversion provisions
 
of SAFE
 
3 or
 
(ii) the
 
payment, or
 
setting aside
 
for payment,
 
of amounts
due the investor.
 
In connection with
 
the Contribution
 
and Exchange
 
Agreement, the
 
holders of SAFEs
 
agreed to
 
convert such
 
SAFEs
into shares of Series A-3 preferred stock of COVAXX,
 
which shares were then exchanged for shares of Vaxxinity’s
 
preferred stock.
The
 
SAFEs
 
were
 
converted
 
into
 
shares
 
of
 
the
 
Company’s
 
Series
 
A
 
preferred
 
stock
 
pursuant
 
to
 
the
 
Contribution
 
and
 
Exchange
Agreement. Prior to
 
the Reorganization, all
 
the holders of outstanding
 
COVAXX
 
SAFEs agreed to
 
convert such SAFEs into
 
shares of
Series
 
A-3
 
preferred
 
stock of
 
COVAXX,
 
which
 
shares
 
were then
 
exchanged
 
for
 
shares of
 
the Company’s
 
Series
 
A preferred
 
stock,
which were converted into Series A Common Stock in connection with the Company’s
 
IPO.
13. Common Stock
As explained
 
in Note
 
1, in
 
accordance with
 
the Contribution
 
and Exchange
 
Agreement, on
 
March 2,
 
2021,
 
all outstanding
 
shares of
common
 
stock
 
of
 
UNS
 
and
 
COVAXX
 
were
 
contributed
 
to
 
Vaxxinity
 
and
 
exchanged
 
for
 
an
 
aggregate
 
of
60,360,523
 
shares
 
of
Vaxxinity’s
 
Class A common
 
stock and
10,999,149
 
shares of Vaxxinity’s
 
Class B common
 
stock. Each
 
UNS share of
 
common stock
was exchanged
 
for
0.2191
 
shares of Vaxxinity
 
common stock and
 
each share of
 
COVAXX
 
common stock
 
was exchanged for
3.4233
shares of Vaxxinity
 
common stock.
 
In June 2021, the Company converted
2,874,983
 
shares of Class A common stock held by the Company’s
 
Chief Executive Officer and
Executive Chairman on a one-to-one basis for shares of Class B common
 
stock.
 
Vaxxinity’s
 
Amended and Restated Certificate of Incorporation dated November 15, 2021 authorized
1,100,000,000
 
shares of common
stock
 
with
 
a
 
par
 
value
 
of
 
$
0.0001
 
per
 
share,
 
of
 
which
1,000,000,000
 
shares
 
have
 
been
 
designated
 
as
 
Class
 
A
 
common
 
stock
 
and
100,000,000
 
shares have been designated as Class B common stock.
 
Holders of Class
 
A common stock and
 
Class B common
 
stock have identical rights,
 
except with respect
 
to voting and conversion.
 
Except
as otherwise expressly provided in Vaxxinity’s
 
Amended and Restated Certificate of Incorporation or Bylaws, or
 
required by applicable
law,
 
holders
 
of Class
 
A common
 
stock will
 
be entitled
 
to one
 
vote per
 
share on
 
all matters
 
submitted
 
to a
 
vote
 
of stockholders
 
and
holders of our Class B common stock will be entitled to ten votes per share on all matters submitted
 
to a vote of stockholders.
 
Holders
 
of
 
Class A
 
common
 
stock
 
and
 
Class B
 
common
 
stock
 
vote
 
together
 
as a
 
single class
 
on
 
all matters
 
submitted
 
to
 
a
 
vote
 
of
stockholders, except (i) amendments
 
to Vaxxinity’s
 
Amended and Restated Certificate of
 
Incorporation to increase
 
or decrease the par
value
 
of
 
a
 
class
 
of
 
capital
 
stock,
 
in
 
which
 
case
 
the
 
applicable
 
class
 
would
 
be
 
required
 
to
 
vote
 
separately
 
to
 
approve
 
the
 
proposed
amendment
 
and (ii)
 
amendments to
 
Vaxxinity’s
 
Amended and
 
Restated Certificate
 
of Incorporation
 
that alter
 
or change
 
the powers,
preferences or special rights
 
of a class of capital
 
stock in a manner
 
that affects its holders adversely,
 
in which case the applicable
 
class
would be required to vote separately to approve the proposed amendment.
 
Holders of common
 
stock are entitled to
 
receive, ratably,
 
dividends as may
 
be declared by
 
Vaxxinity’s
 
board of directors out
 
of funds
legally available therefor if the board of directors, in its discretion, determines to issue dividends.
 
The
 
voting,
 
dividend,
 
and
 
liquidation
 
rights of
 
the holders
 
of
 
common
 
stock
 
are
 
subject to
 
and
 
qualified
 
by
 
the rights,
 
powers,
 
and
preferences of the holders of Vaxxinity’s
 
preferred stock.
 
The Company has reserved shares of common stock for issuance for the following
 
purposes:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED
 
FINANCIAL STATEMENTS
 
130
December 31,
2022
2021
Options and RSU issued and outstanding
20,716,760
21,387,909
Options available for future grants
6,064,003
7,209,538
Warrants issued and
 
outstanding
1,928,020
1,928,020
28,708,783
30,525,467
14. Equity Incentive Plan
Stock Options
In March
 
2021, the
 
Company replaced
 
the 2017
 
and 2020
 
Stock Option
 
and Grant
 
Plans with
 
the 2021
 
Stock Option
 
and Grant
 
Plan
(the “Existing 2021 Plan”), which provided for the Company to
 
grant qualified incentive options, nonqualified options, restricted stock
awards,
 
unrestricted
 
stock
 
awards,
 
and
 
restricted
 
stock
 
units
 
to
 
employees
 
and
 
non-employees
 
to
 
purchase
 
the
 
Company’s
 
Class
 
A
common stock. The Existing
 
2021 Plan authorized the
 
issuance of up
 
to
21,593,830
 
shares of Class
 
A common stock pursuant
 
to awards.
In
 
August
 
2021,
 
the
 
Company
 
canceled
 
existing
 
options
 
to
 
purchase,
 
in
 
aggregate,
6,362,455
 
shares
 
of
 
Class
 
A
 
common
 
stock
 
in
exchange for an equal number of options to purchase shares
 
of Class B common stock. The Company accounted
 
for this exchange as a
stock option modification.
 
In November 2021, the
 
Company replaced the Existing 2021
 
Plan with the 2021
 
Omnibus Incentive Compensation Plan (the
 
“New 2021
Plan”),
 
which
 
provides
 
for
 
the Company
 
to
 
grant
 
nonqualified
 
stock
 
options,
 
incentive
 
(qualified)
 
stock
 
options,
 
stock
 
appreciation
rights,
 
restricted
 
share
 
awards,
 
restricted
 
stock
 
units,
 
performance
 
awards,
 
cash
 
incentive
 
awards
 
and
 
other
 
equity-based
 
awards
(including fully vested
 
shares). The New
 
2021 Plan replaced
 
the Existing 2021
 
Plan and no
 
further grants will
 
be made under
 
the Existing
2021 Plan. The following is a summary of certain terms and conditions of the
 
New 2021 Plan.
At its
 
inception in
 
November 2021,
 
the maximum
 
number of
 
shares of
 
common stock
 
that could
 
be issued
 
under the
 
New 2021
 
Plan
was
8,700,000
 
shares of Class A equity. This number
 
increases automatically on January 1 of each year,
 
commencing January 1, 2023,
by the
 
number of
 
shares equal
 
to the
 
lesser of
 
(i)
4
% of
 
the outstanding
 
shares of
 
the Company’s
 
common stock
 
on the
 
immediately
preceding December 31, (ii) the number of shares determined by the Compensation Committee,
 
if any such determination is made, and
(iii)
 
the
 
number
 
of
 
shares
 
underlying
 
any
 
awards
 
granted
 
during
 
the
 
preceding
 
calendar
 
year,
 
net
 
of
 
the
 
shares
 
underlying
 
awards
canceled or forfeited under the New 2021
 
Plan. On January 1, 2023, in accordance with
 
the automatic “evergreen” provision of the New
2021 Plan, the maximum number of shares that can be issued under the
 
plan was increased to
11,886,306
.
As of December 31,
 
2022,
6,064,003
 
shares were available
 
for future grant.
 
Shares issued under
 
the New 2021
 
Plan that are forfeited,
canceled, reacquired by the Company prior to vesting, satisfied without the issuance
 
of stock, withheld to cover the exercise price or tax
withholdings, or
 
otherwise terminated,
 
other than by
 
exercise, shall be
 
added back
 
to the shares
 
available for
 
issuance under
 
the New
2021 Plan.
The exercise
 
price for
 
grants made
 
pursuant to
 
the terms
 
of the
 
New 2021
 
Plan is
 
determined in
 
the applicable
 
grant by
 
the board
 
of
directors. Any incentive options granted to persons
 
possessing less than 10% of the total combined
 
voting power of all classes of stock
may not have an exercise price of less than 100% of the fair market value of the common stock on the grant date.
 
Any incentive options
granted to persons possessing more than 10% of the total combined
 
voting power of all classes of stock may not have an exercise price
of less than 110% of the fair market value of
 
the common stock on the grant date.
 
The option term for incentive awards
 
may not be greater than ten years
 
from the date of the grant. Incentive
 
options granted to persons
possessing more than
 
10% of the total
 
combined voting power
 
of all classes of
 
stock may not
 
have an option
 
term of greater than
 
five
years from the date of the grant. The vesting period for equity-based awards
 
is determined at the discretion of the board of directors.
 
As
 
of
 
December 31,
 
2022
 
there
 
were
 
options
 
to
 
purchase
14,054,305
 
shares
 
of
 
Class
 
A
 
common
 
stock
 
outstanding
 
and
 
options
 
to
purchase
6,362,455
 
shares of Class
 
B common stock
 
outstanding, of which
9,830,751
 
Class A and
4,968,437
 
Class B
 
shares, respectively
were exercisable.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED
 
FINANCIAL STATEMENTS
 
131
Stock Option Activity
The following table summarizes stock option activity for the year ended
 
December 31, 2022:
 
Number of Stock
Options
Outstanding
Weighted Price
Per Share
Weighted
Contractual
Term
 
(years)
Aggregate
Intrinsic Value
(in thousands)
Balance at December 31, 2021
21,387,909
$
5.25
7.4
$
49,684
Granted
1,387,221
2.96
Exercised
(1,066,586)
(3.26)
Forfeited
(1,291,784)
(7.14)
Balance at December 31, 2022
20,416,760
$
5.07
6.8
$
7,166
Options vested and exercisable at December 31, 2022
14,799,188
$
4.62
6.5
$
6,923
The aggregate intrinsic value of options is calculated as the difference between the exercise price of the options and the fair value of the
common stock for those options that had exercise prices lower than the fair
 
value of the common stock.
The intrinsic
 
value of
 
options exercised
 
during each
 
of the
 
years ended
 
December 31,
 
2022 and
 
2021 was
 
$
4.5
 
million and
 
less than
$
0.1
 
million, respectively.
The weighted-average grant-date fair value per share of options granted during the years ended December 31,
 
2022 and 2021 was $
2.21
and $
4.21
, respectively.
The
 
total
 
fair
 
value
 
of
 
options
 
vested
 
during
 
the
 
years
 
ended
 
December
 
31,
 
2022
 
and
 
2021
 
was
 
$
8.8
 
million
 
and
 
$
24.5
 
million,
respectively.
Valuation
 
of Stock Options Granted that Contain Service Conditions Only
 
The fair
 
value of
 
each option
 
award granted
 
with service-based
 
vesting is
 
estimated on
 
the date
 
of the
 
grant using
 
the Black-Scholes
option valuation
 
model based on
 
the assumptions
 
noted in
 
the table below
 
for those
 
options granted
 
in the years
 
ended December
 
31,
2022 and 2021:
December 31,
2022
2021
Risk-free interest rate
1.46
% -
4.22
%
0.59
% -
1.35
%
Expected term (in years)
5.5
 
-
6.1
5.0
 
-
6.3
Expected volatility
90.01
% -
97.82
%
71.6
% -
93.4
%
Expected dividend yield
0.00
%
0.00
%
In August 2021, the Company canceled
378,786
 
existing Class A common stock options with
 
service-based conditions held by Mei Mei
Hu in exchange for an equal
 
number of options to purchase shares
 
of Class B common stock. The
 
Company accounted for this exchange
as a stock option modification.
 
There was no incremental stock-based compensation expense as a result of this modification as the fair-
value-based
 
measures of
 
the modified
 
award immediately
 
after the
 
modification were
 
less than
 
the fair-value-based
 
measures
 
of the
original award immediately before the modification.
Stock Options Granted to Employees that Contain Performance and Market Conditions
Included
 
in the
 
stock options
 
granted
 
during the
 
year ended
 
December 31,
 
2021 were
 
stock options
 
to purchase
6,799,625
 
shares of
Class A
 
common stock
 
that contain
 
performance-
 
and market-based
 
vesting conditions
 
granted to
 
the Mei
 
Mei Hu,
 
Louis Reese,
 
and
Peter Diamandis.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED
 
FINANCIAL STATEMENTS
 
132
In August 2021, the stock option awards for the Mei Mei Hu and Louis Reese totaling
5,983,670
 
shares were cancelled in exchange for
an equal number of
 
options to purchase shares
 
of Class B common
 
stock. The Company accounted
 
for this exchange as a
 
stock option
modification. The fair
 
value of the awards
 
granted to Mei Mei
 
Hu and Louis
 
Reese at the modification
 
date was $
23.8
 
million, valued
using the Monte-Carlo simulation model. The assumptions used in the Monte-Carlo
 
simulation model were as follows:
Time to expiration (in years)
4.5
Volatility
75
%
Risk-free interest rate
58
%
Cost of equity
25
%
Fair value of underlying common stock (as of valuation date)
$
10.07
The stock option awards for Peter Diamandis totaling
815,955
 
shares had a grant date fair value of $
0.3
 
million. The assumptions used
in the Monte-Carlo simulation model were as follows:
Time to expiration (in years)
1
Volatility
90
%
Risk-free interest rate
0.09
%
Cost of equity
25
%
Fair value of underlying common stock (as of valuation date)
$
4.12
The compensation
 
expense for
 
these awards
 
is recognized
 
when the
 
vesting condition
 
is met
 
for the
 
performance-based
 
criteria, and
over the derived service period for the market-based criteria.
The
 
condition
 
for
 
the
 
performance-based
 
criteria
 
in
 
the
 
stock
 
options
 
was
 
based
 
on
 
the
 
Company's
 
completion
 
of
 
its
 
IPO,
 
and
 
the
condition for the market-based criteria in the stock options
 
was based on the future price of the Company's common
 
stock trading at or
above a specified
 
threshold. During the
 
year ended December 31,
 
2021, stock options
 
for an
 
aggregate of
5,439,700
 
of the total
6,799,625
shares containing
 
performance- and
 
market-based vesting
 
conditions were
 
vested following
 
the satisfaction
 
of the
 
performance-based
condition achieved through
 
the Company’s
 
completion of its IPO.
 
As of December 31,
 
2022, the market-based
 
vesting conditions had
not been achieved.
Restricted Stock
The following table summarizes the Company’s
 
restricted stock activity for the year ended December 31, 2022:
 
Number of
Shares
Weighted
Average Grant
Date Fair Value
Per Share
Unvested at December 31, 2021
—
$
—
Issued
300,000
3.76
Unvested at December 31, 2022
300,000
$
3.76
The aggregate fair value
 
of restricted stock that vested
 
was less than $
0.1
 
million for the year ended
 
December 31, 2021.
No
 
restricted
stock vested during the year ended December 31, 2022.
Stock-Based Compensation Expense
The
 
Company
 
recorded
 
stock-based
 
compensation
 
expense
 
in
 
the
 
following
 
expense
 
categories
 
in
 
the
 
accompanying
 
consolidated
statements of operations (in thousands):
Years
 
Ended December 31,
2022
2021
Research and development
$
3,276
$
1,343
General and administrative
5,438
29,069
Total stock-based
 
compensation expense
$
8,714
$
30,412
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED
 
FINANCIAL STATEMENTS
 
133
As of December 31,
 
2022, total unrecognized
 
compensation cost related
 
to the unvested
 
stock-based awards was $
16.2
 
million, which
is expected to be recognized over a weighted average period of
2.7
 
years.
15. Income Taxes
The sources of losses from
 
continuing operations, before income taxes, classified between
 
domestic entities and those entities domiciled
outside of the U.S., are as follows (in thousands):
Years
 
Ended December 31,
Losses before taxes
2022
2021
Domestic entities
$
(69,943)
$
(128,538)
Entities outside the U.S.
(5,477)
(8,636)
$
(75,420)
$
(137,174)
Tax
 
Expense (Benefit)
The components of the provision for income taxes are as follows for the years ended
 
December 31, 2022 and 2021 (in thousands):
Years
 
Ended December 31,
2022
2021
Current:
Federal
$
—
$
—
State and local
—
—
Foreign
—
—
Total current
 
tax expense
—
—
Deferred tax (benefit):
Federal
—
—
State and local
—
—
Foreign
—
—
Total deferred tax
 
(benefit)
—
—
Provision for income taxes
$
—
$
—
Tax
 
Rate Reconciliation
The Company’s effective
 
tax rate for the years ended December 31, 2022 and 2021 was
0.00
% and
0.00
%, respectively.
A reconciliation of
 
the provision for
 
income taxes
 
at the
 
statutory rate to
 
the amount reflected
 
in the
 
consolidated statements of
 
operations
is as follows (in thousands):
Years
 
Ended December 31,
2022
2021
Income taxes at statutory rate
21.00
%
 
21.00
%
 
State income taxes, net of federal benefit
(1.17)
%
 
0.50
%
 
Stock compensation
(0.68)
%
 
(3.65)
%
 
Foreign rate differential
(0.59)
%
 
(0.74)
%
 
Uncertain tax positions
0.0
%
 
0.0
%
 
Other
1.41
%
 
(1.90)
%
 
Change in valuation allowance
(19.98)
%
 
(15.21)
%
 
Provision for income taxes
0.0
%
 
0.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED
 
FINANCIAL STATEMENTS
 
134
Deferred Tax
 
Assets (Liabilities)
 
The Company computes income taxes using the liability method. This method requires recognition of deferred tax assets and liabilities,
measured by enacted rates, attributable to temporary differences between the financial statements and the income tax basis
 
of assets and
liabilities. In
 
assessing the
 
realizability of
 
deferred tax
 
assets, the
 
Company
 
considers whether
 
it is
 
more likely
 
than not
 
that certain
deferred tax
 
assets will
 
be realized.
 
The ultimate
 
realization of
 
deferred tax
 
assets is
 
dependent upon
 
the generation
 
of future
 
taxable
income
 
in
 
those
 
specific
 
jurisdictions
 
prior
 
to
 
the
 
dates
 
on which
 
such
 
net
 
operating
 
losses expire.
 
The
 
Company
 
maintained
 
a
 
full
valuation allowance against
 
its net deferred
 
tax assets as of
 
December 31, 2022 and
 
2021 because the
 
Company has determined
 
that it
is more likely
 
than not that
 
these assets will
 
not be fully
 
realized based on
 
a current evaluation
 
of expected future
 
taxable income
 
and
the Company is in a cumulative loss position. The valuation allowance increased
 
by $
15.0
 
million during the year ended December 31,
2022 and
 
$
20.9
 
million during
 
the year
 
ended December 31,
 
2021, primarily
 
as a
 
result of
 
net operating
 
losses generated
 
during the
periods. The Company reevaluates the positive and negative evidence
 
at each reporting period.
Significant components of the Company’s
 
deferred tax assets and liabilities are as follows (in thousands):
As of December 31,
2022
2021
Deferred tax assets:
Net operating loss carryforwards
$
39,184
$
32,405
Stock Compensation
2,090
1,735
Section 174 Costs
7,424
—
Other
559
27
Total deferred tax
 
assets
49,257
34,167
Less: valuation allowance
(49,173)
(34,106)
Net deferred tax assets
$
84
$
61
Deferred tax liabilities:
Depreciation
$
(84)
$
(61)
Net deferred tax liabilities
(84)
(61)
Net deferred income taxes
$
—
$
—
Net Operating Losses
The Company had total net operating loss carryforwards
 
for U.S. federal income tax purposes of $
165.1
 
million, and $
134.6
 
million as
of December 31, 2022 and 2021, respectively, that have no expiration
 
date and foreign net operating loss
 
carryforwards of $
29.2
 
million
and $
24.0
 
million, respectively, that
 
have no expiration date.
Utilization
 
of
 
the
 
NOL
 
carryforwards
 
and
 
credits
 
may
 
be
 
subject
 
to
 
a
 
substantial
 
annual
 
limitation
 
due
 
to
 
the
 
ownership
 
change
limitations provided
 
by the Internal
 
Revenue Code
 
Sections 382
 
and 383 (the
 
“Code”), as amended,
 
and similar state
 
provisions. The
Company has not completed
 
a study to
 
assess whether an ownership
 
change has occurred or
 
whether there have been
 
multiple ownership
changes since
 
the Company’s
 
formation due
 
to the
 
complexity and
 
cost associated
 
with such
 
a study,
 
and the
 
fact that
 
there may
 
be
additional ownership changes in the future. If
 
the Company experienced an ownership change at
 
any time since its formation, utilization
of the
 
NOL or
 
tax credit
 
carryforwards to
 
offset future
 
taxable income
 
and taxes,
 
respectively,
 
would be
 
subject to
 
annual limitation
under the Code. The annual
 
limitation may result in
 
the expiration of the NOL and
 
credits before utilization. If impaired,
 
the NOL and
credit carryforwards would be removed from the deferred tax asset schedule with a corresponding reduction in the valuation allowance.
On March 27, 2020, the President
 
of the United States signed into law
 
the CARES Act, which, along with
 
earlier issued IRS guidance,
contains numerous
 
provisions that
 
may benefit
 
the Company,
 
including the
 
deferral of
 
certain taxes.
 
The CARES
 
Act did
 
not have
 
a
material impact on the Company’s
 
tax provision for the years ended December 31, 2022 and 2021.
The Consolidated Appropriations Act, 2021, which was enacted on December
 
27, 2020, has expanded, extended, and clarified selected
CARES Act provisions,
 
specifically on Paycheck Protection
 
Program loan and Employee
 
Retention Tax
 
Credit, 100% deductibility
 
of
business meals as well
 
as other tax
 
extenders. The Consolidated
 
Appropriations Act did
 
not have a material
 
impact on the
 
Company’s
tax provision for the year ended December 31, 2022 and 2021.
The Inflation Reduction Act (IRA) was signed into law on August 16, 2022. The IRA introduces a 15% corporate alternative minimum
tax
 
(CAMT)
 
for
 
corporations
 
whose
 
average
 
annual
 
adjusted
 
financial
 
statement
 
income
 
(AFSI)
 
for
 
any
 
consecutive
 
three-tax-year
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED
 
FINANCIAL STATEMENTS
 
135
period ending after December 31, 2021 and preceding the tax year exceeds $1.0
 
billion and a 1% excise tax on stock repurchases
 
made
by publicly traded
 
U.S. corporations. Since the
 
Company does not meet
 
the book income threshold
 
to be subject to
 
CAMT,
 
the excise
tax is not
 
an ASC 740
 
tax, they are
 
not expected to
 
have any impact.
 
The other tax
 
law updates are
 
not expected
 
to have any
 
material
impact to the Company's consolidated financial statements and related disclosures.
 
The CHIPS
 
and Science
 
Act was
 
signed into
 
law on
 
August 9,
 
2022. The
 
Act introduces
 
the advanced
 
manufacturing investment
 
tax
credit, a 25% tax credit for investments in semiconductor manufacturing. It also includes incentives for manufacturing semiconductors,
as well as specialized tooling equipment required
 
in the semiconductor manufacturing process. The Company is not
 
currently claiming
any such tax credits, as
 
such the tax law updates
 
are not expected to have
 
any material impact to the
 
Company's consolidated financial
statements and related disclosures.
Enacted in 2017,
 
the Tax
 
Cuts and Jobs Act
 
(“TCJA”) included significant
 
changes in tax law
 
including a change
 
to Internal Revenue
Code section
 
174
 
regarding the
 
deductibility
 
of research
 
and experimentation
 
expenses (“R&E
 
expenses”).
 
The section
 
174 tax
 
law
change had a delayed effective date and became effective for the Company in 2022. New section 174 requires that companies capitalize
and amortize R&E expenses
 
performed in the U.S.
 
over five years and further
 
provides for a fifteen-year amortization
 
period for R&E
expenses
 
incurred
 
outside
 
the
 
U.S.
 
The
 
Company
 
has
 
factored
 
any
 
impact
 
of
 
section
 
174
 
in
 
the
 
Company’s
 
consolidated
 
financial
statements and related disclosures.
The Company
 
is subject
 
to tax
 
in the
 
United States
 
and many
 
state and
 
local jurisdictions.
 
The Company,
 
with certain
 
exceptions,
 
is
subject to income tax examinations by U.S. federal, state and local for tax years 2017 and future periods. The Company is not currently
under audit for any US federal or state or foreign income tax audits.
Uncertain Tax
 
Positions
A summary of the Company’s unrecognized
 
tax benefits activity and related information is presented as follows (in thousands):
Years
 
Ended December 31,
2022
2021
Uncertain tax position liability at the beginning of the year
$
652
$
652
Increases (decreases) related to tax positions taken during current period
—
—
Uncertain tax position liability at the end of the year
$
652
$
652
The unrecognized tax benefits for U.S. jurisdiction of $
0.7
 
million, if recognized, would not have an impact
 
on the Company’s effective
tax
 
rate
 
assuming
 
the
 
Company
 
continues
 
to
 
maintain
 
a
 
full
 
valuation
 
allowance
 
position
 
against
 
its
 
U.S.
 
deferred
 
tax
 
assets.
 
The
remaining unrecognized tax benefits of less than $
0.1
 
million, if recognized, will have an impact
 
on the effective tax rate. The Company
recognizes accrued interest and penalties related
 
to unrecognized tax benefits in
 
income tax expense. We accrued $
0.2
 
million in interest
and penalties related to prior year’s tax filings, as of
 
December 31, 2022.
 
The
 
Company
 
is subject
 
to
 
U.S. federal
 
income
 
tax
 
as well
 
as income
 
tax
 
of various
 
foreign
 
jurisdictions.
 
Generally,
 
the
 
statute
 
of
limitations for examination
 
of the Company’s
 
U.S. federal and
 
foreign income tax
 
filings are open
 
for the years
 
ending December 31,
2017 and future periods.
16. Net Loss Per Share
The Company’s unvested restricted
 
common shares have been excluded from the computation of basic net loss per
 
share.
 
The
 
Company’s
 
potentially
 
dilutive
 
securities,
 
which
 
include
 
options,
 
unvested
 
restricted
 
stock,
 
convertible
 
notes
 
payable
 
and
convertible
 
preferred stock, have been excluded
 
from the computation of diluted net
 
loss per share as the effect
 
would be to reduce the
net loss per share.
 
Therefore, the weighted average
 
number of common
 
shares outstanding used to
 
calculate both basic and
 
diluted net
loss per share is the
 
same. The Company excluded
 
the following potential common
 
shares, presented based on
 
amounts outstanding at
each period end, from the computation of diluted net loss per share for the years ended December 31, 2022 and 2021 because including
them would have had an anti-dilutive effect:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED
 
FINANCIAL STATEMENTS
 
136
December 31,
2022
2021
Unvested restricted stock
300,000
-
Options issued and outstanding
20,416,760
21,387,909
Warrants issued and
 
outstanding
1,928,020
1,928,020
22,644,780
23,315,929
17. Commitments and Contingencies
Contractual Obligations
 
The Company
 
enters into
 
agreements with
 
contract research
 
organizations
 
(“CROs”) to
 
conduct clinical
 
trials and
 
preclinical studies
and contract manufacturing organizations
 
(“CMOs”) to produce vaccines and other
 
potential product candidates. Contracts with
 
CROs
and CMOs are generally cancellable, with notice, at the Company’s
 
option.
 
As of December 31, 2022, the Company
 
had remaining prepayments to CROs of
 
$
2.9
 
million and remaining prepayments to
 
CMOs of
less than
 
$
0.1
 
million for
 
activities associated
 
with the
 
conduct of
 
its clinical
 
trials and
 
for the
 
production of
 
the Company’s
 
product
candidates.
 
Michael J. Fox Foundation Grant
 
On November 3,
 
2021, the Company
 
was awarded a
 
grant from the
 
Michael J. Fox
 
Foundation for Parkinson’s
 
Research (“MJFF”) in
the amount of $
0.8
 
million to be used
 
in a project for
 
the exploration of markers
 
for target engagement
 
in individuals immunized
 
with
UB-312, an
 
active
a
-Synuclein immunotherapy.
 
The Company
 
will oversee
 
sample management,
 
sample preparation
 
(IgG fractions)
and
 
distribution,
 
as
 
well
 
as
 
characterize
 
the
 
binding
 
properties
 
of
 
the
 
antibodies
 
against
 
pathological
 
forms
 
of
 
aSyn.
 
As
 
funding
 
is
expected to be
 
utilized over a
 
two-year period, as
 
cash is
 
received, the amount
 
expected to the
 
utilized within twelve
 
months is
 
recognized
to short-term
 
restricted cash/deposits,
 
with a
 
corresponding short-term
 
accrued liability,
 
which is
 
released as
 
the related
 
expenses are
offset. The Company recognizes
 
payments from MJFF as a
 
reduction of research and development
 
expenses, in the same period
 
as the
expenses that the
 
grant is
 
intended to
 
reimburse are incurred.
 
The remaining balance
 
of cash
 
received is recognized
 
to long-term
 
restricted
cash/deposits, with a
 
corresponding long-term accrued liability. As
 
of December 31, 2022,
 
there was
no
 
balance remaining in
 
the accrued
liability related to this grant. For
 
the years ended December 31, 2022 and 2021,
 
the Company recognized $
0.1
 
million and less than $
0.1
million, respectively,
 
as a reduction of research and development expenses for amounts reimbursed through
 
the grant.
Coalition for Epidemic Preparedness Innovations (“CEPI”) Grant
In April
 
2022, the
 
Company entered
 
into an
 
agreement with
 
the Coalition
 
for Epidemic
 
Preparedness Innovations
 
(“CEPI”) whereby
CEPI has
 
agreed to
 
provide
 
funding of
 
up to
 
$
9.3
 
million to
 
co-fund
 
a Phase
 
3 clinical
 
trial of
 
Vaxxinity’s
 
next generation
 
UB-612
COVID-19
 
vaccine
 
candidate
 
as
 
a
 
heterologous
 
–
 
or
 
‘mix-and-match’
 
–
 
booster
 
dose.
 
The
 
Phase
 
3
 
trial,
 
which
 
began
 
in
 
2022,
 
is
evaluating the
 
ability of
 
UB-612 to
 
boost COVID-19
 
immunity against
 
the original
 
strain and
 
multiple variants
 
of concern
 
including
Omicron - in people aged 16 years or older, who
 
have been previously immunized with an authorized COVID-19
 
vaccine.
The Company will also be performing further manufacturing scale-up
 
work to enable readiness for potential commercialization. Under
the terms of the
 
agreement with CEPI, if
 
successful, a portion
 
of the released doses
 
of the commercial
 
product will be delivered
 
to the
COVID-19 Vaccines
 
Global Access (“COVAX”)
 
consortium for distribution to developing countries at low cost.
Cash payments received in advance under the CEPI Funding Agreement are restricted as to their use until expenditures contemplated in
the funding agreement are
 
incurred. As funding is expected
 
to be received in tranches
 
over an eighteen month period,
 
and the amounts
received in each tranche are expected to the utilized within twelve months, the funds received are reflected within restricted cash with a
corresponding short-term accrued liability.
 
The Company recognizes payments from
 
CEPI as a reduction of research
 
and development
expenses, in the same period as the expenses that the grant is intended to reimburse are incurred. As of December 31, 2022, the balance
of the restricted cash and
 
short-term accrued liability was
 
$
1.0
 
million. For the year ended
 
December 31, 2022, the Company recognized
a reduction of $
7.5
 
million of research and development expenses.
Lease Agreements
 
The Company has
two
 
operating lease agreements for
 
office and laboratory space.
 
The Company is
 
also required to
 
pay certain operating
costs under its leases.
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED
 
FINANCIAL STATEMENTS
 
137
In August 2022, the Company entered into a lease for
9,839
 
square feet of lab and office space with Space Florida in
 
Exploration Park,
Florida commencing August 12,
 
2022. The lease
 
has an initial
one-year
 
term with an
 
annual lease obligation of
 
$
0.5
 
million, after Lessee
credits. Additionally,
 
the lease requires the Company to provide a security deposit in the amount of less than
 
$
0.1
 
million.
In April 2022, the
 
Company entered into a
 
facility lease agreement for
4,419
 
square feet of office
 
space in New York,
 
New York.
 
The
lease commenced in April 2022
 
and will expire March 2029 with
 
no option to renew.
 
This lease and its terms were
 
reviewed using the
guidance found in ASC 842. Since the lease has a non-cancellable period of
one year
, and after the first year both the Company and the
landlord have the
 
option to early
 
terminate the lease
 
for any or
 
no reason, the
 
Company has elected
 
to apply the
 
short-term expedient,
which does not subject the New York
 
lease to capitalization.
 
Rent expense for each
 
of the years
 
ended December 31, 2022 and
 
2021 amounted to
 
$
0.5
 
million and less
 
than $
0.1
 
million, respectively.
 
License Agreements
In October 2014, the Company entered into a contribution agreement with
 
UBI, whereby UBI contributed and assigned to the Company
assets and granted
 
a non-exclusive license
 
to certain technologies deemed
 
necessary or reasonably
 
useful in the
 
utilization of the licensed
intellectual
 
property.
 
In consideration,
 
the Company
 
issued
32,505,306
 
shares of
 
common stock
 
to UBI.
 
The agreement
 
allowed for
exploitation of all diagnostic, prophylactic, and therapeutic
 
uses and indications in humans in
 
the field of neurology. The agreement was
amended in
 
August 2019
 
to provide
 
the Company
 
with exclusivity
 
(except as
 
to UBI)
 
in the
 
field of
 
neurology and
 
the flexibility
 
to
pursue indications outside the initial field limitations.
 
In connection with
 
the amendment, the
 
Company agreed to execute
 
an exclusive, worldwide
 
license agreement for
 
any product that
 
is
developed by the
 
Company outside the original
 
field. The terms and
 
conditions are to be
 
negotiated in good
 
faith and mutually
 
agreed
upon. The
 
Company anticipates
 
that if
 
it is required
 
to enter into
 
an exclusive
 
license agreement,
 
it will be
 
able to negotiate
 
financial
terms for the license
 
at prevailing market
 
rates within the pharmaceutical
 
industry.
 
Accordingly,
 
the Company may
 
be required to pay
UBI upfront fees, revenue royalties, development milestones, commercial
 
milestones, sublicense fees, and other related fees.
 
Vaxxinity’s
 
COVAXX
 
subsidiary was
 
formed in March
 
2020 through
 
a transfer of
 
technology from
 
UBI, UBI IP
 
Holdings, and
 
UBI
US Holdings, LLC,
 
all related parties
 
of the Company,
 
whereby the Company,
 
pursuant to an
 
April 2020 license
 
agreement, obtained
exclusive
 
rights to
 
intellectual
 
property
 
and
 
technology
 
related
 
to the
 
discovery
 
of vaccines,
 
diagnostic
 
assays,
 
and
 
antigens
 
for
 
use
against all coronaviruses including,
 
without limitation, SARS,
 
MERS, and COVID-19 in
 
all strains in
 
humans. The license is
 
worldwide,
perpetual, exclusive and fully paid-up. There are no future royalty or milestone
 
payment obligations associated with the agreement. The
Company has the right to grant sublicenses.
 
The
 
Company
 
considered
 
ASC
 
805,
 
“Business
 
Combinations”
 
and
 
ASC
 
730,
 
“Research
 
and
 
Development”
 
in
 
determining
 
how
 
to
account for the
 
issuance of common
 
stock. The license
 
agreement is considered
 
to be a common
 
control transfer; however,
 
the related
party did not have any basis in the assets licensed, so there was no accounting impact for
 
the Company.
 
In August 2021,
 
Vaxxinity
 
entered into a
 
license agreement (the
 
“Platform License
 
Agreement”) with UBI
 
and certain of
 
its affiliates
that
 
expanded
 
intellectual
 
property
 
rights
 
previously
 
licensed
 
under
 
previously
 
issued
 
license
 
agreements
 
with
 
UBI.
 
As
 
part
 
of
 
the
agreement, Vaxxinity
 
obtained a worldwide, sublicensable
 
(subject to certain conditions), perpetual,
 
fully paid-up, royalty-free license
to
 
research,
 
develop,
 
make,
 
have
 
made,
 
utilize,
 
import,
 
export,
 
market,
 
distribute,
 
offer
 
for
 
sale,
 
sell,
 
have
 
sold,
 
commercialize
 
or
otherwise exploit peptide-based vaccines in the field of all human prophylactic and therapeutic uses, except for such vaccines related to
human immunodeficiency
 
virus (HIV), herpes
 
simplex virus (HSE)
 
and Immunoglobulin E
 
(IgE). The patents
 
and patent applications
licensed under the
 
Platform License Agreement
 
include claims directed
 
to a CpG delivery
 
system, artificial T
 
helper cell epitopes
 
and
certain designer
 
peptides and
 
proteins utilized
 
in UB-612.
 
As described
 
above, in
 
consideration for
 
the Platform
 
License Agreement,
the Company issued to UBI a warrant to purchase Class A common stock (the
 
“UBI Warrant”).
 
The Company considered ASC 805, “Business Combinations” (“ASC 805”) and ASC 730,
 
“Research and Development” (“ASC 730”)
in determining how to account
 
for the issuance of the
 
Class A common stock warrants. The
 
Class A common stock warrants
 
were issued
to a related party in exchange for a license agreement.
 
The majority of the voting interests in the related party
 
and that of the Company
were held
 
by a
 
group of
 
immediate family
 
members, at
 
the time
 
of the
 
transaction, and
 
as such the
 
transaction constitutes
 
a common
control transaction,
 
which requires
 
the license
 
to be
 
accounted for
 
at the
 
carrying value
 
in the
 
books of
 
the transferor.
 
As the
 
related
party did not have any basis in the assets licensed, there was no accounting impact for
 
the Company.
Indemnification Agreements
 
In the
 
ordinary course
 
of business,
 
the Company
 
may provide
 
indemnification of
 
varying scope
 
and terms
 
to employees,
 
consultants,
vendors, lessors,
 
business partners
 
and other
 
parties with
 
respect to
 
certain matters
 
including, but
 
not limited
 
to, losses
 
arising out
 
of
breach of such agreements
 
or from intellectual property
 
infringement claims made by
 
third parties. In addition,
 
the Company has entered
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED
 
FINANCIAL STATEMENTS
 
138
into indemnification
 
agreements with
 
members of
 
its board
 
of directors
 
and executive
 
officers that
 
will require
 
the Company,
 
among
other things, to indemnify them
 
against certain liabilities that may
 
arise by reason of their status or
 
service as directors or officers.
 
The
maximum potential amount
 
of future payments the
 
Company could be
 
required to make under
 
these indemnification agreements
 
is, in
many cases, unlimited.
 
To
 
date, the Company
 
has not incurred
 
any material
 
costs as a
 
result of
 
such indemnification
 
obligations. The
Company
 
is
 
not
 
aware
 
of
 
any
 
indemnification
 
arrangements
 
that
 
could
 
have
 
a
 
material
 
effect
 
on
 
its
 
financial
 
position,
 
results
 
of
operations, or cash flows, and it has not accrued any liabilities related to such obligations
 
as of December 31, 2022 or 2021.
 
Legal Proceedings
 
From
 
time
 
to
 
time,
 
the
 
Company
 
may
 
become
 
involved
 
in
 
legal
 
proceedings
 
arising
 
in
 
the
 
ordinary
 
course
 
of
 
business.
 
As
 
of
December 31, 2022 and 2021, the Company was not a party to any material legal matters
 
or claims.
 
In December 2022,
 
the Board became
 
aware of pending
 
litigation filed by
 
the Company’s
 
CEO against a
 
significant stockholder,
 
Ask
America, LLC (“Ask America”).
 
The CEO filed the lawsuit in Texas in May 2022 regarding an alleged private agreement
 
between the
CEO,
 
the
 
Company’s
 
Chairman,
 
and
 
Ask
 
America,
 
relating
 
to
 
the
 
potential
 
purchase
 
of
 
stock
 
by
 
Ask
 
America
 
in
 
the
 
Company’s
November 2021
 
initial public offering,
 
on behalf of
 
a former director.
 
Ask America asserts
 
that the CEO
 
and Chairman guaranteed
 
a
loan
 
by
 
Ask
 
America
 
to
 
fund
 
the
 
former
 
director’s
 
contemplated
 
purchase.
 
The
 
lawsuit
 
seeks
 
a
 
declaration
 
that
 
no
 
enforceable
transaction was
 
ever completed
 
or consummated.
 
Although the
 
Company is
 
not a
 
party to
 
the litigation,
 
the Board
 
formed a
 
special
committee, comprised
 
of independent
 
directors who
 
are being
 
advised by
 
independent legal
 
counsel, to
 
conduct an
 
investigation into
the
 
circumstances
 
of
 
the
 
litigation
 
and
 
the
 
purported
 
transaction.
 
The
 
investigation
 
concluded
 
in
 
the
 
first
 
quarter
 
of
 
2023,
 
and
 
the
company is
 
evaluating certain
 
additional control
 
measures, including
 
(i) additional
 
training for
 
executives and
 
directors on
 
securities
regulations,
 
(ii)
 
additional
 
internal
 
reporting
 
requirements
 
regarding
 
transactions
 
between
 
Company
 
insiders,
 
stockholders,
 
or
 
other
related
 
parties,
 
and
 
(iii)
 
retention
 
of
 
a
 
consultant
 
or
 
other
 
advisor
 
with
 
public
 
company
 
and
 
capital
 
markets
 
experience
 
to
 
assist
management in connection with capital markets strategy and activity.
 
Loss Contingency
In April 2021, the Company engaged United Biopharma, Inc. (UBP) to begin
 
acquiring raw materials for use in the production of
GMP grade recombinant protein for UB-612, our Covid vaccine candidate.
 
It was anticipated that $
7.2
 
million in raw materials would
be needed to produce the initial 30kg of protein. An Authorization to Proceed (ATP)
 
agreement authorized UBP to acquire the first $
3
million of materials using an advance payment from Vaxxinity,
 
pending execution of a final supply agreement between the parties.
Through August 2021, $
7.2
 
million of materials were ordered, $
3
 
million of materials were received by UBP and paid for with the
advance payment, and the Company expensed $
1.2
 
million as these raw materials were used to produce proteins.
 
During 2022,
Vaxxinity
 
recognized an additional $
1.8
 
million in expense related to the materials UBP had taken possession of but had not yet
 
used
in production.
When Vaxxinity
 
asked to pause further manufacture of protein upon rejection of the EUA by Taiwan
 
in August 2021, UBP requested
that its suppliers cancel the remaining $
4.2
 
million in orders where it had not taken possession of the materials. In the fourth
 
quarter of
2022, the Company learned that most of the suppliers refused to cancel
 
the orders, although some agreed to seek other buyers for the
materials. For these orders, management has not yet concluded that
 
a loss for Vaxxinity
 
for this entire amount is probable, since they
were not originally authorized by the ATP,
 
and UBP’s suppliers may be able to dispose
 
of some amount to other buyers. Hence, an
expense has not been recognized for them.
18. Benefit Plans
In
 
March
 
2018,
 
the
 
Company
 
established
 
a
 
defined
 
contribution
 
savings
 
plan
 
under
 
Section
 
401(k)
 
of
 
the
 
Code.
 
This
 
plan
 
covers
substantially all
 
U.S. employees
 
who meet
 
minimum age
 
and service
 
requirements and
 
allows participants
 
to defer
 
a portion
 
of their
annual compensation on a pre-tax basis. The Company does not make matching
 
contributions to the Plan.
The Company offers
 
its Ireland-based employees
 
a Personal Retirement Savings
 
Account (“PRSA”) that allows
 
participants to defer a
portion of their annual compensation. The Company provides contributions
 
equal to
5
% of each participant’s annual
 
salary. During the
years ended December 31, 2022 and 2021, the Company contributed
 
less than $
0.1
 
million per year to the PRSA accounts.
19. Related Party Transactions
The Company has a Related
 
Party policy which defines related parties,
 
and assigns oversight responsibility for related party
 
transactions
to
 
the
 
Company's
 
Audit
 
Committee.
 
The
 
Committee
 
reviews
 
in
 
advance
 
related
 
party
 
transactions,
 
and
 
considers
 
multiple
 
factors,
including the proposed aggregate
 
value of the
 
transaction, or, in the
 
case of indebtedness,
 
the amount of
 
principal that would
 
be involved,
the benefits
 
to the
 
Company of
 
the proposed
 
transaction, the
 
availability of
 
other sources
 
of comparable
 
products or
 
services, and
 
an
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED
 
FINANCIAL STATEMENTS
 
139
assessment of
 
whether the
 
proposed transaction
 
is on terms
 
that are comparable
 
to the terms
 
available to
 
or from, as
 
the case may
 
be,
unrelated third parties.
 
Under the policy,
 
related party transactions
 
are approved only
 
if the Audit Committee
 
determines in good
 
faith
that the transaction is not inconsistent with the interests of the Company
 
and its shareholders.
The Company has related party arrangements with UBI
 
and a number of its
 
affiliated companies listed namely, United Biomedical, Inc.,
Asia (“UBI-Asia”), UBI Pharma, Inc. (“UBI-P”), United BioPharma,
 
Inc (“UBP”) and UBI IP Holding (“UBI-IP”).
As of December 31, 2022 UBI and its affiliated companies
 
owned
44
% of the Company’s stock. The majority
 
of the voting interests in
both UBI and the Company were held by a group of immediate family members
 
,
 
and as such the entities are under common control.
These related parties are governed by various Master Services Agreement
 
s
 
(“MSA”) detailed below.
 
UBI MSA - UBI provides research, development and clinical functions to the Company. There is also a purchase arrangement with
UBI for the production and shipment of the Company’s
 
diagnostic test kits.
UBIA MSA - UBI-Asia for manufacturing, quality control, testing, validation,
 
and supply services.
UBP MSA - United BioPharma, Inc provide the Company with manufacturing,
 
testing and validation.
COVID MSA (“COVID
 
MSA”) -
 
COVID MSA provides
 
that UBI acts
 
as COVAXX’s
 
agent with respect
 
to matters relating
 
the
Company’s COVID-19 program and provides research,
 
development, manufacturing and back office administrative services to the
Company.
 
COVID-19
 
Relief
 
MSA
 
-
 
A
 
four-company
 
MSA
 
with
 
UBI,
 
UBI-Asia
 
and
 
UBP.
 
The
 
Company
 
is
 
an
 
exclusive
 
licensee
 
of
technologies related to diagnostics, vaccines, and therapies for COVID-19.
 
The MSA established the terms under which UBI-Asia
provides research, development,
 
testing and manufacturing services
 
to the Company and
 
UBP provides contract
 
development and
manufacturing services to the Company.
Total
 
amounts
 
due
 
to
 
related
 
parties
 
were
 
$
12.8
 
million
 
and
 
$
19.4
 
million
 
as
 
of
 
December 31,
 
2022
 
and
 
2021,
 
respectively.
 
Total
amounts due
 
from related
 
parties were
 
$
0.4
 
million and
 
$
0.4
 
million as
 
of December 31,
 
2022 and
 
2021, respectively.
 
Total
 
service
fees incurred were $
4.2
 
million and $
35.4
 
million for the years ended December 31, 2022 and 2021, respectively.
 
Taiwan
 
Centers for Disease Control Grant (“Taiwan
 
CDC”)
 
UBI-Asia, which is responsible for applying for and managing grants on our behalf under the
 
COVID-19 program, was awarded a grant
by the Taiwan CDC for COVID-19 vaccine development. The Company contracted with UBI-Asia to conduct a two-phase clinical trial
of a COVID-19 vaccine candidate in Taiwan,
 
which was completed in 2021. Costs that were incurred to complete the two phases of the
clinical trial were reimbursed based on the achievement of certain milestones
 
as provided in the agreement.
Total related party operating
 
activity, including the activity described
 
above is as follows (in thousands):
December 31,
2022
2021
Consolidated balance sheet
Assets
Prepaid expenses and other current assets
$
237
$
3,517
Property and equipment, net
—
337
Amounts due from related parties
414
393
Liabilities
Accrued expenses
—
—
Amounts due to related parties
12,772
19,407
Current portion of note payable
1,113
—
Note payable
3,112
—
Accrued interest payable
$
73
$
—
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONSOLIDATED
 
FINANCIAL STATEMENTS
 
140
Years
 
Ended December 31,
2022
2021
Consolidated statements of operations
Revenue
$
—
$
—
Cost of revenue
—
—
Operating expenses
Research and development
Services provided by related parties
4,172
41,430
Taiwan CDC grant reimbursement
 
from related party
—
(7,199)
General and administrative
Services provided by related parties
—
1,173
Other (income) expense
Related party interest expense
$
 
73
$
 
—
20. Subsequent Events
On March 9, 2023, the Company completed its rolling submission of a conditional authorization
 
application to the UK MHRA for UB-
612 based on the Phase 3 study results.
 
 
141
Item 9. Changes in and Disagreements with Accountants on Accounting
 
and Financial Disclosure.
 
None.
 
Item 9A. Controls and Procedures.
 
Evaluation of Disclosure Controls and Procedures
Our management,
 
with the
 
participation of
 
our principal
 
executive officer
 
and principal
 
financial officer,
 
evaluated, as
 
of and
 
for the
year ended of the
 
period covered by this
 
Annual Report on Form
 
10-K, the effectiveness
 
of our disclosure
 
controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). In designing and evaluating our disclosure controls
 
and procedures,
management
 
recognizes
 
that
 
any
 
controls
 
and
 
procedures,
 
no
 
matter
 
how
 
well
 
designed
 
and
 
operated,
 
can
 
provide
 
only
 
reasonable
assurance of achieving the desired control objectives. In addition,
 
the design of disclosure controls and procedures must reflect the fact
that there
 
are resource
 
constraints, and
 
that management
 
is required
 
to apply
 
judgment in
 
evaluating the
 
benefits of
 
possible controls
and procedures relative to their costs. Based on management’s
 
evaluation our principal executive officer
 
and principal financial officer
concluded that, as of December 31, 2022, our disclosure controls and procedures
 
were effective at the reasonable assurance level.
Report on Internal Control Over Financial Reporting
The
 
Company’s
 
management
 
is responsible
 
for
 
establishing
 
and
 
maintaining
 
adequate
 
internal
 
control over
 
financial
 
reporting.
 
The
internal control process has been designed under management’s supervision
 
to provide reasonable assurance regarding the reliability of
financial reporting and the
 
preparation of the
 
Company’s consolidated financial statements for external
 
reporting purposes in
 
accordance
with U.S. GAAP.
Management conducted an
 
assessment of
 
the effectiveness of
 
the Company’s internal control
 
over financial reporting
 
as of
 
December 31,
2022 utilizing
 
the framework
 
established in
 
Internal Control
 
– Integrated
 
Framework (2013)
 
issued by
 
the Committee
 
of Sponsoring
Organizations
 
of
 
the
 
Treadway
 
Commission
 
(COSO).
 
Based
 
on
 
this
 
assessment,
 
management
 
has
 
determined
 
that
 
the
 
Company’s
internal control over financial reporting as of December 31, 2022
 
is effective.
The Company’s internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that
accurately and
 
fairly reflect,
 
in reasonable
 
detail, transactions
 
and dispositions
 
of assets;
 
and provide
 
reasonable assurances
 
that: (1)
transactions are
 
recorded as
 
necessary to
 
permit preparation
 
of financial
 
statements in
 
accordance with
 
U.S. GAAP;
 
(2) receipts
 
and
expenditures
 
are
 
being
 
made
 
only
 
in
 
accordance
 
with
 
authorizations
 
of
 
management
 
and
 
the
 
directors
 
of
 
the
 
Company;
 
and
 
(3)
unauthorized acquisition, use,
 
or disposition of the
 
Company’s assets
 
that could have a
 
material effect on
 
the Company’s
 
consolidated
financial statements are prevented or timely detected.
All internal
 
control systems,
 
no matter
 
how well
 
designed, have
 
inherent limitations.
 
Therefore, even
 
those systems
 
determined to
 
be
effective can
 
provide only
 
reasonable assurance
 
with respect
 
to financial
 
statement preparation
 
and presentation.
 
Also, projections
 
of
any
 
evaluation
 
of effectiveness
 
to future
 
periods
 
are subject
 
to the
 
risk that
 
controls
 
may
 
become
 
inadequate
 
because of
 
changes
 
in
conditions, or that the degree of compliance with the policies or procedures
 
may deteriorate.
This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm due to an
exemption established by the JOBS Act for “emerging growth
 
companies.”
Changes in Internal Control Over Financial Reporting
A material
 
weakness is
 
a deficiency,
 
or combination
 
of deficiencies,
 
in internal
 
control over
 
financial reporting,
 
such that
 
there
 
is a
reasonable
 
possibility
 
that
 
a material
 
misstatement
 
of
 
a
 
company’s
 
annual and
 
interim
 
consolidated
 
financial
 
statements
 
will not
 
be
detected or prevented on a timely basis.
During
 
2022,
 
we
 
invested
 
resources
 
to
 
remediate
 
the
 
material
 
weaknesses
 
identified
 
in
 
the
 
preparation
 
of
 
our
 
audited
 
consolidated
financial statements for the year ended December 31, 2021 and in the
 
preparation of our unaudited consolidated financial statements for
the quarter ended March 31, 2022. These remediation activities involved
 
the following:
•
hiring additional accounting
 
personnel with the
 
appropriate level of
 
skill and experience
 
for public company
 
financial reporting;
•
designing and implementing a formal financial close process
 
that includes multiple levels of reviews of accounting
 
entries; and
•
supplementing our resources for evaluating and
 
accounting for complex transactions and
 
stock options through the use
 
of third-
party advisors.
Other
 
than
 
the
 
measures
 
described
 
in
 
“Remediation
 
Measures”
 
above,
 
there
 
were
 
no
 
changes
 
in
 
our
 
internal
 
control
 
over
 
financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
 
Act) during the quarter ended December 31, 2022
 
that have
materially affected, or are reasonably likely to materially
 
affect, our internal control over financial reporting.
 
 
 
 
 
 
 
142
Item 9B. Other Information.
 
None.
 
Item 9C. Disclosure Regarding Foreign
 
Jurisdictions that Prevent Inspections.
 
The disclosure required by this item is not applicable.
PART
 
III
 
Items 10, 11, 12, 13 and 14.
Our independent registered public accounting firm is Armanino LLP,
 
San Ramon, California, Auditor Firm ID: 32.
The
 
information
 
required
 
by these
 
items
 
is incorporated
 
by reference
 
to our
 
definitive
 
proxy
 
statement relating
 
to our
 
2023
 
Annual
Meeting of Shareholders. We
 
currently anticipate that our definitive
 
proxy statement will be filed with
 
the SEC not later than 120 days
after December 31, 2022, pursuant to Regulation 14A of the Securities Exchange
 
Act of 1934, as amended.
 
PART
 
IV
 
Item 15. Exhibits and Financial Statement Schedules.
(a) Documents
 
filed as part of this Report:
(1)
 
Financial Statements
 
.
 
The following
 
consolidated
 
financial statements
 
and the
 
notes thereto,
 
and the
 
Reports of
 
Independent
Registered Public Accounting Firm are incorporated by reference
 
as provided in Item 8 and Item 9A of this Report:
Audited Consolidated Financial Statements as of and for the years ended
 
December 31, 2022 and 2021
 
(PCAOB ID: 32)
107
108
109
110
110
112
113
(2)
 
Financial Statement Schedules.
(b) Exhibits:
The following exhibits
 
required by Item 601
 
of Regulation S-K
 
are filed herewith
 
or have been
 
filed previously with
 
the SEC as
 
indicated
below:
Exhibit
No.
 
Index to Exhibits
 
3.1
 
 
3.2
 
 
4.1
 
 
4.2
 
143
 
10.1
 
 
10.2
 
 
10.3
 
 
10.4
 
 
10.5
 
 
10.6
 
 
10.7
 
 
10.8
 
 
10.9
 
 
10.10
 
 
10.11
 
 
10.12
 
 
10.13
 
 
10.14
 
 
10.15
 
 
21.1
 
 
24.1
 
 
 
144
 
31.1
 
31.2
 
32.1
101.INS
Inline XBRL Instance Document*
101.SCH
Inline XBRL Taxonomy
 
Extension Schema Document*
101.CAL
Inline XBRL Taxonomy
 
Extension Calculation Linkbase Document*
101.DEF
Inline XBRL Taxonomy
 
Extension Definition Linkbase Document*
101.LAB
Inline XBRL Taxonomy
 
Extension Label Linkbase Document*
101.PRE
Inline XBRL Taxonomy
 
Extension Presentation Linkbase Document*
104
Cover Page Interactive Data File (the cover page XBRL tags are embedded
 
within the Inline XBRL document).*
__________________________
*
 
Filed herewith.
+
 
Indicates management contract or compensatory plan, contract or arrangement.
§
 
Portions of
 
the exhibit,
 
marked by
 
brackets, have
 
been omitted
 
because the
 
omitted information
 
(i) is not
 
material and (ii)
 
is
the type of information that the Company treats as private or confidential.
‡ The certifications attached as Exhibits 32.1 that accompany this Form 10-K
 
are deemed furnished and not filed with the
Securities and Exchange Commission and are not to be incorporated by reference
 
into any filing of Vaxxinity,
 
Inc. under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
 
as amended, whether made before or after the date of this
Form 10-K, irrespective of any general incorporation language contained
 
in such filing.
(c) Schedules:
None
Item 16. Form 10-K Summary.
 
None.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
145
SIGNATURES
 
Pursuant to the requirements of
 
Section 13 or 15(d) of the
 
Securities Exchange Act of 1934,
 
the registrant has duly caused
 
this Annual
Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly
 
authorized on March 27, 2023.
 
VAXXINITY,
 
INC.
By:
/s/ Mei Mei Hu
Mei Mei Hu, President and
Chief Executive Officer
ADDITIONAL SIGNATURES
 
AND POWERS OF ATTORNEY
KNOW ALL PERSONS
 
BY THESE PRESENTS,
 
that each person
 
whose signature appears
 
below constitutes
 
and appoints
 
Mei Mei
Hu
 
and
 
René
 
Paula,
 
jointly
 
and
 
severally,
 
her
 
or
 
his
 
attorney-in-fact,
 
with
 
the
 
power
 
of
 
substitution,
 
for
 
her
 
or
 
him
 
in
 
any
 
and
 
all
capacities, to sign any amendments to this Annual Report on Form 10-K and to
 
file the same, with exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-
in-fact, or her or his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to
 
the requirements of
 
the Securities Exchange
 
Act of 1934,
 
as amended, this
 
Annual Report on
 
Form 10-K has
 
been signed
below by the following persons and in the capacities indicated on March
 
27, 2023.
Signature
 
Capacity in Which Signed
/s/: Mei Mei Hu
President, Chief Executive Officer and Director
Mei Mei Hu
(Principal executive officer)
/s/: Jason Pesile
Senior Vice President, Finance &
 
Accounting
Jason Pesile
(Principal financial officer and principal accounting officer)
/s/: Louis Reese
Executive Chairman
Louis Reese
/s/: George Hornig
Director
George Hornig
/s/: Landon Ogilvie
Director
Landon Ogilvie
/s/: Gaby Toledano
Director
Gaby Toledano
/s/: Peter Diamandis
Director
Peter Diamandis
/s/: Katherine Eade
Director
Katherine Eade
/s/: Peter Powchik
Director
Peter Powchik
/s/: James Smith
Director
James Smith