UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20162019
o 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 001-36289
GENOCEA BIOSCIENCES, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 51-0596811 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| 100 Acorn Park Drive, | ||
| Cambridge, | 02140 | |
| (Address of principal executive offices) | (Zip Code) | |
(617) 876-8191
(Registrant’s telephone number, including area code: (617) 876-8191code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol | Name of each exchange on which registered | ||
| Common Stock, $0.001 par value | Nasdaq Capital Market | |||
Securities registered pursuant to Section 12(g)Section12(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. o Yes x 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. o Yes x 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. x Yes o No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | o | Accelerated filer | x | |
Non-accelerated filer | o | Smaller reporting company | x | |
| Emerging growth company | o | |||
If an emerging growth company, indicate by a 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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes xNo
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, based on the closing price for such stock as reported on the NASDAQ GlobalNasdaq Capital Market on June 30, 2016,2019, the last business day of the registrant’s most recently completed second quarter, was: $85,898,985.$73,983,101.
The number of shares outstanding of the registrant’s common stock as of February 15, 201711, 2020 was 28,498,694.27,643,773.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive proxy statement related to its 2020 annual meeting of stockholders to be filed subsequently are incorporated by reference into Part III of this report.
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements that involve substantial risks and uncertainties. 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, our clinical results and other future conditions. The words “anticipate”, “believe”, “contemplate”, “continue”, “could”, “estimate”, “expect”, “forecast”, “goal”, “intend”, “may”, “plan”, “potential”, “predict”, “project”, “should”, “target”, “will”, “would”, or the negative of these terms or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.
The forward-looking statements in this Annual Report on Form 10-K include, among other things, statements about:
our estimates regarding the timing and amount of funds we require to complete ourconduct clinical trials for GEN-003GEN-009, to continue preclinical studies and file an investigational new drug (“IND”) for GEN-011, to continue preclinical studies for our other product candidates and to continue our investments in our immuno-oncology;
our estimates regarding expenses, future revenues, capital requirements, the sufficiency of our current and expected cash resources and our need for additional financing.financing;
the timing of, and our ability to, obtain and maintain regulatory approvals for our product candidates;
the potential benefits of strategic partnership agreements and our ability to enter into strategic partnership arrangements;
our intellectual property position;
the rate and degree of market acceptance and clinical utility of any approved product candidate;
our ability to quickly and efficiently identify and develop product candidates; and
our commercialization, marketing and manufacturing capabilities and strategy.
We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Annual Report on Form 10-K, particularly in the “Risk Factors” section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make or collaborations or strategic partnerships we may enter into.
You should read this Annual Report on Form 10-K and the documents that we have filed as exhibits to the Annual Report on Form 10-K completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
PART I
Item 1. Business
Unless the context requires otherwise, references in this Annual Report on Form 10-K to “Genocea”, “we”, “us” and “our” refer to Genocea Biosciences, Inc.
Overview
We are a biopharmaceutical company that discoversseeks to discover and developsdevelop novel vaccines andcancer immunotherapies to address diseases with significant unmet needs. We useusing our proprietary discovery platform, ATLASTM, to rapidly design vaccines proprietary discovery platform. The ATLAS platform profiles each patient's CD4+ and immunotherapies that act, in part, throughCD8+ T cell (or cellular) immune responses to every potential target or "antigen" in contrast to approved vaccines and immunotherapies, which are designed to act primarily through B cell (or antibody) immune responses.that patient's tumor. We believe that by harnessing T cells we can develop first-in-classthis approach optimizes antigen selection for immunotherapies such as cancer vaccines and immunotherapiescellular therapies by identifying the antigens to address diseases where T cells are centralwhich the patient can respond. Consequently, we believe that ATLAS could lead to the control of the disease.more immunogenic and efficacious cancer immunotherapies.
ATLAS Platform
Our lead program is GEN-003, a Phase 2 candidate therapeutic vaccine, or immunotherapy, that we are developing to treat genital herpes infections. Data from our double-blind, placebo-controlled, dose-escalating Phase 1/2a trial for GEN-003 represented the first reported instance of a therapeutic vaccine working against an infectious disease. Our second trial was a Phase 2 dose optimization study, which confirmed the Phase 1/2a trial results and tested six combinations of proteins and adjuvant to determine the optimal dose for future trials. Our third trial utilized the top two performing doses identified from our
Our Immuno-Oncology Program
The following describes our active immuno-oncology programs in development:
Our lead program, GEN-009, is an adjuvanted neoantigen peptide vaccine candidate. Using ATLAS to identify patientspecific neoantigens, or newly formed antigens unique towe then manufacture a personalized vaccine for each patient that are associated with that individual's tumor. We anticipate filing a personalized cancer vaccine Investigational New Drug ("IND") application with the FDA in 2017. We are also applying the results fromusing only those neoantigens determined by ATLAS and its utility a prognostic tool, to identify patients that could benefit from checkpoint inhibitor therapy. Our strategy in immuno-oncology combines our own internal development programs with a focus on partnering ATLAS for other immuno-oncology applications.
Part A of the ratetrial is assessing the safety and densityimmunogenicity of upper airway colonizationGEN-009 as monotherapy in a human challenge model, but that neithercertain cancer patients with no evidence of disease; and
Part B of the endpoints achieved statistical significance. GEN-004 was safetrial, for which we have commenced dosing patients, is designed to assess the safety, immunogenicity, and well tolerated by subjects. Althoughpreliminary antitumor activity of GEN-009 in combination with ICI therapy in patients with advanced or metastatic tumors.
Throughout 2019, we did not achieve statistical significance in this study,presented data from Part A of the consistent apparent effect gives us confidence inclinical trial. In the vaccine concept and indata from the eight dosed patients that, we believe, confirms the potential for GEN-004. In November 2016, we paused activities on our other early stage programs focused on genital herpes prophylaxis, chlamydia, and malaria in order to focus allantigen selection advantages of our internal research and pre-clinical resources on our immuno-oncology investments. Progress made and data generated to date in these infectious disease clinical and research programs remains valuable to Genocea for the future.ATLAS:
100% of |
| • | GEN-009 elicited CD8+ T cell responses ex vivo, which is a measure of T cell effector function, for 41% of vaccine neoantigens and CD4+ T cell responses to 51% of neoantigens; |
| • | GEN-009 elicited broad immune responses using an in vitro stimulation assay, which is a measure of central memory responses, with 87% of neoantigens eliciting a CD4+ response and 57% of neoantigens eliciting a CD8+ response; |
GEN-009 was well tolerated, with no dose-limiting toxicities observed; and
Through January 31, 2020, we are not aware of studies of HSV-2 viral shedding. In the example shown above, the subject collected swabs twice daily for 28 days. HSV-2 DNA was detectableany disease recurrence in approximately 66%any of the collected swabs, meaning the patient’s shedding frequency is 66% for the period measured. Some swabs had no detectable viral DNA, meaning the subject did not shed virus at the time of sample collection (exemplified by the blank areas of the above graph). The magnitude of viral shedding varied widely from day to day and only sometimes resulted in clinical symptoms such as visible genital ulcers (represented by the dark bars of the above graph). Ulcers generally appear after several days of asymptomatic shedding and at times when the magnitude of shedding is highest. The extent, frequency, and duration of shedding vary from person to person, but the pattern is relatively consistent for each person.vaccinated patients.
We have achieved promising preclinical resultsalso continue to explore additional program opportunities. We continue to evaluate GEN-010, our vaccine candidate employing next-generation antigen delivery technology, which we may advance to provide an opportunity for better immunogenicity and/or efficiency of vaccine production. In addition, we are using chlamydia antigens identified using ATLAS. The ATLAS screening, comprising 144 subjects, identified chlamydia antigen targets that elicit T cell responses preferentially in patients with positive clinical outcomes (spontaneous clearance) versus patients with infertility or pelvic inflammatory disease. Based on our screening analysis, we prioritized 25 Chlamydia trachomatisto pursue discovery of novel candidate antigens for pre-clinical testing. Allnon-personalized cancer immunotherapies. Such programs could target shared neoantigens, non-mutated tumor-associated antigens, have been clonedcancers of viral origin such as cancers driven by Epstein-Barr virus infection and expressed and twelve have been successfully purified. These proteins were paired with Matrix-M2 adjuvant and evaluated as potential vaccine candidates in an animal efficacy model of chlamydia infection. From these studies we have identified three antigen targets that confer protection against chlamydia challenge based on bacterial burden analysis in the genital tract measured over time. Immunogenicity studies done coincident with the challenge model suggest that these antigens may be protecting mice by different mechanisms of action. Research under this program was paused in the fourth quarter of 2016 to focus on GEN-003 and our immuno-oncology program.Inhibigens
Competition
The biotechnology and pharmaceutical industries are characterized by intense and rapidly changing competition to develop new technologies and proprietary products. Although we believe that our proprietary patent portfolio and T cell vaccine and cellular therapy expertise provide us with competitive advantages, we face potential competition from many different sources, including larger and better-funded pharmaceutical companies. Not only must we compete with other vaccineimmuno-oncology companies but any products that we may commercialize will have to compete with existing therapies and new therapies that may become available in the future.
There are other organizations working to improve existing therapies or to develop new vaccines or therapies for our initially selected indications. Depending on how successful these efforts are, it is possible they may increase the barriers to adoption and success of our GEN-003 product candidate, if approved.
Similarly, there are other companies attempting to develop cellular therapies targeted towards neoantigens, either through transferring T cells that have been transduced with T cell Receptors ("TCR") that recognize tumor antigens, or T cells that have been enriched from tumors in a non-specific way (tumor infiltrating lymphocytes), or T cells from the peripheral blood that have been expanded on multiple tumor-specific antigens. These include Achilles Therapeutics Ltd., Adaptive Biotechnologies Corp., BioNTech SE, Cellular Biomedicine Group Inc., Eutilex Co., Ltd., Gilead Sciences, Inc., Iovance Biotherapeutics Inc., Marker Therapeutics, Inc., Oncotherapy Science Inc., PACT Pharma Inc., and Ziopharm Oncology Inc. We believe that Genocea’s ATLAS true neoantigen selection will lead to better targeted and more effective cell therapy; however, there can be no assurance that one or more of these companies, or other companies, will not achieve similar or superior clinical results in the future as compared to GEN-011, or that our future clinical trials will be successful.
Many of our competitors, either alone or with their strategic partners, have substantially greater financial, technical and human resources than we do and significantly greater experience in the discovery and development of product candidates, obtaining FDA, and other regulatory approvals of vaccines and the commercialization of those vaccines.vaccines or cell therapies. Accordingly, our competitors may be more successful than us in obtaining approval for vaccines and cell therapies and achieving widespread market acceptance. Our competitors’ vaccines or cell therapies may be more effective, or more effectively marketed and sold, than any vaccine we may commercialize and may render our vaccinesproducts obsolete or non-competitive.
Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated among a smaller number of our competitors. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
We anticipate that we will face intense and increasing competition as new drugs enter the market and advanced technologies become available. We expect any vaccines or cell therapies that we develop and commercialize to compete based on, the basis of, among other things, efficacy, safety, convenience of administration and delivery, price, the level of generic competition, and the availability of reimbursement from government and other third-party payors.
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. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for our products, which could result in our competitors establishing a strong market position before we are able to enter the market. In addition, our ability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic products.
Intellectual Property
We strive to protect and enhance the proprietary technology, inventions, and improvements that are commercially important to our business, including seeking, maintaining, and defending patent rights, whether developed internally or licensed from third parties. We also rely on trade secrets relating to our proprietary technology platform and on know-how, continuing technological innovation and in-licensing opportunities to develop, strengthen and maintain our proprietary position in the vaccine field.and cell therapy fields. We additionally rely on regulatory protection afforded through data exclusivity, market exclusivity, and patent term extensions where available. Still further, we utilize trademark protection for our company name, and expect to do so for products and/or services as they are marketed.
Our commercial success may depend in part on our ability to obtain and maintain patent and other proprietary protection for commercially important technology, inventions and know-how related to our business; defend and enforce our patents; preserve the confidentiality of our trade secrets; and operate without infringing the valid enforceable patents and proprietary rights of third parties. Our ability to stop third parties from making, using, selling, offering to sell or importing our products may depend on the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities. With respect to both licensed and company-owned intellectual property, we cannot be sure that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents that may be granted to us in the future will be commercially useful in protecting our commercial products and methods of manufacturing the same.
We have developed or in-licensed numerous patents and patent applications and possess substantial know-how and trade secrets relating to the development and commercialization of vaccine and cell therapy products. The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we file, the patent term is 20 years from the date of filing the non-provisional application. In the United States, a patent’s term may be lengthened by patent term adjustment ("Patent Term Adjustment"), which compensates a patentee for administrative delays by the United States Patent and Trademark Office ("U.S. PTO") in 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 an FDA-approved drug may also be eligible for patent term extension, which permits patent term restoration of a United States patent as compensation for the patent term lost during the FDA regulatory review process. The Hatch-Waxman Act permits a patent term extension of up to five years beyond the expiration of the patent. The length of the patent term extension is related to the length of time the drug is under regulatory review. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval and only one patent applicable to an approved drug may be extended. Moreover, a patent can only be extended once, and thus, if a single patent is applicable to multiple products, it can only be extended based on one product. Similar provisions are available in Europe and
other foreign jurisdictions to extend the term of a patent that covers an approved drug. When possible, depending upon the length of clinical trials and other factors involved in the filing of a biologics license application ("BLA"), we expect to apply for patent term extensions for patents covering our product candidates and their methods of use.
As of the date of this Annual Report on Form 10-K, our patent portfolio includes the following:
ATLAS
Our discovery platform patent portfolio includes three patent families, currently comprising sixfive issued U.S. patents. We hold an exclusive license from The Regents of the University of California ("UC") to the first patent family, including U.S. Patent 6,004,815 and the related U.S. Patents 6,287,556 and 6,599,502. This first family includes claims to fundamental aspects of the ATLAS platform, developed by our scientific founder, Darren Higgins, Ph.D. while he was employed at the University of California, Berkeley. Patents in this family have a patent term until August 2018. We hold a further exclusive license from President and Fellows of Harvard College ("Harvard") to the secondfirst patent family, which covers methods related to the ATLAS discovery platform.platform, including discovery of antigens expressed in neoplastic cells. This secondfirst patent family includes U.S. PatentPatents 9,051,564 issued patents in Europe and Australia, a pending9,920,314, an allowed U.S. application, and pending applicationspatents granted in Europe, Canada, and Canada. Patents issuing from these applicationsAustralia. The granted foreign patents in this family are expected to expire in 2027 with the exception of2027. U.S. PatentPatents 9,051,564 which includes aand 9,920,314 include Patent Term AdjustmentAdjustments and extendsextend until December 2031.2031 and June 2028, respectively. We wholly own the thirda second patent family, which is specifically directed to the ATLAS platform as utilized by us.us, including for discovery of cancer- or tumor-related antigens. This thirdsecond patent family includes U.S. Patents 8,313,894, 9,045,791, and 9,045,791,9,873,870, an allowed U.S. patent application, a pending U.S. patent application, an issued patent in Australia, and pending applicationspatents in Europe, Canada, and Australia. Patents issuing from applicationsAustralia, and a pending application in Europe. The granted foreign patents in this family are expected to have a patent term until at least July 2029. U.S. Patents 8,313,894 and 9,045,791 have terms that include Patent Term Adjustments and extend until August 2030 and August 2029, respectively.
July 2029. We co-own with Children’s Medical Center Corporation ("Children's"), a portfolio ofwholly own the third patent applicationsfamily, which is directed to pneumococcus vaccines, including GEN-004. This portfolio includes two patent families covering pneumococcal vaccine compositions and methods for inhibiting or treating pneumococcal infections. A U.S. applicationcancer diagnosis, prognosis, and patient selection, as well as related compositions. This third family currently comprises pending applications in Europe, Canada, Brazil, India, China and eight additionaleleven foreign jurisdictions are pending in the first patent family. The first family also includes granted patents in Australia, Japan, New Zealand and Russia. The second patent family includes U.S. Patent 9,393,294, a pending U.S. application, granted patents in Australia, Indonesia, Mexico and New Zealand, and pending applications in Europe, Canada, Japan, Brazil, Russia, India, China and six additional foreign jurisdictions. Patents that issue from applications in theseapplication. We wholly own three further patent families, each comprising a pending PCT application, claiming first priority to provisional applications filed in late 2018. These PCT applications are expecteddirected to have patent terms until at least 2030ATLAS-based methods for further selection of cancer- or tumor-related antigens, and 2032, respectively. We hold an exclusive license to Children's interest in these patent rights. We co-own with Children's one further patent family covering follow-on pneumococcal vaccine compositions, with pending applications in the U.S., Europe, Canada, Australia,for redirecting immune responses and Japan. Children's interest in these patent rights is also exclusively licensed to us.
Harvard University
platform. We are obligated to pay Harvard an annual license maintenance fee ranging from the low five figures to the mid-five figures depending on the type of product and the number of years after the effective date of the agreement. For products covered by the licensed patent rights, we arealso obligated to pay Harvard milestone payments up to $1.8$1.6 million in the aggregate upon the achievement of certain development and regulatory milestones. ForAs of December 31, 2019, we have paid $0.3 million in aggregate milestone payments. We are obligated under this license agreement to use commercially reasonable efforts to develop, market and sell licensed products discovered using the licensed methods,in compliance with an agreed upon development plan. In addition, we are obligated to pay Harvard milestone payments up to $600 thousandachieve specified development milestones and in the aggregateevent we are unable to meet our development milestones for eachany type of product or service, absent any reasonable proposed extension or amendment thereof, Harvard has the first threeright, depending on the type of product or service, to terminate this agreement with respect to such products or to convert the license to a non-exclusive, non-sublicensable license with respect to such products and up to $300 thousand in the aggregate for each additional product under the agreement upon the achievement of certain development and regulatory milestones. As of December 31, 2016, we paid $198 thousand in aggregate milestone payments. services.
Upon commercialization of our products covered by the licensed patent rights or discovered using the licensed methods, we are obligated to pay Harvard royalties on the net sales of such products and services sold by us, our affiliates, and our sublicensees. This royalty varies depending on the type of product or service but is in the low single digits. The sales-based royalty based on salesdue by our sublicensees is the greater of the applicable royalty rate or a percentage in the high single digits or the low double digits of the royalties we receive from such sublicensee, depending on the type of product. DependingBased on the type of commercialized product or service, royalties are payable until the expiration of the last-to-expire valid claim under the licensed patent rights or for a period of 10 years from first commercial sale of such product or service. The royalties payable to Harvard are subject to reduction, capped at a specified percentage, for any third partythird-party payments required to be made. In addition to the royalty payments, if we receive any additional revenue (cash or non-cash) under any sublicense, we must pay Harvard a percentage of such revenue, excluding certain categories of payments, varying from the low single digits to up to the low double digits depending on the scope of the license that includes the sublicense.
In September 2008,January 2018, we entered into a collaborative research agreementLicense and Supply Agreement with Children’s, that was funded by PATH Vaccine Solutions ("PATH"Oncovir, Inc. (“Oncovir”). The collaborativeagreement provides the terms and conditions under which Oncovir will manufacture and supply an immunomodulator and vaccine adjuvant, Hiltonol® (poly-ICLC) (“Hiltonol”), to us for use in connection with the research, project led todevelopment, use, sale, manufacture, commercialization and marketing of products combining Hiltonol with our technology (the “Combination Product”). Hiltonol is the identificationadjuvant component of certain highly conserved pneumococcal antigens that are able to protect against colonization. The intellectual property covering these antigens is co-owned byGEN-009, which will consist of synthetic long peptides or neoantigens identified using our proprietary ATLAS platform, formulated with Hiltonol.
Oncovir granted us and Children's and covers pneumococcal vaccine compositions and methods for inhibiting or treating pneumococcus infections. In February 2010, we entered into an exclusivea non-exclusive, assignable, royalty-bearing worldwide license, agreement with Children's, which was amended and restated in March 2012. This agreement grants us an exclusive, worldwide, sublicensable license under Children's rights to the jointly-owned intellectual property to make, have made, use, sell, offer for sale, import and export licensed products and to practice licensed processes for the prevention and treatment of Streptococcus pneumoniae. Children's retains the right to practice and use, andgrant sublicenses through one tier, to allow academic non-profit research organizations to practice and use, the licensedcertain of Oncovir’s intellectual property forin connection with the research, educational, clinical and charitable purposes. Under the terms of the agreement, our license from Children's is subject to PATH’s separate non-exclusive, royalty-free license from Children's to develop pneumococcal T cell-based protein vaccines worldwide and to market and sell such vaccines in developing countries.
agreement onupon a country-by-country and licensed product-by-licensed product basisdecision to discontinue the development of the Combination Product or in its entirety at any timeupon a determination by giving Novavax advance written notice. Both parties may also terminate the agreement in the event ofus or an applicable regulatory authority that Hiltonol or a material breach by the other party that remains uncuredCombination Product is not clinically safe or for bankruptcy, insolvency or similar circumstances. Novavax may terminate this agreement if we challenge the validity of any patents licensed to us.
Trade Secrets
We may rely, in some circumstances, on trade secrets to protect our technology. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations, and systems, agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our consultants, contractors, or collaborators use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.
Biological products such as vaccines and adoptive cell therapies are subject to regulation under the Federal Food, Drug, and Cosmetic Act ("FD&C Act") and the Public Health Service Act ("PHS Act"), and other federal, state, local and foreign statutes and regulations. Both the FD&C and PHS Acts and their corresponding regulations govern, among other things, the testing, manufacturing, safety, efficacy, labeling, packaging, storage, record keeping, distribution, reporting, advertising and other promotional practices involving biological products. Clinical testing of biological products is subject to FDA review before initiation. In addition, FDA approval must be obtained before marketing of biological products. The process of obtaining regulatory review and approval and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources and we may not be able to obtain the required regulatory approvals.
United States Biological Products Development Process
The process required by the FDA before a biological product may be marketed in the United States generally involves the following:following process:
completion of nonclinical laboratory tests and animal studies according to good laboratory practices ("GLP") and applicable requirements for the humane use of laboratory animals or 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 regulations commonly referred to as good clinical practices ("GCP") and any additional requirements for the protection of human research subjects and their health information, to establish the safety and efficacy of the proposed biological product for its intended use, including approval by an independent Institutional Review Board (“IRB”), representing each clinical site before each clinical trial may be initiated;
submission to the FDA of a BLA for marketing approval that includes substantive evidence of safety, purity, and potency from results of nonclinical testing and clinical trials;
satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the biological product is produced to assess compliance with good manufacturing practices ("GMPs")GMPs to assure that the facilities, methods and controls are adequate to preserve the biological product’s identity, strength, quality and purity and, if applicable, the FDA’s current good tissue practices ("GTP") for the use of human cellular and tissue products;
potential FDA audit of the nonclinical and clinical trial sites that generated the data in support of the BLA; and
FDA review and approval, or licensure, of the BLA.
Before testing any biological product candidate in humans, the product candidate enters the preclinical study stage. Preclinical studies, 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 conduct of the preclinical studies must comply with federal regulations and requirements including GLPs.
The clinical trial sponsor must submit the results of the preclinical 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. Some preclinical studies may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA places the clinical trial on 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 also may impose clinical
holds on a biological product candidate at any time before or during clinical trials due to safety concerns or non-compliance. If the FDA imposes a clinical hold, studies may not recommence without FDA authorization and then only under terms authorized by the FDA. 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 studies.
Clinical trials involve the administration of the biological product candidate to healthy volunteers or patients under the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor’s 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, including stopping rules that assure a clinical trial will be stopped if certain AEsadverse events ("AEs") should occur. Each protocol and any amendments to the protocol must be submitted to the FDA as part of the IND. Clinical trials must be conducted and monitored in accordance with the FDA’s regulations comprising the GCP requirements, including the requirement that all research subjects provide informed consent. Further, each clinical trial must be reviewed and approved by an 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 studies 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 must monitor the clinical trial until completed.
Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:
Phase 1. The biological product 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 is often conducted in patients.
Phase 2. The biological product is evaluated in a limited patient population to identify possible AEs 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.
Phase 3. Clinical studies are undertaken to further evaluate safety, purity, and potential of biological product in an expanded patient population at geographically dispersed clinical trial sites. These clinical studies are intended to establish the overall risk/benefit ratio of the product and provide an adequate basis for product approval and product labeling.
Post-approval clinical studies, sometimes referred to as Phase 4 clinical studies, may be conducted after initial marketing approval. These clinical studies are used to gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow-up.
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 studies must be submitted to the FDA. Written IND safety reports must be promptly submitted to the FDA and the investigators for serious and unexpected AEs, any findings from other studies, tests in laboratory animals or in vitro testing that suggest a significant risk for human subjects, or any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. The sponsor must submit an IND safety report within 15 calendar days after the sponsor determines that the information qualifies for reporting. The sponsor also must notify the FDA of any unexpected fatal or life-threatening suspected adverse reaction within seven calendar days after the sponsor’s initial receipt of the information. Phase 1, Phase 2 and Phase 3 clinical studies 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 or terminate a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the biological product has been associated with unexpected serious harm to patients. Sponsors of all controlled clinical trials, except for Phase 1 trials, are required to submit certain clinical trial information for inclusion in the public clinical trial registry and results data bank maintained by the National Institutes of Health, which are publicly available at http://clinicaltrials.gov.
Concurrent with clinical studies, companies usually complete additional animal studies and must also develop additional information about the physical characteristics of the biological product as well as finalize a process for manufacturing the product in commercial quantities in accordance with GMP requirements. To help reduce the risk of the introduction of adventitious agents with use of biological products, the PHS Act emphasizes the importance of manufacturing control for products whose attributes
cannot be precisely defined. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the sponsor must develop methods for testing the identity, strength, quality, potency and purity of the final biological product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the biological product candidate does not undergo unacceptable deterioration over its shelf life.
United States Review and Approval Processes
After the completion of clinical trials of a biological product, FDA approval of a BLA must be obtained before commercial marketing of the biological product. The BLA must include results of product development, laboratory and animal studies, human studies, information on the manufacture and composition of the product, proposed labeling and other relevant information. In addition, under the Pediatric Research Equity Act, a BLA or supplement to a BLA must contain data to assess the safety and effectiveness of the biological product 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. The testing and approval processes require substantial time and effort and there can be no assurance that the FDA will accept the BLA for filing and, even if filed, that any approval will be granted on a timely basis, if at all, and for what indications will be approved, if any.
Under the Prescription Drug User Fee Act ("PDUFA"), as amended,re-authorized for an additional five years in 2017, each BLA must be accompanied by a significant user fee. PDFUAPDUFA also imposes an annual product fee for biologics and an annual establishment feeprogram fees based on facilities used to manufacture prescription biologics.each approved biologic. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application filed by a small business.
Within 60 days following submission of the application, the FDA reviews the BLA to determine if it is substantially complete before the agency accepts it for filing. The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the time of submission and may request additional information. In this event, the BLA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review of the BLA. The FDA reviews the BLA to determine, among other things, whether the proposed product is safe and potent, or effective, for its intended use, and has an acceptable purity profile, and whether the product is being manufactured in accordance with GMP regulations to assure and preserve the product’s identity, safety, strength, quality, potency and purity. The FDA may refer applications for novel biological products or biological products that 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 biological product approval process, the FDA also will determine whether a Risk Evaluation and Mitigation Strategy ("REMS"), is necessary to assure the safe use of the biological product. If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS; the FDA will not approve the BLA without a REMS, if required.
Before approving a 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 GMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving a BLA, the FDA will typically inspect one or more clinical sites to assure that the clinical trials were conducted in compliance with IND study requirements and GCP requirements. To assure GMP, GTP and GCP compliance, an applicant must incur significant expenditure of time, money and effort in the areas of training, record keeping, production, and quality control.
Notwithstanding the submission of relevant data and information, the FDA may ultimately decide that the BLA does not satisfy its regulatory criteria for approval and deny approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret the same data. If the agency decides not to approve the BLA in its present form, the FDA will issue a complete response letter that usually describes all of the specific deficiencies in the 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 resubmit the BLA, 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. The FDA may impose restrictions and conditions on product distribution, prescribing, or dispensing in the form of a risk management plan,REMS, or otherwise limit the scope of any approval. In addition, the FDA may require post marketing clinical trials, sometimes referred to as Phase 4 clinical trials, designed
to further assess a biological product’s safety and effectiveness, and testing and surveillance programs to monitor the safety of approved products that have been commercialized.
In the United States, our business activities are subject to numerous other federal, state and local laws by federaldesigned to, for example, prevent fraud and state authorities,abuse; promote transparency in addition tointeractions with others in the FDA, including but not limited to,healthcare industry; protect the United States Departmentprivacy of Health and Human Services ("HHS"), and its various divisions, including but not limited to, the Centers for Medicare & Medicaid Services ("CMS").individual information; ensure integrity of research or protect human subjects involved in research. These laws are enforced by various federal and state enforcement authorities, including but not limited to, the United States Department of Justice, and individual United States Attorney offices within the Department of Justice, the United States Department of Health and Human Services ("HHS"), HHS’ various enforcement divisions, including but not limited to, the Centers for Medicare & Medicaid Services ("CMS"), the Office of Inspector General, the Office for Human Research Protections, and the Office of Research Integrity, and other state and local government agencies.
Laws and regulations have been enacted by the federal government and various states to regulate the sales and marketing practices of pharmaceutical manufacturers with marketed products. The laws and regulations generally limit financial interactions between manufacturers and health care providers; require manufacturers to adopt certain compliance standards and/or knowingly making, using, or causing to be made or used, a false record or statement material to a false or fraudulent claimrequire disclosure to the government and public of such interactions. Many of these laws and regulations contain ambiguous requirements or require administrative guidance for implementation. Given the lack of clarity in laws and their implementation, any future activities (if we obtain approval and/or reimbursement from federal government. Recently, the civil False Claims Act has been usedhealthcare programs for our product candidates) could be subject to assert liability on the basis of kickbacks and improper referrals, improperly reported government pricing metrics such as Medicaid Best Price or Average Manufacturer Price, improper use of supplier or provider Medicare numbers when detailing a provider of services, improper promotion of drugs or off-label uses not expressly approved by the FDA in a drug’s label, and misrepresentations with respect to the services rendered or items provided.challenge.
See “Risk Factors - Risks Related to Our Business and Industry”.
If our operations are found to be in violation of any of the health regulatory laws described above, or any other laws that apply to us, we may be subject to penalties, including, without limitation, civil, criminal, and administrative penalties, damages, monetary fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other federal health care programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment or restructuring of our operations.
Reimbursement
In both domestic and foreign markets, the commercial success of any approved products will depend, in part, on the availability of coverage and adequate reimbursement offor such products from third-party payors, such as government health care programs, commercial insuranceprivate health insurers, and managed care organizations. Patients who are provided vaccinations, and providers providing vaccinations, generally rely on third-party payors to reimburse all or part of the associated health care costs. Sales of any approved vaccines will therefore depend substantially, both domestically and abroad, on the extent to which the costs of our approved vaccines will be paid by third-party payors. These third-party payors are increasingly challenging the prices charged for medical products and services and imposing controls to manage costs. The containment of health care costs has become a priority of federal and state governments and the prices of drugs have been a focus in this effort. Governments have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue and results. Third-party payors may limit coverage to specific products on an approved list or formulary, which might not include all of the FDA-approved products for a particular indication. In addition, there is significant uncertainty regarding the reimbursement status of newly approved health care products. Third-party payors are increasingly examining the medical necessity and cost-effectiveness of medical products
and services, in addition to their safety and efficacy. We may need to conduct expensive pharmacoeconomic studies in order to demonstrate the cost-effectiveness of our products. If third-party payors do not consider our products to be cost-effective compared to other therapies, the payors may not cover our products after approvedapproval as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our products on a profitable basis.
Within the United States, if we obtain appropriate approval in the future to market any of our current product candidates, we may seek approval and coverage for those products under Medicaid, Medicare, and the PHS Act, pharmaceutical340B drug pricing program and also seek to sell the products to federal agencies.programs. These programs are administered by various federal and state agencies and provide prescription drug benefits to allow for individuals who are age 65 and over, low income, andor disabled beneficiaries accessor allow healthcare providers that serve vulnerable populations to purchase prescription drugs at discounted prices. In the future, we may also seek to sell any approved medicines and treatments. Under theseproduct candidates to government purchasers. In order to obtain coverage for our products under government benefit programs, manufacturers areor to sell products to government purchasers, we may be required to track and report prices for our products, offer discounts to certain purchasers, or pay rebates and the pricing of an approved treatment may be subject to various forms of price modifications.on certain utilization.
There have been other reform initiatives under the Trump Administration, including initiatives focused on drug pricing. For example, in May of 2018, President Trump and membersthe Secretary of Congress during the presidential campaignDepartment of Health and followingHuman Services released a “blueprint” to lower prescription drug prices and out-of-pocket costs. Certain proposals in the election.blueprint, and related drug pricing measures proposed since the blueprint, could cause significant operational and reimbursement changes for the pharmaceutical industry. As another example, legislation passed in 2019 revised how certain prices reported by manufacturers under the Medicaid Drug Rebate Program are calculated, a revision that the Congressional Budget Office has estimated will save the federal government approximately $3 billion in the next ten years.
There have also been other efforts by government officials or legislators to implement measures to regulate prices or payment for pharmaceutical products, including legislation on drug importation. Recently, there has been considerable public and government scrutiny of pharmaceutical pricing and proposals to address the perceived high cost of pharmaceuticals. There have been recent state legislative efforts to address drug costs, which generally have focused on increasing transparency around drug costs or limiting drug prices.
Adoption of new legislation at the federal or state level could affect demand for, or pricing of, our product candidates if approved for sale. We cannot, however, predict the ultimate content, timing, or effect of any changes to the 2010Healthcare Reform Act or other federal and state reform efforts. There is no assurance that federal or state health care reform will not adversely affect our future business and financial results, and we cannot predict how future federal or state legislative, judicial or administrative changes relating to healthcare reform will affect our business.results.
Outside the United States, ensuring adequate coverage and payment for our products will face challenges. In international markets, reimbursement and health care payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies. Pricing of prescription pharmaceuticals is subject to governmental control in many countries. Pricing negotiations with governmental authorities can extend well beyond the receipt of regulatory marketing approval for a product and may require us to conduct a clinical trial that compares the cost effectiveness of our product candidates or products to other available therapies. The conduct of such a clinical trial could be expensive and result in delays in our commercialization efforts. Third-party payors are challenging the prices charged for medical products and
services, and many third-party payors limit reimbursement for newly-approved health care products. Recent budgetary pressures in many European Union countries are also causing governments to consider or implement various cost-containment measures, such as price freezes, increased price cuts and
rebates. If budget pressures continue, governments may implement additional cost-containment measures. Cost-control initiatives could decrease the price we might establish for products that we may develop or sell, which would result in lower product revenues or royalties payable to us. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products.
Foreign Regulation
In addition to regulations in the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our product candidates. Whether or not we obtain FDA approval for a product candidate, we must obtain approval from the comparable regulatory authorities of foreign countries or economic areas, such as the European Union, before we may commence clinical trials or market products in those countries or areas. The approval process and requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from place to place, and the time may be longer or shorter than that required for FDA approval.
Certain countries outside of the United States have a process that requires the submission of a clinical trial application ("CTA") much like an IND prior to the commencement of human clinical trials. In Europe, for example, a CTA must be submitted to the competent national health authority and to independent ethics committees in each country in which a company intends to conduct clinical trials. Once the CTA is approved in accordance with a country’s requirements, clinical trial development may proceed in that country. In all cases, the clinical trials must be conducted in accordance with GCPs and other applicable regulatory requirements.
Under European Union regulatory systems, a company may submit marketing authorization applications either under a centralized or decentralized procedure. The centralized procedure is compulsory for medicinal products produced by biotechnology or those medicinal products containing new active substances for specific indications such as the treatment of AIDS, cancer, neurodegenerative disorders, diabetes, viral diseases and designated orphan medicines, and optional for other medicines which are highly innovative. Under the centralized procedure, a marketing application is submitted to the European Medicines Agency where it will be evaluated by the Committee for Medicinal Products for Human Use and a favorable opinion typically results in the grant by the European Commission of a single marketing authorization that is valid for all European Union member states within 67 days of receipt of the opinion. The initial marketing authorization is valid for five years, but once renewed is usually valid for an unlimited period. The decentralized procedure provides for approval by one or more “concerned” member states based on an assessment of an application performed by one memberone-member state, known as the “reference” member state. Under the decentralized approval procedure, an applicant submits an application, or dossier, and related materials to the reference member state and concerned member states. The reference member state prepares a draft assessment and drafts of the related materials within 120 days after receipt of a valid application. Within 90 days of receiving the reference member state’s assessment report, each concerned member state must decide whether to approve the assessment report and related materials. If a member state does not recognize the marketing authorization, the disputed points are eventually referred to the European Commission, whose decision is binding on all member states. In light of the United Kingdom’s vote in 2016 to leave the European Union, the so-called Brexit vote, there may be changes forthcoming in the scope of the centralized approval procedure as the terms of that exit are negotiated between the United Kingdom and the European Union.
Manufacturing
We do not have any manufacturing facilities. We currently rely, and expect to continue to rely, on third parties for the manufacture of our product candidates for non-clinical studies and clinical trials, as well as for commercial manufacture if our product candidates receive marketing approval. To date, we have obtained materials for GEN-003 from third-party manufacturers who are sole source suppliers to us. We intend to identify and qualify contract manufacturers to provide the protein process development, protein production, adjuvant production, and fill-and-finish services prior to submission of a BLA to the FDA.
Information about our Executive Officers
The following table sets forth the name, age and position of each of our executive officers as of February 17, 2017.13, 2020.
| Name | Age | Position | ||
| William Clark | President and Chief Executive Officer | |||
| 45 | Chief Business Officer | |||
| Thomas Davis, M.D. | Chief Medical Officer | |||
| Chief Financial | ||||
| Jessica Baker Flechtner, Ph.D. | Chief Scientific Officer | |||
| Narinder Singh | 48 | Senior Vice President, Pharmaceutical Sciences and Manufacturing | ||
William Clark"Chip" Clark. Chip has served as our President and Chief Executive Officer since February 2011. Previously he served2011 after serving as our Chief Business Officer from August 2010 to February 2011. Mr. ClarkChip has also served on our board of directors since February 2011. Prior to joining our Company,Genocea, he served as Chief Business Officer at Vanda Pharmaceuticals, Inc. ("Vanda"), a biopharmaceutical company he co-founded in 2004. While at Vanda, he leadled the company’s strategic and business development activities and played a central role in raising more than $220$400 million in multiple publicthrough business development deals and privateequity financings. Prior to Vanda, Mr. ClarkChip was a principal at Care Capital, LLC, a venture capital firm investing in biopharmaceutical companies, after serving in a variety of commercial and strategic roles at SmithKline Beecham (now GlaxoSmithKline). Mr. ClarkChip holds a B.A. from Harvard University and an M.B.A. from The Wharton School at the University of Pennsylvania.
Thomas Davis, M.D. Tom joined Genocea in October 2018 as our Chief Medical Officer since joining our Companywith over 20 years of academic and industry experience in January 2011.immuno-oncology and cancer drug development. Most recently, he served as Chief Medical Officer of Gadeta B.V., a Dutch cell therapy company pursuing novel cancer targets from October 2017 to April 2018, where he steered a novel cell therapy technology into first-in human clinical studies. Prior to joining our Company, Dr. HetheringtonGadeta B.V., he served as Senior Vice PresidentChief Medical Officer of Celldex from 2006 to 2017, where he led all aspects of clinical and regulatory development including strategy, tactics, and execution. While at Celldex, Tom actively built and oversaw Clinical andScience, Medical Affairs, Safety, Clinical Operations, Statistics, Regulatory Affairs, at Icagen, Inc. ("Icagen"), from May 2006 through December 2010. Prior to Icagen, Dr. Hetheringtonand Project Management, managed collaborations with large global pharmaceutical partners, and participated in investor relations activities. He also served as Vice President, Clinical Development and Chief Medical Officer at Inhibitex Inc. from June 2002 through April 2005GenVec and held various positionsas Senior Director of increasing responsibility inClinical Science at Medarex.Prior to joining the industry, Tom supervised clinical drug development at GlaxoSmithKline from 1995 through June 2002. Dr. Hetherington has also served as a faculty memberefforts at the UniversityCancer Therapy Evaluation Program (CTEP) of North Carolina Schoolthe National Cancer Institute (NCI), and worked on the development of Medicinerituximab and held appointmentsidiotype vaccines at several leading academic medical centers, including the University of Tennessee, St. Jude Children’s Research HospitalStanford University. Dr. Davis received his B.A. in Memphis and Albany Medical College. Dr. Hetherington earnedBiophysics from Johns Hopkins, his B.S. at Yale UniversityM.S. in Physiology and his M.D. at thefrom Georgetown University, of North Carolina, Chapel Hill and he completed his postgraduate training in pediatrics and pediatric infectious diseases at the University of North Carolina and the University of Minnesota, respectively. Dr. Hetherington has published extensivelya fellowship in medical and scientific literature, and is board certified in both pediatrics and pediatric infectious diseases. He has served as the industry representative to the Vaccines and Related Blood Products Advisory Committee of the FDA and the National Vaccine Advisory Committee of the U.S. Department of Health and Human Services.oncology at Stanford University.
Jessica Baker Flechtner, Ph.D.Ph.D. Jess joined Genocea in 2007, soon after the company was founded, and has held multiple scientific roles since joining our Company in March 2007 andGenocea. She has served as our Chief Scientific Officer since February 2016, Senior Vice President of Research from February 2014 to January 2016, and Vice President of Research from January 2010 to February 2014, and Senior Director, Research and Development from2014. From 2007 to 2010.February 2014, she held various roles of increasing seniority at Genocea. Prior to joining our Company,Genocea, Dr. Flechtner was an Immunology Consultant at BioVest International, Inc. from June 2006 to March 2007, where she guided the development of assays to evaluate the success of the company’s autologous Follicular (Non-Hodgkin’s) Lymphoma vaccine in patients. As a researcher at Mojave Therapeutics, Inc., or Mojave, and Antigenics Inc. (now Agenus), which acquired Mojave’s intellectual property, from 2001 to 2005, Dr. Flechtner developed protein and peptide-based vaccines and immunotherapies for cancer, infectious disease, autoimmunity and allergy. She is an inventor on various pending or issued patents and has multiple peer-reviewed scientific publications. Dr. Flechtner performed her post-doctoral work in the laboratory of Dr. Harvey Cantor at the Dana Farber Cancer Institute and Harvard Medical School and holds a Ph.D. in Cellular Immunology and B.S. in Animal Science from Cornell University. She is a member of the American Association of Immunologists, American Association for Cancer Research, Society for the Immunotherapy of Cancer, the American Society for Microbiology,President’s Council of Cornell Women, and Women in Bio.
Narinder Singh. Narinder joined Genocea in March 2018 as Senior Vice President, Pharmaceutical Sciences and Manufacturing. In this role, Narinder manages the manufacturing process development and manufacturing of Genocea’s products. Narinder has
extensive experience in process development, scale-up, technical operations, and manufacturing supply chain of biopharmaceuticals. Prior to joining Genocea, Narinder served as Vice President of Drug Product Development and Manufacturing at Momenta Pharmaceuticals from July 2015 to March 2018, responsible for process development and manufacturing of drug products for Momenta’s biosimilars and novel product portfolio. Prior to Momenta, Narinder served as Director, Drug Product Technology at Amgen from June 2007 to July 2015, responsible for process development, commercialization, manufacturing and new technology development for drug products development of Amgen’s biologics-based portfolio. He began his career at Amgen functioning in various junior technical roles, beginning in 1997. Narinder received an Integrated B.Tech/M.Tech. in Biochemical Engineering and Biotechnology from the Indian Institute of Technology, Delhi in 1995, an M.S. in Chemical Engineering from the University of Houston, and an M.B.A. from UCLA Anderson School of Management.
Employees
As of December 31, 2016,2019, we had 9859 full-time employees. Of these 98 employees, 80 employees areof which 46 were engaged in research and development and 18 employees are13 were engaged in finance, legal, business development, human resources, facilities, information technology or other general and business and general management. We have noadministrative functions. None of our employees is represented by a labor union or covered by a collective bargaining agreements with our employeesagreement and we have not experienced any work stoppages. We consider our relations with our employees to be good.
We were incorporated under the laws of the State of Delaware in August 2006. Our principal executive offices are located at 100 Acorn Park Drive, 5th Floor, Cambridge, Massachusetts 02140 and our telephone number is (617) 876-8191. Genocea® and the Genocea logo are registered trademarks.
Available Information
We maintain an Internet website at http://www.genocea.com where our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other documents and all amendments to those reports and documents are available without charge, as soon as reasonably practicable following the time they are filed with, or furnished to, the Securities and Exchange Commission ("SEC"). References to our website address do not constitute incorporation by reference of the information contained on the website, and the information contained on the website is not part of this document.
The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SECalso maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers, including the Company, that file electronically with the SEC. The public can obtain any documents that we file with the SEC at http://www.sec.gov. References to our website address do not constitute incorporation by reference of the information contained on the website, and the information contained on the website is not part of this document.
Item 1A. Risk Factors
Risks Related to Our Financial Position and Need for Additional Capital
We require additional financing to execute our operating plan and continue to operate as a going concern.
Our audited financial statements for the year ended December 31, 2019 have been prepared assuming we will continue to operate as a going concern, but we believe that our continuing operating losses raise substantial doubt about our ability to continue as such. We plan to continue to fund our operations through public or private equity offerings, strategic transactions, proceeds from sales of our common stock under our at-the-market equity offering program, our equity line of credit or by other means. However, adequate additional financing may not be available to us on acceptable terms, or at all. If we are unable to raise capital when needed, or on attractive terms, we may be forced to implement further cost reduction strategies, including ceasing development of GEN-009, GEN-011, and/or other product candidates and other corporate activities.
We have incurred significant losses since our founding in 2006 and anticipate that we will continue to incur significant losses for the foreseeable future and may never achieve or maintain profitability.
We are a clinical-stage biotechnology company, and we have not yet generated significant revenues. We have incurred net losses each year since our inception, including net losses of $49.6 million, $42.5$39.0 million and $35.3$27.8 million for the years ended December 31, 2016, 2015,2019 and 2014,2018, respectively. As of December 31, 2016 and 2015,2019, we had an accumulated deficitsdeficit of approximately $207.5 million and $157.9 million, respectively.$331.0 million. To date, we have not commercialized any products or generated any revenues from the sale of products and have financed our operations primarily through private placements of our preferred stock, debt financing, our initial public offering ("IPO") completed in February 2014, and follow-on public offerings in March 2015 and August 2015 and we do not expect to generate any product revenues in the foreseeable future. We do not know whether or when we will generate product revenues or become profitable. To date, we have financed our operations primarily through multiple public equity offerings, private placements of our common and preferred stock and debt arrangements.
We have devoted most of our financial resources to research and development, including our clinical and non-clinical technology development and development activities. The amount of our future net losses will depend, in part, on the rate of our
future expenditures and our ability to obtain funding through equity offerings or debt financings, strategic collaborations or additional
We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We anticipate that our expenses will increase significantly if and as we:
continue our Phase 2 and commence our Phase 3 programsclinical trials for GEN-003,GEN-009, our most advanced product candidate that we are developing for the treatment of genital herpes infections;
candidate;
initiate additional non-clinical, clinical or other studies for GEN-009,GEN-011 and our neoantigen cancer vaccineother product candidate;
candidates;
manufacture material for clinical trials and for commercial sale;
seek regulatory approvals for any product candidates that successfully complete clinical trials;
establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;
seek to discover and develop additional product candidates;
acquire or in-license other product candidates and technologies;
make royalty, milestone or other payments under any in-license agreements;
maintain, protect and expand our intellectual property portfolio;
attract and retain skilled personnel; and
create additional infrastructure to support our operations as a public company and our product development and planned future commercialization efforts.
The net losses that we incur may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance. In any particular quarter or quarters, our operating results could be below the expectations of securities analysts or investors, which could cause our stock price to decline.
To become and remain profitable, we must succeed in developing and eventually commercializing products that generate significant revenue. This will require us to be successful in a range of challenging activities, including completing non-clinical studies and clinical trials of our product candidates, discovering additional product candidates, obtaining regulatory approval for these product candidates and manufacturing, marketing and selling any products for which we may obtain regulatory approval. We are only in the preliminary stages of most of these activities. We may never succeed in these activities and, even if we do, may never generate revenues that are significant enough to achieve profitability.
Because of the numerous risks and uncertainties associated with pharmaceutical 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. If we are required by the FDA or the European Medicines Agency to perform studies in addition to those currently expected, or if there are any delays in completing our clinical trials or the development of any of our product candidates, our expenses could increase.
Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our product offerings or even continue our operations. A decline in the value of our company could also cause you to lose all or part of your investment.
We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed would force us to delay, limit, reduce or terminate our product development or commercialization efforts.
As of December 31, 2016,2019, our cash and cash equivalents and investments were $63.4$40.1 million. We believe that we will continue to expend substantial resources for the foreseeable future developing GEN-003GEN-009, GEN-011 and GEN-009, ourany other neoantigen cancer vaccine product candidate.candidates. These expenditures will include costs associated with research and development, potentially acquiring new technologies, potentially obtaining regulatory approvals and manufacturing products, as well as marketing and selling products approved for sale, if any. In addition, other unanticipated costs may arise. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the
development and commercialization of our product candidates. Furthermore, because of the significant expense associated with conducting clinical trials, we cannot be certain we will have sufficient capital to complete such trials for a given product candidate.
Our future capital requirements depend on many factors, including:
the progress, resultstiming and costs of our ongoing Phase 2 programplanned clinical trials for GEN-003;GEN-009 and GEN-011;
the progress, timing, and costs of manufacturing GEN-009 and GEN-011 for planned clinical trials;
the outcome, timing, and costs of seeking regulatory approvals, including an IND application for GEN-011;
the initiation, progress, timing, costs, and results of preclinical studies and clinical trials for our other product candidates and potential product candidates;
the terms and timing of any future collaborations, grants, licensing, consulting, or other arrangements that we may establish;
the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights, including milestone payments, royalty payments and patent prosecution fees that we are obligated to pay pursuant to our license agreements;
the costs associated with initiatingof preparing, filing, and prosecuting patent applications, maintaining and protecting our planned Phase 3 program for GEN-003;
intellectual property rights, and defending against intellectual property related claims;
the numberextent to which we in-license or acquire other products and development requirementstechnologies;
the receipt of marketing approval;
the costs of commercialization activities for GEN-009 and GEN-011 and other product candidates, thatif we pursue;
Based on our current operating plan, we believe that our existing cash and cash equivalents and investments are sufficient to support our operating expenses and capital expenditure requirements into the first quarter of 2018, without assuming any receipt of proceeds from potential business development partnerships, equity financings or debt drawdowns. This guidance assumes commencing Phase 3 trials for GEN-003 for genital herpes in the fourth quarter of 2017 and filing an IND for GEN-009 for cancer by the end of the year, however it is our strategy to secure additional sources of financing in advance of starting GEN-003 Phase 3 clinical trials.2021.
Our operating plan may change as a result of many factors currently unknown to us, and we may need additional funds sooner than planned. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. Additional funds may not be available when we need them on terms that are acceptable to us, or at all. If adequate funds are not available to us when needed, we would be required to delay, limit, reduce or terminate non-clinical studies, clinical trials or other development activities for one or more of our product candidates or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary to commercialize our product candidates.
We cannot be certain that we will be successful in advancing GEN-009 or GEN-011 through clinical development, obtaining regulatory approval for either product candidate, or commercializing either product candidate or any of our future product candidates.
At this time, GEN-009 is our most advanced product candidate and our future revenues, if any, will depend highly on the successful clinical progress, approval, and commercialization of GEN-009. In addition to GEN-009, we also are advancing preclinical work on GEN-011, for which we expect to file an IND with the FDA in the second quarter of 2020. GEN-009, GEN-011 and any future product candidate will require substantial clinical development, testing and regulatory approval before we are permitted to commence commercialization. This process can take many years and will require the expenditure of substantial resources and we expect it will require that we obtain substantial additional funding.
We are currently conducting our GEN-009 Part B clinical trial. As with any open label study, we may slow or pause enrollment to evaluate a smaller set of patients in an effort to assure that a preliminary clinical signal is seen. We anticipate reporting these preliminary clinical results for our GEN-009 Part B clinical trial in the second or third quarter of 2020. Based upon this evaluation, we will consider whether it is appropriate to continue the study. A decision to stop the study would result in a delay in the clinical progress, approval and commercialization of GEN-009.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates on unfavorable terms to us.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings debt financings and license and development agreements with strategic partnerships with third parties.transactions. In 2015,January 2018, we raised additional net capitalproceeds of approximately $95.2$51.7 million through follow-onconcurrent public offerings in Marchof our common stock and August alongwarrants exercisable for shares of our common stock and preferred stock and warrants exercisable for shares of our common stock (the "Concurrent Offerings"). In February 2019, we raised additional net proceeds of approximately $13.8 million through private placement. In June 2019, we raised additional net proceeds of approximately $38.4 million through an underwritten public offering of our common stock and warrants exercisable for shares of our common stock. In October 2019, we entered into an agreement (the "Purchase Agreement") with $4.7Lincoln Park Capital ("LPC") from which we raised additional net proceeds of $2.5 million, and we have the right, at our sole discretion, to sell up to an additional $27.5 million of net debt financingour common stock based on prevailing market prices of our common stock at the time of each sale. The Purchase Agreement limits our sales of shares of common stock to LPC to 5,227,323 shares of common stock, representing 19.99% of the shares of common stock outstanding on the date of the Purchase Agreement. The Purchase Agreement also prohibits us from directing LPC to purchase any shares of common stock if those shares, when aggregated with all other shares of our common stock then beneficially owned by LPC and its affiliates, would result in December. No significant capital activities occurredLPC and its affiliates having beneficial ownership, at any single point in 2016.time, of more than 9.99% of the then total outstanding shares of our common stock. We have also periodically sold shares under our at-the-market equity offering program with Cowen and Company, LLC (the "ATM"). To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships with third parties, we may have to relinquish valuable rights to our technologies or product candidates, future revenue streams, research programs or product candidates or grant licenses on terms that are not favorable to us. If we are unable to raise additional capital when needed, we would be required to delay, limit, reduce or terminate our product development or commercialization efforts for GEN-003, our immuno-oncology program,GEN-009, GEN-011, or our other product candidates,candidates.
Our stockholders will experience substantial additional dilution if shares of our preferred stock are converted into, or grant rightsoutstanding warrants are exercised for, common stock.
As of February 11, 2020 there were 1,635 shares of our Series A convertible preferred stock outstanding, which are convertible, without payment of additional consideration, into 204,375 shares of our common stock. As of February 11, 2020, there were 5,122,183 shares of common stock issuable upon the exercise of warrants, having a weighted average exercise price of $7.66 per share, and 1,310,927 shares of common stock issuable upon the exercise of stock options outstanding, having a weighted average exercise price of $11.72 per share. The conversion of the outstanding shares of our Series A convertible preferred stock into, or exercise of outstanding options or warrants for, common stock would be substantially dilutive to developexisting stockholders. Any dilution or potential dilution may cause our stockholders to sell their shares, which may contribute to a downward movement in the stock price of our common stock.
SEC regulations limit the amount of funds we may raise during any 12-month period pursuant to our shelf registration statement on Form S-3.
Our public float was less than $75 million within 60 days of filing of this Annual Report on Form 10-K. As a result, under General Instruction I.B.6 to Form S-3, the amount of funds we can raise through primary public offerings of securities, including through our ATM, in any 12-month period using our registration statement on Form S-3 is limited to one-third of the aggregate market value of the voting and market product candidates thatnon-voting common equity held by our non-affiliates. We are subject to this limitation until such time as our public float exceeds $75 million. If we would otherwise preferare required to developfile a new registration statement on another form, we may incur additional costs and market ourselves.be subject to delays due to review by the SEC.
Risks Related to Clinical Development, Regulatory Review and Approval of Our Product Candidates
We are substantially dependent on the success of the clinical development of GEN-003,GEN-009, our only product candidate currently in an active clinical trial.trials. Any failure to successfully develop or commercialize the GEN-003GEN-009 vaccine, or any significant delays in doing so, will have a material adverse effect on our business, result of operations and financial condition.
We have investedare now currently investing a significant portion of our efforts and financial resources in the development of the GEN-003GEN-009, a neoantigen cancer vaccine for genital herpes, the only product candidate we have thatwhich is currently in an activea Phase 1/2a clinical development.trial. Our ability to generate product revenue depends heavily on the success of clinical trials for GEN-009 and the successful development and commercialization of GEN-003.GEN-009. The successful development and commercialization of GEN-003GEN-009 will depend on several factors, including the following:
successful completion of our ongoing and additionalall required clinical studiestrials of GEN-003;GEN-009;
Any failure to successfully develop or commercialize GEN-003GEN-009 or any significant delays in doing so will have a material adverse effect on our business, results of operations and financial condition.
Because our active product candidate is in an early stage of clinical development, there is a high risk of failure, and we may never succeed in developing marketable products or generating product revenue.
If the results of our ongoing or future clinical trials are inconclusive with respect to the efficacy of our product candidates or if we do not meet our clinical endpoints with statistical significance or if there are safety concerns or AEs associated with our product candidates, we may be prevented or delayed in obtaining marketing approval for our product candidates. Alternatively, even if we obtain regulatory approval, that approval may be for indications or patient populations that are not as broad as intended or desired or may require labeling that includes significant use or distribution restrictions or safety warnings. We may also be required to perform additional or unanticipated clinical trials to obtain approval or be subject to additional post-marketing testing requirements to maintain regulatory approval. In addition, regulatory authorities may
withdraw their approval of the product or impose restrictions on its distribution in the form of a modified risk evaluation and mitigation strategy.
If we do not obtain regulatory approval for our current and future product candidates, our business will be adversely affected.
Our product candidates are subject to extensive governmental regulations relating to, among other things, research, clinical trials, manufacturing, import, export and commercialization. In order to obtain regulatory approval for the commercial sale of any product candidate, we must demonstrate through extensive non-clinical studies and clinical trials that the product candidate is safe and effective for use in each target indication. Clinical trials are expensive, time-consuming and uncertain as to outcome. We may gain regulatory approval for GEN-003GEN-009, GEN-011 or our other current or potential future clinical and non-clinical product candidates in some but not all of the territories available or some but not all of the target indications, resulting in limited commercial opportunity for the approved vaccine or immunotherapy,our product candidates, or we may never obtain regulatory approval for these product candidates for any indication in any jurisdiction.
We may find it difficult to enroll patients in our clinical trials, which could delay or prevent clinical trials of our product candidates.
Identifying and qualifying patients to participate in clinical trials of our product candidates is critical to our success. The timing of our clinical trials depends on the speed at which we can recruit patients to participate in testing our product candidates. If patients are unwilling to participate in our studies because of negative publicity from AEs in the biotechnology industries or for other reasons, including competitive clinical trials for similar patient populations, the timeline for recruiting patients, conducting studies and obtaining regulatory approval of potential products may be delayed or prevented. These delays could result in increased costs, delays in advancing our product development, delays in testing the effectiveness of our technology or termination of the clinical trials altogether.
We may not be able to identify, recruit and enroll a sufficient number of patients, or those with required or desired characteristics to achieve diversity in a study, to complete our clinical trials in a timely manner. Patient enrollment is affected by factors including:
severity of the disease under investigation;
design of the study protocol;
size of the patient population;
eligibility criteria for the trial in question;
perceived risks and benefits of the product candidate under study;
proximity and availability of clinical trial sites for prospective patients;
availability of competing therapies and clinical trials;
efforts to facilitate timely enrollment in clinical trials;
patient referral practices of physicians; and
ability to monitor patients adequately during and after treatment.
We may not be able to initiate or continue clinical trials if we cannot enroll a sufficient number of eligible patients to participate in the clinical trials required by regulatory agencies. If we have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, we may need to delay, limit or terminate ongoing or planned clinical trials, any of which would have an adverse effect on our business.
We may not be able to comply with requirements of foreign jurisdictions in conducting trials outside of the United States.
To date, we have not conducted any clinical trials for GEN-003 outside of the United States. Our ability to successfully initiate, enroll and complete a clinical trial in any foreign country, should we attempt to do so, is subject to numerous risks unique to conducting business in foreign countries, including:
difficulty in establishing or managing relationships with contract research organizations ("CROs") and physicians;
different standards for the conduct of clinical trials;
our inability to locate qualified local consultants, physicians and partners;
the potential burden of complying with a variety of foreign laws, medical standards and regulatory requirements, including the regulation of pharmaceutical and biotechnology products and treatment; and
the acceptability of data obtained from studies conducted outside the United States to the FDA in support of a BLA.
If we fail to successfully meet requirements for the conduct of clinical trials outside of the United States, we may be delayed in obtaining, or be unable to obtain, regulatory approval for our product candidates.
We may encounter substantial delays in our clinical trials or we may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities.
Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct extensive clinical trials to demonstrate the safety and efficacy of the product candidates for the intended indications. Clinical testing is expensive, time-consuming and uncertain as to outcome. We cannot guarantee that clinical trials will be conducted as planned or completed on schedule, if at all. A failure of one or more clinical trials can occur at any stage of testing. Events that may prevent successful or timely completion of clinical development include:
delays caused by us or third parties in conducting clinical trials for GEN-009;
delays by us in reaching a consensus with regulatory agencies on trial design, including our end of Phase 2 meetingthe IND for GEN-003 expected to occur in the first quarter of 2017;GEN-011;
delays in reaching agreement on acceptable terms with prospective CROs and clinical trial sites;
delays in obtaining required IRBInstitutional Review Board ("IRB") approval at each clinical trial site;
imposition of a clinical hold by regulatory agencies or an IRB for any reason, including safety concerns raised by other clinical trials of similar vaccines that may reflect an unacceptable risk with GEN-003GEN-009 or GEN-011 or after an inspection of clinical operations or trial sites;
failure to perform in accordance with the FDA’s GCPsgood clinical practices ("GCPs") or applicable regulatory guidelines in other countries;
delays in the testing, validation, manufacturing and delivery of the product candidates to the clinical sites;
delays caused by patients not completing participation in a trial or not returning for post-treatment follow-up;
clinical trial sites or patients dropping out of a trial or failing to complete dosing;
occurrence of serious AEs in clinical trials that are associated with the product candidates that are viewed to outweigh its potential benefits; or
changes in regulatory requirements and guidance that require amending or submitting new clinical protocols.
Delays, including delays caused by the above factors, can be costly and could negatively affect our ability to complete a clinical trial. We intend to file an IND for a product candidate in our immuno-oncology program before the end of 2017, but we have experienced clinical holds on IND submissions in the past. Our IND for GEN-003 was subject to a clinical hold from January 2012 to July 2012. In our original IND submission, we described a finding of osteonecrosis (microscopic evidence of bone and bone marrow death) in a toxicity study of GEN-003 conducted in mice. Because this finding was not present in toxicity studies conducted in other species, we reasoned that this was a mouse-specific finding and did not indicate a risk to humans in clinical trials. As the FDA provided us with several options that would resolve this issue to their satisfaction, we conducted an additional toxicity study in a highly relevant species (non-human primate) that would be more representative of a risk to humans. Since no bone or bone marrow toxicity was observed in this additional study, the FDA subsequently lifted the clinical hold, allowing us to proceed with the first study in humans of GEN-003.
Our active product candidate, GEN-003,GEN-009, GEN-011 and our current and future potential product candidates including any arising out of our immuno-oncology program, are or will be based on T cell activation, which is a novel approach for vaccines, immunotherapies and medical treatments.
We have concentrated our research and development efforts on T cell vaccine and immunotherapy technology, which is a novel approach for vaccines, immunotherapies and medical treatments, and our future success is highly dependent on the successful development of T cell immunotherapies in general, and our active development product and current and future product candidates in particular. Consequently, it may be difficult for us to predict the time and cost of product development. Unforeseen problems with the T cell approach to vaccines and immunotherapies may prevent further development or approval of our current and future product candidates. There can be no assurance that any development problems we or others researching T cell vaccines and immunotherapies may experience in the future will not cause significant delays or unanticipated costs, or that such development problems can be solved. Because of the novelty of this approach, there may be unknown safety risks associated with the vaccines and immunotherapies that we develop. Regulatory agencies such as the FDA may require us to conduct extensive safety testing prior to approval to demonstrate a low risk of rare and severe AEs caused by the vaccines and immunotherapies. If approved, the novel mechanism of action of the vaccines may adversely affect physician and patient perception and uptake of our products.
We custom design and manufacture our product candidates. Manufacturing unique lots of these product candidates is susceptible to product loss or failure due to issues with:
logistics associated with the requirementscollection of a patient’s tumor or blood;
batch-specific manufacturing failures or issues that arise due to the FDAuniqueness of each patient-specific batch that may not have been foreseen;
quality control testing failures;
unexpected failures of batches placed on stability;
novel assays, cell selection or other regulatory agenciescomponents within our manufacturing processes;
significant costs associated with individualized manufacturing that may imposeadversely affect our ability to demonstratecontinue development;
successful and timely manufacture and release of the safetypatient-specific batch;
shipment issues encountered during transport of the batch to the site of patient care; and
our reliance on single-source suppliers.
As certain of our product candidates are manufactured for each individual patient, we will be required to maintain a chain of identity with respect to each patient’s sample, sequence data derived from such sample, analyze results of such patient’s immunologic profile, and the custom manufactured product candidates.for each patient. Maintaining such a chain of identity is difficult and complex, and failure to do so could result in product mix-up, adverse patient outcomes, loss of product, or regulatory action, including withdrawal of any approved products from the market. Further, as our product candidates are developed through early-stage clinical studies to later-stage clinical trials towards approval and commercialization, we expect that multiple aspects of the complicated collection, analysis, manufacture and delivery processes will be modified in an effort to optimize processes and results. These changes may not achieve the intended objectives, and any of these changes could cause our product candidates to perform differently than we expect, potentially affecting the results of clinical trials.
Novel vaccine adjuvants, includedincluding those in some of our GEN-009 product candidates,candidate, may pose an increased safety risk to patients.
Adjuvants are compounds that are added to vaccine antigens to enhance the activation of the immune system and improve the immune response and efficacy of vaccines. Development of vaccines with novel adjuvants requires evaluation in larger numbers of patients prior to approval than would be typical for therapeutic drugs. Guidelines for evaluation of vaccines with novel adjuvants have been established by the FDA and other regulatory bodies and expert committees. Our product candidates, including GEN-003,GEN-009, may include one or more novel vaccine adjuvants. Any neoantigen cancer vaccine, because of the presence of an adjuvant, may have side effects considered to pose too great a risk to patients to warrant approval of the vaccine. Traditionally, regulatory authorities have required extensive study of novel adjuvants because vaccines typically get administered to healthy populations, in particular infants, children and the elderly, rather than in people with disease. Such extensive study has often included long-term monitoring of safety in large general populations that has at times exceeded 10,000 subjects. This contrasts with the few thousand subjects typically necessary for approval of novel therapeutics. Although GEN-003 is being developed as a treatment, and therefore is not expected to be administered to uninfected subjects, regulators nonetheless may require us to amass a prophylactic vaccine-like safety database. To date, the FDA and other major regulatory agencies have only approved vaccines containing five adjuvants, which makes it difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for our product candidates in the United States or elsewhere.
If we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market our products in those jurisdictions.
We intend to market our product candidates, if approved, in international markets. Such marketing will require separate regulatory approvals in each market and compliance with numerous and varying regulatory requirements. The approval procedures vary among countries and may involve requirements for additional testing, and the time required to obtain approval may differ from that required to obtain FDA approval. In addition, in many countries outside the United States, a vaccine must be approved for reimbursement before it can be approved for sale in that country. In some cases, the price that we intend to charge for our vaccine is also subject to approval. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We
may not be able to file for regulatory approvals and may not receive necessary approvals to commercialize our vaccines in any market.
Even if we receive regulatory approval for our product candidates, such vaccines and immunotherapies will be subject to ongoing regulatory review, which may result in significant additional expense. Additionally, our product candidates, including our active development product, GEN-003,GEN-009, GEN-011 and any other current or potential future vaccine or immunotherapy product candidates, if approved, could be subject to labeling and other restrictions, and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our products.
Any regulatory approvals that we receive for our product candidates may also be subject to limitations on the approved indications for which the product may be marketed or to conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of the vaccine or immunotherapy potentially over many years. In addition, if the FDA approves any of our product candidates, the manufacturing processes, labeling, packaging, distribution, AE reporting, storage, advertising, 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, registration, as well as continued compliance with current good manufacturing practice ("cGMP"),(cGMP) and GCP, for any clinical trials that we conduct post-approval.
Later discovery of previously unknown problems with an approved product, including AEs of unanticipated severity or frequency, or with manufacturing operations or 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, or holds on clinical trials;
refusal by the FDA to approve pending applications or supplements to approved applications filed by us, or suspension or revocation of product license approvals;
product seizure or detention, or refusal to permit the import or export of products; and
injunctions or the imposition of civil, criminal and/or administrative penalties, damages, monetary fines, disgorgement, exclusion from participation in Medicare, Medicaid and other federal health care programs, and curtailment or restructuring of our operations.
The FDA’s policies may change and additional government regulations may be enacted that could affect regulatory approval that we have received for our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or not able to maintain regulatory compliance, we may lose any marketing approval that may have been obtained and we may not achieve or sustain profitability, which would adversely affect our business.
Risks Related to Our Reliance on Third Parties
We rely on third parties to conduct technical development, non-clinical studies and clinical trials for our product candidates, including our active clinical development product, GEN-003,GEN-009, GEN-011 and any other current or future product candidates, and if they do not properly and successfully perform their obligations to us, we may not be able to obtain regulatory approvals for our product candidates.
We rely, and intend to continue to rely on, on third party CROs and other third parties to assist in managing, monitoring and otherwise carrying out our GEN-003GEN-009 and GEN-011 clinical trials. We expect to continue to rely on third parties, such as CROs, clinical data management organizations, medical institutions and clinical investigators, to conduct our clinical trials. We compete with many other companies for the resources of these third parties. The third parties on whom we rely generally may terminate their engagements at any time and having to enter into alternative arrangements would delay development and commercialization of our product candidates.
Our reliance on these third parties for research and development activities will reduce our control over these activities but will not relieve us of our responsibilities. For example, the FDA and foreign regulatory authorities require compliance with regulations and standards, including GCP, for designing, conducting, monitoring, recording, analyzing, and reporting the results of clinical trials to assure that the data and results are credible and accurate and that the rights, integrity and confidentiality of
trial participants are protected. Although we rely on third parties to conduct our clinical trials, we are responsible for ensuring that each of these clinical trials is conducted in accordance with its general investigational plan and protocol.
Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors. If these third parties do not successfully carry out their duties under their agreements, if the quality or accuracy of the data they obtain is compromised due to their failure to adhere to clinical trial protocols or to regulatory requirements, or if they otherwise fail to comply with clinical trial protocols or meet expected deadlines, the clinical trials of our product candidates may not meet regulatory requirements. If clinical trials do not meet regulatory requirements or if these third parties need to be replaced, non-clinical development activities or clinical trials may be extended, delayed, suspended or terminated. If any of these events occur, we may not be able to obtain regulatory approval of our product candidates on a timely basis or at all.
We also expect to rely on other third parties to store and distribute drug supplies for our clinical trials. Any performance failure on the part of our distributors could delay clinical development or marketing approval of our product candidates or commercialization of our products, producing additional losses and depriving us of potential product revenue.
We rely on third parties to conduct some or all aspects of our product manufacturing, and these third parties may not perform satisfactorily.
We do not have any manufacturing facilities or personnel. We do not expect to independently conduct all aspects of our product manufacturing. We currently rely, and expectintend to rely on third parties with respect to manufacturing including under our agreements with FujifilmGEN-009 and Novavax. For example, we relyGEN-011.We have also relied on third party suppliers and manufacturers to manufacture and supply vaccines for our GEN-003other clinical trials. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or products or such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts.
Any of these third parties may terminate their engagement with us at any time. If we need to enter into alternative arrangements, it could delay our product development activities. Our reliance on these third parties for manufacturing activities will reduce our control over these activities but will not relieve us of our responsibility to ensure compliance with all required regulations regarding manufacturing.
Reliance on third party manufacturers entails risks to which we would not be subject if we manufactured the product candidates ourselves, including:
the inability to negotiate manufacturing agreements with third parties under commercially reasonable terms;
reduced control as a result of using third party manufacturers for all aspects of manufacturing activities, including regulatory compliance and quality assurance;
termination or nonrenewal of manufacturing agreements with third parties in a manner or at a time that is costly or damaging to us;
the unavailability of a manufacturer that is capable of, or that has the capacity to, manufacture our clinical supply that results in delays or additional manufacturing costs;
the possible misappropriation of our proprietary information, including our trade secrets and know-how or infringement of third partythird-party intellectual property rights by our contract manufacturers; and
disruptions to the operations of our third partythird-party manufacturers or suppliers caused by conditions unrelated to our business or operations, including the bankruptcy of the manufacturer or supplier.
Any of these events could lead to clinical trial delays or failure to obtain regulatory approval or affect our ability to successfully commercialize future products. Some of these events could be the basis for FDA action, including injunction, recall, seizure or total or partial suspension of production.
Our product candidates and any products that we may develop may compete with other product candidates and products for access to manufacturing facilities. There are a limited number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for us.
Any performance failure on the part of our existing or future manufacturers could delay clinical development or marketing approval. We do not currently have arrangements in place for redundant supply or a second source for bulk drug substance.GEN-009 and GEN-011. If our current contract manufacturers cannot perform as agreed, we may be required to replace such manufacturers. Although we believe that there are several potential alternative manufacturers who could manufacture our product candidates, we may incur added costs and delays in identifying and qualifying any such replacement.
Our current and anticipated future dependence upon others for the manufacture of our product candidates or products may adversely affect our future profit margins and our ability to commercialize any products that receive marketing approval on a timely and competitive basis.
If we are unable to manufacture our products in sufficient quantities, or at sufficient yields, or are unable to obtain regulatory approvals for a manufacturing facility for our products, we may experience delays in product development, clinical trials, regulatory approval and commercial distribution.
Completion of our clinical trials and commercialization of our product candidates require access to, or development of, facilities to manufacture our product candidates at sufficient yields and at commercial-scale. We have no experience manufacturing, or managing third parties in manufacturing, any of our product candidates in the volumes that will be necessary to support large-scale clinical trials or commercial sales. Efforts to establish these capabilities may not meet initial expectations as to scheduling, scale-up, reproducibility, yield, purity, cost, potency or quality.
We expect to rely on third-parties for the manufacture of clinical and, if necessary, commercial quantities of our product candidates. These third-party manufacturers must also receive FDA approval before they can produce clinical material or commercial products. Our products may be in competition with other products for access to these facilities and may be subject to delays in manufacture if third-parties give other products greater priority. We may not be able to enter into any necessary third-party manufacturing arrangements on acceptable terms, or on a timely basis. In addition, we may have to enter into technical
transfer agreements and share our know-how with the third-party manufacturers, which can be time-consuming and may result in delays.
Our reliance on contract manufacturers may adversely affect our operations or result in unforeseen delays or other problems beyond our control. Because of contractual restraints and the limited number of third-party manufacturers with the expertise, required regulatory approvals and facilities to manufacture our bulk vaccines on a commercial-scale, replacement of a manufacturer may be expensive and time-consuming and may cause interruptions in the production of our vaccine. A third-party manufacturer may also encounter difficulties in production. These problems may include:
difficulties with production costs, scale-up and yields;
unavailability of raw materials and supplies;
insufficient quality control and assurance;
shortages of qualified personnel;
failure to comply with strictly enforced federal, state and foreign regulations that vary in each country where product might be sold; and
lack of capital funding.
As a result, any delay or interruption could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We may not be successful in establishing and maintaining strategic partnerships, which could adversely affect our ability to develop and commercialize products.
A part of our strategy is to evaluate and, as deemed appropriate, enter into partnerships in the future when strategically attractive, including potentially with major biotechnology or pharmaceutical companies. We face significant competition in seeking appropriate partners for our product candidates, and the negotiation process is time-consuming and complex. In order for us to successfully partner our product candidates, potential partners must view these product candidates as economically valuable in markets they determine to be attractive in light of the terms that we are seeking and other available products for licensing by other companies. Even if we are successful in our efforts to establish strategic partnerships, the terms that we agree upon may not be favorable to us, and we may not be able to maintain such strategic partnerships if, for example, development or approval of a product is delayed or sales of an approved product are disappointing. Any delay in entering into strategic partnership agreements related to our product candidates could delay the development and commercialization of our product candidates and reduce their competitiveness even if they reach the market.
In addition, our strategic partners may breach their agreements with us, and we may not be able to adequately protect our rights under these agreements. Furthermore, our strategic partners will likely negotiate for certain rights to control decisions regarding the development and commercialization of our product candidates, if approved, and may not conduct those activities in the same manner as we would do so.
If we fail to establish and maintain strategic partnerships related to our product candidates, we will bear all of the risk and costs related to the development of any such product candidate, and we may need to seek additional financing, hire additional employees and otherwise develop expertise which we do not have and for which we have not budgeted. This could negatively affect the development of any unpartnered product candidate.
In addition, we are currently seeking to establish strategic partnerships with companies with adjuvant and delivery technologies for our neoantigen cancer vaccine candidates. If we are unable to successfully enter into these partnerships, our ability to develop our neoantigen cancer vaccine candidates may be adversely affected.
Risks Related to Our Intellectual Property
If we are unable to obtain or protect intellectual property rights related to our product candidates, we may not be able to compete effectively in our markets.
We rely upon a combination of patents, patent applications, know-how and confidentiality agreements to protect the intellectual property related to our platform technology and product candidates. The patent position of biotechnology companies is generally uncertain because it involves complex legal and factual considerations. The standards applied by the United States
Patent and Trademark Office ("U.S. PTOPTO") and foreign patent offices in granting patents are not always applied uniformly or predictably. For example, there is no uniform worldwide policy regarding patentable subject matter or the scope of claims allowable in biotechnology patents. The patent applications that we own or in-license may fail to result in issued patents with claims that cover our discovery platform or product candidates in the United States or in other countries. There is no assurance that all potentially relevant prior art relating to our patents and patent applications or those of our licensors has been found, and prior art that we have not disclosed could be used by a third party to invalidate a patent or prevent a patent from issuing from a pending patent application. Even if patents do successfully issue and even if such patents cover our discovery platform or product candidates, third parties may challenge their validity, enforceability or scope, which may result in such patents being narrowed or invalidated. Furthermore, even if they are unchallenged, our patents and patent applications, or those of our licensors, may not adequately protect our platform technology, provide exclusivity for our product candidates, prevent others from designing around our patents with similar products, or prevent others from operating in jurisdictions in which we did not pursue patent protection. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business.
If patent applications we hold or have in-licensed with respect to our platform or product candidates fail to issue, if their breadth or strength of protection is threatened, or if they fail to provide meaningful exclusivity for our product candidates or ATLAS discovery platform, it could dissuade companies from collaborating with us.us and could limit or destroy our ability to develop or commercialize one or more of our products, or even any product. We or our licensors have filed several patent applications covering aspects of our product candidates. We cannot offer any assurances about which, if any, patents will be issued, the breadth of any such patents or whether any issued patents will be found invalid and unenforceable or will be challenged by third parties. Any successful opposition to these patent applications, or patents that may issue from them, or to any other patent applications or patents owned by or licensed to us, could deprive us of rights necessary for the successful commercialization of any product candidate that we may develop. Since patent applications in the United States and most other countries are confidential for a period of time after filing, and some remain so until issued, we cannot be certain that we or our licensors were the first to file a patent application relating to any particular aspect of a product candidate. Furthermore, if third parties have filed such patent applications, an interference proceeding in the United States can be initiated by such third party, or by the U.S. PTO itself, to determine who was the first to invent any of the subject matter covered by the patent claims of our applications.
In the United States, for patent applications filed prior to March 16, 2013, assuming the other requirements for patentability are met, the first to invent is entitled to the patent, while outside the United States, the first to file a patent application is entitled to the patent. On March 16, 2013, the United States transitioned to a ‘first to file’ system more like that in the rest of the world in that the first inventor to file a patent application is entitled to the patent. Under either the prior system or current one, third parties are allowed to submit prior art prior to the issuance of a patent bypatent. Furthermore, both the U.S. PTO, and may become involvedforeign patent systems permit third parties or, in some cases, the patent authorities themselves, to initiate proceedings challenging the scope and / or validity of issued patents, including for example, opposition, derivation, reexamination, inter partes review or interference proceedings challenging our patent rights or the patent rights of others.proceedings. An adverse determination against our or our licensor's patent rights in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, which could adversely affect our competitive position with respect to third parties.
In addition, patents have a limited lifespan. In most countries, including the United States, the natural expiration of a patent is 20 years from the date it is filed. Various extensions of patent term may be available in particular countries, however in all circumstances the life of a patent, and the protection it affords, has a limited term. If we encounter delays in obtaining regulatory approvals, the period of time during which we could market a product under patent protection could be reduced. We expect to seek extensions of patent terms where these are available in any countries where we are prosecuting patents. Such possible extensions include those permitted under the Drug Price Competition and Patent Term Restoration Act of 1984 in the United States, which permits a patent term extension of up to five years to cover an FDA-approved product. However, the applicable authorities, including the FDA in the United States, and any equivalent regulatory authority in other countries, may not agree with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may grant more limited extensions than we request. If this occurs, our competitors may be able to take advantage of our investment in development and clinical trials by referencing our clinical and non-clinical data, and then may be able to launch their product earlier than might otherwise be the case.
Filing, prosecuting and enforcing patents on our platform or product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States could be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from infringing our patents in all countries outside the United States, or from selling or importing products that infringe our patents in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Any loss of, or failure to obtain, patent protection could have a material adverse impact on our business. We may be unable to prevent competitors from entering the market with a product that is similar to or the same as our products.
We may become involved in lawsuits to protectdefend or enforce our intellectual property, which could be expensive, time consuming and unsuccessful.
Competitors may infringe our patents or misappropriate or otherwise violate our intellectual property rights, and competitors or other third parties may challenge the validity or enforceability of those rights. To counter infringement or unauthorized use, or to defend against other challenges, litigation may be necessary to enforce or defend our intellectual property rights, to protect our trade secrets and/or to determine the validity and scope of our own intellectual property rights or the proprietary rights of others. Such litigation can be expensive and time consuming. Many of our current and potential competitors have the ability to dedicate substantially greater resources to litigate intellectual property rights than we can. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property. Litigation could result in substantial costs and diversion of management resources, which could harm our business and financial results. In addition, in an infringement proceeding,contested proceedings, a court or agency may decide that a patent owned by or licensed to us is invalid or unenforceable or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated, held unenforceable or interpreted narrowly. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.
Third-party claims of intellectual property infringement or misappropriation may prevent or delay our development and commercialization efforts.
Our commercial success depends in part on our ability to develop, manufacture, market and sell our product candidates, and to use our or our licensors’ proprietary technologies without infringing the patents and proprietary rights of third parties. There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions, reexamination, and inter partes review proceedings before the U.S. PTO and corresponding foreign patent offices. Numerous U.S. and foreign issued patents and pending patent applications owned by third parties exist in the fields in which we are developing and may develop our product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of the patent rights of third parties.
Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims for example to materials, formulations, methods of manufacture, methods of analysis, and/or methods for treatment related to the use or manufacture of our products or product candidates. In some cases,
we may have failed to identify such relevant third-party patents or patent applications. For example, applications filed before November 29, 2000 and certain applications filed after that date that will not be filed outside the United States remain confidential until patents issue. Except for the preceding exceptions, patent applications in the United States and elsewhere are generally published only after a waiting period of approximately 18 months after the earliest filing. Therefore, patent applications covering our platform technology or our products or product candidates could have been filed by others without our knowledge. Additionally, pending patent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our platform technologies, our products or product candidates and/or the use, analysis, and/or manufacture of our product candidates.
If any third-party patents were held by a court of competent jurisdiction to cover aspects of our materials, formulations, methods of manufacture, methods of analysis, and/or methods for treatment, the holders of any such patents would be able to block our ability to develop and commercialize the applicable product candidate until such patent expired or unless we obtain a license. Such licenses may not be available on acceptable terms, if at all. Even if we were able to obtain a license, the rights may be nonexclusive, which could result in our competitors gaining access to the same intellectual property. Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspect of our business operations, if, as a result of actual or threatened patent infringement claims, we are unable to enter into licenses on acceptable terms.
Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our product candidates. Defending against claims of patent infringement or misappropriation of trade secrets could be costly and time consuming, regardless of the outcome. Thus, even if we were to ultimately prevail, or to settle at an early stage, such litigation could burden us with substantial unanticipated costs. In addition, litigation or threatened litigation could result in significant demands on the time and attention of our management team, distracting them from the pursuit of other company business. In the event of a successful claim of infringement against us, we may have to pay substantial
damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.
We may face a claim of misappropriation if a third party believes that we inappropriately obtained and used trade secrets of such third party. If we are found to have misappropriated a third party’s trade secrets, we may be prevented from further using such trade secrets, limiting our ability to develop our product candidates, and we may be required to pay damages. During the course of any patent or other intellectual property litigation, there could be public announcements of the results of hearings, rulings on motions, and other interim proceedings in the litigation. If securities analysts or investors regard these announcements as negative, the perceived value of our products, programs, or intellectual property could be diminished. Accordingly, the market price of our common stock may decline.
We have in-licensed a portion of our intellectual property, and, if we fail to comply with our obligations under these arrangements, or our licensors fail to obtain and maintain intellectual property rights, we could lose such intellectual property rights or owe damages to the licensor of such intellectual property.
We are a party to a number of license and collaboration agreements that are important to our business, and we may enter into additional license or collaboration agreements in the future. OurFor example, our discovery platform is built, in part, around patents exclusively in-licensed from academic or research institutions. Certain of our in-licensed intellectual property also covers, or may cover GEN-003 and other current or future product candidates. See “Business — In-License- License Agreements” and “Business — Other Collaborations” for a description of our outstandingin-license agreement with Harvard and Oncovir. These and other licenses may not provide exclusive rights to use such intellectual property and technology in all relevant fields of use and in all territories in which we may wish to develop or commercialize our technology and product candidates in the future. It is possible that we may be unable to obtain additional licenses at a reasonable cost or on reasonable terms, if at all. As a result, we may not be able to prevent competitors from developing and commercializing competitive products in territories included in all of our licenses. In that event, we may be required to expend significant time and resources to redesign our product candidates or to develop or license and collaboration agreements with UC, Harvard, Children’s, Novavax, andreplacement technology, all of which may not be feasible on a technical or commercial basis. If we are unable to do so, we may be unable to develop or commercialize the DFCI.affected product candidates, which could harm our business significantly.
Our existing license agreements impose, and we expect that future license agreements will impose, various diligence, milestone payment, royalty and other obligations on us. For example, in our existing license agreements, and we expect in our future agreements, patent prosecution of our licensed technology may be controlled by the licensor, and we may be required to reimburse the licensor for their costs of patent prosecution. If our licensors fail to obtain and maintain patent or other protection for the proprietary intellectual property we license from them, we could lose our rights to the intellectual property or our exclusivity with respect to those rights, and our competitors could market competing products covered by the intellectual property. Further, in our license agreements we may be responsible for bringing any actions against any third party for infringing the patents we have licensed. If there is any conflict, dispute, disagreement or issue of non-performance between us and our licensing partners regarding our rights or obligations under the license agreements, including any such conflict, dispute or disagreement arising from our failure to satisfy payment obligations under any such agreement, we may owe damages, our licensor may have a right to terminate the affected license, and our ability to utilize the affected intellectual property in our drug discovery and development efforts, and our ability to enter into collaboration or marketing agreements for an affected product candidate, may be adversely affected.
For example, disputes may arise regarding intellectual property subject to a licensing agreement, including the scope of rights granted under the license agreement and other interpretation-related issues; the extent to which our technology infringes the intellectual property of the licensor that is not subject to the licensing agreement; the sublicensing of patent and other rights under any collaborative development relationships; our diligence obligations under the license agreement and what activities satisfy those diligence obligations; the inventorship or ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; and the priority of invention of patented technology. If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates.
Confidentiality agreements with employees and third parties may not prevent unauthorized disclosure of proprietary information.
In addition to the protection afforded by patents, we rely on confidentiality agreements to protect proprietary know-how that may not be patentable or that we may elect not to patent, processes for which patents are difficult to enforce and any other elements of our platform technology and discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, and outside scientific advisors, contractors and collaborators. Although we use reasonable efforts to protect our know-how, our employees, consultants, contractors, or outside scientific advisors might intentionally or inadvertently disclose our know-how information to competitors. In addition, competitors may otherwise gain access to our know-how or independently develop substantially equivalent information and techniques.
Enforcing a claim that a third party illegally obtained and is using any of our know-how is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States sometimes are less willing than U.S. courts to protect know-how. Misappropriation or unauthorized disclosure of our know-how could impair our competitive position and may have a material adverse effect on our business.
Risks Related to Commercialization of Our Product Candidates
Our future commercial success depends upon attaining significant market acceptance of our product candidates, if approved, among physicians, patients, third-party payors and others in the medical community.
Even if we obtain marketing approval for GEN-003GEN-009, GEN-011 or any other products that we may develop or acquire in the future, the product may not gain market acceptance among physicians, third-party payors, patients and others in the medical community. For example, we currently expect that the initial administration of GEN-003 will be though three injections and future maintenance doses may be required. Physicians or patients may not accept this product as a result of this anticipated dosing requirement. In addition, market acceptance of any approved products depends on a number of other factors, including:
the efficacy and safety of the product, as demonstrated in clinical trials;
the clinical indications for which the product is approved, and the label approved by regulatory authorities for use with the product, including any warnings that may be required on the label;
acceptance by physicians and patients of the product as a safe and effective treatment and the willingness of the target patient population to try new therapies and of physicians to prescribe new therapies;
the cost, safety and efficacy of treatment in relation to alternative treatments;
the availability of adequate coursecoverage and reimbursement by third-party payors and government authorities;
relative convenience and ease of administration;
the prevalence and severity of adverse side effects;
the effectiveness of our sales and marketing efforts; and
the restrictions on the use of our products together with other medications, if any.
Market acceptance is critical to our ability to generate significant revenue. Any product candidate, if approved and commercialized, may be accepted in only limited capacities or not at all. If any approved products are not accepted by the market to the extent that we expect, we may not be able to generate significant revenue and our business would suffer.
If we are unable to establish sales, marketing and distribution capabilities, we may not be successful in commercializing our product candidates if and when they are approved.
We do not have a sales or marketing infrastructure and have no experience in the sale, marketing or distribution of pharmaceutical products. To achieve commercial success for any product for which we have obtained marketing approval, we will need to establish a sales and marketing organization.
In the future, we expect to build a focused sales and marketing infrastructure to market or co-promote some of our product candidates in the United States, if and when they are approved. There are risks involved with establishing our own sales, marketing and distribution capabilities. For example, recruiting and training a sales force is expensive and time consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
Factors that may inhibit our efforts to commercialize our products on our own include:
our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;
the inability of sales personnel to obtain access to physicians;
the lack of adequate numbers of physicians to prescribe any future products;
the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and
unforeseen costs and expenses associated with creating an independent sales and marketing organization.
If we are unable to establish our own sales, marketing and distribution capabilities, and instead enter into arrangements with third parties to perform these services, our product revenues and our profitability, if any, are likely to be lower than if we were to market, sell and distribute any products that we develop ourselves. In addition, we may not be successful in entering into arrangements with third parties to sell, market and distribute our product candidates or may be unable to do so on terms that are favorable to us. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. If we do not establish sales, marketing and distribution capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our product candidates.
Coverage and reimbursement may be limited or unavailable in certain market segments for our product candidates, which could make it difficult for us to sell our products profitably.
Market acceptance and sales of any approved products will depend significantly on the availability of adequate coverage and reimbursement from third-party payors and may be affected by existing and future health care reform measures. Third-party payors, such as government health care programs, private health insurers and health maintenancemanaged care organizations, decide for which drugs they will provide coverage for and establish reimbursement levels. Coverage and reimbursement decisions by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that use of a product is:
a covered benefit under its health plan;
safe, effective and medically necessary;
appropriate for the specific patient;
cost-effective; and
neither experimental nor investigational.
Third-party payors, whether foreign or domestic, or governmental or commercial, are developing increasingly sophisticated methods of controlling health care costs. Coverage and reimbursement can vary significantly from payor to payor. As a result, obtaining coverage and reimbursement approval for a product from each government and other third-party payor willmay require us to provide supporting scientific, clinical and cost-effectiveness data for the use of our products to each payor separately, with no assurance that we will be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. We cannot be sure that coverage or adequate reimbursement will be available for any of our product candidates. Also, we cannot be sure that coverage determinations or reimbursement amounts will not reduce the demand for or require us to lower the price of or provide discounts on, our products. If reimbursement is not available or is available only to limited levels, we may not be able to commercialize certain of our products. In addition, in the United States, third-party payors are increasingly attempting to contain health care costs by limiting both coverage and the level of reimbursement of new drugs. As a result, significant uncertainty exists as to whether and how much third-party payors will reimburse patients for their use of newly approved drugs, which in turn will put pressure on the pricing of drugs.
Price controls may be imposed, which may adversely affect our future profitability.
In international markets, reimbursement and health care payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies. In some countries, particularly member states of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after receipt of marketing approval for a product. In addition, there can be considerable pressure by governments and other stakeholders on coverage, prices and reimbursement levels, including as part of cost containment measures. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after coverage and reimbursement has been obtained. Reference pricing used by various European Union member states and parallel distribution, or arbitrage between low-priced and high-priced member states, can further reduce prices. In some countries, we may be required to conduct a clinical trial or other studies that compare the cost-effectiveness of our product candidates to other available vaccines in order to obtain or maintain coverage, reimbursement or pricing approval. 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. There can be no assurance that our vaccine candidates will be considered cost-effective by third-party payors, that an adequate level of reimbursement will be available or that the third-party payors’ reimbursement policies will not adversely affect our ability to sell our products profitably. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be adversely affected.
The impact of recent health care reform legislation and other changes in the health care industry and in health care spending on us is currently unknown and may adversely affect our business model.
In the United States, and in some foreign jurisdictions, the legislative landscape continues to evolve. Our revenue prospects could be affected by changes in health care spending and policy in the United States and abroad. We operate in a highly regulated industry and new laws or judicial decisions, or new interpretations of existing laws or decisions, related to health care availability, the method of delivery or payment for health care products and services could negatively impact our business, operations and financial condition. There is significant interest in promoting health care reform, as evidenced by the enactment in the United States of the Patient Protection and Affordable CareHealthcare Reform Act, (the "ACA"), as amended by the Health Care and Education Reconciliation Act in 2010, as well as by the pending proposalsongoing efforts to eliminate or significantly modify the ACA.Healthcare Reform Act. For example, recent tax reform legislation eliminated the tax penalty for individuals who do not maintain sufficient health insurance coverage. See “Business- Government Regulation-Reimbursement”. It is likely that federal and state legislatures within the United States andas well as foreign governments will continue to consider changes to existing health care legislation.
We cannot predict the ultimate content, timing or effect of any changes to the ACAHealthcare Reform Act or other federal and state reform efforts.efforts within the United States or abroad. There is no assurance that federal or state health care reform will not adversely affect our business and financial results, and we cannot predict how future federal or state legislative, judicial or administrative changes relating to healthcare reform will affect our business.
The continuing efforts of the government, insurance companies, managed care organizations and other payors of health care services to contain or reduce costs of health care may adversely affect:
the demand for any drug products for which we may obtain regulatory approval;
our ability to set a price that we believe is fair for our products;
our ability to obtain coverage and reimbursement approval for a product;
our ability to generate revenues and achieve or maintain profitability; and
the level of taxes that we are required to pay.
In addition, other broader legislative changes have been adopted that could have an adverse effect upon, and could prevent, our products’ or product candidates’ commercial success. The Budget Control Act of 2011, as amended, or the Budget Control Act, includes provisions intended to reduce the federal deficit, including reductions in Medicare payments to providers through 2029. Any significant spending reductions affecting Medicare, Medicaid, or other publicly funded or subsidized health programs, or any significant taxes or fees imposed as part of any broader deficit reduction effort or legislative replacement to the Budget Control Act, or otherwise, could have an adverse impact on our anticipated product revenues.
We face substantial competition, which may result in others discovering, developing or commercializing products before, or more successfully, than we do.
The development and commercialization of new drug products is highly competitive. Our future success depends on our ability to demonstrate and maintain a competitive advantage with respect to the design, development and commercialization of our product candidates. Our objective is to design, develop and commercialize new products with superior efficacy, convenience, tolerability and safety. In many cases, the products that we commercialize will compete with existing, market-leading products.
Other companies that are seeking to identify antigens for the development of vaccines and T cell receptor therapies using predictive tools include Foundation Medicine, NeonAchilles Therapeutics Ltd., Adaptive Biotechnologies Corp., BioNTech SE, Cellular Biomedicine Group Inc., Eutilex Co., Ltd., Genentech, Inc., Gilead Sciences, Inc., Gritstone Oncology Immatics Biotechnologies GmbH, Immunocore Limited,Inc., Iovance Biotherapeutics Inc., Marker Therapeutics, Inc., Merck & Co., Inc., Moderna Inc., Oncotherapy Science Inc., PACT Pharma Inc., Vaccibody AS and Adaptive Biotechnologies.Ziopharm Oncology Inc.
Many of our potential competitors have significantly greater financial, manufacturing, marketing, drug development, technical and human resources than we do. Large pharmaceutical companies, in particular, have extensive experience in clinical testing, including recruiting patients, obtaining regulatory approvals, recruiting patients and in manufacturing pharmaceutical products. Large and established companies such as Merck & Co., Inc., GlaxoSmithKline plc, Novartis, Inc., Sanofi Pasteur, SA, Pfizer Inc. and MedImmune, LLC (a subsidiary of AstraZeneca PLC), among others, compete in the vaccine market. In particular, these companies have greater experience and expertise in securing government contracts and grants to support their research and development efforts, conducting testing and clinical trials, obtaining regulatory approvals to market products, manufacturing such products on a broad scale and marketing approved products. These companies also have significantly greater research and marketing capabilities than we do and may also have products that have been approved or are in late stages of development and have collaborative arrangements in our target markets with leading companies and research institutions.
Established pharmaceutical companies may also invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds that could make the product that we develop obsolete. As a result of all of these factors, our competitors may succeed in obtaining patent protection and/or FDA approval or discovering, developing and commercializing products before we do. In addition, any new product that competes with an approved product must demonstrate compelling advantages in efficacy, convenience, tolerability, and safety in order to overcome price competition and to be commercially successful. If we are not able to compete effectively against potential competitors, our business will not grow and our financial condition and operations will suffer.
Our products may cause undesirable side effects or have other properties that delay or prevent their regulatory approval or limit their commercial potential.
Undesirable side effects caused by our products or even competing products in development that utilize a common mechanism of action could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in the denial of regulatory approval by the FDA or other regulatory authorities and potential product liability claims. We are currently conducting Phase 2 clinical trials for GEN-003. Serious AEs deemed to be caused by our product candidates could have a material AE on the development of our product candidates and our business as a whole. The most commonWe do not yet have any information related to whether GEN-009 may cause AEs to date in the clinical trial evaluating the safety and tolerability of GEN-003 have been fatigue, myalgia (muscle pain), pain tenderness and induration (inflammatory hardening of the skin). Our understanding of the relationship between GEN-003 and these events, as well as our understanding of AEs in future clinical trials of other product candidates, may change as we gather more information, and additional unexpected AEs may be observed.or serious AEs.
If we or others identify undesirable side effects caused by any of our product candidates either before or after receipt of marketing approval, a number of potentially significant negative consequences could result, including:
our clinical trials may be put on hold;
we may be unable to obtain regulatory approval for our vaccine candidates;
regulatory authorities may withdraw approvals of our vaccines;
regulatory authorities may require additional warnings on the label;
a medication guide outlining the risks of such side effects for distribution to patients may be required;
we could be sued and held liable for harm caused to patients; and
our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of our products and could substantially increase commercialization costs.
Risks Related to Our Indebtedness
Our level of indebtedness and debt service obligations could adversely affect our financial condition and may make it more difficult for us to fund our operations.
In December 2015,April 2018, we entered into an amendment (the "First Amendment") to our Loan Agreement (the "2014 Term Loan")amended and restated loan and security agreement with Hercules Capital, Inc. (f/k/a Hercules Technology Growth Capital, Inc.) (“Hercules”), which was subsequently amended in November 2019 (as amended, the "2018 Term Loan"). The First Amendment required us2018 Term Loan provides up to draw an additional $5.0$14.0 million of debt financing. The 2018 Term Loan has interest only payments through December 31, 2020. Thereafter, we are obligated to make payments that will include equal installments of principal and permitted us to draw two additional $5.0 million tranches, which expired unused at December 15, 2016.interest through the maturity date of May 2021. At December 31, 2016, $17.02019, $13.4 million was outstanding under the amended 20142018 Term Loan. Principal payments are currently scheduled to begin July 1, 2017.Loan, as amended.
All obligations under our 2014the 2018 Term Loan are secured by substantially all of our existing property and assets, excluding our intellectual property and in-licensed technology. This indebtedness may create additional financing risk for us, particularly if our business or prevailing financial market conditions are not conducive to paying off or refinancing our outstanding debt obligations at maturity. This indebtedness could also have important negative consequences, including:including the fact that:
we will need to repay our indebtedness by making payments of interest and principal, which will reduce the amount of money available to finance our operations, our research and development efforts and other general corporate activities; and
our failure to comply with the restrictive covenants in our 2014the 2018 Term Loan could result in an event of default that, if not cured or waived, would accelerate our obligation to repay this indebtedness, and Hercules could seek to enforce its security interest in the assets securing such indebtedness.
To the extent that additional debt is added to our current debt levels, the risks described above could increase.
We may not have cash available to us in an amount sufficient to enable us to make interest or principal payments on our indebtedness when due. If we do not make scheduled payments when due, or otherwise materially breach or experience an event of default under the 2018 Term Loan Hercules could accelerate our total loan obligation or enforce its security interest against us.
Failure to satisfy our current and future debt obligations under our 2014the 2018 Term Loan could result in an event of default. In addition, other events, including certain events that are not entirely in our control, such as the occurrence of a material adverse event on our business, could cause an event of default and, asto occur. As a result of the occurrence of an event of default, Hercules could accelerate all of the amounts due. In the event of an acceleration of amounts due under our 2014the 2018 Term Loan as a result of an event of default, we may not have sufficient funds or may be unable to arrange for additional financing to repay our indebtedness. In addition, Hercules could seek to enforce its security interests in the assets securing such indebtedness. If we are unable to pay amounts due to Hercules upon acceleration of the 2018 Term Loan or if Hercules enforces its security interest against our assets securing our indebtedness to Hercules, our ability to continue to operate our business may be jeopardized.
We are subject to certain restrictive covenants which, if breached, could result in the acceleration of our debt under the 2018 Term Loan and have a material adverse effect on our business and prospects.
dispose of certain assets;
change our lines of business;
engage in mergers or consolidations;
incur additional indebtedness;
create liens on assets;
pay dividends and make distributions or repurchase our capital stock; and
engage in certain transactions with affiliates.
These restrictive covenants may prevent us from undertaking an action that we feel is in the best interests of our business. In addition, if we were to breach any of these restrictive covenants, Hercules could accelerate our indebtedness under the 2018 Term Loan or enforce its security interest against our assets, either of which would materially adversely affect our ability to continue to operate our business.
Risks Related to Our Business and Industry
If we fail to attract and keep senior management and key scientific personnel, we may be unable to successfully develop our products, conduct our clinical trials and commercialize our product candidates.
We are highly dependent on members of our senior management, including William Clark, our President and Chief Executive Officer, Seth Hetherington,Girish Aakalu, Ph.D., our Chief Business Officer, Tom Davis, M.D., our Chief Medical Officer, Jonathan Poole,Diantha Duvall, our Chief Financial Officer, and Jessica Flechtner, Ph.D., our Chief Scientific Officer.Officer, and Narinder Singh, our Senior Vice President of Pharmaceutical Sciences and Manufacturing. The loss of the services of any of these persons could impede the achievement of our research, development and commercialization objectives. We have employment agreements with each of these members of senior management.
Recruiting and retaining qualified scientific, clinical, manufacturing, sales and marketing personnel will also be critical to our success. The loss of the services of our executive officers or other key employees could impede the achievement of our research, development and commercialization objectives and seriously harm our ability to successfully implement our business strategy. Furthermore, replacing executive officers and key employees may be difficult 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 successfully develop, gain regulatory approval of and commercialize products. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these key personnel on acceptable terms, givenbased on the status of our clinical development programs and the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In
addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. If we are unable to continue to attract and retain high quality personnel, our ability to pursue our growth strategy will be limited.
Our employees, independent contractors, principal investigators, consultants, commercial partners, and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements and insider trading.
We are exposed to the risk of fraudulent or other illegal activity by our employees, independent contractors, principal investigators, consultants, commercial partners, and vendors. Misconduct by these parties could include intentional, reckless and/or negligent conduct that fails: to comply with the laws of the FDA and similar foreign regulatory bodies; to provide true, complete and accurate information to the FDA and similar foreign regulatory bodies; to comply with manufacturing standards we have established; to comply with federal, state and foreign health care fraud and abuse laws and regulations; to report financial information or data accurately; or to disclose unauthorized activities to us. In particular, the promotion, sale and marketing of health care items and services, as well as certain business arrangements in the health care industry are subject to extensive laws and regulations intended to prevent misconduct, including fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing, and, structuring and commission(s), certain customer incentive programs and other business arrangements. Activities subject to these laws also involve the improper use of information obtained in the course of patient recruitment for clinical trials. It is not always possible to identify and deter such misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other federal health care programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
We may encounter difficulties in managing our growth and expanding our operations successfully.
As we seek to advance our product candidates through clinical trials and commercialization, we will need to expand our development, regulatory, manufacturing, marketing and sales capabilities or contract with third parties to provide these capabilities for us. As our operations expand, we expect that we will need to manage additional relationships with various strategic partners, suppliers and other third parties. Future growth will impose significant added responsibilities on members of management. Our future financial performance and our ability to commercialize our product candidates and to compete effectively will depend, in part, on our ability to manage any future growth effectively. To that end, we must be able to manage our development efforts and clinical trials effectively and hire, train and integrate additional management, administrative and, if necessary, sales and marketing personnel. We may not be able to accomplish these tasks, and our failure to accomplish any of them could prevent us from successfully growing our company.
If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.
We face an inherent risk of product liability as a result of the clinical testing of our product candidates and will face an even greater risk if we commercialize any products. For example, we may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates. Even a successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:
decreased demand for any product candidates or products that we may develop;
injury to our reputation and significant negative media attention;
withdrawal of clinical trial participants;
significant costs to defend the related litigations;
a diversion of management’s time and our resources;
substantial monetary awards to trial participants or patients;
product recalls, withdrawals, or labeling, marketing or promotional restrictions;
loss of revenue;
the inability to commercialize any product candidates that we may develop; and
a decline in our stock price.
Failure to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products we develop. We currently carry product liability insurance covering our clinical trials in the amount of $5.0 million in the aggregate. Although we maintain product liability insurance, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. Our insurance policies also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We will have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts.
We must comply with environmental laws and regulations, and failure to comply with these laws and regulations could expose us to significant liabilities.
We use hazardous chemicals and radioactive and biological materials in certain aspects of our business and are subject to a variety of federal, state and local laws and regulations governing the use, generation, manufacture, distribution, storage, handling, treatment and disposal of these materials. We cannot eliminate the risk of accidental injury or contamination from the use, manufacture, distribution, storage, handling, treatment or disposal of hazardous materials. In the event of contamination or injury, or failure to comply with environmental, occupational health and safety and export control laws and regulations, we could be held liable for any resulting damages and any such liability could exceed our assets and resources. We are uninsured for third-party contamination injury.
The collection and academic institutions. Such grants haveuse of personal health data in the European Union is governed by the provisions of the General Data Protection Regulation (“GDPR”) which came into effect in May 2018. This regulation imposes several requirements relating to the consent of the individuals to whom the personal data relates, the information provided to the individuals, notification of data processing obligations to the competent national data protection authorities and the security and confidentiality of the personal data. The GDPR also imposes strict rules on the transfer of personal data out of the European Union to the United States. Failure to comply with the requirements of the GDPR and the related national data protection laws of the European Union Member States may result in significant fines and other administrative penalties. In the United States, several state legislatures are considering enacting new data privacy legislation. One example of such legislation that has already been our only source of revenuepassed is the California Consumer Privacy Act (“CCPA”), which takes effect on January 1, 2020. The CCPA gives California consumers (defined to date. Such contracts or grants can be highly attractive because they provide capital to fundinclude all California residents) certain rights, including the ongoing development of our technologies and product candidates without diluting our stockholders. However, there is often significant competition for these contracts or grants. Entities offering contracts or grants may have requirements to apply for or to otherwise be eligibleright to receive certain contracts or grants that our competitors may be abledetails regarding the processing of their data by covered companies, the right to satisfy that we cannot. In addition, such entities may make arbitrary decisions as to whether to offer contracts or make grants, to whom the contracts or grants will be awardedrequest deletion of their data, and the sizeright to opt out of the contracts or grantssales of their data. The CCPA additionally imposes several obligations on covered companies to each awardee. Even if we are ableprovide notice to satisfy the award requirements, there is no guarantee that we will be a successful awardee. Therefore, we may not be able to win any contracts or grants in a timely manner, if at all.California consumers regarding their data processing activities. The
CCPA provides for imposition of substantial fines on companies that violate the law and also confers a private right of action on data subjects to seek statutory or actual damages for breaches of their personal information.
Significant disruptions of information technology systems or security breaches could adversely affect our business.
We are increasingly dependent upon information technology systems, infrastructure and data to operate our business. In the ordinary course of business, we collect, store and transmit large amounts of confidential information (including, among other things, trade secrets or other intellectual property, proprietary business information and personal information). It is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information. We also have outsourced elements of our operations to third parties, and as a result we manage a number of third-party vendors who may or could have access to our confidential information. The size and complexity of our information technology systems, and those of third-party vendors with whom we contract, and the large amounts of confidential information stored on those systems, make such systems vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by our employees, consultants, third-party vendors, and/or business partners, or from cyber-attacks by malicious third parties. Cyber-attacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect. Cyber-attacks could include the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information. Cyber-attacks could also include phishing attempts or e-mail fraud to cause payments or information to be transmitted to an unintended recipient.
Significant disruptions of our information technology systems, or those of our third-party vendors, or security breaches could adversely affect our business operations and/or result in the loss, misappropriation and/or unauthorized access, use or disclosure of, or the prevention of access to, confidential information, including, among other things, trade secrets or other intellectual property, proprietary business information and personal information, and could result in financial, legal, business and reputational harm to us. For example, any such event that leads to unauthorized access, use or disclosure of personal information, including personal information regarding our patients or employees, could harm our reputation, require us to comply with federal and/or state breach notification laws and foreign law equivalents, and otherwise subject us to liability under laws and regulations that protect the privacy and security of personal information. Security breaches and other inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm of the type described above. While we have implemented security measures to protect our information technology systems and infrastructure, there can be no assurance that such measures will prevent service interruptions or security breaches that could adversely affect our business.
Risks Related to Our Common Stock
Our largest stockholder, NEA, beneficially owns, in the Jumpstart Our Business Startups Actaggregate, shares representing approximately 30% of 2012 ("JOBS Act"), and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our outstanding common stock less attractive to investors.
We cannot predict what the market price of our common stock will be and, as a result, it may be difficult for you to sell your shares of our common stock.
An inactive market may impair our ability to raise capital by selling shares of our common stock and may impair our ability to enter into strategic partnerships or acquire companies or products by using our shares of common stock as consideration. We cannot predict the prices at which our common stock will trade. It is possible that in one or more future periods our results of operations may be below the expectations of public market analysts and investors and, as a result of these and other factors, the price of our common stock may fall.
If our stock price is volatile, our stockholders could incur substantial losses.losses and we may become involved in securities-related litigation, including securities class action litigation, that could divert management’s attention and harm our business and subject us to significant liabilities.
Our stock price is likely to be volatile. The stock market in general and the market for biopharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies.
As a result of this volatility, our stockholders could incur substantial losses. The market price for our common stock may be influenced by many factors, including:
the success of competitive products or technologies;
results of clinical trials of our product candidates;
the timing of the release of results of our clinical trials;
results of clinical trials of our competitors’ products;
regulatory actions or legal developments with respect to our products or our competitors’ products;
developments or disputes concerning patent applications, issued patents or other proprietary rights;
the results of our efforts to discover, develop, acquire or in-license additional product candidates or products;
actual or anticipated fluctuations in our financial condition and operating results;
publication of research reports by securities analysts about us or our competitors or our industry;
our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market;
additions and departures of key personnel;
strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy;
the passage of legislation or other regulatory developments affecting us or our industry;
fluctuations in the valuation of companies perceived by investors to be comparable to us;
sales of our common stock by us, our insiders or our other stockholders;
speculation in the press or investment community;
announcement or expectation of additional financing efforts;
changes in accounting principles;
terrorist acts, acts of war or periods of widespread civil unrest;
natural disasters and other calamities;
changes in market conditions for biopharmaceutical stocks; and
changes in general market and economic conditions.
In addition, the stock market has recently experienced significant volatility, particularly with respect to pharmaceutical, biotechnology and other life sciences company stocks. The volatility of pharmaceutical, biotechnology and other life sciences company stocks often does not relate to the operating performance of the companies represented by the stock. As we operate in a single industry, we are especially vulnerable to these factors to the extent that they affect our industry or our products, or to a lesser extent our markets. In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price. This type of
Further, any future lawsuits or litigation could result in substantial costs and divert our management’smanagement's attention and resources and could also require us to make substantial payments to satisfy judgments or to settle litigation.
Failure to comply with The Nasdaq Capital Market continued listing requirements may result in our common stock being delisted from The Nasdaq Capital Market.
If our stock price falls below $1.00 per share, we may not continue to qualify for continued listing on The Nasdaq Capital Market or The Nasdaq Global Market. To maintain listing, we are required, among other things, to maintain a minimum closing bid price of $1.00 per share. If the closing bid price of our common stock is below $1.00 per share for 30 consecutive business days, we will receive a deficiency notice from Nasdaq advising us that we have a certain period of time, typically 180 days, to regain compliance by maintaining a minimum closing bid price of at least $1.00 for at least ten consecutive business days, although Nasdaq could require a longer period.
On June 15, 2018, we received a written notification from Nasdaq's Listing Qualifications Department that we had failed to comply with Nasdaq Listing Rule 5450(a)(1) because the bid price for our common stock over a period of 30 consecutive business days prior to such date had closed below the minimum $1.00 per share requirement for continued listing. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were afforded an initial period of 180 calendar days, or until December 12, 2018, to regain compliance with Rule 5450(a)(1). We determined that we would not be in compliance with Rule 5450(a)(1) by December 12, 2018, and on November 19, 2018, submitted an application to transfer our common stock from listing on the Nasdaq Global Market to the Nasdaq Capital Market. Doing so allowed us to become eligible for an additional 180 day compliance period provided for companies listed on the Nasdaq Capital Market, provided that we met the continued listing requirements for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the minimum bid price requirement, and provided written notice of our intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. In accordance with the original notification, we indicated in our transfer application that we met all of the other continuing listing requirements for the Nasdaq Capital Market, with the exception of the bid price requirement, and provided written notice of our intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. On December 13, 2018, we received notice from Nasdaq that we were granted an additional 180 calendar days, or until June 11, 2019, to regain compliance with the minimum $1.00 bid price per share requirement of the Nasdaq listing rules. Accordingly, at the opening of business on December 17, 2018, the listing of the shares of our common stock was transferred from the Nasdaq Global Market to the Nasdaq Capital Market. Our common stock continues to trade under the symbol "GNCA."
On May 22, 2019, we effected a reverse stock split of our issued and outstanding common stock, par value $0.001, at a ratio of one-for-eight. As such, prior to June 10, 2019 the bid price of our common stock closed at or above $1.00 per share for a minimum of 10 consecutive business days, and Nasdaq provided written notice that we achieved compliance with the Nasdaq listing rules. Even though we did regain compliance with minimum closing bid price of $1.00 per share by June 10, 2019, there is no guarantee that we will remain in compliance thereafter. The delisting of our common stock would significantly affect the ability of investors to trade our common stock and negatively impact the liquidity and price of our common stock. In addition, the delisting of our common stock could materially adversely impact our ability to raise capital on acceptable terms or at all. Delisting from Nasdaq could also have other negative results, including the potential loss of confidence by our current or prospective third-party providers and collaboration partners, the loss of institutional investor interest, and fewer licensing and partnering opportunities.
Our failure to implement and maintain effective internal control over financial reporting could result in material misstatements in our financial statements which could require us to restate financial statements, cause investors to lose confidence in our reported financial information and have a negative effect on our stock price.
We cannot assure you that additionalany material weaknesses or significant deficiencies in our internal control over financial reporting will not be identified in the future. Any failure to maintain or implement required new or improved controls, or any difficulties we encounter in their implementation, could result in additional material weaknesses or significant deficiencies, cause us to fail to meet our periodic reporting obligations or result in material misstatements in our financial statements. Any such failure could also adversely affect the results of periodic management evaluations regarding the effectiveness of our internal control over financial reporting. The existence of a material weakness or significant deficiency could result in errors in our financial statements that could result in a restatement of financial statements, cause us to fail to meet our reporting obligations and cause investors to lose confidence in our reported financial information, leading to a decline in our stock price.
We incur significant costs as a result of being a public company and our management expects to devote substantial time to public company compliance programs.
As a public company, we incur significant legal, insurance, accounting and other expenses that we did not incur as a private company.expenses. In addition, our administrative staff are required to perform additional tasks. We invest resources to comply with evolving laws, regulations and standards, and this investment could result in increased general and administrative expenses and may divert management’s time and attention from product development activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed. InDue to the future, it may be more expensive for us to obtainrecent changes in the shareholder class action landscape, director and officer liability insurance andhas been more expensive. If this trend continues we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.
The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal control over financial reporting. Any failure to develop or maintain effective controls could adversely affect the results of periodic management evaluations. In the event that we are not able to demonstrate compliance with the Sarbanes-Oxley Act, that our internal control
over financial reporting is perceived as inadequate, or that we are unable to produce timely or accurate financial statements, investors may lose confidence in our operating results and the price of our ordinary shares could decline. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the NASDAQ Global Market.Nasdaq.
We are required to comply with certain of the SEC’s rules that implement Section 404 of the Sarbanes-Oxley Act, which require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting commencing with our second annual report. This assessment must include the disclosure of any material weaknesses in our internal control over financial reporting identified by our management or our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we engage in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statement.
Provisions in our charter documents and under Delaware law have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders and prevent attempts by our stockholders to replace or remove our current management.
Provisions in our amended and restated certificate of incorporation and amended and restated by-laws contain provisions that may have the effect of discouraging, delaying or preventing a change in control of us or changes in our management. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions:
authorize “blank check” preferred stock, which could be issued by our board of directors without stockholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock;
create a classified board of directors whose members serve staggered three-year terms;
specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, our chief executive officer or our president;
prohibit stockholder action by written consent;
establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors;
provide that our directors may be removed only for cause;
provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorumquorum;
specify that no stockholder is permitted to cumulate votes at any election of directors;
expressly authorize our board of directors to modify, alter or repeal our by-laws; and
require supermajority votes of the holders of our common stock to amend specified provisions of our by-laws.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
Any provision of our amended and restated certificate of incorporation, our amended and restated by-laws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.
Our ability to use net operating losses to offset future taxable income may be subject to certain limitations.
In general, under Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"), a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses ("NOLs"), to offset future taxable income. Our existing NOLs are subject to limitations arising from previous ownership changes, and if we undergo an ownership change in connection any follow-on offerings of our common or preferred stock, our ability to utilize NOLs could be further limited by Section 382 of the Code. Our NOLs may also be impaired under state law. Accordingly, we may not be able to utilize a material portion of our NOLs. Furthermore, our ability to utilize our NOLs is conditioned upon our attaining profitability and generating U.S. federal taxable income. We have incurred net losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future; thus, we do not know whether or when we will generate the U.S. federal taxable income necessary to utilize our NOLs.
Our amended and restated certificate of incorporation designates the state or federal courts located 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, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our amended and restated certificate of incorporation provides that, subject to limited exceptions, the state and federal courts located in the State of Delaware will be the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf, (2) 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, (3) any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated by-laws or (4) any other action asserting a claim against us that is governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions of our amended and restated certificate of incorporation described above. This choice of forum provision 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 amended and restated certificate of incorporation 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 and financial condition.
Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be the source of gain for our stockholders.
You should not rely on an investment in our common stock to provide dividend income. We do not anticipate that we will pay any cash dividends to holders of our common stock in the foreseeable future. Instead, we plan to retain any earnings to maintain and expand our operations. In addition, our ability to pay cash dividends is currently prohibited by the terms of our debt financing arrangement, and any future debt financing arrangement may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any return on their investment. As a result, investors seeking cash dividends should not purchase our common stock.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Our principal executive offices areoffice is located at 100 Acorn Park Drive, 5th floor, Cambridge, Massachusetts 02140. We have two leases at this address, and in aggregate, we occupy approximately 34,200 square feet of laboratory and office space. Both leases were extended in 2016In March 2020, we will occupy an additional 22,440 square feet of laboratory and have terms that expireoffice space. The lease for just office space expires in February 2020.2020, while the lease for laboratory and office space expires in February 2025. We believe that our existing facilities are sufficient for our present operations, but that over time,in the near future our existing facility space will need to be expanded to meet the demands of our future lab operations.operations or we will have to move into a new facility.
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuers Purchases of Equity Securities
Market Information
Our common stock has been publicly traded on the NASDAQ GlobalThe Nasdaq Capital Market under the symbol “GNCA” since February 5, 2014.December 17, 2018. Prior to that, time, there was no public market for our common stock. The following table sets forth, for the periods indicated, the high and low sales prices for our common stock as reportedhad been publicly traded on the NASDAQThe Nasdaq Global Market.
| Year ended December 31, 2016 | Year ended December 31, 2015 | |||||||||||||
| High | Low | High | Low | |||||||||||
| First quarter | $ | 8.07 | $ | 2.56 | $ | 12.50 | $ | 6.15 | ||||||
| Second quarter | $ | 7.74 | $ | 3.35 | $ | 14.29 | $ | 9.00 | ||||||
| Third quarter | $ | 6.39 | $ | 3.86 | $ | 16.18 | $ | 6.63 | ||||||
| Fourth quarter | $ | 5.22 | $ | 3.28 | $ | 8.20 | $ | 4.27 | ||||||
Holders
As of February 14, 2017,11, 2020, there were approximately 2414 holders of record of our common stock. This number does not include beneficial owners whose shares are held by nominees in street name.
Dividends
We have never declared or paid cash dividends on our common stock, and we do not expect to pay any cash dividends on our common stock in the foreseeable future.
| 2/5/2014 | Mar-14 | Jun-14 | Sep-14 | Dec-14 | Mar-15 | Jun-15 | Sep-15 | Dec-15 | Mar-16 | Jun-16 | Sep-16 | Dec-16 | ||||||||||||||||||||||||||
| Genocea Biosciences, Inc. | 100.00 | 165.36 | 170.45 | 82.27 | 63.64 | 107.82 | 124.82 | 62.27 | 47.91 | 70.36 | 37.27 | 46.55 | 37.45 | |||||||||||||||||||||||||
| NASDAQ Composite | 100.00 | 104.67 | 109.89 | 112.01 | 118.06 | 122.17 | 124.31 | 115.17 | 124.82 | 121.40 | 120.72 | 132.42 | 134.19 | |||||||||||||||||||||||||
| NASDAQ Biotechnology | 100.00 | 99.66 | 108.44 | 115.41 | 128.26 | 145.21 | 156.00 | 127.93 | 142.91 | 110.08 | 108.73 | 122.20 | 111.93 | |||||||||||||||||||||||||
Purchase of Equity Securities
We did not purchase any of our registered equity securities during the period covered by this Annual Report on Form 10-K.
Securities Authorized for Issuance under Equity Compensation Plans
The following table contains information about our equity compensation plans as of December 31, 2016.2019.
| Plan category | Number of securities to be issued upon exercise of outstanding stock options and warrants | Weighted-average exercise price of outstanding options and warrants | Number of securities remaining available for future issuance under equity compensation plans | Number of securities to be issued upon exercise of outstanding stock options and warrants | Weighted-average exercise price of outstanding options and warrants | Number of securities remaining available for future issuance under equity compensation plans | ||||||||||||||||
Equity compensation plans approved by security holders (1) | 3,807,061 | $ | 5.94 | 485,483 | (2) | 6,445,288 | $ | 8.48 | 245,430 | (2) | ||||||||||||
(1) Includes information regarding our Amended and Restated 2014 Equity Incentive PlanPlan.
(2) Does not include 1,137,7811,098,116 shares added to the Amended and Restated 2014 Equity Incentive Plan under the evergreen provision on January 1, 2017.2020.
Item 6. Selected Financial Data
| Years Ended December 31 | ||||||||||||||||||||
| (In thousands, except per share data) | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||
| Grant revenue | $ | 235 | $ | 670 | $ | 308 | $ | 731 | $ | 1,977 | ||||||||||
| Operating expenses: | ||||||||||||||||||||
| Research and development | 34,645 | 28,049 | 23,727 | 15,695 | 11,240 | |||||||||||||||
| General and administrative | 15,427 | 13,987 | 9,747 | 4,961 | 3,690 | |||||||||||||||
| Refund of research and development expense | (1,592 | ) | — | — | ||||||||||||||||
| Total operating expenses | 48,480 | 42,036 | 33,474 | 20,656 | 14,930 | |||||||||||||||
| Loss from operations | (48,245 | ) | (41,366 | ) | (33,166 | ) | (19,925 | ) | (12,953 | ) | ||||||||||
| Other expense, net: | ||||||||||||||||||||
| Interest income | 410 | 163 | 55 | 6 | 13 | |||||||||||||||
| Interest expense | (1,738 | ) | (1,280 | ) | (1,025 | ) | (465 | ) | (520 | ) | ||||||||||
| Change in fair value of warrants | — | — | (725 | ) | (222 | ) | 93 | |||||||||||||
| Loss on debt extinguishment | — | — | (435 | ) | (200 | ) | — | |||||||||||||
| Total other expense, net | (1,328 | ) | (1,117 | ) | (2,130 | ) | (881 | ) | (414 | ) | ||||||||||
| Net loss | $ | (49,573 | ) | $ | (42,483 | ) | $ | (35,296 | ) | $ | (20,806 | ) | $ | (13,367 | ) | |||||
| Comprehensive loss | $ | (49,573 | ) | $ | (42,490 | ) | $ | (35,303 | ) | $ | (20,806 | ) | $ | (13,367 | ) | |||||
| Reconciliation of net loss to net loss attributable to common stockholders | ||||||||||||||||||||
| Net loss | $ | (49,573 | ) | $ | (42,483 | ) | $ | (35,296 | ) | $ | (20,806 | ) | $ | (13,367 | ) | |||||
| Accretion of redeemable convertible preferred stock to redemption value | — | — | (180 | ) | (1,605 | ) | (1,781 | ) | ||||||||||||
| Net loss attributable to common stockholders | $ | (49,573 | ) | $ | (42,483 | ) | $ | (35,476 | ) | $ | (22,411 | ) | $ | (15,148 | ) | |||||
| Net loss per share attributable to common stockholders - basic and diluted (1) | $ | (1.75 | ) | $ | (1.74 | ) | $ | (2.27 | ) | $ | (75.46 | ) | $ | (51.35 | ) | |||||
| Weighted-average number of common shares used in net loss per share attributable to common stockholders - basic and diluted | 28,299 | 24,460 | 15,618 | 297 | 295 | |||||||||||||||
| As of December 31, | ||||||||||||||||||||
| (in thousands) | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||
| Balance Sheet Data: | ||||||||||||||||||||
| Cash, cash equivalents and investments | $ | 63,362 | $ | 106,432 | $ | 47,079 | $ | 12,208 | $ | 11,516 | ||||||||||
| Working capital | 53,918 | 89,226 | 42,173 | 8,382 | 7,932 | |||||||||||||||
| Total assets | 69,896 | 112,142 | 50,332 | 15,761 | 13,531 | |||||||||||||||
| Preferred stock warrant liability | — | — | — | 656 | 246 | |||||||||||||||
| Preferred stock | — | — | — | 81,562 | 64,707 | |||||||||||||||
| Common stock and additional paid-in capital | 253,024 | 247,578 | 147,941 | — | — | |||||||||||||||
| Total stockholders’ equity (deficit) | 45,541 | 89,661 | 32,507 | (80,131 | ) | (58,402 | ) | |||||||||||||
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with the section entitled “Selected Financial Data” and our financial statements and related notes appearing in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Annual Report on Form 10-K, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are a biopharmaceutical company that discoversseeks to discover and developsdevelop novel vaccines andcancer immunotherapies to address diseases with significant unmet needs. We useusing our proprietary discovery platform, ATLASTM, to rapidly design vaccines proprietary discovery platform. The ATLAS platform profiles each patient's CD4+ and immunotherapies that act, in part, throughCD8+ T cell (or cellular) immune responses to every potential target or "antigen" in contrast to approved vaccines and immunotherapies, which are designed to act primarily through B cell (or antibody) immune responses.that patient's tumor. We believe that by harnessing T cells we can develop first-in-classthis approach optimizes antigen selection for immunotherapies such as cancer vaccines and immunotherapiescellular therapies by identifying the antigens to address diseases where T cellswhich the patient can respond. Consequently, we believe that ATLAS could lead to more immunogenic and efficacious cancer immunotherapies.
Our most advanced program is GEN-009, a personalized neoantigen cancer vaccine, for which we are central to the control of the disease.
| Placebo | 60/50 Dose | 60/75 Dose | |||||
| Endpoint | Post dose 3 | Post dose 3 | 6 months | 12 months | Post dose 3 | 6 months | 12 months |
Viral shedding rate reduction(1) | -4% | 41% | 47% | 66% | 55% | 58% | 55% |
Poisson mixed effect model (Old Model)(2) | |||||||
| p-value vs baseline | 0.48 | <0.0001 | <0.0001 | <0.0001 | <0.0001 | <0.0001 | <0.0001 |
| p-value vs placebo | NA | <0.0001 | NA | NA | <0.0001 | NA | NA |
Poisson mixed effect model with Empirical Variance (New Model)(3) | |||||||
| p-value vs baseline | 0.88 | 0.01 | 0.0004 | <0.0001 | 0.006 | <0.0001 | 0.01 |
| p-value vs placebo | NA | 0.04 | NA | NA | 0.01 | NA | NA |
| % patients lesion free | NA | 68% | 36% | 30% | 68% | 30% | 21% |
Genital lesion rate reduction(1) | 60% | 69% | 50% | 65% | 60% | 43% | 47% |
Poisson mixed effect model (Old Model)(2) | |||||||
| p-value vs baseline | <0.0001 | <0.0001 | <0.0001 | <0.0001 | <0.0001 | <0.0001 | <0.0001 |
| p-value vs placebo | NA | 0.3 | NA | NA | 0.79 | NA | NA |
Poisson mixed effect model with Empirical Variance (New Model)(3) | |||||||
| p-value vs baseline | 0.0002 | 0.0005 | 0.01 | 0.003 | 0.02 | 0.03 | 0.02 |
| p-value vs placebo | NA | 0.59 | NA | NA | 0.85 | NA | NA |
| Placebo | 60/50 Dose | 60/75 Dose | |
Viral shedding rate reduction(1) | 6% | -40% | -27% |
Poisson mixed effect model with Empirical Variance (New Model)(2)(3) | |||
| p-value vs. baseline | 0.76 | 0.03 | 0.16 |
| p-value vs. placebo | NA | 0.05 | 0.20 |
| Secondary clinical endpoint | Placebo (n=44) | 60/50 (n=43) | 60/75 (n=44) |
| Mean genital lesion rate (percent of days with lesions over six months) | 7.9% | 4.5% | 4.6% |
| Median genital lesion rate | 5.6% | 2.7% | 1.9% |
p-value versus placebo(1) | NA | 0.03 | 0.03 |
| Mean duration of recurrences (days) | 4.8 | 3.3 | 4.3 |
| Median duration of recurrences | 4.2 | 2.8 | 4.0 |
p-value versus placebo(1) | NA | 0.01 | 0.64 |
| Mean number of recurrences over six months | 2.7 | 2.1 | 1.9 |
| Median number of recurrences over six months | 2.0 | 1.0 | 1.5 |
p-value versus placebo(1) | NA | 0.08 | 0.02 |
| Kaplan-Meier estimate of percent recurrence free after first dose | 10% | 29% | 31% |
p-value versus placebo(2) | NA | 0.03 | 0.03 |
| Kaplan-Meier estimate of percent recurrence free after last dose | 13% | 22% | 36% |
p-value versus placebo(2) | NA | 0.17 | 0.02 |
Financing and business operations
We commenced business operations in August 2006. To date, our operations have been limited to organizing and staffing our company, acquiring and developing our proprietary ATLAS technology, identifying potential product candidates, and undertaking preclinical studies and clinical trials for our product candidates. All of our revenue to date has been grant revenue. We have not generated any product revenue and do not expect to do so for the foreseeable future. We have primarily financed our operations primarily through the issuance of our equity securities, debt financings, and amounts received through grants. As of December 31, 2016,2019, we had received an aggregate of $279.6$399.3 million in gross proceeds from the issuance of equity securities and gross proceeds from debt facilities and an aggregate of $7.9 million from grants. At December 31, 2016,2019, our cash and cash equivalents and investments were $63.4$40.1 million.
Since inception, we have incurred significant operating losses. Our net losses were $49.6$39.0 million and $42.5$27.8 million for the years ended December 31, 20162019 and 2015,2018, respectively, and our accumulated deficit was $207.5$331.0 million as of December 31, 2016.2019. We expect to incur significant expenses and increasing operating losses for the foreseeable future. Our net losses may fluctuate significantly from quarter to quarterquarter-to-quarter and year to year.year-to-year. We will need to generate significant revenue to achieve profitability, and we may never do so.
In March 2015,October 2019, we entered into a purchase agreement with LPC pursuant to which LPC purchased $2.5 million of our common stock at a purchase price of $2.587 per share. In addition, for a period of 30 months, we have the right, at our sole discretion, to sell up to an additional $27.5 million of our common stock (subject to certain ownership limitations) based on prevailing market prices of our common stock at the time of each sale. In consideration for entering into the purchase agreement, we issued 289,966 shares of our common stock to LPC as a commitment fee.
In June 2019, we completed an underwritten public offering of 6.3in which we sold 10.5 million shares of our common stock at a public offering price of $8.25$3.50 per share, for an aggregate offering pricegross proceeds of $51.7approximately $36.8 million. In August 2015, we completed anotherThis underwritten public offering also included an overallotment option for the underwriters for 1.6 million shares, which they exercised in full on June 26, 2019. This generated additional gross proceeds of 3.9$5.5 million. We incurred approximately $3.9 million of offering-related expenses, resulting in total net proceeds of $38.4 million.
In February 2019, we completed a private placement financing transaction in which we issued shares of our common stock, at a public offering pricepre-funded warrant to purchase shares of $13.00 per shareour common stock, and warrants to purchase shares of our common stock for an aggregate offering pricegross cash proceeds of $50.1approximately $15.0 million. We receivedincurred $1.2 million of offering-related expenses, resulting in total net proceeds from theseof $13.8 million.
In January 2018, we completed two underwritten public offerings in which we issued common stock, warrants, and preferred shares for net proceeds of approximately $95.7$51.7 million.
As reflected in our consolidated financial statements, we used cash to fund operating activities of $37.7 million after deducting approximately $6.1for the year ended December 31, 2019 and had $40.1 million available in underwriting discountscash and commissions, excludingcash equivalents at December 31, 2019. In addition, we had an accumulated deficit of $331.0 million and anticipate that we will continue to incur significant operating losses for the foreseeable future as we continue to develop our product candidates. Until such time, if ever, as we attempt to generate substantial product revenue and achieve profitability, we expect to finance our cash needs through a combination of equity offerings, strategic transactions, proceeds from sale of our common stock under our at-the-market equity offering costs payable by us.program, and other sources of funding. If we are unable to raise additional funds when needed, we may be required to implement further cost reduction strategies, including ceasing development of GEN-009, GEN-011, and other corporate programs and activities. These factors, combined with our forecast of cash required to fund operations for a period of at least one year from the date of issuance of these consolidated financial statements, raise substantial doubt about our ability to continue as a going concern.
We believe that our cash and cash equivalents and investments at December 31, 20162019 are sufficient to support our operating expenses and capital expenditure requirements into the first quarter of 2018, without assuming any receipt of proceeds from potential business development partnerships, equity financings or debt drawdowns. This guidance assumes commencing Phase 3 trials for GEN-003 for genital herpes in the fourth quarter of 2017 and filing an IND for GEN-009 for cancer by the end of the year, however it is our strategy to secure additional sources of financing in advance of starting GEN-003 Phase 3 clinical trials.2021.
Costs related to clinical trials can be unpredictable and therefore there can be no guarantee that our current balances of cash and cash equivalents and investments, and anycombined with proceeds received from other sources, will be sufficient to fund our studiestrials or operations through this period. These funds will not be sufficient to enable us to conduct pivotal clinical trials for, seek marketing approval for, or commercially launch GEN-003GEN-009, GEN-011 or any other product candidate. Accordingly, to obtain marketing approval for and to commercialize these or any other product candidates, we will be required to obtain further funding through public or private equity offerings, debt financings, collaboration and licensing arrangements, or other sources. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failureall, which could result in a decision to raise capital when needed would have a negative effect onpause or delay development or advancement of clinical trials for one or more of our financial condition andproduct candidates. Similarly, we may decide to pause or delay development or advancement of clinical trials for one or more of our ability to pursue our business strategy.product candidates if we believe that such development or advancement is imprudent or impractical.
Financial Overview
Research and development expenses
Research and development expenses consist primarily of costs incurred to advance our preclinical and clinical candidates, which include:
expenses incurred under agreements with contract research organizations ("CROs"), contract manufacturing organizations ("CMOs"), consultants, and other vendors that conduct our clinical trials and preclinical activities;
costs of acquiring, developing, and manufacturing clinical trial materials and lab supplies; and
facility costs, depreciation, and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance, and other supplies.
We expense internal research and development costs to operations as incurred. We expense third party costsNonrefundable advance payments for goods and services that will be used in future research and development activities such as conducting clinical trials, based on an evaluation ofare expensed when the progress to completion of specific performanceactivity has been performed or tasks such as patient enrollment, clinical site activations or information, whichwhen the goods have been received rather than when the payment is provided to us by our vendors.made.
The following table identifies research and development expenses on a program-specific basis for our product candidates as follows (in thousands):
| Years ended December 31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| Genital herpes (GEN-003) (1) | $ | 19,641 | $ | 15,555 | $ | 15,147 | ||||||
| Other research and development (2) | 15,004 | 12,494 | 8,580 | |||||||||
| Total research and development | $ | 34,645 | $ | 28,049 | $ | 23,727 | ||||||
| Years ended December 31, | Increase | |||||||||||
| 2019 | 2018 | (Decrease) | ||||||||||
| Phase 1/2a programs | $ | 16,462 | $ | 6,234 | $ | 10,228 | ||||||
| Discovery and pre-IND | 7,141 | 14,888 | (7,747 | ) | ||||||||
| Other research and development | 3,349 | 4,087 | (738 | ) | ||||||||
| Total research and development | $ | 26,952 | $ | 25,209 | $ | 1,743 | ||||||
development costs related to ATLAS. Additionally,includes costs that are not specifically allocated by projectto active product candidates, including facilities costs, depreciation expense, and non-project specific costs incurred by R&D personnel, are included in this line item.
General and administrative expenses
General and administrative expenses consist principallyprimarily of salaries and related costsexpenses for personnel including stock-based compensation and travel expenses, in executive and other administrative functions. Other general and administrative expenses include facility-relatedfacility costs, communication expenses and professional fees associated with consulting, corporate and intellectual property legal expenses, consulting and accounting services.
Other expense, net
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of our financial position and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptionsjudgments that affect the amounts of assets, liabilities and expenses reported in the consolidated financial statements and accompanying notes. On an ongoing basis, we evaluate these estimates which include, but are not limited to, estimates related to clinical trial accruals, prepaid and accrued research and development expenses, stock-based compensation expense, common stock warrants, warrants to purchase redeemable securities, and reported amounts of revenues and expenses during the reported period.judgments, including those described below. We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from those estimates or assumptions.
While our significant accounting policies are described in more detail in the notes to our financial statements Note 2. Summary of significant accounting policies appearing elsewherein Item 8 in this Annual Report on Form 10-K, we believe the following accounting policies to beare the most critical to aid you in fully understanding and evaluating our reported financial results and affect the more significant judgments and estimates usedthat we use in the preparation of our consolidated financial statements.
As part of the process of preparing our consolidated financial statements, we are required to estimate our prepaid and accrued research and development expenses. This process involves reviewinga thorough review of open contracts and purchase orders communicating with ourand an evaluation by internal personnel to identify services received that have been performed for us and estimating the level of service performed and the associated cost incurred for the service whenthese services for which we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met. We make estimates of our prepaid and accrued research and development expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments, if necessary. Examples of estimated prepaid and accrued research and development expenses include fees paid to CROs in connection with clinical trials, CMOs with respect to pre-clinicalpreclinical and clinical materials and intermediaries, and vendors in connection with preclinical development activities.
We base our expenses related to clinical trials on our estimates of the services performed pursuant to contracts with clinical sites that conduct 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. Payments under some of these contracts depend on factors such as the successful enrollment of subjectspatients and the completion of required data submission. In recording service fees, we make estimates based upon the time period over which services will be performed or other observable and measureablemeasurable progress points as defined in the contracts, such as number of subjectspatients enrolled, number of sites, or quantityextent of services performed in each period. The calculated amount of service fee expense is compared to the actual payments made pursuant to the contract's billing schedule to determine the resulting prepaid or accrual position. Additionally, for each clinical site, we accrue 10% of the earned amounts which is payable upon completion of the required data submission for the clinical trial. If our estimates of the status and timing of services performed differs from the actual status and timing of services performed, we may report amounts that are too high or too low in any particular period. To date, there has been no material differences from our estimates to the amount actually incurred.
We have appliedrecorded the warrants issued in a 2018 public offering to purchase redeemable securities (the "2018 Public Offering Warrants") as a liability on our balance sheets. As the 2018 Public Offering Warrants are liability-classified, we remeasure the fair value recognition provisions of Financial Accounting Standards Board Accounting Standards Codification ("FASB ASC"), Topic 718, Compensation — Stock Compensation ("ASC 718"), to account for stock-based compensation for employees and ASC 718 and FASB ASC Topic 505, Equity ("ASC 505"), for non-employees.the 2018 Public Offering Warrants at each reporting date. We recognize compensation costs related to stock options granted to employees based oncalculated the estimated fair value of the awards on the date of grant. Stock compensation related to non-employee awards is re-measured at each reporting period until the awards are vested.2018 Public
Offering Warrants using a Monte Carlo simulation. The Monte Carlo simulation requires the amountinput of stock-based compensationassumptions, including our stock price, the volatility of our stock price, remaining term in years, expected dividend yield, and risk-free rate. In addition, the valuation model considers our probability of being acquired during each annual period within the 2018 Public Offering Warrant term, as an acquisition event can potentially impact the settlement of the 2018 Public Offering Warrants. Changes to be recorded requires us to develop estimates ofthe assumptions used in determining the fair value of stock-based awards as of their measurement date. We recognize stock-based compensation expense over the requisite service period, which is the vesting period2018 Public Offering Warrants could result in materially different fair values of the award. Calculating the fair value of stock-based awards requires that we make highly subjective assumptions. We use the Black-Scholes option pricing model to value our stock option awards. Use of this valuation methodology requires that we make assumptions as to the volatility of our common stock, the fair value of our common stock on the measurement date, the expected term of our stock options, the risk free interest rate for a period that approximates the expected term of our stock options and our expected dividend yield. Because of our limited operating history as a publicly traded entity, we utilize data from a representative group of publicly traded companies to estimate expected stock price volatility. We selected representative companies from the biopharmaceutical industry with characteristics similar to us. We use the simplified method as prescribed by the SEC Staff Accounting Bulletin No. 107, Share-Based Payment as we do not have sufficient historical stock option activity data to provide a reasonable basis upon which to estimate the expected term of stock options granted to employees. For non-employee grants, we use an expected term equal to the remaining contractual term of the award. We utilize a dividend yield of zero based on the fact that we have never paid cash dividends and have no current intention of paying cash dividends. The risk-free interest rate used for each grant is based on the U.S. Treasury yield curve in effect at the time of grant for instruments with a similar expected life.
| Years ended December 31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| Research and development | $ | 1,568 | $ | 1,690 | $ | 1,511 | ||||||
| General and administrative | 2,579 | 2,158 | 1,394 | |||||||||
| Total | $ | 4,147 | $ | 3,848 | $ | 2,905 | ||||||
| Years ended December 31, | ||||||
| 2016 | 2015 | 2014 | ||||
| Expected Volatility | 67.4% - 77.9% | 68.5% - 85.3% | 86.2% - 103.6% | |||
| Risk-free interest rate | 1.14% - 2.09% | 1.56% - 1.94% | 1.75% - 2.00% | |||
| Expected term (in years) | 5.50 - 6.08 | 5.50 - 6.08 | 6.25 | |||
| Expected dividend yield | 0% | 0% | 0% | |||
Results of Operations
Comparison of the Years Ended December 31, 20162019 and December 31, 20152018
Years Ended December 31, | Increase | Years Ended December 31, | Increase | |||||||||||||||||||||
| (in thousands) | 2016 | 2015 | (Decrease) | 2019 | 2018 | (Decrease) | ||||||||||||||||||
| Grant revenue | $ | 235 | $ | 670 | $ | (435 | ) | |||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||
| Research and development | 34,645 | 28,049 | 6,596 | $ | 26,952 | $ | 25,209 | $ | 1,743 | |||||||||||||||
| General and administrative | 15,427 | 13,987 | 1,440 | 12,037 | 14,309 | (2,272 | ) | |||||||||||||||||
| Refund of research and development expense | (1,592 | ) | — | 1,592 | ||||||||||||||||||||
| Total operating expenses | 48,480 | 42,036 | 6,444 | 38,989 | 39,518 | (529 | ) | |||||||||||||||||
| Loss from operations | (48,245 | ) | (41,366 | ) | 6,879 | (38,989 | ) | (39,518 | ) | (529 | ) | |||||||||||||
| Other income and expenses: | ||||||||||||||||||||||||
| Interest income | 410 | 163 | 247 | |||||||||||||||||||||
| Interest expense | (1,738 | ) | (1,280 | ) | 458 | |||||||||||||||||||
| Total other income and expense | (1,328 | ) | (1,117 | ) | 211 | |||||||||||||||||||
| Other income (expense): | �� | |||||||||||||||||||||||
| Change in fair value of warrant | 986 | 14,757 | (13,771 | ) | ||||||||||||||||||||
| Interest expense, net | (946 | ) | (1,021 | ) | (75 | ) | ||||||||||||||||||
| Other expense | (1 | ) | (2,029 | ) | (2,028 | ) | ||||||||||||||||||
| Total other income | 39 | 11,707 | (11,668 | ) | ||||||||||||||||||||
| Net loss | $ | (49,573 | ) | $ | (42,483 | ) | 7,090 | $ | (38,950 | ) | $ | (27,811 | ) | $ | 11,139 | |||||||||