UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K10-K/A
(Amendment No.1)
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-36783
Bellicum Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)
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| Delaware | | 20-1450200 |
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
3730 Kirby Drive, Suite 1200, Houston, TX 77098
(Address of principal executive offices) (Zip code)
(281) 454-3424
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common Stock, par value $0.01 per share | BLCM | The Nasdaq Capital Market |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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| Large accelerated filer | ☐ | | Accelerated filer | ☐ |
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| Non-accelerated filer | ☒ | | Smaller reporting company | ☒
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| | | Emerging growth company | ☐
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’smanagement’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The approximate aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, based upon the last sale price of the registrant’sregistrant’s common stock as reported on The Nasdaq Capital Market as of June 30, 2022 (the last business day of the registrant’sregistrant’s most recently completed second fiscal quarter), was $9,205,453. Shares of the registrant’sregistrant’s common stock held by each executive officer, director and stockholder that the registrant concluded were affiliates of the registrant have been excluded from such calculation. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
As ofMarch 24,31, 2023, there were9,046,298 shares of the registrant’sregistrant’s common stock, par value $0.01 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Definitive Proxy Statement relating to its 2023 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K. Such Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days following the end of the registrant’s fiscal year ended December 31, 2022.None.
BELLICUM PHARMACEUTICALS, INC.
Form 10-K10-K/A
For the Fiscal Year Ended December 31, 2022
TABLE OF CONTENTS
SPECIAL
EXPLANATORY NOTE REGARDING FORWARD-LOOKING STATEMENTS
ThisBellicum Pharmaceuticals, Inc. (“the Company,” “we,” or “our”) filed its Annual Report on Form 10-K orfor the fiscal year ended December 31, 2022 (the “Form 10-K”) with the U.S. Securities and Exchange Commission (the “SEC”) on March 31, 2023 (the “Original Filing”). The Company is filing this Amendment No. 1 on Form 10-K/A (the “Form 10-K/A”) for the principal purpose of including Part III that was to be incorporated by reference from its definitive proxy statement for the 2023 Annual Report, including the sections entitled “Business,” “Risk Factors”Meeting of Stockholders. This Form 10-K/A amends and “Management’s Discussion and Analysisrestates in their entirety Items 10 through 14 of Financial Condition and Results of Operations,” may contain “forward-looking statements” within the meaning of Section 27APart III of the Securities ActForm 10-K. In addition, the reference on the cover of 1933, asthe Form 10-K to the incorporation by reference of the Company’s definitive proxy statement into Part III of the Form 10-K is hereby amended to delete that reference. In addition, Item 15 of Part IV of the Form 10-K is amended and Section 21E ofrestated in its entirety to file a new certification by our principal executive officer and principal financial officer as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, which statements involve substantial risks and uncertainties. We may, in some cases, use words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or the negative or plural of those terms, and similar expressions that convey uncertainty of future events or outcomes to identify these forward-looking statements. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. Forward-looking statements in this Annual Report include, but are not limited to, statements about our plans to evaluate and explore a variety of strategic alternatives focused on maximizing shareholder value, including, but not limited to, a merger, sale, or other business combination, a strategic partnership with one or more parties, or the licensing, sale or divestiture of our programs.amended.
These forward-looking statements reflect our management’s beliefs and views with respect to future events and are based on estimates and assumptions as of the filing date of this Annual Report and are subject to risks and uncertainties. We discuss many of these risks in greater detail under the heading “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Given these uncertainties, you should not place undue reliance on these forward-looking statements.
You should carefully read this Annual Report and the documents that we reference in this Annual Report completely and with the understanding that our actual future results may be materially different from what we expect or express in any forward-looking statements contained herein. We qualify all of the forward-looking statements in this Annual Report by these cautionary statements.
Except as required by law, we undertake no obligation toexpressly noted in this Form 10-K/A, this Form 10-K/A does not reflect events occurring after the Original Filing of the Form 10-K or modify or update these forward-looking statements publicly, or to update the reasons that actual results could differ materially from those anticipated in any forward-looking statements, whether as a result of new information, future events or otherwise.
Summary of Risk Factors
There are a number of risks related to our business and our securities. Below is a summary of material factors that make an investment in our securities speculative or risky. Importantly, this summary does not address allway any of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, as well as other risks that we face, can be found in this Annual Report on Form 10-K in Item 1A entitled “Risk Factors.”
•We have incurred net losses from operations in every year since our inception and anticipate that we will continue to incur net losses in the future.
•Our activities to evaluate and pursue strategic alternatives may not result in any definitive transaction or enhance stockholder value.
•Clinical trials may fail to adequately demonstrate the safety and efficacy of any of our product candidates, which would prevent or delay regulatory approval and commercialization.
•Adverse side effects or other safety risks associated with our product candidates have caused us to discontinue our clinical trials and could, if we, or an acquiror, pursues clinical development in the future, cause a suspension or discontinuance of future clinical trials, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.
•The terms of our 2019 private placement of equity restrict our operating and financial flexibility, and give priority to certain investors, both of which could significantly harm our liquidity, financial condition, operating results, business and prospects and cause the price of our common stock to decline.
•If we fail to satisfy applicable listing standards, our common stock may be delisted from the Nasdaq Capital Market.
•Our principal stockholders own a significant percentage of our stock and can exert significant control over matters subject to stockholder approval.
ITEM 1. Business
Overview
We are a biopharmaceutical company that has discovered and developed novel, controllable cellular immunotherapies for various forms of cancer, including both hematological cancers and solid tumors. Our proprietary Chemical Induction of Dimerization, or CID, technology platform is designed to enable control of components of the immune system in real time. By incorporating our CID platform into cellular immunotherapies, we may enhance their efficacy and safety.
In March 2023, we announced our decision to discontinue our ongoing Phase 1/2 clinical trials evaluating the safety and preliminary efficacy of our GoCAR-T cell product candidates (including BPX-601 and BPX-603) in combination with rimiducid in heavily pre-treated cancer patients following our assessment of the risk/benefit profile of BPX-601 in combination with rimiducid.
We are communicating with clinical trial sites and regulatory agencies regarding our decision to discontinue these trials. We are evaluating and exploring a variety of strategic and financing alternatives focused on maximizing shareholder value, including, but not limited to, a merger, sale, or other business combination, a strategic partnership with one or more parties, or the licensing, sale or divestiture of our programs. Despite undertaking this process, we may not be successful in completing a transaction, and, even if a strategic transaction is completed, it ultimately may not deliver the anticipated benefits or enhance stockholder value. If we do not successfully consummate a strategic alternative, our board of directors may decide to pursue a dissolution and liquidation of the Company.
We are no longer pursuing further clinical development of our product candidates at this time. The disclosures throughout this document include discussions regarding our historical operations along with potential risks that could arise if we or a third party pursue further research, trials, or development in the future.
Historical research overview
Cell behavior is controlled by cascades of specialized signaling proteins. CID consists of molecular switches, modified forms of these signaling proteins, which are triggered inside the patient by infusion of a small molecule, instead of by natural upstream signals. We genetically introduce these molecular switches into the appropriate immune cells and deliver the cells to the patient in the manner of conventional cellular immunotherapy. We have developed two such switches: an “activation switch,” designed to stimulate activation, proliferation and persistence of the immunotherapy cells and provide other immunomodulatory benefits, and a “safety switch,” designed to initiate programmed cell death, or apoptosis, of the immunotherapy cells:
•The inducible MyD88/CD40 (iMC) activation switch that was incorporated into our GoCAR product candidates is designed to enhance CAR-based cell therapies by augmenting multiple mechanisms of action, including: 1) boosting effector cell proliferation; 2) enhancing functional persistence by resisting exhaustion and inhibitory signals found in the tumor microenvironment; and 3) stimulating the cancer patient’s own immune system to intensify tumor killing. Unlike other CAR therapies that can behave unpredictably due to their autonomous activity, GoCAR antitumor effects are controlled through scheduled administration of rimiducid. In the event of severe side effects, GoCAR activity can be attenuated by extending the interval between rimiducid doses or suspending further rimiducid administration.
•Our CaspaCIDe™ safety switch (also known as inducible Caspase-9, or iC9) is designed to be inactive unless the patient experiences a serious side effect (e.g., cytokine release syndrome, or CRS, neurologic toxicities or off-tumor / on-target toxicities). In that event, rimiducid or temsirolimus is administered to induce Caspase-9 and eliminate the cells, with the goal of attenuating the therapy and resolving the serious side effect.
•“Dual-switch” GoCARs are designed to provide a user-controlled system for managing proliferation, persistence and safety of tumor antigen-specific CAR cells by incorporating both our iMC and CaspaCIDe switches.
We developed GoCAR product candidates we advanced to Phase 1/2 clinical trials:
•BPX-601 is an autologous GoCAR-T product candidate containing our proprietary iMC activation switch, designed to treat solid tumors expressing prostate stem cell antigen, or PSCA.
•BPX-603 is an autologous dual-switch GoCAR-T product candidate containing both the iMC activation and CaspaCIDe safety switches. BPX-603 is designed to target solid tumors that express the human epidermal growth factor receptor 2 antigen, or HER2.
Product Candidates
BPX-601: GoCAR-T for PSCA+ Solid Tumors
We were previously developing BPX-601, an autologous GoCAR-T product candidate containing our proprietary iMC activation switch, designed to treat solid tumors expressing PSCA. PSCA is an antigen expressed in several solid tumor indications, including prostate and pancreatic cancer. Pre-clinical data show iMC enhances T cell proliferation and persistence, enhances host immune activity, and modulates the tumor microenvironment to improve the potential to treat solid tumors compared to traditional CAR-T therapies.
In March 2023, we announced our decision to discontinue our ongoing Phase 1/2 clinical trial, called BP-012, in patients with metastatic castration-resistance prostate, or mCRPC, and have begun evaluating strategic alternatives for our company. The most recent patient treated in the Phase 1/2 trial of BPX-601 in mCRPC experienced serious immune-mediated adverse events including Grade 4 CRS, the second dose-limiting toxicity observed in this cohort of dose escalation. After conducting a thorough review of the risk/benefit observed in BPX-601 to date, we determined that, while clinically meaningful efficacy has been observed, we do not believe that we have the necessary resources to optimize either the clinical dose and schedule of BPX-601 cells and the activating agent rimiducid, or the design of the BPX-601 cell construct to achieve a favorable risk/benefit profile.
We completed cell dose escalation and lymphodepletion optimization and initiated rimiducid dose escalation in our BP-012 study in patients with metastatic pancreatic cancer. In 24 pancreatic cancer patients treated in the study, we reported: adverse events generally consistent with cytotoxic chemotherapy or other cancer immunotherapies (including two Grade 3-4 CRS and one Grade 4 ICANS); disease control rate of 64.7% with best response of stable disease, with tumor shrinkage <30% reported in 3 subjects; evidence of rimiducid-mediated BPX-601 cell activation, including increased serum cytokine levels, increased expression of activation markers on peripheral T cells indicative of systemic immune modulation via BPX-601 iMC activation, and changes in gene expression in the tumor microenvironment consistent with productive T cell response. We discontinued enrollment of pancreatic cancer patients in 2021 to focus our study of BPX-601 in mCRPC.
In February 2023, we presented early Phase 1 results at the American Society of Clinical Oncology Genitourinary Cancers Symposium (ASCO GU) in San Francisco and virtually. The presentation was of initial data from the first two cohorts (8 patients, total) who received lymphodepleting chemotherapy (fludarabine + cyclophosphamide) followed by a single dose of 5x106 BPX-601 cells/kg and single (n=3) or weekly (n=5) doses of 0.4 mg/kg rimiducid beginning seven days following the cell infusion. The primary observations were:
•Four of eight (50%) patients achieved a decrease in the level of prostate-specific antigen, or PSA, of at least 50% (PSA50), three of whom achieved a PSA90 response.
•Of the six patients with soft tissue (visceral and/or lymph node) disease, two achieved partial responses by RECIST v1.1, one of which was confirmed.
•Of the two patients with bone-only disease, one patient achieved a PSA90 response with decreased enhancement of bone lesions observed on bone scan.
•The most common grade 3+ adverse events were myelosuppression, characteristic of the lymphodepleting chemotherapies. Two patients experienced Grade 3 CRS. One patient experienced Grade 4 ICANS with concurrent hemophagocytic lymphohistiocytosis; while ICANS improved to grade 1 with standard of care treatment and withholding of subsequent doses of rimiducid, the patient died on study day 20 due to sepsis. Interpretation of immune-mediated adverse events in this patient is confounded by concurrent sepsis.
•Consistent BPX-601 cell expansion across patients was observed, with persistence of BPX-601 cells detected in peripheral blood over 200 days.
•Evidence of inducible MyD88/CD40 (iMC) activation was observed, with serum levels of pro-inflammatory T cell cytokines (including IFNγ, TNFα, IL-6 and IP-10) rising after administration of rimiducid and subsequently falling prior to subsequent doses.
•BPX-601 cell infiltration in PSCA-positive tumor was observed.
BPX-603: Dual-Switch GoCAR-T for HER2+ Solid Tumors
We were previously developing BPX-603, which is our first controllable dual-switch autologous GoCAR-T product candidate and incorporates both the iMC activation switch and the CaspaCIDe safety switch. BPX-603 is designed to target solid tumors that express the human epidermal growth factor receptor 2 antigen, or HER2. HER2 is a validated antigen for cancer therapies, and academic HER2 CAR-T cell clinical studies have shown evidence of anti-tumor activity. These academic HER2 CAR-T approaches targeting HER2 have been limited by modest clinical efficacy and off-tumor/on-target toxicity. We believe that our dual-switch GoCAR-T technology may be uniquely suited to improve upon these earlier efforts, by driving greater efficacy through iMC activation while enabling clinicians to manage any treatment-emergent toxicities with CaspaCIDe.
In March 2023, we announced our decision to discontinue our ongoing Phase 1/2 clinical trial, called BPX603-201A, in patients with metastatic HER2+ solid tumors as discussed above.
Manufacturing, Processing and Delivering to Patients
We developed efficient and scalable processes to manufacture genetically modified T cells of high quality.
Our product candidates require a combination of three critical components: (1) viral vectors with DNA content encoded for our proprietary switch proteins and co-stimulatory and other accessory molecules, (2) patient-derived T cells that are genetically modified by our viral vectors, and (3) the small molecules rimiducid and/or temsirolimus, which activate the switch proteins. Each of these components requires a separate supply chain and shares the same regulatory requirements applicable for biological or chemical materials suitable for human use. Details on each of these components are described below:
a.Viral Vectors. We used gamma retrovirus to transduce our product candidates. We believe that gamma retrovirus is optimal for cell transduction given that it is an integrating vector that induces long-term gene expression, exhibits high transduction efficiency, has sufficient capacity for DNA content, and has been extensively and safely used in clinical trials.
b.Genetically Modified Cells. We have designed and refined a proprietary process for cell engineering that has been improved from lab-based open procedures used in academic and research settings to a functionally closed system that is more appropriate for large-scale clinical trials and commercialization.
c.Small Molecules. Rimiducid is a synthetic small molecule that has been rationally designed to trigger the proprietary switch proteins in our CID platform. We have separate third-party manufacturers for the active pharmaceutical ingredient, or API, and the finished drug product. Manufacturers of both the API and finished drug product have been selected based on their technical expertise and ability to provide supplies for our clinical trial. In our dual-switch constructs, the small molecule temsirolimus can be used to trigger one of the two switches. Temsirolimus is an approved and commercially available product manufactured and distributed by Pfizer Inc. under the trade name TORISEL.
Before we discontinued our clinical development programs, we were focused on refining our overall cell therapy supply chain, manufacturing, processing and delivery to patients to be more efficient. Our current process cycles for our autologous product candidates, from collection of white blood cells to infusion of the final product, can be completed in as little as four weeks and are customized to be complementary to the treatment procedure of interest in order to prevent delays or complications.
Intellectual Property
We seek to protect proprietary technology, inventions, and improvements that are commercially important to our business by seeking, maintaining, and defending patent rights, whether developed internally or licensed from third parties. We also seek to rely on regulatory protection afforded through orphan drug designations, data exclusivity, market exclusivity and patent term extensions where available as well as contractual agreements with our academic and commercial partners.
A strategic focus for us has been to identify and license key patents and patent applications that serve to enhance our intellectual property and technology position. Our intellectual property estate includes: (1) claims directed to core CID technologies and components used in our products; (2) claims directed to methods of treatment for therapeutic indications; (3) claims directed to specific products; and (4) claims directed to innovative methods for generating new constructs for genetically engineering T cells. We believe our patent estate, together with our efforts to develop and patent next generation technologies, provides us with a substantial intellectual property position.
As of December 31, 2022, to our knowledge, our patent estate, on a worldwide basis, includes 192 issued patents, 26 of which are in the U.S., and 63 pending patent applications, 17 of which are in the U.S., which we own or for which we have an exclusive, either in its entirety or within our field of use, commercial license. The provisional and pending patent applications and issued patents include composition of matter and method of use claims.
▪We have internally developed technology disclosed in seven pending utility patent applications in the U.S., one European granted patent validated in eight countries, two issued foreign patents and 23 pending foreign patent applications that relate to our GoCAR-T technology. If U.S. patents issue from the U.S. applications, the estimated expiration date of the last to expire patent is in 2039. If patents are issued in foreign jurisdictions, the anticipated expiration dates will be in 2039.
▪Pursuant to our licenses from Baylor College of Medicine and Ariad Pharmaceuticals, Inc., we have exclusive commercial rights to 12 issued U.S. patents expiring in 2024 or later, four pending U.S. utility patent applications, three European granted patents (the first validated in three countries, the second validated in nine countries, and the third validated in four countries), five issued foreign patents expiring in 2024 or later and two pending patent applications in foreign jurisdictions that relate to our GoCAR-T, rivo-cel and certain of our other technologies. If U.S. patents issue from the currently pending U.S. patent applications, the estimated expiration date of the last to expire patent is 2031. If patents from the currently pending patent applications are issued in foreign jurisdictions, the estimated expiration dates range from 2024 to 2029.
▪Pursuant to our license agreement with Agensys, Inc. we have exclusive commercial rights for technology to target certain cancer-specific antigens.
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 of the first non-provisional application to which priority is claimed. In the U.S., a patent’s term may be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the U.S. Patent and Trademark Office, or the USPTO, 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 a drug or biologic approved by the U.S. Food and Drug Administration, or FDA, may also be eligible for a patent term restoration of up to five years under the Hatch-Waxman Act, which is designed to compensate for the patent term lost during the FDA regulatory review process. The length of the patent term restoration is calculated based on the length of time the drug or biologic is under regulatory review. A patent term restoration under the Hatch-Waxman Act 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 or biologic may be restored. Moreover, a patent can only be restored 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 certain other foreign jurisdictions to extend the term of a patent that covers an approved drug or biologic.
We may rely, in some circumstances, on trade secrets to protect our technology. 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.
Our Collaboration and License Agreements
Co-Development and Co-Commercialization Agreement - Adaptimmune
In December 2016, we and Adaptimmune Therapeutics plc, or Adaptimmune, entered into a Co-Development and Co-Commercialization Agreement, or the Adaptimmune Agreement, in order to facilitate a staged collaboration to evaluate, develop and commercialize next generation T cell therapies. Since we have stopped all development activity related to our product candidates, we are not currently performing any development efforts under this agreement.
Under the Adaptimmune Agreement, the parties agreed to evaluate our GoTCR technology, iMC co-stimulation, with Adaptimmune's affinity-optimized SPEAR® T cells for the potential to create enhanced TCR product candidates. Depending on results of the preclinical proof-of-concept phase, the agreement may progress to a two-target co-development and co-commercialization phase. To the extent necessary, and in furtherance of the parties’ proof-of-concept and co-development efforts, the parties granted each other a royalty-free, non-transferable, non-exclusive license covering their respective technologies for purposes of facilitating such proof-of-concept and co-development efforts. In addition, as to covered therapies developed under the Adaptimmune Agreement, the parties granted each other a reciprocal exclusive license for the commercialization of such therapies.
With respect to any joint commercialization of a covered therapy, the parties agreed to negotiate in good faith the commercially reasonable terms of a co-commercialization agreement. The parties also agreed that any such agreement shall provide for, among other things, equal sharing of the costs of any such joint commercialization and the calculation of profit shares as set forth in the Adaptimmune Agreement.
The Adaptimmune Agreement will expire on a country-by-country basis once the parties cease commercialization of the T cell therapies covered by the Adaptimmune Agreement, unless earlier terminated by either party for material breach, non-performance or cessation of development, bankruptcy/insolvency, or failure to progress to co-development phase.
License Agreement - Agensys
In December 2015, we and Agensys, Inc., or Agensys, entered into a license agreement, or the Agensys Agreement, pursuant to which (i) Agensys granted us, within the field of cell and gene therapy of diseases in humans, an exclusive, worldwide license and sublicense to its patent rights directed to PSCA and related antibodies, and (ii) we granted Agensys a non-exclusive, fully paid license to our patents directed to inventions that were made by us in the course of developing our licensed products, solely for use with Agensys therapeutic products containing a soluble antibody that binds to PSCA or, to the extent not based upon our other proprietary technology, to non-therapeutic applications of antibodies not used within the field.
As consideration for the rights granted to us under the Agensys Agreement, we agreed to pay to Agensys a non-refundable upfront fee of $3.0 million. We are also required to make aggregate milestone payments to Agensys of up to (i) $5.0 million upon the first achievement of certain specified clinical milestones for its licensed products, (ii) $50.0 million upon the achievement of certain specified clinical milestones for each licensed product, and (iii) $75.0 million upon the achievement of certain sales milestones for each licensed product. The Agensys Agreement additionally provides that we will pay to Agensys a royalty percentage that ranges from the mid to high single digits based on the level of annual net sales of licensed products by us, our affiliates or permitted sublicensees. The royalty payments are subject to reduction under specified circumstances.
Under the Agensys Agreement, Agensys also was granted the option to obtain an exclusive license, on a product-by-product basis, from us to commercialize in Japan each licensed product developed under the Agensys Agreement that has completed a phase 2 clinical trial. As to each such licensed product, if Agensys or its affiliate, Astellas Pharma, Inc., exercises the option, the Agensys Agreement provides that we will be paid an option exercise fee of $5.0 million. In addition, the Agensys Agreement provides that we will be paid a royalty that ranges from the mid to high single digits based on the level of annual net sales in Japan of each such licensed product. If the option is exercised, the aggregate milestone payments payable by us to Agensys, described above with respect to each licensed product, would be reduced by up to an aggregate of $65.0 million upon the achievement of certain specified clinical and sales milestones.
The Agensys Agreement will terminate upon the expiration of the last royalty term for the products covered by the Agensys Agreement, which is the earlier of (i) the date of expiration or abandonment of the last valid claim within the licensed patent rights covering any licensed products under the Agensys Agreement, (ii) the expiration of regulatory exclusivity as to a licensed product, and (iii) 10 years after the first commercial sale of a licensed product. Either party may terminate the Agensys Agreement upon a material breach by the other party that remains uncured following 60 days after the date of written notice of such breach (or 30 days if such material breach is related to failure to make payment of amounts due under the Agensys Agreement) or upon certain insolvency events. In addition, Agensys may terminate the Agensys Agreement immediately upon written notice to us if we or any of our affiliates or permitted sublicensees commence an interference proceeding or challenge the validity or enforceability of any of Agensys’ patent rights.
License Agreement - BioVec
In June 2015, we and BioVec Pharma, Inc., or BioVec, entered into a license agreement, or the BioVec Agreement, pursuant to which BioVec agreed to supply us with certain proprietary cell lines and granted us a non-exclusive, worldwide license to certain of its patent rights and related know-how related to such proprietary cell lines.
As consideration for the products supplied and rights granted to us under the BioVec Agreement, we agreed to pay to BioVec an upfront fee of $100,000 within ten business days of the effective date of the BioVec Agreement and a fee of $300,000 within ten business days of its receipt of the first release of GMP lot of the products licensed under the BioVec Agreement. In addition, we agreed to pay to BioVec an annual fee of $150,000, commencing 30 days following the first filing of an IND, or its foreign equivalent, for a product covered by the license; with such annual fees being creditable against any royalties payable by us to BioVec under the BioVec Agreement. We also are required to make a $250,000 milestone payment to BioVec for each of the first three licensed products to enter into a clinical phase trial and one-time milestone payments of $2.0 million upon receipt of a registration granted by the FDA or EMA on each of our first three licensed products. The BioVec Agreement additionally provides that we will pay to BioVec a royalty in the low single digits on net sales of products covered by the BioVec Agreement. We may also grant sub licenses under the licensed patent rights and know-how to third parties for limited purposes related to the use, sale and other exploitation of the products licensed under the BioVec Agreement. The BioVec Agreement will continue until terminated. The BioVec Agreement may be terminated by us, in our sole discretion, at any time upon 90 days written notice to BioVec. Either party may terminate the BioVec Agreement in the event of a breach by the other party of any material provision of the BioVec Agreement that remains uncured on the date that is 60 days after written notice of such failure or upon certain
insolvency events that remain uncured following the date that is 30 days after the date of written notice to a party regarding such insolvency event.
License Agreements - Baylor College of Medicine
2008 Baylor License Agreement
Pursuant to an Exclusive License Agreement with Baylor College of Medicine, or Baylor, dated March 20, 2008, or the 2008 Baylor license agreement, we obtained an exclusive, worldwide and fully paid up license to certain intellectual property, including intellectual property related to methods for activating antigen presenting cells and to genetic constructs coding for membrane bound inducible cytoplasmic CD40.
As consideration for the 2008 Baylor license agreement, we issued to Baylor 23,529 shares of our common stock and assumed responsibility for all legal fees and expenses, filing or maintenance fees, assessments and all other costs and expenses related to prosecuting, obtaining and maintaining patent protection on the patents subject to the 2008 Baylor license agreement.
The 2008 Baylor license agreement is subject to certain restrictions and is nonexclusive with respect to (1) the making or use of the licensed intellectual property for use in non-commercial research, patient care, teaching, and other educational purposes; (2) any non-exclusive license covering the licensed intellectual property that Baylor grants to other academic or research institutions for noncommercial research purposes; (3) any non-exclusive licenses that Baylor is required to grant to the U.S. or foreign state pursuant to an existing or future treaty with the U.S.; and (4) a non-exclusive license granted to ARIAD Pharmaceuticals, Inc. or ARIAD under the terms of a materials transfer agreement between Baylor and ARIAD.
Baylor may terminate or modify the 2008 Baylor license agreement in the event of a material breach by us that remains uncured following the date that is 90 days after written notice of such breach or upon certain insolvency events that remain uncured following the date that is 30 days following written notice of such insolvency event. We may terminate the 2008 Baylor license agreement, or any portion thereof, at our sole discretion at any time upon 30 days’ written notice to Baylor. Upon termination of the 2008 Baylor license agreement, all rights to the intellectual property immediately revert to Baylor.
2010 Baylor License Agreement
Pursuant to an Exclusive License Agreement with Baylor, dated June 27, 2010, or the 2010 Baylor license agreement, we obtained an exclusive, worldwide license to certain intellectual property, including intellectual property related to methods for treating prostate cancer, methods of administering T cells to a patient, and methods of activating antigen presenting cells with constructs comprising MyD88 and CD40.
Pursuant to the terms of the 2010 Baylor license agreement we are required to pay a low annual maintenance fee on each anniversary of the agreement date.
The terms of the 2010 Baylor license agreement also require us to make royalty payments of less than one percent, subject to certain annual minimums, on net sales of products covered by the license. In addition, to the extent we enter into a sublicensing agreement relating to a licensed product, we are required to pay Baylor a percentage in the mid-single digits on all non-royalty income received from sublicensing revenue. Bellicum is required to make milestone payments, of up to $735,000 in aggregate, upon successful completion of clinical and regulatory milestones regarding the first two products covered by this license.
The 2010 Baylor license agreement will expire upon expiration of the last patent contained in the licensed patent rights, on a country-by-country basis, upon which we will have a perpetual, paid-in-full license in such country. Baylor may terminate or modify the 2010 Baylor license agreement in the event of a material breach by us that remains uncured following the date that is 90 days after written notice of such breach or upon certain insolvency events that remain uncured following the date that is 30 days following written notice of such insolvency event. We may terminate the 2010 Baylor license agreement, or any portion thereof, at our sole discretion at any time upon 60 days’ written notice to Baylor. Upon termination of the 2010 Baylor license agreement for any reason prior to expiration, we must assign to Baylor each authorized sublicense agreement that is currently in effect on the date of termination.
2014 Baylor License Agreement
Pursuant to an Exclusive License Agreement with Baylor, effective November 1, 2014, or the 2014 Baylor license agreement, we obtained an exclusive, worldwide license to certain intellectual property, including intellectual property related to methods for inducing selective apoptosis.
Pursuant to the terms of the 2014 Baylor license agreement we are required to pay Baylor a low annual maintenance fee on each anniversary of the agreement date. The terms of the 2014 Baylor license agreement also require us to make royalty payments in the low single digits, subject to certain annual minimums, on net sales of products covered by the license. To the extent we enter into a sublicensing agreement relating to a licensed product, Bellicum is also required to pay Baylor a percentage in the low double-digits on all non-royalty income received from sublicensing revenue. We are required to make milestone payments, of up to $275,000 in aggregate, upon successful completion of clinical and regulatory milestones regarding the first product covered by this license. The 2014 Baylor license agreement will expire upon expiration of the last patent contained in the licensed patent rights, on a country-by-country basis, upon which we will have a perpetual, paid-in-full license in each such country.
Baylor may terminate or modify the 2014 Baylor license agreement in the event of a material breach by us that remains uncured following the date that is 90 days after written notice of such breach or upon certain insolvency events that remain uncured following the date that is 30 days following written notice of such insolvency event. We may terminate the 2014 Baylor license agreement, or any portion thereof, at our sole discretion at any time upon 60 days’ written notice to Baylor.
Competition
The biopharmaceutical industry is characterized by intense and dynamic competition to develop new technologies and proprietary therapies. We are not currently pursuing further clinical development of our product candidates. If we or a third party pursues such further development in the future, any product candidates that are successfully developed and commercialized will have to compete with existing therapies and new therapies that may become available in the future. While we believe that our proprietary CID platform, differentiated product candidates and scientific expertise in the field of cellular immunotherapy provide us with competitive advantages, we would face potential competition from various sources, including larger and better-funded pharmaceutical, specialty pharmaceutical and biotechnology companies, as well as from academic institutions, governmental agencies and public and private research institutions.
Cell based treatments for cancer, such as CAR-T therapies, have recently been an area of significant research and development by academic institutions and biopharmaceutical companies. We are not currently pursuing further clinical development of our product candidates. If we or a third party pursues such further development in the future, those product candidates would compete with product candidates from a number of companies that are currently focused on this therapeutic modality, including 2seventy bio, Inc., AbbVie, Inc., Adaptimmune, Alaunos Therapeutics, Inc., Allogene Therapeutics, Inc., Amgen Inc., Atara Biotherapeutics, Inc., Athenex, Inc., Autolus Therapeutics plc, BioNTech Europe GmbH, Bristol-Meyer Squibb Co., Cellectis SA, Celyad S.A., CRISPR Therapeutics AG, Fate Therapeutics Inc., Fortress Biotech, GlaxoSmithKline plc, Gilead Sciences, Inc., Immatics N.V., ImmunityBio, Inc., Iovance Biotherapeutics, Inc., Janssen Pharmaceutical, Legend Biotech, Lyell Immunopharma, Inc., Medigene AG, Mustang Bio, Inc., Novartis AG, Poseida Therapeutics, Precigen Inc., Precision Biosciences, Inc., Prescient Therapeutics, Sana Biotechnology, Sorrento Therapeutics, Inc., and Takeda Pharmaceutical Co. In addition to other cell based treatments, our product candidates may compete in their solid tumor indications with novel therapeutics of other modalities, including small molecules, monoclonal antibodies, bi-specific antibodies, antibody-drug conjugates, and targeted radionuclides.
Many of our competitors, either alone or with their strategic partners, have substantially greater financial, technical and human resources and significantly greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of treatments and commercializing those treatments. Accordingly, our competitors may be more successful in obtaining approval for treatments and achieving widespread market acceptance. Our competitors’ treatments may be more effective, or more effectively marketed and sold, than any treatment we may commercialize and may render our treatments obsolete or non-competitive before we can recover the expenses of developing and commercializing any of our treatments.
Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
Should we or a third party commercialize our product candidates, they will face intense and increasing competition as new drugs enter the market and advanced technologies become available. Therapeutics compete 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 payers.
The opportunity for our product candidates could be reduced or eliminated if third parties develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive. Third parties also may obtain FDA or other regulatory approval for their products more rapidly, which could result in our competitors establishing a
strong market position before our product candidates are able to enter the market. In addition, we expect that our therapeutic products, if approved, will be priced at a significant premium over competitive generic products and the ability to compete may be affected in many cases by insurers or other third-party payers seeking to encourage the use of generic products.
Government Regulation and Product Approval
We are not currently pursuing further clinical development of our product candidates. If we or a third party pursues such further development in the future, those product candidates would subject to government regulation and product approval.
Our cell product candidates would be regulated as biologics. With this classification, commercial production of our product candidates would need to occur in registered and licensed facilities in compliance with the current good manufacturing practice, or cGMP, for biologics.
The FDA regulates human cells, tissues, and cellular and tissue-based products, or HCT/Ps, under a two-tiered framework, based on risk categorization. Higher-risk HCT/Ps are regulated as biologics. For example, such products must complete extensive clinical trials, which must be conducted pursuant to an effective IND. The FDA must review and approve a Biologics License Application, or BLA before a new biologic may be marketed.
The FDA considers our investigational products to be “combination products” because our products involve a biologic, the engineered cells, that is intended to be used with a small molecule chemical drug, rimiducid. In general, biologics such as our engineered cells are regulated through the FDA’s Center for Biologics Evaluation and Research, or CBER, while synthetic drugs are regulated through the FDA’s Center for Drug Evaluation and Research. When the FDA encounters a combination product such as our products, the agency determines which of the two centers will have primary responsibility for regulating the product by determining the primary mode of action for the product. The cellular component of our combination contributes the primary mode of action and, as a result, the FDA will regulate our investigational products as biologics, through CBER.
Government authorities in the U.S., at the federal, state and local levels, and in other countries extensively regulate, among other things, the research, development, testing, manufacturing, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of biopharmaceutical products such as those we are developing. Our product candidates must be approved by the FDA before they may be legally marketed in the U.S. and by the appropriate foreign regulatory agency before they may be legally marketed in foreign countries. Generally, our activities in other countries will be subject to regulation that is similar in nature and scope as that imposed in the U.S., although there can be important differences. Additionally, some significant aspects of regulation in Europe are addressed in a centralized way, but country-specific regulation remains essential in many respects.
U.S. Product Development Process
In the U.S., the FDA regulates new drugs and biological products under the Federal Food, Drug and Cosmetic Act, or FDCA, the Public Health Service Act, or PHSA, and implementing regulations. Products are also subject to other federal, state and local statutes and regulations. The process required by the FDA before a biological product may be marketed in the U.S. generally involves the following:
a.completion of nonclinical laboratory tests and animal studies according to good laboratory practices, or GLPs, and applicable requirements for the humane use of laboratory animals or other applicable regulations;
b.submission to the FDA of an IND, which must become effective before human clinical trials may begin;
c.performance of adequate and well-controlled human clinical trials according to the FDA’s regulations commonly referred to as good clinical practices, or GCPs, and any additional requirements for the protection of human research patients and their health information, to establish the safety and efficacy of the proposed biological product for its intended use;
d.submission to the FDA of a BLA for marketing approval that includes substantial evidence of safety, purity, and potency from results of nonclinical testing and clinical trials;
e.satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the biological product is produced to assess compliance with cGMP, 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, or GTPs, for the use of HCT/Ps;
f.potential FDA audit of the nonclinical study and clinical trial sites that generated the data in support of the BLA; and
g.FDA review and approval, or licensure, of the BLA.
Before testing any biological product candidate, including our product candidates, in humans, the product candidate enters the preclinical testing stage. Preclinical tests, also referred to as nonclinical studies, include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies to assess the potential safety and activity of the product candidate. The conduct of the preclinical tests 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 testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA unless the FDA raises concerns or questions regarding the proposed clinical trials and places the trial on a clinical hold within that 30-day time period. In such a case, the IND sponsor must resolve FDA’s outstanding concerns before the clinical trial can begin. The FDA may also 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, trials may not recommence without FDA authorization and then only under terms authorized by the FDA.
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 adverse events 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 patients provide informed consent. Further, each clinical trial must be reviewed and approved by an institutional review board, or IRB, at or servicing each institution at which the clinical trial will be conducted. An IRB is independent from the trial sponsor and is charged with protecting the welfare and rights of clinical trial participants and considers such items as whether the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the form and content of the informed consent that must be signed by each clinical trial subject or his or her legal representative and must monitor the clinical trial until completed. Clinical trials also must be reviewed by an institutional biosafety committee, or IBC, a local institutional committee that reviews and oversees basic and clinical research conducted at that institution. The IBC assesses the safety of the research and identifies any potential risk to public health or the environment.
Human clinical trials for biologic products are typically conducted in three sequential phases that may overlap or be combined:
a.Phase 1. The biological product is initially introduced into healthy human subjects and tested for safety. 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.
b.Phase 2. The biological product is evaluated in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance, optimal dosage and dosing schedule.
c.Phase 3. Clinical trials are undertaken to further evaluate dosage, clinical efficacy, potency, and safety in an expanded patient population at geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk to benefit ratio of the product and provide an adequate basis for product labeling.
Post-approval clinical trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These clinical trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication, 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 progress of the clinical trials must be submitted to the FDA. Written IND safety reports must be promptly submitted to the FDA and the investigators for serious and unexpected adverse events, any findings from other studies, tests in laboratory animals or in vitro testing that suggest a significant risk for human patients, 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 trials may not be completed successfully within any specified period, if at all. The FDA or the
sponsor or its data safety monitoring board may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research patients are being exposed to an unacceptable health risk, including risks inferred from other unrelated immunotherapy trials. 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.
Concurrently with clinical trials, companies usually complete additional studies and must also develop additional information about the physical characteristics of the biological product, as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. To help reduce the risk of the introduction of adventitious agents with use of biological products, the PHSA emphasizes the importance of manufacturing control for products whose attributes cannot be precisely defined. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the sponsor must develop methods for testing the identity, strength, quality, potency and purity of the final biological product. Additionally, 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.
Federal law requires that we register all of our clinical trials on a publicly accessible website and provide results information for most of our clinical trials, other than Phase 1 clinical trials.
U.S. 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 trials, information on the manufacture and composition of the product, proposed labeling and other relevant information. The FDA may grant deferrals for submission of certain data or full or partial waivers.
Under the Prescription Drug User Fee Act, or PDUFA, as amended, each BLA must be accompanied by a significant user fee. The FDA adjusts the PDUFA user fees on an annual basis. The PDUFA also imposes an annual program fee for approved biological products. 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. Additionally, no user fees are assessed on BLAs for products designated as orphan drugs, unless the application also includes a non-orphan indication.
Within 60 days following submission of the application, the FDA reviews a BLA submitted 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, potent, and/or effective for its intended use, and has an acceptable purity profile, and whether the product is being manufactured in accordance with cGMP 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, or 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 a 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 cGMP requirements and adequate to assure consistent production of the product within required specifications. For immunotherapy products, the FDA also will not approve the product if the manufacturer is not in compliance with the GTPs, to the extent applicable. These are FDA regulations and guidance documents that govern the methods used in, and the facilities and controls used for, the manufacture of HCT/Ps. The primary intent of the GTP requirements is to ensure that cell and tissue-based products are manufactured in a manner designed to prevent the introduction, transmission and spread of communicable disease. FDA regulations also require HCT/P establishments to register and list their HCT/Ps with the FDA and, when applicable, to evaluate donors through screening and testing. 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 trial requirements and GCP requirements. To maintain compliance with CGMPs, GTPs, and GCPs, 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 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 REMS or other risk management plan, 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 addition, under the Pediatric Research Equity Act, or PREA, a BLA or supplement to a BLA must contain data to assess the safety and effectiveness of the 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. Unless otherwise required by regulation, the PREA does not apply to any product for an indication for which orphan designation has been granted. However, if only one indication for a product has orphan designation, a pediatric assessment may still be required for any applications to market that same product for the non-orphan indication(s). Sponsors in satisfaction of this obligation may receive an additional six months of marketing exclusivity for all dosage forms and all indications with the same active moiety as the drug studied.
Orphan Drug Designation
Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which there is no reasonable expectation that the cost of developing and making available in the U.S. a drug or biologic for this type of disease or condition will be recovered from sales in the U.S. for that drug or biologic. Orphan drug designation must be requested before submitting a BLA. After the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. The orphan drug designation does not shorten the duration of the regulatory review or approval process, but does provide certain advantages, such as a waiver of PDUFA fees, enhanced access to FDA staff, and potential waiver of the PREA requirements discussed above.
If a product that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications, including a full BLA, to market the same biologic for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity. Orphan drug exclusivity does not prevent FDA from approving a different drug or biologic for the same disease or condition, or the same drug or biologic for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the BLA application user fee.
A designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, exclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition.
Expedited Development and Review Programs
The FDA has a Fast Track program that is intended to expedite or facilitate the process for reviewing new products that meet certain criteria. Specifically, new products are eligible for Fast Track designation if they are intended to treat a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs, or if the drug has been designated as a qualified infectious disease product. Fast Track designation applies to the combination of the product and the specific indication for which it is being studied. Under Fast Track, the FDA may consider for review sections of the BLA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the BLA, the FDA agrees to accept sections of the BLA and determines that the schedule is acceptable, and the sponsor pays any
required user fees upon submission of the first section of the BLA. Even if Fast Track designation is granted, it may be rescinded if the product no longer meets the qualifying criteria.
Any product, submitted to the FDA for approval, including a product with a Fast Track designation, may also be eligible for other types of FDA programs intended to expedite development and review, such as priority review and accelerated approval. A product is eligible for priority review if it treats a serious condition and, if approved, would provide a significant improvement in safety and efficacy. The FDA will attempt to direct additional resources to the evaluation of an application for a new product designated for priority review in an effort to facilitate the review. Additionally, a product may be eligible for accelerated approval. Products studied for their safety and effectiveness in treating serious or life-threatening diseases or conditions may receive accelerated approval upon a determination that the product treats a serious condition, provides a meaningful advantage over available therapies, and demonstrates an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA may require that a sponsor of a drug or biological product receiving accelerated approval perform appropriate post-marketing clinical studies to verify and describe the predicted effect on irreversible morbidity or mortality or other clinical benefit. In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product. The FDCA also provides expedited procedures for FDA withdrawal of approval of a product approved through accelerated approval. Fast Track designation, priority review and accelerated approval do not change the standards for approval but may expedite the development or approval process.
Breakthrough Therapy Designation is intended to expedite the development and review of products that treat serious or life-threatening conditions. The designation requires preliminary clinical evidence that may demonstrate substantial improvement on a clinically significant endpoint over available therapies. The designation includes all of the Fast Track program features, as well as more intensive FDA interaction and guidance, organizational commitment, and other potential actions to expedite review. The Breakthrough Therapy Designation is a distinct status from both accelerated approval and priority review, which can also be granted to the same product if relevant criteria are met. If a product is designated as breakthrough therapy, the FDA will expedite the development and review of such product. Even if a Breakthrough Therapy Designation is granted, it may be rescinded if the product no longer meets the qualifying criteria.
Other U.S. Health Care Laws and Compliance Requirements
In the U.S., our activities are potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including but not limited to, the Centers for Medicare and Medicaid Services, or CMS, other divisions of the U.S. Department of Health and Human Services, or HHS, such as the Office of Inspector General, the U.S. Department of Justice, or DOJ, and individual U.S. Attorney offices within the DOJ, and state and local governments. For example, sales, marketing and scientific/educational grant programs must comply with the anti-fraud and abuse provisions of the Social Security Act, the false claims laws, the privacy provisions of the Health Insurance Portability and Accountability Act, or HIPAA, the sunshine provisions of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, collectively, the PPACA and similar state laws, each as amended.
The federal Anti-Kickback Statute prohibits, among other things, any person or entity, from knowingly and willfully offering, paying, soliciting or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for either the referral of an individual, or for the purchasing, leasing, ordering or arranging for the purchase, lease or order of any good, facility, item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federal health care programs. The term remuneration has been interpreted broadly to include anything of value. The Anti-Kickback Statute has been interpreted to apply to arrangements between biologic manufacturers on one hand and prescribers, purchasers, and formulary managers on the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution. The exceptions and safe harbors are drawn narrowly and practices that involve remuneration that may be alleged to be intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances.
Additionally, the intent standard under the Anti-Kickback Statute was amended by the PPACA to a stricter standard such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. The Anti-Kickback Statute may be violated if only one purpose of the remuneration is to induce referrals. In addition, the PPACA codified case law that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.
The civil monetary penalties law imposes penalties against any person or entity who, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.
The federal false claims laws, including but not limited to the federal civil False Claims Act, prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, a false claim for payment to, or approval by, the federal government. Pharmaceutical and other health care companies have been prosecuted under these laws for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. Companies also have been prosecuted for causing false claims to be submitted because of the companies’ marketing of the product for unapproved, that is, off-label, and thus non-reimbursable, uses.
HIPAA created additional new federal criminal statutes that prohibit, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations or promises, any money or property owned by, or under the control or custody of, any health care benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up by trick, scheme or device, a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for health care benefits, items or services.
Also, many states have similar fraud and abuse statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor.
We may be subject to data privacy and security regulations by both the federal government and the states in which we conduct our business. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing regulations, imposes requirements relating to the privacy, security and transmission of individually identifiable health information. Among other things, HITECH makes HIPAA’s security standards directly applicable to business associates, independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity, and their covered subcontractors. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in specified circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
Additionally, the federal Physician Payments Sunshine Act, and its implementing regulations, require that certain manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with certain exceptions, to report annually information related to certain payments or other transfers of value made or distributed to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors), other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals and require that certain manufacturers and group purchasing organizations report annually certain ownership and investment interests held by physicians and their immediate family members.
We will also be required to begin satisfying the product tracing, verification, and reporting requirements set out in the Drug Supply Chain Security Act.
In order to distribute products commercially, we must also comply with state laws that require the registration of manufacturers and wholesale distributors of drug and biological products in a state, including, in certain states, manufacturers and distributors who ship products into the state even if such manufacturers or distributors have no place of business within the state.
Several states have enacted legislation requiring pharmaceutical and biotechnology companies to, among other things, establish marketing compliance programs, file periodic reports with the state, make periodic public disclosures on sales, marketing, pricing, clinical trials and other activities, and/or register their sales representatives, as well as to prohibit pharmacies and other health care entities from providing certain physician prescribing data to pharmaceutical and biotechnology companies for use in sales and marketing, and to prohibit certain other sales and marketing practices. All of our activities are potentially subject to federal and state consumer protection and unfair competition laws.
If our operations are found to be in violation of any of the laws described above or any other government regulations that apply to us, we may be subject to penalties, including significant administrative, civil and criminal penalties, damages, fines, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve
allegations of noncompliance with these laws, exclusion from participation in government health care programs, such as Medicare and Medicaid, disgorgement, contractual damages, reputational harm and the curtailment or restructuring of our operations.
Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which we obtain regulatory approval. In the U.S. and markets in other countries, sales of any products for which we receive regulatory approval for commercial sale will depend, in part, on the extent to which third-party payors provide coverage and establish adequate reimbursement levels for such products. In the U.S., third-party payors include federal and state health care programs, private managed care providers, health insurers and other organizations. The process for determining whether a third-party payor will provide coverage for a product may be separate from the process for setting the price of a product or for establishing the reimbursement rate that such a payor will pay for the product. Third-party payors may limit coverage to specific products on an approved list, also known as a formulary, which might not include all of the FDA-approved products for a particular indication. Third-party payors are increasingly challenging the price, examining the medical necessity and reviewing the cost-effectiveness of medical products, therapies and services, in addition to questioning their safety and efficacy. We may need to conduct expensive pharmaco-economic studies in order to demonstrate the medical necessity and cost-effectiveness of our products, in addition to the costs required to obtain the FDA approvals. Our product candidates may not be considered medically necessary or cost-effective. A payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage for the product. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development.
Different pricing and reimbursement schemes exist in other countries. In the European Union, or EU, governments influence the price of pharmaceutical products through their pricing and reimbursement rules and control of national health care systems that fund a large part of the cost of those products to consumers. Some jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement price has been agreed. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare the cost-effectiveness of a particular product candidate to currently available therapies. Other member states allow companies to fix their own prices for medicines, but monitor and control company profits. The downward pressure on health care costs has become very intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-border imports from low-priced markets exert a commercial pressure on pricing within a country.
The marketability of any product candidates for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide adequate coverage and reimbursement. In addition, emphasis on managed care in the U.S. has increased and we expect will continue to increase the pressure on health care pricing. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
Health Reform
In the United States and some foreign jurisdictions, there have been, and we anticipate there will continue to be, several legislative and regulatory changes and proposed healthcare reform measures with the stated goals of containing healthcare costs, improving quality and expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by federal and state legislative initiatives, including those designed to limit the pricing, coverage, and reimbursement of pharmaceutical and biopharmaceutical products, especially under government-funded healthcare programs, and increased governmental control of drug pricing. For example, the PPACA, which was enacted in March 2010, substantially changed the way healthcare is financed by both governmental and private insurers, and continues to significantly impact the U.S. pharmaceutical industry. Since its enactment, the PPACA has been subject to executive branch, judicial and Congressional challenges. For example, on June 17, 2021 the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the PPACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022, or IRA, into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in PPACA marketplaces through plan year 2025. The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and creating a new manufacturer discount program. It is possible that the PPACA will be subject to judicial or Congressional challenges in the future. Moreover, payment methodologies may also be subject to changes in healthcare legislation and regulatory initiatives.
In addition, other legislative changes have been proposed and adopted in the United States since the PPACA was enacted. For example, through the process created by the Budget Control Act of 2011, there are automatic reductions of Medicare payments to
providers up to 2% per fiscal year, which went into effect in April 2013 and, following passage of the Bipartisan Budget Act of 2018, will remain in effect until 2031, unless additional Congressional action is taken. Under current legislation, the actual reduction in Medicare payments will vary from 1% in 2022 to up to 4% in the final fiscal year of this sequester. Additionally, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to several providers.
Further, there has been increasing legislative and executive branch interest in the United States with respect to drug pricing practices. Specifically, there have been several recent U.S. Congressional inquiries, Presidential executive orders and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. For example, in July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response to Biden’s executive order, on September 9, 2021, HHS released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue as well as potential administrative actions HHS can take to advance these principles. Further, the IRA, among other things (i) directs HHS to negotiate the price of certain high-expenditure, single-source drugs and biologics covered under Medicare and (ii) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation. These provisions will take effect progressively starting in fiscal year 2023, although they may be subject to legal challenges. Additionally, the Biden administration released an additional executive order on October 14, 2022, directing HHS to report on how the Center for Medicare and Medicaid Innovation can be further leveraged to test new models for lowering drug costs for Medicare and Medicaid beneficiaries. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
The Foreign Corrupt Practices Act
The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the U.S. to comply with accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.
Additional Regulation
In addition to the foregoing, state and federal laws regarding environmental protection and hazardous substances, including the Occupational Safety and Health Act, the Resource Conservancy and Recovery Act and the Toxic Substances Control Act, affect our business. These and other laws govern our use, handling and disposal of various biological, chemical and radioactive substances used in, and wastes generated by, our operations. If our operations result in contamination of the environment or expose individuals to hazardous substances, we could be liable for damages and governmental fines. We believe that we are in material compliance with applicable environmental laws and that continued compliance therewith will not have a material adverse effect on our business. We cannot predict, however, how changes in these laws may affect our future operations.
Employees
As of December 31, 2022, we had 13 employees, all of whom were full-time, 11 of whom were engaged in research and development activities and 2 of whom were engaged in general and administrative activities. None of our employees is subject to a collective bargaining agreement. We consider our relationship with our employees to be good.
Our human capital objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants. The principal purposes of our equity and cash incentive plans are to attract, retain and reward personnel through the granting of stock-based and cash-based compensation awards, in order to increase stockholder value and the success of our company by motivating such individuals to perform to the best of their abilities and achieve objectives.
The success of our business is fundamentally connected to the well-being of our employees. Accordingly, we are committed to their health, safety and wellness. We provide our employees and their families with access to a variety of innovative, flexible and convenient health and wellness programs, including benefits that provide protection and security so they can have peace of mind concerning events that may require time away from work or that impact their financial well-being; that support their physical and mental health by providing tools and resources to help them improve or maintain their health status and encourage healthy behaviors; and that offer choice where possible so they can customize their benefits to meet their needs and the needs of their families. Over the last two years, we implemented several new policies to enhance the well-being and engagement of our employees, including an unlimited flexible time schedule, expanded parental leave, and enhanced support for remote work.
Corporate Information
We were incorporated in Delaware in July 2004. Our principal executive office is located at 3730 Kirby Drive, Suite 1200, Houston, Texas and our telephone number is (281) 454-3424. Our corporate website address is www.bellicum.com. Our Annual Reports on Form 10-K Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) ofincluding, without limitation, the Securities Exchange Act of 1934, as amended, or the Exchange Act, will be made available free of charge on our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission, or the SEC. The contents of our website are not incorporated into this Annual Report and our reference to the URL for our website is intended to be an inactive textual reference only.
Item 1A. Risk Factors
Our business and results of operations are subject to a number of risks and uncertainties. You should carefully consider the following risk factors, as well as the other information in this report, and in our other public filings. The occurrence of any of the following risks could harm our business, financial condition, results of operations and/or growth prospects or cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time. You should consider all of the risk factors described when evaluating our business.
Risks Related to Our Business and Industry
We have incurred net losses from operations in every year since our inception and anticipate that we will continue to incur net losses in the future.
We are a biopharmaceutical company, have no products approved for commercial sale and have incurred significant losses since our inception in 2004. To date, we have financed our operations primarily through equity and debt financings. For the fiscal years ended December 31, 2022 and 2021, we reported a net loss of $25.0 million and $9.7 million, respectively. As of December 31, 2022, we had an accumulated deficit of $575.4 million. We expect to continue to incur significant losses from operations for the foreseeable future.
We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital.
Our activities to evaluate and pursue strategic alternatives may not result in any definitive transaction or enhance stockholder value.
Following the discontinuation of our Phase 1/2 clinical trials to evaluate the safety and preliminary efficacy of our GoCAR-T cell product candidates (including BPX-601 and BPX-603) in combination with rimiducid in heavily pre-treated cancer patients, we have begun evaluating and exploring a variety of strategic alternatives focused on maximizing shareholder value, including, but not limited to, a merger, sale, or other business combination, a strategic partnership with one or more parties, or the licensing, sale or divestiture of our programs. Our ability to successfully execute on a strategic alternative is dependent on a number of factors and we may not be able to execute upon a transaction or other strategic alternative upon favorable terms within an advantageous timeframe and recognize significant value for these assets, if at all. Additionally, the negotiation and consummation of a transaction or other strategic alternative may be costly and time-consuming. Any executed strategic alternative may not result in anticipated savings or other economic benefits, could result in total costs and expenses that are greater than expected, could make it more difficult to attract and retain qualified personnel and may disrupt our operations, each of which could have a material adverse effect on our business.
The current market price of our common stock may reflect a market assumption that a strategic alternative will occur, and a failure to complete a strategic alternative could result in negative investor perceptions and could cause a decline in the market price of our common stock, which could adversely affect our ability to access the equity and financial markets, as well as our ability to explore and enter into different strategic alternatives. There can be no certainty that any strategic alternative will be completed, be on attractive terms, enhance stockholder value or deliver the anticipated benefits, and successful integration or execution of the strategic alternatives will be subject to additional risks. In addition, potential strategic alternatives that require stockholder approval may not be approved by our stockholders. If we do not successfully consummate a strategic alternative, our board of directors may decide to pursue a dissolution and liquidation of our company. In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such liquidation, the amount of cash that will need to be reserved for commitments and contingent liabilities, and the payment of the liquidation preference applicable to the Series 1 preferred stock.Depending on these factors, the amount available for distribution to our common stockholders could be as low as $0.00 and result in a total loss of investment to our stockholders.
Our product candidates may never receive regulatory approval from the FDA or other regulatory authorities.
We are not currently pursuing further clinical development of our product candidates. If we or a third party pursues such further development in the future, those product candidates would require additional clinical and non-clinical development, regulatory review and approval in multiple jurisdictions, substantial investment, and access to sufficient commercial manufacturing capacity and significant marketing efforts before generating any revenue from product sales.
Our product candidates could fail to receive regulatory approval for many reasons, including the following:
•The FDA or comparable regulatory authority or an IRB or comparable ethics oversight body may decline to clear the applicable Investigational New Drug Application (IND) or equivalent regulatory submission necessary to conduct human clinical trials;
•failure to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that our product candidates have the necessary safety, purity, and potency for any of their proposed indications;
•the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;
•failure to demonstrate that clinical and other benefits outweigh safety risks;
•serious and unexpected adverse events during clinical trials that render the product candidates unsafe for use in humans;
•the FDA or comparable foreign regulatory authorities may disagree with the interpretation of data from preclinical studies or clinical trials;
•the data collected from clinical trials of our product candidates may not be sufficient to the satisfaction of the FDA or comparable foreign regulatory authorities to support the submission of a BLA or other comparable submission in foreign jurisdictions or to obtain regulatory approval in Europe, the U.S. or elsewhere;
•the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes and/or facilities of third-party manufacturers; and
•the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering the clinical data insufficient for approval.
Our CID technology is novel and largely unproven.
Our proprietary CID technology platform is novel and there are no approved products or third-party product candidates in late-stage clinical trials based on this technology. Additionally, the safety and efficacy profile of rimiducid has not been subject to large scale clinical testing. Based on our Phase 1 results of BPX-601 and rimiducid, we believe further optimization of the clinical dose and schedule of GoCAR-T cells and rimiducid or further engineering of the CID platform may be needed to achieve favorable outcomes, which would require significant time and expense. In addition, our CID platform technology may not be applicable or effective in the development of additional cellular immunotherapies which would adversely affect its value.
Cell therapies are novel and present significant challenges.
CAR-T and other cell therapy product candidates represent a relatively new field of cellular immunotherapy. Advancing this novel and personalized therapy creates significant challenges, including:
•obtaining regulatory approval, as the FDA and other regulatory authorities have limited experience with commercial development of cell therapies for cancer;
•sourcing clinical and, if approved, commercial supplies for the materials used to manufacture and process our product candidates;
•developing a consistent and reliable process, while limiting contamination risks, for engineering and manufacturing T cells ex vivo and infusing the engineered cells into the patient;
•educating medical personnel regarding the potential safety benefits, as well as the challenges, of incorporating our product candidates into their treatment regimens;
•establishing sales and marketing capabilities upon obtaining any regulatory approval to gain market acceptance of a novel therapy; and
•the availability of coverage and adequate reimbursement from third-party payors for our novel and personalized therapy.
Clinical trials may fail to adequately demonstrate the safety and efficacy of any of our product candidates, which would prevent or delay regulatory approval and commercialization.
Clinical testing is expensive, takes many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process and our product candidates are subject to the risks of failure inherent in biologic drug development. Success in early clinical trials does not mean that later clinical trials will be successful because product candidates in later-stage clinical trials may fail to demonstrate sufficient safety or efficacy despite having progressed through initial clinical testing, even at statistically significant levels. If we, or a third party, wanted to continue the development of our product candidates, it would
require clinical trials results to show that our product candidates are safe and effective for use in the target indication before regulatory approvals for commercial sale. Companies frequently suffer significant setbacks in late-stage clinical trials, even after earlier clinical trials have shown promising results and most product candidates that commence clinical trials are never approved as products. We expect there may be greater variability in results for cellular immunotherapy products processed and administered on a patient-by-patient basis like some of our CID technology-based development and product candidates than for “off-the-shelf” products, like many drugs.
Our current product candidates were recently in early stage clinical trials, and, if we, or an acquiror, reinitiates these trials and initiate additional clinical trials, they may experience unfavorable results in the future.
We have recently discontinued the Phase 1/2 clinical trial for BPX-601 for the treatment of prostate cancer, and the Phase 1/2 clinical trial for BPX-603 in HER2-positive solid tumors, following our assessment of the risk/benefit profile of BPX-601 in combination with rimiducid. We are communicating with clinical trial sites and regulatory agencies regarding our decision to discontinue our ongoing clinical trials, and have begun evaluating a variety of strategic and financing alternatives focused on maximizing shareholder value, including, but not limited to, a merger, sale, or other business combination, a strategic partnership with one or more parties, or the licensing, sale or divestiture of our programs. As these product candidates are in early stages of development, there is significant uncertainty regarding whether they will be effective and safe in human patients, and the results from preclinical studies, such as in vitro and in vivo studies, of BPX-601 and BPX-603 may not be indicative of the results of clinical trials of these product candidates. Additionally, the most recent patient treated in the Phase 1/2 trial of BPX-601 in mCRPC experienced serious immune-mediated adverse events including Grade 4 CRS, the second dose-limiting toxicity observed in this cohort of dose escalation. Preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval for their products.
Even if clinical trials are successfully completed, the FDA or foreign regulatory authorities may not interpret the results as we do, and more clinical trials could be required before submission of our product candidates for approval. To the extent that the results of clinical trials are not satisfactory to the FDA or foreign regulatory authorities for support of a marketing application, approval of our product candidates may be significantly delayed, or significant additional resources may be required to conduct additional clinical trials in support of potential approval of our product candidates.
We have in the past and expect to, in the future, rely on third parties to conduct clinical trials.
While we are not currently conducting any clinical development and do not have plans to initiate any additional clinical trials, we have in the past and would expect to, in the future, depend upon independent investigators and collaborators, such as universities, medical institutions, and strategic partners to conduct preclinical and clinical trials under agreements with us. Negotiations of budgets and contracts with study sites may result in delays to development timelines and increased costs. We would expect to rely heavily on these third parties over the course of clinical trials, and would control only certain aspects of their activities. Nevertheless, we would be responsible for ensuring that each study is conducted in accordance with applicable protocol, legal, regulatory and scientific standards, and reliance on third parties would not relieve us of regulatory responsibilities. We and these third parties would be required to comply with GCPs, which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities for product candidates in clinical development. Regulatory authorities enforce these GCPs through periodic inspections of clinical trial sponsors, principal investigators and clinical trial sites. If we or any of these third parties failed to comply with applicable GCP regulations, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities could require us to perform additional clinical trials before approving our marketing applications. It is possible that, upon inspection, such regulatory authorities could determine that any of our clinical trials fail to comply with the GCP regulations. In addition, any future clinical trials with our product candidates would be required to be conducted with biologic product produced under current good manufacturing practices, or cGMPs, and will require a large number of test patients. Our failure or any failure by these third parties to comply with these regulations or to recruit a sufficient number of patients may require us to repeat clinical trials, which would delay the regulatory approval process. Moreover, our business may be implicated if any of these third parties violates federal or state fraud and abuse or false claims laws and regulations or healthcare privacy and security laws.
Any third parties conducting our clinical trials are and will not be our employees and, except for remedies available to us under our agreements with these third parties, we cannot control whether they devote sufficient time and resources to our ongoing preclinical, clinical and nonclinical programs. These third parties may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other drug development activities, which could affect their performance on our behalf. If these third parties do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to clinical protocols or regulatory requirements or for other reasons, the clinical trials may be extended, delayed or terminated and we may not be able to complete development of, obtain regulatory approval of or successfully commercialize our product candidates.
Switching or adding third parties to conduct clinical trials involves substantial cost and requires extensive management time and focus. In addition, there is a natural transition period when a new third party commences work.
There may be difficulties enrolling patients in future clinical trials of our product candidates, resulting in clinical development delays.
While we are not currently conducting any clinical trials and do currently have plans to initiate any further clinical trials in the future, should our product candidates be acquired and developed by others, there may be difficulties in patient enrollment in clinical trials for a variety of reasons. The timely completion of clinical trials in accordance with their protocols depends, among other things, on the ability to enroll a sufficient number of patients who remain in the study until its conclusion. The enrollment of patients depends on many factors, including:
•the patient eligibility criteria defined in the protocol;
•the size of the patient population required for analysis of the trial’s primary endpoints;
•the proximity of patients to study sites;
•the design of the clinical trial;
•the ability to recruit clinical trial investigators with the appropriate competencies and experience;
•the ability to obtain and maintain patient consents;
•the impact of the COVID-19 pandemic;
•the risk that patients enrolled in clinical trials will drop out of the clinical trials before completion; and
•competing clinical trials and approved therapies available for patients.
In particular, some of future clinical trials could look to enroll patients with characteristics which are found in a very small population, for example, patients with rare cancers with specific attributes that are targeted with our product candidates. If we, or a third party, wanted to continue the development of our product candidates, any future clinical trials will compete with other companies’ clinical trials for product candidates that are in the same therapeutic areas as our product candidates, and this competition will reduce the number and types of patients available, because some patients who might have opted to enroll in the clinical trials may instead opt to enroll in a trial being conducted by a competitor. Further, since the number of qualified clinical investigators is limited, we expect future clinical trials could be conducted at the same clinical trial sites that competitors use, which will reduce the number of patients who are available at these clinical trial sites. Moreover, because our CAR-T therapies represent a departure from more commonly used methods for cancer treatment, potential patients and their doctors may be inclined to use conventional therapies, such as chemotherapy and antibody therapy, rather than enroll patients in any future clinical trials for our product candidates. Patients may also be unwilling to participate in clinical trials because of negative publicity from adverse events in the biotechnology or gene therapy industries.
Any adverse developments that occur during any clinical trials conducted by academic investigators, our collaborators or other entities conducting clinical trials under independent INDs may affect the value of our CID platform.
Rimiducid and CaspaCIDe-containing cell therapy constructs are being used by third parties in clinical trials which are completely independent of our previous development programs.. If serious adverse events occur during these or any other clinical trials using our product candidates, the FDA and other regulatory authorities may delay, limit or deny approval of our product candidate or require additional clinical trials as a condition to marketing approval. If a product candidate receives regulatory approval and a new and serious safety issue is identified in clinical trials conducted by third parties, the applicable regulatory authorities may withdraw their approval of the product or otherwise restrict our ability to market and sell the product. In addition, treating physicians may be less willing to administer a product due to concerns over such adverse events.
Adverse side effects or other safety risks associated with our product candidates have caused us to discontinue our clinical trials and could, if we, or an acquiror, pursues clinical development in the future, cause a suspension or discontinuance of future
clinical trials, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.
Adoptive cell therapy with autologous T cells is associated with a range of potentially severe immune-mediated adverse effects. In third party clinical trials involving CAR-T cells, the most prominent acute toxicities included symptoms thought to be associated with the release of cytokines, such as fever, low blood pressure and kidney dysfunction. Some patients also experienced toxicity of the central nervous system, such as confusion, cranial nerve dysfunction and speech impairment. Adverse side effects attributed to CAR-T cells were severe and life-threatening in some patients. The life-threatening events were related to kidney dysfunction and toxicities of the central nervous system. Severe and life-threatening toxicities occurred primarily in the first two weeks after cell infusion and generally resolved within three weeks. In the past, patients have also died in clinical trials by others involving CAR-T cells.
Undesirable side effects observed in our clinical trials, whether or not they are caused by our product candidates, have resulted in, and could, in the future, result in the delay, suspension or termination of clinical trials for our product candidates, the FDA or other regulatory authorities for a number of reasons. In addition, because the patients in clinical trials involving CAR-T cells are typically suffering from life-threatening diseases, are often suffering from multiple complicating conditions and are in a position of extreme immune deficiency at the time that they receive therapy, it may be difficult to accurately assess the relationship between our product candidates and adverse events experienced by very ill patients. Serious adverse events observed in clinical trials could hinder or prevent market acceptance of the product candidate at issue.
Clinical trials are expensive, time-consuming and difficult to design and implement.
Human clinical trials are expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. Because our product candidates are based on relatively new technology, we expect that they will require extensive research and development and have substantial manufacturing and processing costs. Costs to treat patients with relapsed/refractory cancer and to treat potential side effects that may result from therapies such as our current and future product candidates can be significant. Accordingly, clinical trial costs for our product candidates are likely to be significantly higher than for more conventional therapeutic technologies or drug products. In addition, our proposed product candidates involve several complex and costly manufacturing and processing steps, the costs of which will be borne by us.
We are highly dependent on our key personnel, and if we are not successful in retaining highly qualified personnel, we may not be able to successfully implement our business strategy. Workforce and expense reductions may have an adverse impact on our business, our ability to retain key personnel and may be distracting to management.
Our ability to pursue and complete strategic transactions and/or an orderly wind-down of the Company depends on our ability to retain key personnel, including our Chief Executive Officer. We currently employ a small number of employees and are highly dependent on our management, scientific and medical personnel. The loss of the services of any of our key employees could substantially harm our business prospects.
Furthermore, we may identify deficiencies in our internal controls over financial reporting due in part to our limited staffing and resources. If we are unable to maintain effective controls over financial reporting, it is possible that a misstatement of our annual or interim financial statements would not be prevented or detected on a timely basis. We have implemented and continue to implement measures designed to improve our internal control over financial reporting, including the retention of accounting consultants to assist in areas of complex accounting and financial reporting. However, if we are unsuccessful in maintaining the effectiveness of our internal control over financial reporting, the accuracy and timing of our financial reporting may be harmed, which could result in, among other things, restatements of our financial statements, failure to comply with SEC requirements, loss of investor confidence in our financial reporting, and a decline in our stock price.
Despite our efforts to retain valuable employees, any employee may terminate their employment with us on short notice. Although we have employment agreements with our key employees, these employment agreements provide for at-will employment, which means that any of our employees could leave our employment at any time, with or without notice. We do not maintain “key man” insurance policies on the lives of these individuals or the lives of any of our other employees.
The terms of our 2019 private placement of equity restrict our operating and financial flexibility, and give priority to certain investors, both of which could significantly harm our liquidity, financial condition, operating results, business and prospects and cause the price of our common stock to decline.
In August 2019, we entered into an agreement with certain institutional investors providing for a private placement. Pursuant to the terms of the 2019 securities purchase agreement for the private placement transaction, the investors in the private placement transaction have consent rights over certain significant matters of our business. These include decisions to authorize or issue equity securities that are senior or pari passu to the Series 1 preferred stock with respect to liquidation preference, the occurrence of indebtedness in excess of $1,000,000, the sale or license of certain of our technology and the payment of dividends. As a result, these stockholders, acting together, will have significant influence over certain matters affecting our business. The investors in the
private placement may not consent to us seeking additional funds through debt or other equity financings or the sale or license of our technology. Further, in the event of a liquidation, dissolution, winding up or deemed liquidation, holders of the Series 1 preferred will receive a payment equal to the per share purchase price of their Series 1 preferred stock before any proceeds are distributed to the holders of common stock and this will likely mean that there is little to no consideration available for distribution to the holders of common stock in the case of a strategic transaction or the liquidation of the Company. In addition, any potential investors in the Company or potential strategic partners or acquirers may decline to invest in, or acquire, the Company because of the preferential rights granted under the private placement agreement. Each of these factors could negatively impact our liquidity, financial condition, operating results, business and prospects and cause the price of our common stock to decline.
We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively.
The biopharmaceutical industry is characterized by intense competition and rapid innovation. Our competitors may be able to develop other compounds or drugs that are able to achieve similar or better results. Our potential competitors include major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies and universities and other research institutions. Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff and experienced marketing and manufacturing organizations and well-established sales forces. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors, either alone or with collaborative partners, may succeed in developing, acquiring or licensing on an exclusive basis drug or biologic products that are more effective, safer, more easily commercialized or less costly than our product candidates.
Specifically, genetically engineering T cells is a competitive endeavor. Multiple companies are engaged in the engineering of T cells, including (but not limited to): 2seventy bio, Inc., Adaptimmune, Alaunos Therapeutics, Inc., Allogene Therapeutics, Inc., Amgen Inc., Atara Biotherapeutics, Inc., Athenex, Inc., Autolus Therapeutics plc, BioNTech Europe GmbH, Bristol-Meyer Squibb Co., Cellectis SA, Celyad S.A., CRISPR Therapeutics, Fate Therapeutics Inc., GlaxoSmithKline plc, Gilead Sciences, Inc., Immatics N.V., ImmunityBio, Inc., Iovance Biotherapeutics, Inc., Janssen Pharmaceutical, Legend Biotech, Lyell Immunopharma, Inc., Medigene AG, Mustang Bio, Inc., Novartis AG, Obsidian Therapeutics, Poseida Therapeutics, Precigen Inc., Precision Biosciences, Inc., Sana Biotechnology, Sorrento Therapeutics, Inc., and Takeda Pharmaceutical Co.
In addition to other cell based treatments, our product candidates may compete in their solid tumor indications with novel therapeutics of other modalities, including small molecules, monoclonal antibodies, bi-specific antibodies, antibody-drug conjugates, and targeted radionuclides. For additional information regarding our competition, see “Item 1. Business Competition” under Part I of our Annual Report.
Our cellular therapy product candidates, viral vectors and small molecule drugs involve a complex manufacturing supply chain.
Because of the complex nature of our cell therapy products, the manufacture of multiple components therein requires a diverse knowledge base and appropriate manufacturing personnel. The supply chain for these components is separate and distinct, and no single manufacturer can supply more than one component of each of our products. Additionally, it is likely that the cell therapy products will need to be made within an appropriate geographic location for the area in which the products will be utilized, so one cell therapy manufacturing facility may not be able to supply diverse geographic areas.
BPX-601 and BPX-603 are manufactured on a patient-by-patient basis using each patient’s own cells. Efficient manufacturing of these products relies upon our ability to sufficiently expand and activate the cells of patients who have undergone multiple lines of prior therapy, often including immunosuppressive chemotherapy. Rimiducid, the small molecule drug used to activate both our iMC and iC9 switches, is a complex molecule to synthesize and is relatively insoluble and lipophilic, rendering it difficult to formulate. We have limited internal expertise in small molecule drug development and manufacturing, and we have identified specialty contract manufacturers to produce the rimiducid drug substance and drug product. It is uncertain whether the drug substance and drug product manufacturers will be able to manufacture sufficient quantity and quality of rimiducid to conduct the necessary non-clinical and clinical trials. These specialty contract manufacturers also may not be capable of supplying commercial product if rimiducid is approved by health authorities.
Cell-based therapies rely on the availability of specialty raw materials, which may not be available on acceptable terms or at all.
Gene-modified cell therapy manufacture requires many specialty raw materials, some of which are manufactured by small companies with limited resources and experience to support a commercial product. Some suppliers typically support biomedical researchers or blood-based hospital businesses and may not have the capacity to support commercial products manufactured under cGMP by biopharmaceutical firms. The suppliers may be ill-equipped to support the manufacturing of our product candidates,
especially in non-routine circumstances like an FDA inspection or medical crisis, such as widespread contamination. We also do not have commercial supply arrangements with many of these suppliers and may not be able to contract with them on acceptable terms or at all.
In addition, some raw materials are currently available from a single supplier, or a small number of suppliers. We cannot be sure that these suppliers will remain in business, or that they will not be purchased by one of our competitors or another company that is not interested in continuing to produce these materials for our intended purpose.
Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.
Because we rely on third parties to manufacture our drug substance and product, and because we collaborate with various organizations and academic institutions on the advancement of our technology platform, we must, at times, share trade secrets with them. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, collaborative research agreements, consulting agreements or other similar agreements with our collaborators, advisors, employees and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information, such as trade secrets. Despite these contractual provisions, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business.
We and our contractors utilized hazardous materials in our business operations, and any claims relating to improper handling, storage, or disposal of these materials could harm our business.
Our activities involve the controlled use of potentially hazardous substances, including chemical and biological materials, by our third-party manufacturers. Our manufacturers are subject to federal, state and local laws and regulations in the U.S. governing the use, manufacture, storage, handling and disposal of medical and hazardous materials, and similar laws in other geographic regions. Although we believe that our manufacturers’ procedures for using, handling, storing and disposing of these materials comply with legally prescribed standards, we cannot completely eliminate the risk of contamination or injury resulting from medical or hazardous materials. As a result of any such contamination or injury, we may incur liability or local, city, state or federal authorities may curtail the use of these materials. In the event of an accident, we could be held liable for damages or penalized with fines, and the liability could exceed our resources. We do not have any insurance for liabilities arising from medical or hazardous materials. Compliance with applicable environmental laws and regulations is expensive, and current or future environmental regulations may impair our research, development and production efforts, which could harm our business, prospects, financial condition or results of operations.
Our internal computer systems, or those used by our clinical investigators, contractors or consultants, may fail or suffer security breaches.
Despite the implementation of security measures, our internal computer systems and those of our contractors and consultants are vulnerable to damage from computer viruses and unauthorized access. While we have not experienced any such material system failure or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our business operations.
System outages, network disruptions and cyber-security threats could interrupt the operation of our business.
We are dependent on the use of information technology systems for our operations. Outages, disruptions and threats could have an adverse impact on our ability to conduct operations. Cyber-security threats, such as malware, phishing and network attacks, are on the rise. These attacks can affect the availability of our information technology systems, including their data, as well as the confidentiality and integrity of these systems. A security breach poses a risk to confidential data, including but not limited to intellectual property and trade secrets resulting in financial, legal or reputational harm to us. Insider threats may exist if an individual authorized to access our technology systems improperly discloses sensitive data to unauthorized persons or the public. We also have outsourced elements of our operations, including elements of our information technology infrastructure, and thus manage several independent vendor relationships with third parties who may have access to our confidential information. Confidentiality agreements are in place for authorized users and third parties to support the prevention of confidential information being improperly disclosed. We have policies and procedures in place, including controls around the access and activity of authorized users, active system monitoring, back-up and recovery, information technology security and mandatory annual information technology security awareness training to assist in the prevention and mitigation of an outage, disruption or threat. In addition, we have invested in high availability, redundant technologies that will reduce the risk of an outage, disruption or threat. However, our efforts may not prevent an outage, disruption or threat that would materially adversely affect us. We also may not have sufficient liability insurance, either type or amount, to cover us against claims related to a cyber-security threat.
Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.
Our operations, and those of our contractors and consultants, could be subject to power shortages, telecommunications failures, water shortages, floods, earthquakes, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics and other natural or man-made disasters or business interruptions, for which we are predominantly self-insured. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses.
Our employees, independent contractors, consultants, commercial partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
We are exposed to the risk of employee fraud or other illegal activity by our employees, independent contractors, 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 other similar foreign regulatory bodies; provide true, complete and accurate information to the FDA and other similar foreign regulatory bodies, comply with manufacturing standards we have established, comply with healthcare fraud and abuse laws in the U.S. and similar foreign fraudulent misconduct laws, or report financial information or data accurately or to disclose unauthorized activities to us. If we obtain FDA approval of any of our product candidates and begin commercializing those products in the U.S., our potential exposure under such laws will increase significantly, and our costs associated with compliance with such laws are also likely to increase. These laws may impact, among other things, our current activities with principal investigators and research patients, as well as proposed and future sales, marketing and education programs. In particular, the promotion, sales and marketing of healthcare items and services, as well as certain business arrangements in the healthcare industry, are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring and commission(s), certain customer incentive programs and other business arrangements generally. Activities subject to these laws also involve the improper use of information obtained in the course of patient recruitment for clinical trials. The laws that may affect our ability to operate include, but are not limited to:
•the federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in return for, either the referral of an individual for, or the purchase, lease, order or recommendation of any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs;
•federal civil and criminal false claims laws and civil monetary penalties law, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid, or other third-party payors that are false or fraudulent or knowingly making a false statement to improperly avoid, decrease or conceal an obligation to pay money to the federal government;
•the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters;
•HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their respective implementing regulations, which impose requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses as well as their respective business associates that perform services for them that involve the use, or disclosure of, individually identifiable health information and their covered subcontractors, relating to the privacy, security and transmission of individually identifiable health information without appropriate authorization;
•the federal Physician Payments Sunshine Act, and its implementing regulations, which requires certain manufacturers of drugs, devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to the HHS, information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other healthcare professionals (such as physicians assistants and nurse practitioners) and teaching hospitals, as well as require certain manufacturers and group purchasing organizations to report annually ownership and investment interests held by such physicians and their immediate family members;
•federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; and
•foreign laws that govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by or are in conflict with HIPAA. For example, the EU General Data Protection Regulation, or the EU GDPR, became effective on May 25, 2018. Further, as a consequence of the exit of the United Kingdom from the European Union (known as “Brexit”), the United Kingdom has implemented a legislation similar to the EU GDPR, the UK GDPR, including the UK Data Protection Act. The EU and UK GDPR impose privacy and security obligations on any entity that collects and/or processes health data from individuals located in the European Economic Area or in the United Kingdom. Under the EU and UK GDPR, fines of up to 20 million euros (17.5 million British Pounds under the UK GDPR) or up to 4% of the annual global turnover of the infringer, whichever is greater, could be imposed for significant non-compliance. As well as complicating our compliance efforts, non-compliance with these laws could result in penalties or significant legal liability. The EU and UK GDPR include more stringent operational requirements for processors and controllers of personal data and create additional rights for data subjects.
Additionally, we are subject to state and foreign equivalents of each of the U.S. healthcare laws described above, among others, some of which may be broader in scope and may apply regardless of the payor.
We have adopted a code of business conduct and ethics, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent inappropriate conduct 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. Efforts to ensure that our business arrangements will comply with applicable healthcare laws may involve substantial costs. It is possible that governmental and enforcement authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and 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, disgorgement, monetary fines, imprisonment, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements and/or oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations. In addition, the approval and commercialization of any of our product candidates outside the U.S. will also subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.
If product liability lawsuits are brought against us, we may incur substantial liabilities.
We face an inherent risk of product liability as a result of the prior clinical testing of our product candidates. We may be sued if our product candidates cause or are perceived to cause injury or are found to be otherwise unsuitable during clinical testing or manufacturing. 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 or a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims and we may incur substantial liabilities. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, federal or state liability claims may result in:
•injury to our reputation;
•initiation of investigations by regulators;
•costs to defend the related litigation;
•a diversion of management’s time and our resources;
•substantial monetary awards to clinical trial participants or patients;
•exhaustion of any available insurance and our capital resources; and
•a decline in our share price.
We currently carry product liability insurance covering our clinical trials, with other coverage limits as appropriate for certain foreign jurisdictions. Although we maintain such insurance, our insurance policies may have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We may 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. Even if our agreements with any future corporate collaborators entitle us to indemnification against losses, such indemnification may not be available or adequate should any claim arise.
Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.
As of December 31, 2022, we had aggregate U.S. federal net operating loss carryforwards of approximately $499.0 million, and aggregate U.S. federal and Texas state research and development credits of approximately $14.0 million and $5.1 million, respectively. These net operating loss carryforwards could expire unused and be unavailable to offset future income tax liabilities. U.S. federal net operating loss carryforwards generated in taxable years beginning before January 1, 2018, may be carried forward only 20 years to offset future taxable income, if any. Under current U.S. federal income tax law, U.S. federal net operating loss carryforwards generated in taxable years beginning after December 31, 2017, can be carried forward indefinitely, but the deductibility of suchnet operating loss carryforwards is limited to 80% of current year taxable income. It is uncertain if and to what extent various states will conform to federal law.
In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change” (which is generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period), the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited. We may have experienced one or more ownership changes in the past, including with respect to our August 2019 public offering, and we may also experience additional ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. If an ownership change occurs and our ability to use our net operating loss carryforwards is materially limited, it would harm our future operating results by effectively increasing our future tax obligations.
Uncertainties in the interpretation and application of existing, new and proposed tax laws and regulations could materially affect our tax obligations and effective tax rate.
The tax regimes to which we are subject or under which we operate are unsettled and may be subject to significant change. The issuance of additional guidance related to existing or future tax laws, or changes to tax laws or regulations proposed or implemented by the current or a future U.S. presidential administration, Congress, or taxing authorities in other jurisdictions, including jurisdictions outside of the United States, could materially affect our tax obligations and effective tax rate. To the extent that such changes have a negative impact on us, our suppliers, manufacturers, or our customers, including as a result of related uncertainty, these changes may adversely impact our business, financial condition, results of operations, and cash flows.
The amount of taxes we pay in different jurisdictions depends on the application of the tax laws of various jurisdictions, including the United States, to our international business activities, tax rates, new or revised tax laws, or interpretations of tax laws and policies, and our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements. The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for pricing intercompany transactions pursuant to our intercompany arrangements or disagree with our determinations as to the income and expenses attributable to specific jurisdictions. If such a challenge or disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest, and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows, and lower overall profitability of our operations. Our financial statements could fail to reflect adequate reserves to cover such a contingency. Similarly, a taxing authority could assert that we are subject to tax in a jurisdiction where we believe we have not established a taxable connection, often referred to as a “permanent establishment” under international tax treaties, and such an assertion, if successful, could increase our expected tax liability in one or more jurisdictions. In addition, beginning in 2022, taxpayers are required to capitalize and amortize certain research and development expenditures over five years if incurred in the United States and fifteen years if incurred in foreign jurisdictions, rather than deducting them currently. Although there have been legislative proposals to repeal or defer the capitalization requirement to later years, there can be no assurance that the provision will be repealed or otherwise modified.
Risks Related to Government Regulation
The regulatory approval process is lengthy and time-consuming.
We have not previously submitted a BLA to the FDA, or similar approval filings to other foreign authorities. A BLA must include extensive preclinical and clinical data and supporting information to establish the product candidate’s safety, purity and potency for each desired indication. It must also include significant information regarding the chemistry, manufacturing and controls for the product. We expect the novel nature of our product candidates to create further challenges in obtaining regulatory approval. For example, FDA’s Office of Tissues and Advanced Therapies, or OTAT, has limited experience with combination products that include a small molecule component. Approval of GoCAR-T product candidates, will likely require this FDA office to consult with other divisions of the FDA, which may result in further challenges in obtaining regulatory approval, including in developing final product labeling. The regulatory approval pathway for our product candidates may be uncertain, complex, expensive and lengthy, and approval may not be obtained.
There will also be delays in completing the clinical development of our product candidates if physicians encounter unresolved ethical issues associated with enrolling patients in clinical trials of our product candidates in lieu of prescribing existing treatments that have established safety and efficacy profiles. Further, a clinical trial may be suspended or terminated by us, the IRBs for the institutions in which such clinical trials are being conducted, or recommended for termination by the Data Monitoring Committee for such clinical trial, or by the FDA or other regulatory authorities due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or clinical trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a product candidate, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.The termination of, or delays in the completion of, any clinical trial of our product candidates, will harm the commercial prospects for our product candidates. In addition, any delays in completing clinical trials will increase costs, slow down product development and approval process and jeopardize the ability to commence product sales and generate revenue.
Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may ultimately lead to the denial of regulatory approval of our product candidates.
Even if our product candidates receive regulatory approval, they will be subject to ongoing regulatory obligations and continued regulatory review.
Any regulatory approvals received for our product candidates will require surveillance to monitor the safety and efficacy of the product candidate. The FDA may also require a REMS in order to approve our product candidates, which could entail requirements for a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. In addition, if the FDA or a comparable foreign regulatory authority approves our product candidates, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion, import, export and recordkeeping for our product candidates will be subject to extensive and ongoing regulatory requirements. These requirements include, among other things, submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with cGMPs and GCPs for any clinical trials that are conducted post-approval. Later discovery of previously unknown problems with our product candidates, including adverse events of unanticipated severity or frequency, or with third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things:
•restrictions on the marketing or manufacturing of our product candidates, 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 license approvals;
•suspension or termination of manufacturing at one or more manufacturing facilities;
•product seizure or detention, or refusal to permit the import or export of our product candidates; and
•injunctions or the imposition of civil or criminal penalties.
The FDA’s and other regulatory authorities’ policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the U.S. or abroad.
Foreign legislative changes may also affect the ability to commercialize our product candidates. Effective as of May 25, 2018, the GDPR imposes privacy and security obligations on any entity that collects and/or processes personal information from individuals located in the EU. Under the GDPR, fines of up to 20 million euros or up to 4% of the annual global turnover of the infringer, whichever is greater, could be imposed for significant non-compliance.
Even if our product candidates obtain regulatory approval, the products may not gain market acceptance among physicians, patients, hospitals, cancer treatment centers, third-party payors and others in the medical community.
The use of engineered T cells as potential cancer treatments is a recent development and may not become broadly accepted by physicians, patients, hospitals, cancer treatment centers, third-party payors and others in the medical community. Many factors will influence whether our product candidates are accepted in the market, including:
•the clinical indications for which our product candidates are approved;
•physicians, hospitals, cancer treatment centers and patients considering our product candidates as a safe and effective treatment;
•the potential and perceived advantages of our product candidates over alternative treatments;
•the prevalence and severity of any side effects;
•product labeling or product insert requirements of the FDA or other regulatory authorities;
•limitations or warnings contained in the labeling approved by the FDA or other regulatory authorities;
•the extent and quality of the clinical evidence supporting the efficacy and safety of our product candidates;
•the timing of market introduction of our product candidates as well as competitive products;
•the cost of treatment in relation to alternative treatments;
•the pricing of our product candidates and the availability of adequate reimbursement by third-party payors and government authorities;
•the willingness and ability of patients to pay out-of-pocket in the absence of coverage by third-party payors, including government authorities;
•relative convenience and ease of administration, including as compared to alternative treatments and competitive therapies;
•confusion or lack of understanding regarding the effects of rimiducid and the timing and size of dosing of rimiducid after immune cell therapy; and
•the effectiveness of sales and marketing efforts.
In addition, although our product candidates are not utilizing embryonic stem cells or replication competent vectors, adverse publicity due to the ethical and social controversies surrounding the therapeutic use of such technologies, and reported side effects from any clinical trials using these technologies or the failure of such clinical trials to demonstrate that these therapies are safe and effective may limit market acceptance our product candidates.
Even if our products achieve market acceptance, they may not be able to maintain that market acceptance over time if new products or technologies are introduced that are more favorably received than our products, are more cost effective or render our products obsolete.
Coverage and reimbursement may be limited or unavailable in certain market segments for our product candidates.
Market acceptance and sales of our product candidates will depend in large part on global reimbursement policies and may be affected by future healthcare reform measures, both in the United States and other key international markets. Patients who are prescribed medicine for the treatment of their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their prescription drugs. Patients are unlikely to use our products unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products. Therefore, successful commercialization of our products will depend in part on the availability of governmental and third-party payor reimbursement for the cost of our product candidates and/or payment to the physician for administering our product candidates. In the United States, no uniform policy of coverage and reimbursement for drug products exists among third-party payors. Therefore, coverage and reimbursement for drug products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be obtained. One third-party payor’s decision to cover a particular medical product or service does not assure that other payors will also provide coverage for the medical product or service, or to
provide coverage at an adequate reimbursement rate. As a result, the coverage determination process will require scientific and clinical support for the use of our products to each payor separately, with no assurance that adequate coverage and reimbursement will be obtained. Further, a third-party payor’s decision to provide coverage for a medical product or service does not imply that an adequate reimbursement rate will be approved. The market for our product candidates will depend significantly on access to third-party payors’ formularies or lists of treatments for which third-party payors provide coverage and reimbursement. Third party payors may also have difficulty in determining the appropriate coverage of our product candidates, if approved, due to the fact that they are combination products that include a small molecule drug, rimiducid.
Third-party payors establish coverage and reimbursement policies for new products, including our product candidates. In particular, in the United States, private health insurers and other third-party payors often provide reimbursement for treatments based on the level at which the government (through the Medicare or Medicaid programs) provides reimbursement for such treatments. In the United States, the European Economic Area, or EEA. and other significant or potentially significant markets for our product candidate, government authorities and third-party payors are increasingly attempting to limit or regulate the price of medical products and services, particularly for new and innovative products and therapies, which has resulted in lower average selling prices. Further, the increased emphasis on managed healthcare in the United States and on country and regional pricing and reimbursement controls in Canada and the EEA will put additional pressure on product pricing, coverage, reimbursement and utilization. These pressures can arise from policies and practices of managed care groups, judicial decisions and governmental laws and regulations related to Medicare, Medicaid and healthcare reform, coverage and reimbursement policies and pricing in general. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors.
In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the PPACA, became law in the United States. PPACA substantially changed the way healthcare is financed by both governmental and private insurers and significantly affects the pharmaceutical industry.
There have been executive judicial and Congressional challenges to other aspects of the PPACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the PPACA. While Congress has not passed comprehensive repeal legislation, several bills affecting the implementation of certain taxes under the PPACA have been signed into law. For example, the Tax Cuts and Jobs Act of 2017, or Tax Act, includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the PPACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”. On June 17, 2021, the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the PPACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022, or IRA, into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in PPACA marketplaces through plan year 2025. The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and creating a new manufacturer discount program. It is possible that the PPACA will be subject to judicial or Congressional challenges in the future. It is unclear how such challenges and any additional healthcare reform measures will impact the PPACA.
In addition, other legislative changes have been proposed and adopted in the United States since the PPACA was enacted. For example, through the process created by the Budget Control Act of 2011, there are automatic reductions of Medicare payments to providers up to 2% per fiscal year, which went into effect in April 2013 and, following passage of the Bipartisan Budget Act of 2018, will remain in effect until 2031, unless additional Congressional action is taken. Under current legislation, the actual reduction in Medicare payments will vary from 1% in 2022 to up to 4% in the final fiscal year of this sequester. Additionally, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to several providers.
Further, recently there has been heightened governmental scrutiny in the United States over the manner in which drug manufacturers set prices for their marketed products, in light of the rising cost of prescription drugs and biologics. Such scrutiny has resulted in several recent congressional inquiries and proposed federal legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. For example, in July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response to Biden’s executive order, on September 9, 2021, HHS released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue to advance these principles. Further, the IRA, among other things (i) directs HHS to negotiate the price of certain high-expenditure, single-source drugs and biologics covered under Medicare and (ii) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation. These provisions will take effect progressively starting in fiscal year 2023, although they may be subject to legal challenges. It is currently unclear how the IRA will be implemented but is likely to have a significant impact on the pharmaceutical industry. Additionally, the Biden administration released an additional executive order on October 14, 2022, directing HHS to report on how the Center for Medicare and Medicaid Innovation can be further leveraged to test new models for lowering drug costs for Medicare and Medicaid beneficiaries. At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. We expect that additional federal and state healthcare reform measures will be adopted in the future, any of which could result in reduced demand for our products.
We expect that additional federal and state healthcare reform measures, such as further amendments and changes to the PPACA will be adopted in the future, any of which could result in reduced demand for our products.
Due to the novel nature of our technology and the small size of the target patient populations, there is significant uncertainty related to pricing and reimbursement for these product candidates.
The target patient populations for our potential product candidates are relatively small, as a result, the pricing and reimbursement of our product candidates, if approved, must be adequate to support commercial and manufacturing infrastructure. Obtaining adequate levels of reimbursement will impact the ability to successfully market and sell our product candidates. The manner and level at which reimbursement is provided for services related to our product candidates, for example, reimbursement for administration of our product candidates to patients, is also important. Inadequate reimbursement for such services may lead to physician resistance and adversely affect the ability to market or sell our products.
We are subject to extensive laws and regulations related to data privacy, and our failure to comply with these laws and regulations could harm our business.
We are subject to laws and regulations governing data privacy and the protection of personal information. These laws and regulations govern our processing of personal data, including the collection, access, use, analysis, modification, storage, transfer, security breach notification, destruction and disposal of personal data. There are foreign and state law versions of these laws and regulations to which we are currently and/or may in the future, be subject. For example, the collection and use of personal health data in the EU is governed by the GDPR. The GDPR, which is wide-ranging in scope, imposes several requirements relating to the consent of the individuals to whom the personal data relates, the information provided to the individuals, the security and confidentiality of the personal data, data breach notification and the use of third-party processors in connection with the processing of personal data. The GDPR also imposes strict rules on the transfer of personal data out of the EU to the United States, provides an enforcement authority and imposes large monetary penalties for noncompliance. The GDPR requirements apply not only to third-party transactions, but also to transfers of information within our company, including employee information. The GDPR and similar data privacy laws of other jurisdictions place significant responsibilities on us and create potential liability in relation to personal data that we or our third-party service providers process, including in clinical trials conducted in the United States and EU. In addition, we expect that there will continue to be new proposed laws, regulations and industry standards relating to privacy and data protection in the United States, the EU and other jurisdictions, and we cannot determine the impact such future laws, regulations and standards may have on our business.
Additionally, California recently enacted legislation that has been dubbed the first “GDPR-like” law in the United States. Known as the California Consumer Privacy Act, or the CCPA, it creates new individual privacy rights for consumers (as that word is broadly defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households. As of January 1, 2020, the CCPA requires covered companies to provide new disclosures to California consumers, provide such consumers new ways to opt-out of certain sales of personal information, and allow for a new cause of action for data breaches. As currently written, the CCPA will likely impact (possibly significantly) our business activities and exemplifies the vulnerability of our business to not only cyber threats but also the evolving regulatory environment related to personal data and protected health information.
We are subject to certain U.S. and foreign anti-corruption, anti-money laundering, export control, sanctions, and other trade laws and regulations, or collectively, Trade Laws. We can face serious consequences for violations.
Among other matters, Trade Laws prohibit companies and their employees, agents, clinical research organizations, legal counsel, accountants, consultants, contractors, and other partners from authorizing, promising, offering, providing, soliciting, or receiving directly or indirectly, corrupt or improper payments or anything else of value to or from recipients in the public or private sector. Violations of Trade Laws can result in substantial criminal fines and civil penalties, imprisonment, the loss of trade privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other consequences. We have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities, and other organizations. We engage third parties for clinical trials and/or to obtain necessary permits, licenses, patent registrations, and other regulatory approvals. We also expect our non-U.S. activities to increase in time. We can be held liable for the corrupt or other illegal activities of our personnel, agents, or partners, even if we do not explicitly authorize or have prior knowledge of such activities.
We are subject to U.S. and certain foreign export and import controls, sanctions, embargoes, anti-corruption laws, and anti-money laundering laws and regulations. Compliance with these legal standards could impair our ability to compete in domestic and international markets. We can face criminal liability and other serious consequences for violations, which can harm our business.
We are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations, various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls, the U.S. Foreign Corrupt Practices Act of 1977, as amended, or FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, and other state and national anti-bribery and anti-money laundering laws in the countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, contractors, and other collaborators from authorizing, promising, offering, or providing, directly or indirectly, improper payments or anything else of value to recipients in the public or private sector. We may engage third parties for clinical trials outside of the United States, to sell our products abroad once we enter a commercialization phase, and/or to obtain necessary permits, licenses, patent registrations, and other regulatory approvals. We have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities, and other organizations. We can be held liable for the corrupt or other illegal activities of our employees, agents, contractors, and other collaborators, even if we do not explicitly authorize or have actual knowledge of such activities. Any violations of the laws and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other consequences.
Risks Related to Our Intellectual Property
We depend on intellectual property licensed from third parties and termination of any of these licenses could result in the loss of significant rights.
We are dependent on patents, know-how and proprietary technology, both our own and licensed from others. We license from Baylor College of Medicine, or Baylor, certain intellectual property related to methods for activating antigen presenting cells, to certain genetic constructs and to certain methods for inducing apoptosis. Baylor may terminate or modify our licenses in the event of a material breach by us that remains uncured following the date that is 90 days after written notice of such breach or upon certain insolvency events that remain uncured following the date that is 30 days following written notice of such insolvency event. In addition, we have funded certain of our clinical development activities and may fund certain of our future clinical development with funds from the State of Texas. The State of Texas may have rights to commercialize the results of those clinical trials if it determines that we have failed, after notice and an opportunity to cure, to use diligent and commercially reasonable efforts to commercialize or otherwise bring to practical application the results of the funded clinical trials. We are also dependent on our license agreements with BioVec Pharma Inc. with respect to making retrovirus for all of our programs.
Any termination of these agreements, or other agreements to which we are a party could result in the loss of significant rights.
Disputes may also arise between us and our licensors and other partners regarding intellectual property subject to a license agreement, including:
•the scope of rights granted under the license agreement and other interpretation-related issues;
•whether and the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;
•our right to sublicense patent and other rights to third parties under collaborative development relationships;
•our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization of our product candidates, and what activities satisfy those diligence obligations; and
•the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners.
If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms. We are generally also subject to all of the same risks with respect to protection of intellectual property that we license, as we are for intellectual property that we own.
Our efforts to protect the proprietary nature of our technologies may not be adequate, we may not be able to compete effectively in our market.
Any disclosure to or misappropriation by third parties of our confidential proprietary information could enable competitors to quickly duplicate or surpass our technological achievements. Certain intellectual property which is covered by our in-license agreements has been developed at academic institutions which have retained non-commercial rights to such intellectual property.
There are several pending U.S. and foreign patent applications in our portfolio, and we anticipate additional patent applications will be filed both in the U.S. and in other countries, as appropriate. However, we cannot predict:
•if and when patents will issue;
•the degree and range of protection any issued patents will afford us against competitors including whether third parties will find ways to invalidate or otherwise circumvent our patents;
•whether or not others will obtain patents claiming aspects similar to those covered by our patents and patent applications; or
•whether we will need to initiate litigation or administrative proceedings which may be costly whether we win or lose.
Composition of matter patents for biological and pharmaceutical products are generally considered to be the strongest form of intellectual property. We cannot be certain that the claims in our pending patent applications directed to compositions of matter for our product candidates will be considered patentable by the U.S. Patent and Trademark Office, or the USPTO, or by patent offices in foreign countries, or that the claims in any of our issued patents will be considered valid by courts in the U.S. or foreign countries. Method of use patents have claims directed to the use of a product for the specified method. This type of patent does not prevent a competitor from making and marketing a product that is identical to our product for an indication that is outside the scope of the patented method. Moreover, even if competitors do not actively promote their product for our targeted indications, physicians may prescribe these products “off-label.” Although off-label prescriptions may infringe or contribute to the infringement of method of use patents, the practice is common and such infringement is difficult to prevent or prosecute.
The strength of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can be uncertain. The patent applications that we own or in-license may fail to result in issued patents with claims that cover our product candidates or uses thereof in the U.S. or in other foreign countries. Even if the patents do successfully issue, third parties may challenge the validity, enforceability or scope thereof, which may result in such patents being narrowed, invalidated or held unenforceable. Furthermore, even if they are unchallenged, patents in our portfolio may not adequately exclude third parties from practicing relevant technology or prevent others from designing around our claims. If the breadth or strength of our intellectual property position with respect to our product candidates is threatened, it could dissuade companies from collaborating with us to develop, and threaten our ability to commercialize, our product candidates. Further, if we encounter delays in our clinical trials, the period of time during which we could market our product candidates under patent protection would be reduced. Since patent applications in the U.S. and most other countries are confidential for a period of time after filing, it is possible that patent applications in our portfolio may not be the first filed patent applications related to our product candidates. Furthermore, for U.S. applications in which all claims are entitled to a priority date before March 16, 2013, an interference proceeding can be provoked by a third-party or instituted by the USPTO, to determine who was the first to invent any of the subject matter covered by the patent claims of our applications. For U.S. applications containing a claim not entitled to priority before March 16, 2013, there is a greater level of uncertainty in the patent law with the passage of the America Invents Act (2012) which brings into effect significant changes to the U.S. patent laws that are yet untried and untested, and which introduces new procedures for challenging pending patent applications and issued patents. A primary change under this reform is creating a “first to file” system in the U.S. This will require us to be cognizant going forward of the time from invention to filing of a patent application.
We rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable, processes for which patents are difficult to enforce and any other elements of our product discovery and development processes that involve proprietary know-how, information, or technology that is not covered by patents. We require all of our employees to assign their inventions to us, and require all of our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information, or technology to enter into confidentiality agreements; however, it is possible that our trade secrets and other confidential proprietary information could be disclosed or that competitors may otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Furthermore, the laws of some foreign countries do not
protect proprietary rights to the same extent or in the same manner as the laws of the U.S. As a result, we may encounter significant problems in protecting and defending our intellectual property both in the U.S. and abroad.
Third-party claims of intellectual property infringement may prevent or delay the further discovery and development of our product candidates.
There is a substantial amount of litigation involving patents and other intellectual property rights in the biotechnology and pharmaceutical industries, as well as administrative proceedings for challenging patents, including interference and reexamination proceedings before the USPTO or oppositions and other comparable proceedings in foreign jurisdictions. Recently, under U.S. patent reform, new procedures including inter parties review and post grant review have been implemented. As stated above, this reform is untried and untested and will bring uncertainty to the possibility of challenge to our patents in the future. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing our product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may give rise to claims of infringement of the patent rights of others.
Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents, of which we are currently unaware or have not sufficiently analyzed with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. If any third-party patents were held by a court of competent jurisdiction to cover aspects of our formulations, the manufacturing process of our product candidates, constructs or molecules used in or formed during the manufacturing process, methods of use, including combination therapy or patient selection methods or any final product itself, the holders of any such patents may be able to block our, or an acquiror’s, ability to develop and commercialize the product candidate without a license under the applicable patents, or until such patents expire or they are finally determined to be held invalid or unenforceable. In either case, such a license may not be available on commercially reasonable terms or at all.
Parties making claims against us may seek and obtain injunctive or other equitable relief, which could effectively block our, or an acquiror’s, ability to further develop and commercialize our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources. 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, obtain one or more licenses from third parties, pay royalties or redesign our infringing products, which may be impossible or require substantial time and monetary expenditure. It is possible that any such license would not be available at all or on commercially reasonable terms. Furthermore, even in the absence of litigation, we may need to obtain licenses from third parties. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we, or an acquiror, would be unable to further develop and commercialize our product candidates.
For example, we are aware of a third-party patent having claims directed to chimeric DNA comprising DNA segments encoding (1) a single chain antibody domain and (2) transmembrane and cytoplasmic domains of an endogenous protein. Even though we have reason to believe that our product candidates are not covered by claims of this patent, an owner or licensee of the patent still might bring a patent infringement suit against us. If the patent is asserted against us, we may not prevail in defending against claims of infringement and/or challenging the validity of claims in the patent. We may not successfully develop alternative technologies or enter into an agreement by which we obtain rights to the patent. These rights, if necessary, may not be available on terms acceptable to us.
We are aware of third-party patents having claims that may be considered as being directed to single-chain antibody fragments that bind to PSCA and these patents may be considered relevant to BPX-601 and related technologies we are developing. We currently are evaluating whether or not we need to obtain rights to these patents under a license, and if it is determined that we need to obtain such rights, whether these rights can be obtained. We are also aware of third-party patent applications having claims that may be considered as being directed to cellular therapy constructs utilizing a heterodimer domain for activation of caspase 9. We are monitoring these applications and if they are granted with the claims as drafted, they may be relevant to our potential dual-switch product candidates containing such a heterodimer activation domain, and in such instances, we have sought, and will continue to seek, measures to protect our intellectual property. However, if disputes related to intellectual property relevant to our product candidates arise, we may not be able to resolve such disputes in a satisfactory manner.
Also, while we are aware there are other third-party patents having claims that may be considered relevant to technologies for which we are seeking, or plan to seek, regulatory approval, we believe those patents have a patent term that may expire prior to the time we expect to obtain regulatory approval for these technologies. The estimated expiration dates for those patents were determined according to information on the face pages of the patents, and certain factors that could influence patent term, such as patent term adjustment and patent term extension, for example, were not factored into these estimates. Accordingly, the estimated expiration dates of those patents may not be accurate and one or more of those patents may not expire before we obtain regulatory approval for an applicable technology. Owners or licensees of one or more of those patents may bring a patent infringement suit
against us. If one or more of those patents are asserted against us, we may be able to assert a defense for a safe harbor to patent infringement under 35 U.S.C. 271(e)(1) if certain requirements are met. It is possible that (1) certain of these requirements may not be met, and/or (2) one or more of the third-party patents might expire after one or more of our technologies obtain regulatory approval, and consequently we may not successfully assert such a defense to patent infringement. If we are unsuccessful in asserting a defense under 35 U.S.C. 271(e)(1), it is possible we may not prevail in defending against claims of infringement and/or challenging the validity of claims in those patents. We may not successfully develop alternative technologies or enter into agreements by which we obtain rights to applicable patents. These rights, if necessary, may not be available on terms acceptable to us.
We may be involved in lawsuits or other proceedings to protect or enforce our patents or the patents of our licensors, which could be expensive, time-consuming and unsuccessful.
Competitors may infringe our patents or the patents of our licensors. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that one or more of our patents is not valid or is 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 or defense proceedings could put one or more of our patents at risk of being invalidated, held unenforceable, or interpreted narrowly and could put our patent applications at risk of not issuing. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. It also is possible that a competitor we sue for patent infringement could countersue us for allegedly infringing one or more of their own patents or one or more patents they licensed from another entity. 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, obtain one or more licenses from third parties, pay royalties or redesign our infringing products, which may be impossible or require substantial time and monetary expenditure.
Interference proceedings provoked by third parties or brought by the USPTO may be necessary to determine the priority of inventions with respect to our patents or patent applications or those of our licensors. An unfavorable outcome could result in a loss of our patent rights and could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. It also is possible that third parties could institute a patent office post-grant proceeding against one or more of our patents, or one or more patents licensed to us, such as a post grant review proceeding, inter parties review proceeding or reexamination proceeding at the USPTO, or an opposition proceeding in a jurisdiction outside the U.S. An unfavorable outcome in a post-grant proceeding could result in a loss of our patent rights. Litigation, interference proceedings or patent office post-grant proceedings may result in a decision adverse to our interests and, even if we are successful, may result in substantial costs and distract our management and other employees. We also may not be able to prevent, alone or with our licensors, misappropriation of our trade secrets or confidential information, particularly in countries where the laws may not protect those rights as fully as in the U.S.
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. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.
Obtaining and maintaining our patents depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent position could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. Such noncompliance events are outside of our direct control for (1) non-U.S. patents and patent applications owned by us, and (2) patents and patent applications licensed to us by another entity. In such an event, our competitors might be able to enter the market.
Issued patents covering our product candidates could be found invalid or unenforceable if challenged in court or the USPTO.
If we or one of our licensing partners initiate legal proceedings against a third party to enforce a patent covering one of our product candidates, the defendant could counterclaim that the patent covering our product candidate, as applicable, is invalid and/or unenforceable. In patent litigation in the U.S., defendant counterclaims alleging invalidity and/or unenforceability are commonplace, and there are numerous grounds upon which a third party can assert invalidity or unenforceability of a patent. Third parties may also raise similar claims before administrative bodies in the U.S. or abroad, even outside the context of litigation. Such mechanisms include re-examination, post grant review, and equivalent proceedings in foreign jurisdictions, for example, opposition proceedings. Any such proceedings could result in revocation or amendment to our patents in such a way that they no longer cover our product candidates. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art and that prior art that was cited during prosecution, but not relied on by the patent examiner, will not be revisited. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patents directed to our product candidates.
Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.
As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involve both technological and legal complexity, and is therefore costly, time-consuming and inherently uncertain. In addition, the U.S. has recently enacted and is currently implementing wide-ranging patent reform legislation. Recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. For example, in the recent case, Assoc. for Molecular Pathology v. Myriad Genetics, Inc., the U.S. Supreme Court held that certain claims to DNA molecules are not patentable. While we do not believe that any of the patents owned or licensed by us will be found invalid based on this decision, we cannot predict how future decisions by the courts, the U.S. Congress or the USPTO may impact the value of our patents.
We have limited foreign intellectual property rights and may not be able to protect our intellectual property rights throughout the world.
We have limited intellectual property rights outside the U.S. Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the U.S. can be less extensive than those in the U.S. In addition, the laws of some foreign countries do not protect intellectual property to the same extent as federal and state laws in the U.S. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the U.S., or from selling or importing products made using our inventions in and into the U.S. or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patents to develop their own products and further, may export otherwise infringing products to territories where we have patents, but enforcement is not as strong as that in the U.S. These products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property in foreign jurisdictions. The legal systems of certain countries, particularly China and certain other developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property, particularly those relating to biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. To date, we have not sought to enforce any issued patents in these foreign jurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. The requirements for patentability may differ in certain countries, particularly developing countries. Furthermore, generic drug manufacturers or other competitors may challenge the scope, validity or enforceability of our or our licensors’ patents, requiring us or our licensors to engage in complex, lengthy and costly litigation or other proceedings. Certain countries in Europe and developing countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In those countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party, which could materially diminish the value of those patents. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties.
We have received confidential and proprietary information from third parties. In addition, we employ individuals who were previously employed at other biotechnology or pharmaceutical companies. We may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed confidential information of these third parties or our employees’ former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial cost and be a distraction to our management and employees.
Risks Related to Ownership of our Common Stock
If we fail to satisfy applicable listing standards, our common stock may be delisted from the Nasdaq Capital Market.
Our ability to publicly or privately sell equity securities and the liquidity of our common stock could be adversely affected if we are delisted from The Nasdaq Capital Market or if we are unable to transfer our listing to another stock market.
The continued listing requirements of The Nasdaq Capital Market include minimums for market value of listed securities, closing prices and stockholders’ equity, and currently we are below the minimum requirements. If our common stock is delisted by Nasdaq, it could lead to a number of negative implications, including an adverse effect on the price of our common stock, increased volatility in our common stock, reduced liquidity in our common stock, the loss of federal preemption of state securities laws and greater difficulty in obtaining financing.
In addition, delisting of our common stock could deter broker-dealers from making a market in or otherwise seeking or generating interest in our common stock, could result in a loss of current or future coverage by certain sell-side analysts and might deter certain institutions and persons from investing in our securities at all. Delisting could also cause a loss of confidence of our customers, collaborators, vendors, suppliers and employees, which could harm our business and future prospects.
If our common stock is delisted by Nasdaq, the price of our common stock may decline, and although our common stock may be eligible to trade on the OTC Bulletin Board, another over-the-counter quotation system, or on the pink sheets, an investor may find it more difficult to dispose of their common stock or obtain accurate quotations as to the market value of our common stock. Further, if we are delisted, we would incur additional costs under state blue sky laws in connection with any sales of our securities. These requirements could severely limit the market liquidity of our common stock and the ability of our shareholders to sell our common stock in the secondary market.
The price of our stock is volatile and you could lose all or part of your investment.
The trading price of our common stock is likely to continue to be highly volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control, including market conditions in general and a limited trading volume for our shares. In addition to the factors discussed in this “Risk Factors” section and elsewhere in our Annual Report, these factors include:
•additions or departures of key personnel;
•introduction of new products or services offered by us or our competitors;
•announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors;
•our cash position;
•our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public;
•publication of research reports about us or our industry, or immunotherapy in particular, or positive or negative recommendations or withdrawal of research coverage by securities analysts;
•changes in the market valuations of similar companies;
•overall performance of the equity markets;
•sales of our common stock by us or our stockholders in the future;
•trading volume of our common stock;
•changes in accounting practices;
•ineffectiveness of our internal controls;
•disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;
•significant lawsuits, including patent or stockholder litigation;
•general political and economic conditions; and
•other events or factors, many of which are beyond our control.
In addition, the stock market in general, and biopharmaceutical companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance. In the past, securities class action litigation has often been instituted against companies following periods of volatility in the market price of a company’s securities. This type of litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources, which would harm our business.
Certain investors in the 2019 private placement will have the ability to control or significantly influence certain business decisions.
The terms of our 2019 private placement restrict our operating and financial flexibility, and give priority to certain investors, both of which could significantly harm our liquidity, financial condition, operating results, business and prospects and cause the price of our common stock to decline.
We do not intend to pay dividends on our common stock, so any returns will be limited to the value of our stock.
We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future.
Our principal stockholders own a significant percentage of our stock and can exert significant control over matters subject to stockholder approval.
Holders of 5% or more of our capital stock and their respective affiliates beneficially own a significant portion of our voting stock, including shares subject to outstanding options. As a result, if these shareholders were to choose to act together, they would have the ability to significantly influence all matters requiring stockholder approval. For example, these stockholders may be able to significantly influence elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders.
Changes in accounting rules, assumptions and/or judgments could materially and adversely affect us.
Accounting rules and interpretations for certain aspects of our operations are highly complex and involve significant assumptions and judgment. These complexities could lead to a delay in the preparation and dissemination of ourconsolidated financial statements. Furthermore, changes in accounting rules and interpretations or in our accounting assumptions and/or judgments, such as asset impairments, could significantly impact our financial statements. In some cases, we could be required to apply a new or revised standard retroactively, resulting in restating prior period financial statements. Any of these circumstances could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.
Our consolidated financial statements, including our liabilities and statements of operations are subject to quarterly changes in our accounting of our outstanding Series 1 Preferred Stock and related warrants.
In accordance with ASC Topic 815, Accounting for Derivative Instruments and Hedging Activities, and ASC Topic 480, Liabilities-Distinguishing from Equity, convertible preferred shares are accounted for as temporary equity and warrants are accounted for as liabilities at their fair value during periods where they can be net cash settled in case of a change in control transaction. The warrants are accounted for as a liability at their fair value at each reporting period. The value of the derivative warrant liability is re-measured at each reporting period with changes in fair value recorded in earnings. To derive an estimate of the fair value of these warrants, the binomial model is utilized, adjusted for the effect of dilution, which embodies all of the requisite assumptions (including trading volatility, estimated terms, dilution and risk-free rates) necessary to determine the fair value of these instruments. This process requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. As a result, our consolidated financial statements and results of operations may fluctuate quarterly, based on factors, such as the trading value of our common stock and certain assumptions, which are outside of our control. Consequently, our liabilities and consolidated statements of operations may vary quarterly, based on factors other than our revenues and expenses. The liabilities and accounting line items associated with our derivative securities on our balance sheet and statement of operations are non-cash items, and the inclusion of such items in our financial statements may materially affect the outcome of our quarterly and annual results, even though such items are non-cash and do not affect the cash we have available for operations. Investors should take such derivative accounting matters and other non-cash items into account when comparing our quarter-to-quarter and year-to-year operating results and financial statements.
Sales of a substantial number of shares of our common stock by our existing stockholders in the public market could cause our stock price to fall.
Certain holders of our outstanding shares of common stock, are entitled to rights with respect to the registration of their shares under the Securities Act of 1933, as amended, or the Securities Act. Any sales of these shares by such stockholders could have a material adverse effect on the trading price of our common stock.
We register onAccordingly, this Form S-8 all shares of common stock that are issuable under our 2019 Equity Incentive Plan, as amended, or the EIP. As a consequence, these shares can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates.
We completed a public offering of our Series 1 preferred stock on August 21, 2019, and if we are required to redeem shares of preferred stock, our cash position will be negatively impacted. In addition, we may not have sufficient funds to redeem such shares of preferred stock.
We issued 575,000 shares of Series 1 preferred stock in connection with our August 2019 public offering. Subject to the terms of our certificate of incorporation, at any time on or after August 21, 2024, some or all of our outstanding shares of preferred stock will be redeemable at the option of the holder at a redemption price of $100.00 per share of Series 1, upon delivery of an irrevocable written notice to us. If a holder of preferred stock requests redemption we will be required to redeem such shares of preferred stock. However, we may be unable to redeem such preferred stock if restrictions under applicable law or contractual obligations prohibit such redemption. For example, Delaware law provides that a redemption on capital stock may only be paid from “surplus” or, if there is no “surplus,” from a corporation’s net profits for the then-current or the preceding fiscal year. Unless we operate profitably, our ability to redeem the preferred stock would require the availability of adequate “surplus,” which is defined as the excess, if any, of our net assets (total assets less total liabilities) over our capital. To date, we have operated at a loss. Accordingly, if we do not have sufficient “surplus” under Delaware law, we would be unable to effect such redemption. If we do have sufficient “surplus” to effect such redemption, our available cash will be negatively impacted. In addition, such reduction in our available cash could decrease the trading price of our common stock, and, accordingly, the preferred stock and our warrants.
Anti-takeover provisions under our charter documents and Delaware law could delay or prevent a change of control which could limit the market price of our common stock and may prevent or frustrate attempts by our stockholders to replace or remove our current management.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could delay or prevent a change of control of our company or changes in our board of directors that our stockholders might consider favorable. Some of these provisions include:
•a board of directors divided into three classes serving staggered three-year terms, such that not all members of the board will be elected at one time;
•a prohibition on stockholder action through written consent, which requires that all stockholder actions be taken at a meeting of our stockholders;
•a requirement that special meetings of stockholders be called only by the chairman of the board of directors, the chief executive officer, or by a majority of the total number of authorized directors;
•advance notice requirements for stockholder proposals and nominations for election to our board of directors;
•a requirement that no member of our board of directors may be removed from office by our stockholders except for cause and, in addition to any other vote required by law, upon the approval of not less than two-thirds of all outstanding shares of our voting stock then entitled to vote in the election of directors;
•a requirement of approval of not less than two-thirds of all outstanding shares of our voting stock to amend any bylaws by stockholder action or to amend specific provisions of our certificate of incorporation; and
•the authority of the board of directors to issue convertible preferred stock on terms determined by the board of directors without stockholder approval and which convertible preferred stock may include rights superior to the rights of the holders of common stock.
In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporate Law, which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These anti-takeover provisions and other provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by the then-current board of directors and could also delay or impede a merger, tender offer or proxy contest involving our company. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing or cause us to take other corporate actions you desire. Any delay or
prevention of a change of control transaction or changes in our board of directors could cause the market price of our common stock to decline.
Our amended and restated certificate of incorporation and amended and restated bylaws provide that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and 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 and our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the exclusive forum for (i) any derivative action or proceeding brought on our behalf; (ii) 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; (iii) any action asserting a claim against us or any of our directors, officers or other employees arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws; or (iv) any action asserting a claim against us or any of our directors, officers or other employees governed by the internal affairs doctrine.
These provisions would not apply to suits brought to enforce a duty or liability created by the Exchange Act. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims.
These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers and other employees. If a court were to find either exclusive-forum provision to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could seriously harm our business.
ITEM 1B. Unresolved Staff Comments
None.
ITEM 2. Properties
During 2021, the Company exited its Houston and South San Francisco office facilities and the leases were terminated. As of December 31, 2022, the Company had no physical properties.
ITEM 3. Legal Proceedings
From time to time, we may become involved in legal proceedings relating to claims arising from the ordinary course of business. Our management believes that there are currently no claims or actions pending against us, the ultimate disposition of which could have a material adverse effect on our results of operations, financial condition or cash flows.
ITEM 4. Mine Safety Disclosures
Not applicable.
PART II
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is currently listed on The Nasdaq Capital Market under the symbol “BLCM”.
Holders of Record
As of March 24, 2023, there were 13 stockholders of record of our common stock. Certain shares are held in “street” name and thus the actual number of beneficial owners of such shares is not known or included in the foregoing number.
Dividend Policy
We have never declared or paid any dividends on our common stock. We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business and we do not anticipate paying any cash dividends in the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our board of directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects and other factors our board of directors may deem relevant.
Recent Sales of Unregistered Securities
None.
ITEM 6. [Reserved]
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis10-K/A should be read in conjunction with the financial statementsForm 10-K and related notes included in “Item 8 - Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those expressed or implied in any forward-looking statements as a result of various factors, including those set forth under the caption “Item 1A. Risk Factors.”Company’s other filings with the SEC.
Overview
In March 2023, we announced our decision to discontinue our ongoing Phase 1/2 clinical trials evaluating the safety and preliminary efficacy of our GoCAR-T cell product candidates (including BPX-601 and BPX-603) in combination with rimiducid in heavily pre-treated cancer patients following our assessment of the risk/benefit profile of BPX-601 in combination with rimiducid.
We are communicating with clinical trial sites and regulatory agencies regarding our decision to discontinue these trials. We are evaluating and exploring a variety of strategic and financing alternatives focused on maximizing shareholder value, including, but not limited to, a merger, sale, or other business combination, a strategic partnership with one or more parties, or the licensing, sale or divestiture of our programs. Despite undertaking this process, we may not be successful in completing a transaction, and, even if a strategic transaction is completed, it ultimately may not deliver the anticipated benefits or enhance stockholder value. If we do not successfully consummate a strategic alternative, our board of directors may decide to pursue a dissolution and liquidation of the Company.
Results of Operations
The following table sets forth our results of operations for the periods indicated:
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended |
| (in thousands) | | December 31, 2022 | | December 31, 2021 | | Change |
| Revenues | | | | | | |
| Supply agreement | | $ | — | | | $ | 700 | | | $ | (700) | |
| License revenue | | 1,500 | | | 5,500 | | | (4,000) | |
| Total revenues | | $ | 1,500 | | | $ | 6,200 | | | $ | (4,700) | |
| Operating expenses: | | | | | | |
| Research and development | | 22,764 | | | 23,578 | | | (814) | |
| General and administrative | | 5,717 | | | 7,010 | | | (1,293) | |
| Total operating expenses | | 28,481 | | | 30,588 | | | (2,107) | |
| Other operating expense | | | | | | |
| | | | | | |
| Loss on dispositions, net | | — | | | (478) | | | 478 | |
| Total other operating expense | | — | | | (478) | | | 478 | |
| Loss from operations | | (26,981) | | | (24,866) | | | (2,115) | |
| Other income: | | | | | | |
| Interest income, net of interest expense | | 46 | | | 28 | | | 18 | |
| Change in fair value of warrant and private placement option liabilities | | 1,964 | | | 15,126 | | | (13,162) | |
| Other income | | — | | | 7 | | | (7) | |
| Total other income | | 2,010 | | | 15,161 | | | (13,151) | |
| Loss before tax | | (24,971) | | | (9,705) | | | (15,266) | |
| Income tax expense | | (2) | | | — | | | (2) | |
| Net loss | | $ | (24,973) | | | $ | (9,705) | | | $ | (15,268) | |
Revenues
The decrease in revenues for the year ended December 31, 2022, compared to the year ended December 31, 2021, was mainly due to new supply and license agreements executed with external parties during 2021. In the first quarter of 2021, we entered into a multi-
year supply agreement with Takeda Development Center Americas, Inc., or Takeda, for the supply of rimiducid for potential use in clinical trials of TAK-007 (CD19 CAR-NK cell therapy). The supply was fulfilled in the second quarter of 2021 generating revenue of $0.7 million, although we may generate additional revenue under the agreement based on future sales. In the third quarter of 2021, we entered into an option
PART III
ITEM 10. Directors, Executive Officers and license agreement with The University of Texas M.D. Anderson Cancer Center, or M.D. Anderson for certain option and license rights to CaspaCIDe and related technologies. An upfront fee under the agreement of $5.0 million was recognized as revenue, together with $0.5 million of annual license fee under a previous license agreement with M.D. Anderson. For the year ended December 31, 2022, revenue recognized consistedCorporate Governance
Directors of the annual license fees of $0.5 million and $1.0 million from the 2019 and 2021 M.D. Anderson Option and License Agreement, respectively.Registrant
Research and Development Expenses (R&D)
The decrease in R&D expenses of $0.8 million for the year ended December 31, 2022, compared to the year ended December 31, 2021, was primarily due to continued reduction of expenses related to rivo-cel activities. We discontinued active efforts to identify a partner for rivo-cel in late 2021. As a result, we have further decreased the budget on rivo-cel by limiting activities to maintaining regulatory compliance and long-term follow-up and monitoring patients previously enrolled in rivo-cel clinical trials, leading to a reduction in clinical trial and consulting expenses of $1.8 million for the twelve months ended December 31, 2022, compared to the prior year. Additionally, there were delays in enrolling new patients for our clinical trials, which resulted in a reduction in clinical research costs of $0.7 million for the twelve months ended December 31, 2022, compared to the prior year. These decreases were partially offset by an increase in salaries, benefits, travel, and share-based compensation related charges from R&D departments of $1.7 million for the twelve months ended December 31, 2022, as a result of increased R&D personnel hired during 2022. At the end of 2022, we had 11 full time equivalent employees in our R&D departments, compared to five at the end of 2021. As discussed above, we have discontinued our BPX-601 and BPX-603 Phase 1/2 clinical trials, which we expect will contribute to decreases in R&D expenses in future periods.
General and Administrative Expenses (G&A)
The decrease in G&A expenses of $1.3 million for the year ended December 31, 2022, compared to the year ended December 31, 2021, was primarily due to a reduction in share-based compensation expenses, and IT and communication expenses from G&A departments by $1.1 million. Additionally, insurance and other public company costs decreased by $0.2 million for the twelve months ended December 31, 2022 as a result of a reduced company size and administrative activities, compared to the same period in 2021.
Loss on dispositions, net
We did not incur any gain or loss on dispositions for the year ended December 31, 2022. The loss of $0.5 million recognized for the year ended December 31, 2021 was a result of the lease termination of the South San Francisco office space in the first quarter of 2021. Upon the termination and exit of the office space, we disposed of substantially all of the assets and liabilities associated with the lease including a right-of-use asset of $0.6 million, leased equipment with a net book value less than $0.1 million, and the related lease liability of $1.0 million.
Other Income (Expense)
Other income or expense primarily consists of interest income, interest expense, and changes in fair values of our warrant liability and the private placement option, which are remeasured at each reporting period. Due to the nature of the inputs in the model used to assess the fair value of the warrant liability and private placement option, we may experience significant fluctuations at each reporting period. These fluctuations may be due to a variety of factors, including changes in our stock price and changes in stock price volatility over the remaining term of the warrants and options.
The private placement option was terminated in December 2021, and we recognized $2.6 million of gain from the change in fair value of the private placement option liabilities during the year ended December 31, 2021. We did not record any change in fair value of the private placement option liabilities during 2022. The decrease in other income for the year ended December 31, 2022, was primarily due to a decrease in the gain recognized for the change in fair value of our warrant liability compared to the prior year. In 2022, we recognized $2.0 million of gain, compared to a gain of $15.2 million recognized for 2021. The primary reason of a larger amount of gain in 2021 was a significant decrease of the fair value of our warrant liability of $12.6 million during the year as a result of continued decrease in our stock price with a high volatility rate, compared to the change in fair value during 2022.
Liquidity and Capital Resources
Sources of Liquidity
As of December 31, 2022, we had cash, and cash equivalents of $21.8 million, and net cash used in operations for the year was approximately $25.8 million.
The accompanying financial statements have been prepared on a basis that assumes that we will continue as a going concern, and do not include any adjustments that may result from the outcome of this uncertainty. This basis of accounting contemplates the recovery of our assets and the satisfaction of our liabilities and commitments in the normal course of business and does not include any adjustments to reflect the possible future effects of the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern. We have experienced net losses since our inception andOur six directors, their ages as of December 31, 2022, we have an accumulated deficit of $575.4 million. We believe that there is substantial doubt that our current capital resources, which consist of cashMay 1, 2023, and cash equivalents, are sufficient to fund operations through at least the next twelve months from the date the accompanying financial statements are issued.
In March 2023, we announced our decision to discontinue our ongoing Phase 1/2 clinical trials evaluating the safetytheir principal occupation and preliminary efficacy of our GoCAR-T cell product candidates in combinationposition currently held with rimiducid in heavily pre-treated cancer patients. The trials for BPX-601 and BPX-603 are being discontinued following our assessment of the risk/benefit profile of BPX-601 in combination with rimiducid. We are communicating with clinical trial sites and regulatory agencies regarding its decision to discontinue its trials, and an evaluation of our strategic alternatives is underway.
Based on our current status, we are evaluating strategic alternatives, including, but not limited to, a merger, sale, or other business combination, a strategic partnership with one or more parties, or the licensing, sale, or divestiture of our programs. Despite undertaking this process, we may not be successful in completing a transaction, and, even if a strategic transaction is completed, it ultimately may not deliver the anticipated benefits. If we do not successfully consummate a strategic alternative, our board of directors may decide to pursue a dissolution and liquidation of the Company.
Cash Flows
Operating Activities
Net cash used in operating activities during the year ended December 31, 2022 was $25.8 million compared to $23.1 million for the year ended December 31, 2021. The primary operating activities during 2022 were (1) $25.0 million of net losses, (2) a $2.0 million non-cash gain from change in fair market value of warrant derivative liability, and (3) a $1.4 million net decrease from operating assets and liabilities. These activities were partially offset by share-based compensation charges of $2.6 million and other smaller non-cash items.
Investing Activities
Net cash used in investing activities during the year ended December 31, 2022 was less than $0.1 million compared to net cash provided by investing activities of $0.9 million for the year ended December 31, 2021. The cash used in investing activities for the year ended December 31, 2022 was primarily for the purchase of computer equipment. The $0.9 million of net cash provided by investing activities during 2021 was related to proceeds from the sale of property and equipment.
Financing Activities
There was no cash used in or provided by financing activities during the year ended December 31, 2022, compared to net cash provided by financing activities of $32.9 million during the year ended December 31, 2021. The net cash provided by financing activities for the year ended December 31, 2021 was generated from the issuance of pre-funded warrants during the private placement that closed in December 2021, net of offering expenses.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements (as defined by applicable regulations of the SEC) that are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources. We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or for any other contractually narrow or limited purpose.
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. In many instances, we could have reasonably used different accounting estimates, and in other instances changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from management’s estimates under different assumptions or conditions. To the
extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. While our significant accounting policies are described in the notes to our financial statements, we believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies related to the more significant areas involving management’s judgments and estimates. Our management has discussed the development and selection of these critical accounting estimates with the audit committee of our board of directors and the audit committee has reviewed our disclosure relating to it in this MD&A.
Warrant Derivatives
Freestanding public warrants exercisable for multiple underlying instruments are classified as liabilities. The Company accounts for these warrants in accordance with ASC Topic 480, Distinguishing Liabilities From Equity (“ASC 480”) and ASC Topic 815, Accounting for Derivative Instruments and Hedging Activities (“ASC 815”). The Company estimates the fair value of these liabilities using the Black-Scholes model. The option pricing model of our warrant derivative liabilities are estimates and are sensitive to changes to certain inputs used in the pricing model. See Note 1 - Organization, Basis of Presentation, and Summary of Significant Accounting Policies for a discussion of how the Company accounts for its warrant derivatives.
Freestanding pre-funded warrants and accompanying warrants exercisable for multiple underlying instruments are classified as equity. The Company accounts for these warrants in accordance with ASC Topic 480, Distinguishing Liabilities From Equity (“ASC 480”) and ASC Topic 815, Accounting for Derivative Instruments and Hedging Activities (“ASC 815”). Upon the issuance of pre-funded warrants or the exercise of its accompanying common warrants, the Company receives proceeds from its investors which are recognized as equity. Furthermore, because pre-funded warrants and accompanying warrants do not participate in dividends with common stockholders, they are not considered a participating security in its current form. The pre-funded warrants will be considered in the Company’s basic and diluted EPS calculations, and the common warrants would be included in diluted EPS calculation (if the Company was in a net income position). See Note 1 - Organization, Basis of Presentation, and Summary of Significant Accounting Policies for a discussion of how the Company accounts for its pre-funded warrants.
Private Placement Option
The Company previously entered into a 2019 securities purchase agreement that contained a call option on preferred shares that are puttable outside the control of the Company. The Company accounted for the option in accordance with ASC Topic 480, Distinguishing Liabilities From Equity (“ASC 480”) and ASC Topic 815, Accounting for Derivative Instruments and Hedging Activities (“ASC 815”). The Company estimated the fair value of the liability using a binomial lattice model, which is sensitive to changes to certain inputs. See Note 1 - Organization, Basis of Presentation, and Summary of Significant Accounting Policies for a discussion of how the Company accounted for its private placement option derivative. The private placement option was terminated on December 4, 2021, in connection with the 2021 securities purchase agreement.
Research and Development
Research and development expenses consist of expenses incurred in performing research and development activities, including compensation and benefits for research and development employees and consultants, facilities expenses, overhead expenses, cost of laboratory supplies, manufacturing expenses, fees paid to third parties and other outside expenses. We accrue for costs incurred as the services are being provided by monitoring the status of the clinical trial or project and the invoices received from our external service providers. We adjust our accrual as actual costs become known. See Note 1 - Organization, Basis of Presentation, and Summary of Significant Accounting Policies for a discussion of how the Company accounts for research and development expenses.
Share-Based Compensation
The Company’s share-based awards include stock option grants and restricted stock awards. The estimated fair value for stock options, which determines the Company’s calculation of compensation expense, is based on the Black-Scholes pricing model, which requires a number of estimates, including the expected lives of awards, interest rates, stock volatility and other assumptions. Additionally, we apply a forfeiture rate to estimate the number of grants that will ultimately vest, as applicable, and adjust the expense as these awards vest. See Note 1 - Organization, Basis of Presentation, and Summary of Significant Accounting Policies for a discussion of how the Company accounts for share-based compensation.
Recently Issued Accounting Pronouncements
See Note 1 - Organization, Basis of Presentation, and Summary of Significant Accounting Policies for discussion regarding recent accounting pronouncements.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to provide information required under this item.
ITEM 8. Financial Statements and Supplementary Data
Index to Financial Statements
The financial statements of Bellicum Pharmaceuticals, Inc. listed belowInc, are set forth in Item 8 of this Annual Report for the year ended December 31, 2022:as follows:
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| Name | Age | Position Held With Bellicum Pharmaceuticals, Inc. |
| Richard A. Fair | 54 | President and Chief Executive Officer, Director |
| James M. Daly | 61 | Director |
| Stephen R. Davis | 62 | Director |
| Reid M. Huber | 51 | Director |
| Judith Klimovsky | 66 | Director |
| Jon P. Stonehouse | 63 | Interim Chairman |
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James M. Daly has served as a member of our Board since May 2016. Mr. Daly currently serves on the board of directors of four other public biopharmaceutical companies, including ACADIA Pharmaceuticals Inc., Halozyme Therapeutics Inc., argenx NL, and Madrigal Pharmaceuticals, Inc. Mr. Daly also served on the board of directors of Chimerix, Inc. from June 2014 to February 2020. From October 2012 to June 2015, Mr. Daly served as Executive Vice President and Chief Commercial Officer of Incyte Corporation, a public biotechnology company. From January 2002 to December 2011, Mr. Daly held various positions at Amgen, Inc., a public biopharmaceutical company, where he most recently served as Senior Vice President of North America Commercial Operations and Global Marketing/Commercial Development. Prior to his employment with Amgen, Mr. Daly served as Senior Vice President and General Manager of the Respiratory/Anti-infective business unit of GlaxoSmithKline, a public pharmaceutical company, where he was employed from June 1985 to December 2001. Mr. Daly received his B.S. in Pharmacy and an M.B.A. from the University at Buffalo, The State University of New York. Our Board believes that Mr. Daly’s extensive background in the pharmaceutical industry and experience as an executive and director at multiple public biopharmaceutical companies qualify him to serve on our Board. Importantly, our Board has considered Mr. Daly’s service on other boards as it relates to his capacity to fulfill his responsibilities to the Company and has found them to have no discernable impact. In 2022, Mr. Daly did not miss a meeting of our Board or a committee of our Board on which he serves, and our Board believes his contributions to the Company to be exceptional.
Stephen R. Davis has served as a member of our Board since July 2015. Mr. Davis has served as Chief Executive Officer and as a member of the board of directors of ACADIA Pharmaceuticals, Inc., a public biotechnology company, since September 2015. Previously, Mr. Davis served as ACADIA’s Executive Vice President, Chief Financial Officer and Chief Business Officer from July 2014 through March 2015. From June 2012 to June 2015, Mr. Davis served as a member of the board of directors of Heron Therapeutics, Inc., a public biotechnology company, where he also served as Executive Vice President and Chief Operating Officer from May 2013 to July 2014. From April 2010 to December 2012, Mr. Davis served as Executive Vice President and Chief Operating Officer of Ardea Biosciences, Inc., a public biotechnology company which was acquired by AstraZeneca PLC in June 2012. Earlier in his career, Mr. Davis practiced as a certified public accountant with a major accounting firm and as a corporate and securities attorney with a Wall Street law firm. Mr. Davis received his B.S. degree in accounting from Southern Nazarene University and his Juris Doctorate from Vanderbilt University. Our Board believes that Mr. Davis’ experience as an executive at various public biotechnology companies, his background in law, finance and accounting and his experience as a director at public biotechnology companies qualify him to serve on our Board.
Reid M. Huber, Ph.D., has served as a member of our Board since October 2014. Dr. Huber has served as a Partner at Third Rock Ventures, a healthcare venture firm, since December 2018, where he focuses on discovering, launching and building innovative, value-creating, product engine-focused companies across multiple therapeutic areas. From April 2014 to December 2018, Dr. Huber served as at Executive Vice President and Chief Scientific Officer at Incyte Corporation, a pharmaceutical company, where he led drug discovery research primarily in the area of hematology and oncology. From 2002 to 2014, Dr. Huber held various roles of increasing responsibility at Incyte. Prior to joining Incyte, Dr. Huber held scientific research positions at DuPont Pharmaceuticals and Bristol-
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Judith Klimovsky, M.D., has served as a member of Independent Registered Public Accounting Firmour Board since December 2018. Since February 2017, Dr. Klimovsky has served as the Executive Vice President & Chief Development Officer of Genmab A/S, a public international biotechnology company developing antibody therapeutics for cancer, where she leads the company’s product development efforts. Dr. Klimovsky previously held a number of senior positions at Novartis AG, a public international pharmaceutical company, including Senior Vice President, Head of Clinical Development from May 2015 to February 2017, Vice President, Global Program Head from April 2013 to April 2015, and Executive Medical Director from May 2009 to April 2013. Prior to joining Novartis, Dr. Klimovsky held successively senior positions at Bristol-Myers Squibb and Merck, where she led and contributed to the clinical development of key cancer drugs. Previously, Dr. Klimovsky served in various hematology clinical practice positions in Buenos Aires, Argentina. Dr. Klimovsky earned her M.D. from the Buenos Aires University School of Medicine. Our Board believes that Dr. Klimovsky brings extensive leadership experience in drug development, particularly in the areas of oncology and hematology that qualify her to serve on our Board.
To
Jon P. Stonehouse has served as a member of our Board since December 2014 and currently serves as interim Chairman of the StockholdersBoard. Since January 2007, Mr. Stonehouse has served as the Chief Executive Officer and a member of the Board of DirectorsBioCryst Pharmaceuticals, Inc., a public biopharmaceutical company. Since July 2007, he has also served as President of Bellicum Pharmaceuticals,BioCryst. From March 2002 to December 2006, Mr. Stonehouse served in various positions at Merck KGaA, a pharmaceutical company, including as Senior Vice President of Corporate Development from July 2002 to December 2006, and Vice President of Global Licensing and Business Development and Integration from March 2002 to December 2006. Since November 2008, Mr. Stonehouse has also served as a member of the Advisory Board of Precision Biosciences, Inc., a private biotechnology company. Mr. Stonehouse received his B.S. in Chemistry from the University of Minnesota. Our Board believes that Mr. Stonehouse’s management background, experience as a director at a public pharmaceutical company and extensive history as an advisory board member in the pharmaceutical industry qualify him to serve on our Board.
Opinion on
Board Diversity
The Board Diversity Matrix below provides certain self-identified information regarding the Financial Statementscomposition of our Board. Each of the categories listed in the below table has the meaning as it is used in Nasdaq Rule 5605(f) and related instructions.
We have audited the accompanying consolidated balance sheets of Bellicum Pharmaceuticals, Inc. (the Company)
| | | | | | | | | | | | | | |
| Board Diversity Matrix (As of May 1, 2023) | | | | |
| Total Number of Directors | 6 | | | |
| Female | Male | Non-Binary | Did Not Disclose Gender |
| Part I: Gender Identity | | | | |
| Directors | 1 | 5 | | |
| Part II: Demographic Background | | | | |
| African American or Black | | | | |
| Alaskan Native or Native American | | | | |
| Asian | | | | |
| Hispanic or Latinx | 1 | | | |
| Native Hawaiian or Pacific Islander | | | | |
| White | | 5 | | |
| Two or More Races or Ethnicities | | | | |
| LGBTQ+ | | | | |
| Did Not Disclose Demographic Background | | | | |
Executive Officers
The following table sets forth information regarding our executive officers as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, redeemable convertible preferred stock and stockholders’ (deficit) equity and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.May 1, 2023:
The Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates.
Warrant liability valuation of Bellicum Pharmaceuticals
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Description of the Matter | The Company’s warrant derivative liability is remeasured at fair value on each balance sheet date and is valued at $0.8 million as of December 31, 2022. As explained in Note 1 to the consolidated financial statements, the Company holds freestanding warrants that are exercisable for multiple underlying instruments that are potentially redeemable.
Auditing management’s calculation of estimated fair value remeasurement of the warrant derivative liability was complex and judgmental due to the use of a complex valuation model and the level of uncertainty involved in management’s assumptions used in the measurement process. In particular, management was required to estimate a volatility assumption at December 31, 2022.
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How We Addressed the Matter in Our AuditName | Our substantive audit procedures included, among others, evaluating the methodologyAge | Position Held With Bellicum Pharmaceuticals, Inc. |
| Richard A. Fair | 54 | President and testing the significant assumption stated above and the accuracy and completeness of the underlying data used in management’s warrant derivative liability valuation assessment. To test the volatility, we compared the assumption to historical information and performed a sensitivity analysis to evaluate the impact of changes in the fair value estimate that would result from changes in the underlying assumption. We also involved our valuation specialists to assist in the evaluation of the valuation model and the volatility assumption in the fair value estimate.Chief Executive Officer, Director |
| Charity D. Scripture, MS, PharmD | 48 | Chief Development Officer |
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2014.
Houston, Texas
March 31, 2023
Bellicum Pharmaceuticals,Richard Fair has served as our President and Chief Executive Officer and a member of our Board since January 2017. For additional information regarding Mr. Fair’s industry experience and education, see above under “Directors of the Registrant.”
Charity Scripture, MS, PharmD, has served as our Chief Development Officer since December 2021. Prior to her appointment as our Chief Development Officer, Dr. Scripture served as Vice President, Business and Development Operations at ACELYRIN, Inc., a private biotechnology company, from November 2020 to November 2021. Dr. Scripture also served as our Senior Director, US and Global Medical Affairs from October 2018 to October 2019, and as our Vice President, Clinical & Medical Affairs on a full-time basis from November 2019 to December 2020 and on a part-time basis from January 2021 to November 2021. Dr. Scripture previously held clinical development leadership positions with Stemcentrx, Inc., a biotechnology company and an AbbVie subsidiary, from October 2016 to October 2018, and Pharmacyclics, Inc., a biopharmaceutical company (acquired by AbbVie in May 2015), from January 2015 to October 2016. Prior to AbbVie, Dr. Scripture held positions in clinical development and medical affairs at Amgen Inc., a public biopharmaceutical company, for approximately nine years. Prior to joining Amgen, Dr. Scripture was employed by Dartmouth-Hitchcock Medical Center, where she was involved with the clinical care of cancer patients. Dr. Scripture completed her post-doctoral fellowship in Clinical Pharmacology Drug Development at the National Cancer Institute. She holds a Pharm. D from University of North Carolina at Chapel Hill, a M.S. in Pharmacology and Toxicology from Dartmouth Medical School, and a B.S. in Biochemistry and Molecular Biology from Hamilton College.
Consolidated Balance Sheets
(Audit Committee
Our Audit Committee currently consists of three directors: Messrs. Davis (Chair) and Stonehouse and Dr. Huber. The Board has adopted a written Audit Committee charter that is available to stockholders on the Company’s website at www.bellicum.com. The information on our website is not incorporated by reference into this Form 10-K/A. The Audit Committee of the Board was established by the Board in thousands, except par valueaccordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to oversee the Company’s corporate accounting and share data)
| | | | | | | | | | | | | | |
| | | | |
| | December 31, 2022 | | December 31, 2021 |
| ASSETS | | | | |
| Current assets: | | | | |
| Cash and cash equivalents | | $ | 21,837 | | | $ | 46,156 | |
| Restricted cash | | — | | | 1,501 | |
| Accounts receivable, interest and other receivables | | — | | | 205 | |
| Prepaid expenses and other current assets | | 1,964 | | | 1,269 | |
| Total current assets | | 23,801 | | | 49,131 | |
| Property and equipment, net | | 22 | | | 12 | |
| Total assets | | $ | 23,823 | | | $ | 49,143 | |
| LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY | | | | |
| Current liabilities: | | | | |
| Accounts payable | | $ | 486 | | | $ | 90 | |
| Accrued expenses and other current liabilities | | 2,477 | | | 3,849 | |
| Warrant derivative liability | | 809 | | | 2,773 | |
| Total current liabilities | | 3,772 | | | 6,712 | |
| Total liabilities | | 3,772 | | | 6,712 | |
| Commitments and contingencies | | | | |
| Redeemable Preferred stock: $0.01 par value; 10,000,000 shares authorized | | | | |
| Series 1 redeemable convertible preferred stock, $0.01 par value, 1,517,500 shares authorized at December 31, 2022 and December 31, 2021, 452,000 shares issued and outstanding at December 31, 2022 and December 31, 2021 | | 18,036 | | | 18,036 | |
| Stockholders’ equity: | | | | |
| Common stock, $0.01 par value; 160,000,000 shares authorized at December 31, 2022 and 80,000,000 shares authorized at December 31, 2021; 8,682,447 shares issued and 8,614,701 shares outstanding at December 31, 2022; 8,497,025 shares issued and 8,429,279 shares outstanding at December 31, 2021 | | 87 | | | 85 | |
| Treasury stock: 67,746 shares held at December 31, 2022 and December 31, 2021 | | (5,056) | | | (5,056) | |
| Additional paid-in capital | | 582,763 | | | 580,156 | |
| Accumulated other comprehensive loss | | (354) | | | (338) | |
| Accumulated deficit | | (575,425) | | | (550,452) | |
| Total stockholders’ equity | | 2,015 | | | 24,395 | |
| Total liabilities, redeemable preferred stock and stockholders’ equity | | $ | 23,823 | | | $ | 49,143 | |
The accompanying notes are an integral partfinancial reporting processes and audits of these consolidatedits financial statements. For this purpose, the Audit Committee performs several functions, including, among other things:
•evaluating the performance, independence and qualifications of our independent auditors and determining whether to retain our existing independent auditors or engage new independent auditors;
•reviewing and approving the engagement of our independent auditors to perform audit services and any permissible non-audit services;
•monitoring the rotation of partners of our independent auditors on our engagement team as required by law;
•prior to engagement of any independent auditor, and at least annually thereafter, reviewing relationships that may reasonably be thought to bear on their independence, and assessing and otherwise taking the appropriate action to oversee the independence of our independent auditor;
•reviewing our annual and quarterly financial statements and reports, including the disclosures contained under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and discussing the statements and reports with our independent auditors and management;
• reviewing, with our independent auditors and management, significant issues that arise regarding accounting principles and financial statement presentation and matters concerning the scope, adequacy and effectiveness of our financial controls;
• reviewing with management and our independent auditors any earnings announcements and other public announcements regarding material developments;
• establishing procedures for the receipt, retention and treatment of complaints received by us regarding financial controls, accounting or auditing matters and other matters;
•preparing the report that the SEC requires in our annual proxy statement;
• reviewing and providing oversight of any related-party transactions in accordance with our related-party transaction policy and reviewing and monitoring compliance with legal and regulatory responsibilities, including our code of business conduct and ethics;
•reviewing our major financial risk exposures, including the guidelines and policies to govern the process by which risk assessment and risk management are implemented;
•reviewing, on a periodic basis, our investment policy; and
Bellicum Pharmaceuticals, Inc.
Consolidated Statements•reviewing and evaluating, on an annual basis, the performance of Operationsthe Audit Committee and Comprehensive Loss
(in thousands, except share and per share amounts)
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| | | | |
| | December 31, 2022 | | December 31, 2021 |
| Revenues | | | | |
| Supply agreement | | $ | — | | | $ | 700 | |
| License revenue | | 1,500 | | | 5,500 | |
| Total revenues | | 1,500 | | | 6,200 | |
| Operating expenses | | | | |
| Research and development | | 22,764 | | | 23,578 | |
| General and administrative | | 5,717 | | | 7,010 | |
| Total operating expenses | | 28,481 | | | 30,588 | |
| Other operating expense | | | | |
| | | | |
| Loss on dispositions, net | | — | | | (478) | |
| Total other operating expense | | — | | | (478) | |
| Loss from operations | | (26,981) | | | (24,866) | |
| Other income (expense): | | | | |
| Interest income, net of interest expense | | 46 | | | 28 | |
| Change in fair value of warrant and private placement option liabilities | | 1,964 | | | 15,126 | |
| Other income | | — | | | 7 | |
| Total other income | | 2,010 | | | 15,161 | |
| Loss before tax | | (24,971) | | | $ | (9,705) | |
| Income tax expense | | (2) | | | 0 |
| Net loss | | $ | (24,973) | | | $ | (9,705) | |
| | | | |
| Net loss per common share attributable to common shareholders, basic and diluted | | $ | (0.81) | | | $ | (0.84) | |
| Weighted-average shares outstanding-basic and diluted | | 30,828,247 | | 11,504,294 |
| | | | |
| Net loss | | $ | (24,973) | | | $ | (9,705) | |
| Other comprehensive income (loss): | | | | |
| Foreign currency translation adjustment | | (16) | | | 1 | |
| Comprehensive loss | | $ | (24,989) | | | $ | (9,704) | |
The accompanying notesBoard reviews the Nasdaq listing standards definition of independence for Audit Committee members on an annual basis and has determined that all members of the Audit Committee are independent (as independence is currently defined in Rule 5605(c)(2)(A) of the Nasdaq listing standards and Rule 10A-3 of the Exchange Act).
The Board has also determined that Messrs. Davis, Huber and Stonehouse each qualify as an integral part“audit committee financial expert,” as defined in applicable SEC rules. The Board made a qualitative assessment of their respective levels of knowledge and experience based on a number of factors, including their respective formal education and previous and current experience in financial roles.
Compensation Committee
Our Compensation Committee currently consists of two directors: Messrs. Stonehouse (Chair) and Daly. All members of the Compensation Committee are independent as independence is currently defined in Rule 5605(d)(2)(A) of the Nasdaq listing standards and Rule 10C-1 of the Exchange Act. The Board has adopted a written Compensation Committee charter that is available to stockholders on the Company’s website at www.bellicum.com. The information on our website is not incorporated by reference into this Form 10-K/A.
The Compensation Committee of the Board acts on behalf of the Board to review, adopt or recommend for adoption and oversee the Company’s compensation strategy, policies, plans and programs. For this purpose, the Compensation Committee performs several functions, including, among other things:
•reviewing, modifying and approving (or if it deems appropriate, making recommendations to the full Board regarding) our overall compensation strategy and policies;
•making recommendations to the full Board regarding the compensation and other terms of employment of our executive officers;
•reviewing and making recommendations to the full Board regarding performance goals and objectives relevant to the compensation of our executive officers and assessing their performance against these consolidated financial statements.goals and objectives;
•establishing policies with respect to votes by our stockholders to approve executive compensation to the extent required by Section 14A of the Exchange Act and, if applicable, determining our recommendations regarding the frequency of advisory votes on executive compensation;
•reviewing and assessing the independence of compensation consultants, legal counsel and other advisors as required by Section 10C of the Exchange Act;
•administering our equity incentive plans;
•establishing policies with respect to equity compensation arrangements;
•reviewing the competitiveness of our executive compensation programs and evaluating the effectiveness of our compensation policy and strategy in achieving expected benefits to us;
•reviewing and approving (or if it deems it appropriate, making recommendations to the full Board regarding) the terms of any employment agreements, severance arrangements, change in control protections and any other compensatory arrangements for our executive officers;
•reviewing with management and approving our disclosures under the caption “Compensation Discussion and Analysis” in our periodic reports or proxy statements to be filed with the SEC, to the extent such caption is included in any such report or proxy statement; and
•reviewing and evaluating, on an annual basis, the performance of the Compensation Committee and the Compensation Committee charter.
Bellicum Pharmaceuticals, Inc.
Consolidated StatementsNominating and Corporate Governance Committee
Our Nominating and Governance Committee currently consists of Redeemable Convertible Preferred Stockthree directors: Dr. Huber (Chair), Dr. Klimovsky and Stockholders’ (Deficit) Equity
(amountsMr. Daly. All members of the Nominating and Governance Committee are independent (as independence is currently defined in thousands, except share data)
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| | Series 1 Preferred | | Common Stock | | Treasury Stock | | Additional Paid-In Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | Total Stockholders’ (Deficit) Equity |
| | Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | | | |
| Balance, December 31, 2020 | | 452,000 | | | $ | 18,036 | | | 8,385,650 | | | $ | 84 | | | (67,746) | | | $ | (5,056) | | | $ | 543,561 | | | $ | (540,747) | | | $ | (339) | | | $ | (2,497) | |
| Share-based compensation | | — | | | — | | | — | | | — | | | — | | | — | | | 3,439 | | | — | | | — | | | 3,439 | |
| Issuance of common stock upon vesting of restricted stock units | | — | | | — | | | 111,375 | | | 1 | | | — | | | — | | | (1) | | | — | | | — | | | — | |
| Issuance of pre-funded warrants, net of issuance costs | | — | | | — | | | — | | | — | | | — | | | — | | | 32,908 | | | — | | | — | | | 32,908 | |
| Extinguishment of private option liability | | — | | | — | | | — | | | — | | | — | | | — | | | 249 | | | — | | | — | | | 249 | |
| Comprehensive loss | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (9,705) | | | 1 | | | (9,704) | |
| Balance, December 31, 2021 | | 452,000 | | | $ | 18,036 | | | 8,497,025 | | | $ | 85 | | | (67,746) | | | $ | (5,056) | | | $ | 580,156 | | | $ | (550,452) | | | $ | (338) | | | $ | 24,395 | |
| Share-based compensation | | — | | | — | | | — | | | — | | | — | | | — | | | 2,609 | | | — | | | — | | | 2,609 | |
| Issuance of common stock upon vesting of restricted stock units | | — | | | — | | | 128,472 | | | 1 | | | — | | | — | | | (1) | | | — | | | — | | | — | |
| Issuance of common stock upon exercise of pre-funded warrants | | — | | | — | | | 56,950 | | | 1 | | | — | | | — | | | (1) | | | — | | | — | | | — | |
| Comprehensive loss | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (24,973) | | | (16) | | | (24,989) | |
| Balance, December 31, 2022 | | 452,000 | | | $ | 18,036 | | | 8,682,447 | | | $ | 87 | | | (67,746) | | | $ | (5,056) | | | $ | 582,763 | | | $ | (575,425) | | | $ | (354) | | | $ | 2,015 | |
The accompanying notesNominating and Governance Committee of the Board is responsible for identifying, reviewing and evaluating candidates to serve as directors of the Company consistent with criteria approved by the Board, reviewing and evaluating incumbent directors, selecting or recommending to the Board for selection candidates for election to the Board, making recommendations to the Board regarding the membership of the committees of the Board, assessing the performance of the Board, and developing a set of corporate governance principles for the Company.
The functions of this committee include, among other things:
•identifying, reviewing and evaluating candidates to serve on our Board;
•determining the minimum qualifications for service on our Board;
•evaluating director performance on the board and applicable committees of the board and determining whether continued service on our board is appropriate;
•evaluating, nominating and recommending individuals for membership on our Board;
•evaluating nominations by stockholders of candidates for election to our Board;
•considering and assessing the independence of members of our Board;
•developing a set of corporate governance policies and principles and recommending to our Board any changes to such policies and principles;
•considering questions of possible conflicts of interest of directors as such questions arise; and
•reviewing and evaluating on an annual basis the performance of the Nominating and Governance Committee and the Nominating and Governance Committee charter.
Considerations in Evaluating Director Nominees
The Nominating and Governance Committee believes that candidates for director should have certain minimum qualifications, including the ability to read and understand basic financial statements and having the highest personal integrity and ethics. The Nominating and Governance Committee also intends to consider such factors as possessing relevant expertise upon which to be able to offer advice and guidance to management, having sufficient time to devote to the affairs of the Company, demonstrated excellence in his or her field, having the ability to exercise sound business judgment and having the commitment to rigorously represent the long-term interests of the Company’s stockholders. However, the Nominating and Governance Committee retains the right to modify these qualifications from time to time. Candidates for director nominees are an integral partreviewed in the context of the current composition of the Board, the operating requirements of the Company and the long-term interests of stockholders. In conducting this assessment, the Nominating and Governance Committee typically considers skills, diversity and expertise and such other factors as it deems appropriate, given the current needs of the Board and the Company, to maintain a balance of knowledge, experience and capability and taking into account our policy regarding diversity as set forth in our Corporate Governance Guidelines (discussed below). The Nominating and Governance Committee believes that it is essential that the Board members represent diverse viewpoints, and it therefore may consider such factors as diversity of gender, race, professional experience, and differences in viewpoints and skills.
In the case of incumbent directors whose terms of office are set to expire, the Nominating and Governance Committee reviews these consolidated financial statements.directors’ overall service to the Company during their terms, including the number of meetings attended, level of participation, quality of performance and any other relationships and transactions that might impair the directors’ independence. In the case of new director candidates, the Nominating and Governance Committee also determines whether the nominee is independent for Nasdaq purposes, which determination is based upon applicable Nasdaq listing standards, applicable SEC rules and regulations and the advice of counsel, if necessary. The Nominating and Governance Committee then uses its network of contacts to compile a list of potential candidates, but may also engage, if it deems appropriate, a professional search firm. The Nominating and Governance Committee conducts any appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates after considering the function and needs of the Board. The Nominating and Governance Committee meets to discuss and consider the candidates’ qualifications and then selects a nominee by majority vote which we expect will typically be recommended to the full Board.
Stockholder Recommendations for Nominations to the Board of Directors
The Nominating and Governance Committee will consider director candidates recommended by stockholders. The Nominating and Governance Committee does not intend to alter the manner in which it evaluates candidates, including the minimum criteria set forth above, based on whether or not the candidate was recommended by a stockholder. Stockholders who wish to recommend individuals for consideration by the Nominating and Governance Committee to become nominees for election to the Board may do so by delivering a written recommendation to the Nominating and Governance Committee at the following address: Bellicum Pharmaceuticals, Inc., Attn: Corporate Secretary, 3730 Kirby Drive, Suite 1200, Houston, Texas 77098, no later than the close of business on the 90th day nor earlier than the close of business on the 120th day prior to the first anniversary of the preceding year’s annual meeting. Submissions must include the name and address of the Company stockholder on whose behalf the submission is made; the number of Company shares that are owned beneficially by such stockholder as of the date of the submission; the full name of the proposed candidate; a description of the proposed candidate’s business experience for at least the previous five years; complete biographical information for the proposed candidate; and a description of the proposed candidate’s qualifications as a director. Any such submission must be accompanied by the written consent of the proposed nominee to be named as a nominee and to serve as a director if elected.
Consolidated Statements
Finance Committee
Our Finance Committee currently consists of Cash Flowsthree directors: Mr. Daly (Chair), Dr. Huber and Dr. Klimovsky. The Finance Committee acts on behalf of the Board to, among other things, advise management on the Company’s business development, collaboration and financing arrangements and make recommendations to the Board with respect to such matters. Throughout 2022, the Finance Committee reviewed and assessed such matters, and provided related recommendations to the Board, on an as-needed basis but held no formal meetings.
(in thousands)
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| | December 31, 2022 | | December 31, 2021 |
| Cash flows from operating activities: | | | | |
| Net loss | | $ | (24,973) | | | $ | (9,705) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | | |
| Share-based compensation | | 2,609 | | | 3,439 | |
| Depreciation and amortization expense | | 11 | | | 105 | |
| Change in fair value of warrant and private placement derivative liabilities | | (1,964) | | | (15,126) | |
| Loss on dispositions, net | | — | | | 478 | |
| Amortization of right-of-use assets | | — | | | 33 | |
| Accretion of lease liability | | — | | | 23 | |
| Changes in operating assets and liabilities: | | | | |
| Accounts receivable, interest and other receivables | | 205 | | | 170 | |
| Prepaid expenses and other assets | | (695) | | | (462) | |
| Accounts payable | | 396 | | | (801) | |
| Accrued liabilities and other | | (1,372) | | | (1,260) | |
| Net cash used in operating activities | | (25,783) | | | (23,106) | |
| Cash flows from investing activities: | | | | |
| Proceeds from sale of property and equipment | | — | | | 900 | |
| Purchases of property and equipment | | (21) | | | (7) | |
| Net cash provided by (used in) investing activities | | (21) | | | 893 | |
| Cash flows from financing activities: | | | | |
| Proceeds from issuance of pre-funded warrants, net | | — | | | 32,908 | |
| Payment on financing lease obligations | | — | | | (35) | |
| Net cash provided by financing activities | | — | | | 32,873 | |
| Effect of exchange rate changes on cash | | (16) | | | 1 | |
| Net change in cash, cash equivalents and restricted cash | | (25,820) | | | 10,661 | |
| Cash, cash equivalents and restricted cash at beginning of period | | 47,657 | | | 36,996 | |
| Cash, cash equivalents and restricted cash at end of period | | $ | 21,837 | | | $ | 47,657 | |
Our Science Committee is currently composed of two directors: Drs. Huber (Chair) and Klimovsky. The Science Committee acts on behalf of the Board to, among other things, advise management from time to time upon requestand make recommendations to the Board with respect to our research and development programs, technology and objectives.
Stockholder Communications with the Board Of Directors
The accompanying notes are an integral partCompany’s Board has adopted a formal process by which stockholders may communicate with the Board or any of these consolidated financial statements.
its directors. Stockholders who wish to communicate with the Board may do so by sending written communications addressed to Bellicum Pharmaceuticals, Inc.
Notes, Attn: Corporate Secretary, 3730 Kirby Drive, Suite 1200, Houston, Texas 77098. These communications will be reviewed by the Secretary of Bellicum, who will determine whether the communication is appropriate for presentation to the Consolidated Financial Statements
NOTE 1 - ORGANIZATION, BASIS OF PRESENTATION, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Bellicum Pharmaceuticals, Inc. (“Bellicum”) is a biopharmaceutical company that has developed novel cellular immunotherapies for various forms of cancer.
Bellicum has two wholly-owned subsidiaries, Bellicum Pharma Limited, a private limited company organized underBoard or the laws of the United Kingdom, and Bellicum Pharma GmbH, a private limited liability company organized under German law. Both were formed for therelevant director. The purpose of developing product candidates in Europe. Bellicum, Bellicum Pharma Limitedthis screening is to allow the Board to avoid having to consider irrelevant or inappropriate communications (such as advertisements, solicitations and Bellicum Pharma GmbH are collectively referred to herein as the “Company.” All intercompany balanceshostile communications).
Code of Business Conduct and transactions among the consolidated entities have been eliminated in consolidation.Ethics
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker. The Company has determinedadopted a Code of Business Conduct and Ethics that it has one operatingapplies to all officers, directors and reporting segment as it allocates resourcesemployees. The Code of Business Conduct and assesses financial performanceEthics is available on a consolidated basis.the Company’s website at www.bellicum.com. The Company’s chief operating decision makerinformation on our website is its Chief Executive Officer who manages operations and reviews the financial information as a single operating segment for purposes of allocating resources and evaluating its financial performance.
Basis of Presentation
The accompanying financial statements have been prepared in conformity with the authoritative U.S. generally accepted accounting principles (“GAAP”).
The Company has experienced net losses since its inception and as of December 31, 2022,not incorporated by reference into this Form 10-K/A. If the Company has an accumulated deficitmakes any substantive amendments to the Code of $575.4 million. The Company believes that there is substantial doubt that its current capital resources, which consistBusiness Conduct and Ethics or grants any waiver from a provision of cash and cash equivalents, are sufficientthe Code to fund operations through at least the next twelve months from the date the accompanying financial statements are issued. The accompanying financial statements have been prepared on a basis that assumes thatany executive officer or director, the Company will continue as a going concern, and do not include any adjustments that may result from the outcome of this uncertainty. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of the Company’s liabilities and commitments in the normal course of business and does not include any adjustments to reflect the possible future effects of the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
In March 2023, the Company announced its decision to discontinue its ongoing Phase 1/2 clinical trials evaluating the safety and preliminary efficacy of its GoCAR-T cell product candidates in combination with rimiducid in heavily pre-treated cancer patients. The trials for BPX-601 and BPX-603 are being discontinued following the Company’s assessment of the risk/benefit profile of BPX-601 in combination with rimiducid. The Company is communicating with clinical trial sites and regulatory agencies regarding its decision to discontinue its trials, and an evaluation of the Company’s strategic alternatives is underway. The strategic alternatives include, but are not limited to, a merger, sale, or other business combination, a strategic partnership with one or more parties, or the licensing, sale, or divestiture of our programs. Despite undertaking this process, the Company may not be successful in completing a transaction, and even if a strategic transaction is completed, it ultimately may not deliver the anticipated benefits. If the Company does not successfully consummate a strategic alternative, its board of directors may decide to pursue a dissolution and liquidation of the Company.
Use of Estimates
The preparation of the financial statements in accordance with GAAP requires management to make certain estimates and judgments that affect the reported amounts of assets, liabilities, revenue recognition, and expenses. Actual results could differ materially from those estimates.
Revenue Recognition
The Company’s only source of revenue in 2022 was from its option and license agreement with University of Texas M.D. Anderson Cancer Center (“M.D. Anderson”). The Company has generated revenue from its licensing agreements since 2019. Prior to 2019, the Company’s only source of revenue was from grants. The Company’s sources of revenue in 2021 were from its option and license agreements with M.D. Anderson and a supply agreement with Takeda.
Takeda Supply Agreement
On May 4, 2021, the Company entered a multi-year supply agreement with Takeda. The Company will supply Takeda with rimiducid for potential use in clinical trials of TAK-007 (CD19 CAR-NK cell therapy). The Company generated revenue of $0.7 million in the second quarter of 2021, with the possibility of additional revenue from future sales.
The promised product in the supply agreement with Takeda consists of rimiducid including any components, drug substance, raw materials and/or excipients to be supplied by the Company. Revenue is generally recognized upon the transfer of control of promised goods to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods.
M.D. Anderson License Agreements
On January 22, 2019, the Company entered into a licensing and commercialization agreement with M.D. Anderson (the “2019 M.D. Anderson License Agreement”). Under the 2019 M.D. Anderson License Agreement, the Company granted M.D. Anderson non-exclusive rights in certain Caspase-9 and related technologies and use of a small molecule known as rimiducid in a certain cell therapy program. During the fourth quarter of 2019, and under the terms of the 2019 M.D. Anderson License Agreement, M.D. Anderson exercised an option to grant a non-exclusive sublicense of the rights licensed by the Company to M.D. Anderson. M.D. Anderson, as a result of this exercise, granted a sublicense that entitled the Company to receive as consideration an upfront license fee as well as additional future annual maintenance fees, milestone payments related to the achievement of pre-specified development, regulatory, and commercialization events, and royalties on net sales of licensed products. During the year ended December 31, 2022, the Company earned an annual license maintenance fee of $0.5 million.
On August 31, 2021, the Company entered into a second licensing and commercialization agreement with M.D. Anderson (the “2021 M.D. Anderson Option and License Agreement”). Under the 2021 M.D. Anderson Option and License Agreement, M.D. Anderson has certain rights to the use of CaspaCIDe and rimiducid in product candidates nominated under the agreement, and receives an option to a non-exclusive license to the technology in these candidates. Upon exercise of an option and sublicense of a product candidate to a third party, the Company is entitled to a sublicense execution fee, a percentage of certain consideration received by M.D. Anderson for the sublicense, an annual maintenance fee, and a percentage royalty on net sales of licensed products. During the year ended December 31, 2022, the Company earned an annual license maintenance fee of $1.0 million for two nominated programs.
Licenses of Intellectual Property
Revenue is recognized from the satisfaction of performance obligations when such obligations have been fulfilled. If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, revenue is recognized from non-refundable, up-front fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other promises, the Company uses judgment to assesspromptly disclose the nature of the combinedamendment or waiver on its website.
Corporate Governance Guidelines
Our Board has adopted Corporate Governance Guidelines which provide a framework for the effective governance of the Company. The guidelines address matters such as board composition and selection, the respective roles and responsibilities of the Board and management, director orientation and education, director compensation, Board and committee administrative matters, Board access to management and use of outside advisors, annual review of our Chief Executive Officer’s performance, obligationmanagement succession planning and annual assessment of the performance of the Board, including its committees. The Nominating and Governance Committee is responsible for overseeing and periodically reviewing the Corporate Governance Guidelines, and recommending any proposed changes to determine whether the combined performance obligationBoard for approval. The Corporate Governance Guidelines are available on our website at www.bellicum.comon the “Corporate Governance” page of the section entitled “Investors & Media.” The information on our website is satisfied over a periodnot incorporated by reference into this Form 10-K/A.
Diversity
Our Corporate Governance Guidelines provide that the Board should be diverse. Diversity includes, among other things, gender, sexual orientation, disability, age, ethnicity, business experience, functional expertise, stakeholder expectations, culture and
geography. Our Board believes that diversity promotes the inclusion of time,different perspectives and ideas, and ensures that the Company evaluateshas the measureopportunity to benefit from all available talent.
The Nominating and Governance Committee, in accordance with its charter, will annually assess the diversity of progress each reporting periodour Board in light of its needs, and if necessary, adjustsour Board will review the measureNominating Committee’s assessment, including the extent to which the current composition of performanceour Board reflects a diverse mix of skills, experience, knowledge, backgrounds and related revenue recognition.personal qualities.
Milestone Payments
AtOur Board is committed to a merit-based system for its composition, which requires a diverse and inclusive culture where directors believe that their views are heard, their concerns are attended to and they serve in an environment where bias, discrimination and harassment on any matter are not tolerated. When identifying suitable candidates for appointment to our Board, the inceptionNominating and Governance Committee and our Board will consider candidates on merit against objective criteria having due regard to the benefits of each arrangement that includes developmental, regulatorydiversity (including gender and race) and the needs of our Board. Any search firm engaged to assist our Board or commercial milestone payments, the Company evaluates whether achieving the milestones is considered probableNominating and estimates the amountGovernance Committee in identifying candidates for appointment to our Board shall be directed to include diverse candidates, and diverse candidates will be included in our Board’s evergreen list of potential Board nominees.
Limits on Board Memberships
Our Corporate Governance Guidelines require our directors to advise the transaction price usingchairperson of the most likely amount method. If it is probable thatNominating and Governance Committee before accepting an invitation to serve on the board of directors or committee of another company. A director’s ability to fulfill their responsibilities as a significant revenue reversal would not occur, themember of our Board can be impaired by service on multiple other boards or board committees. Service on boards and board committees of other companies should be consistent with our conflict-of-interest policies. Non-employee directors should generally serve on no more than five other public company boards and on no more than three other public company audit committees, unless otherwise approved by our Board. In addition, non-employee directors who are serving as executive officers of other public companies should generally serve on no more than two other public company boards, unless otherwise approved by our Board.
Stock Ownership Guidelines
Our Corporate Governance Guidelines require each non-employee director to own shares of our common stock with a market value of at least three times the associated milestoneannual cash retainer payable to such director for service on our Board. Our Chief Executive Officer is includedrequired to own shares of our common stock with a market value of at least three times his annual base salary. Our other named executive officers are each required to own shares of our common stock with a market value of at least one times their annual base salary. Our directors and officers are required to meet these guidelines within five years of becoming subject to them.
Prohibitions On Hedging
Under the terms of our insider trading policy, none of our officers, directors, other employees or consultants may engage in short sales, transactions in put or call options, hedging transactions or other inherently speculative transactions with respect to our stock at any time. In addition, none of our officers, directors, other employees or consultants may margin, or make any offer to margin, any shares of our stock, including without limitation, borrowing against such stock, at any time.
Independence of the Board Of Directors
As required under Nasdaq listing standards, a majority of the members of a listed company’s Board must qualify as “independent,” as affirmatively determined by the Board. The Board consults with the Company’s counsel to ensure that the Board’s determinations are consistent with relevant securities and other laws and regulations regarding the definition of “independent,” including those set forth in pertinent listing standards of Nasdaq, as in effect from time to time.
Consistent with these considerations, after review of all relevant identified transactions or relationships between each director, or any of his or her family members, and the Company, its senior management and its independent auditors, the Board has affirmatively determined that the following six directors are independent directors within the meaning of the applicable Nasdaq listing standards: Messrs. Davis, Daly and Stonehouse and Drs. Huber and Klimovsky. In making this determination, the Board found that none of these directors had a material or other disqualifying relationship with the Company. Mr. Fair is an executive officer of the Company, and therefore is not considered independent.
Board Leadership Structure
Jon P. Stonehouse currently serves as the Chairman of the Board, and, following his resignation, Mr. Stonehouse will serve as interim Chairman of the Board. The Chairman of the Board has authority, among other things, to call and preside over Board meetings, to set meeting agendas and to determine materials to be distributed to the Board. Accordingly, the Chairman has substantial ability to shape the work of the Board. We believe that separation of the positions of Chairman and Chief Executive Officer reinforces the independence of the Board in its oversight of our business and affairs. In addition, we have a separate chair for each committee of the Board. The chairs of each committee are expected to report regularly to the Board on the activities of their committee in fulfilling their responsibilities as detailed in their respective charters or specify any shortcomings should that be the case. We also believe that having a separate Chairman creates an environment that is more conducive to objective evaluation and oversight of management’s performance, increasing management accountability and improving the ability of the Board to monitor whether management’s actions
are in the transaction price. Milestone paymentsbest interests of us and our stockholders. As a result, we believe that are not withinhaving a separate Chairman can enhance the Company’s control, such as approvals from regulators or where attainmenteffectiveness of the specified eventBoard as a whole.
Role of the Board in Risk Oversight
One of the key functions of our Board is dependent oninformed oversight of our risk management process. Our Board does not have a standing risk management committee, but rather administers this oversight function directly through the development activitiesBoard as a whole, as well as through various standing committees of a third party, are not considered probableour Board that address risks inherent in their respective areas of being achieved until those approvals are received or the specified event occurs.
Royalty Revenues
For arrangements that include sales-based royalties, including milestone payments based on the level of sales,oversight. In particular, our Board is responsible for monitoring and assessing strategic risk exposure and the licenseAudit Committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is deemedundertaken. The Audit Committee also monitors cybersecurity risk and compliance with legal and regulatory requirements. The Nominating and Governance Committee monitors the effectiveness of our corporate governance practices, including whether they are successful in preventing illegal or improper liability-creating conduct. The Compensation Committee assesses and monitors whether any of our compensation policies and programs has the potential to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, no royalties have been received.encourage excessive risk-taking.
Cash, Cash Equivalents, and Restricted Cash
The Company considers all short-term, highly liquid investments with a maturity of three months or less from the date of purchase and that can be liquidated without prior notice or penalty, to be cash equivalents.ITEM 11. Executive Compensation
Summary Compensation Table
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the balance sheets that sum to the total of the same such amounts shown in the statements of cash flows.
| | | | | | | | | | | | | | |
| (in thousands) | | December 31, 2022 | | December 31, 2021 |
| Cash and cash equivalents | | $ | 21,837 | | | $ | 46,156 | |
| Restricted cash | | — | | | 1,501 | |
| Total cash, cash equivalents and restricted cash shown in the statements of cash flows | | $ | 21,837 | | | $ | 47,657 | |
In April 2020, the Company sold its U.S. manufacturing facility to The University of Texas M.D. Anderson Cancer Center (“M.D. Anderson”). Pursuant to the Company’s asset purchase agreement with M.D. Anderson, $1.5 million of the cash proceeds received were subject to certain escrow provisions and recorded as restricted cash. The claims against the escrow have been resolved and the funds were released and transferred to the Company in July 2022.
Disposition of Assets and Liabilities Held for Sale and Held for Use
In the fourth quarter of 2020, in connection with the Company’s restructuring plan, management elected to seek an exit to its leased R&D facility in Houston, Texas. The lease termination and disposal of the assets and liabilities associated with the facility was completed on February 26, 2021. Under the terms of the agreement, a third party assumed the lease for the facility. In addition, the third party paid $1.1 million to the Company for substantially all of the property, and equipment associated with the location. The consideration included $0.9 million in cash and an unsecured promissory note for $0.2 million. The principal amount of the promissory note together with accrued interest of 4% per annum was paid in July 2022.
On March 15, 2021, the Company entered an agreement to terminate its sub-lease of the South San Francisco office space contingent upon consent of the prime lessor. Under the terms of the agreement, the company agreed to pay a lease termination fee of $0.9 million while the security deposit of $0.2 million was returned to the Company in June 2021. The decision to exit this lease reflects the ability of the Company to carry on its administrative function remotely. On March 26, 2021, the Company met all of the conditions of the agreement and disposed of substantially all of the assets and liabilities associated with the lease including the right-of-use asset of $0.6 million, leased equipment with a net book value less than $0.1 million, and the related lease liability of $1.0 million. The Company recognized a loss on termination of $0.5 million during the first quarter of 2021.
Property and Equipment
Furniture, equipment and software are recorded at cost and are depreciated using the straight-line method over the estimated useful lives of the related assets, which range from 3 to 5 years.
Property and equipment consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands, except useful lives) | | Estimated Useful Lives | | December 31, 2022 | | December 31, 2021 |
| Lab equipment | | | | 5 | Years | | 0 | | | 530 | |
| Manufacturing equipment | | | | 5 | Years | | 0 | | | 138 | |
| Computer and office equipment | | 3 | to | 5 | Years | | 510 | | | 841 | |
| Software | | | | 3 | Years | | 82 | | | 94 | |
| Total | | | | | | | 592 | | | 1,603 | |
| Less: accumulated depreciation | | | | | | | (570) | | | (1,591) | |
| Property and equipment, net | | | | | | | $ | 22 | | | $ | 12 | |
During the years ended December 31, 2022 and 2021, the Company recorded $0.01 million and $0.11 million of depreciation expense, respectively.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other liabilities consist of the following:
| | | | | | | | | | | | | | |
| | December 31, 2022 | | December 31, 2021 |
| Accrued payroll | | 264 | | | $ | 320 | |
| Accrued patient treatment costs | | 675 | | | 2,086 | |
| Accrued clinical research costs | | 841 | | | 479 | |
| Accrued manufacturing costs | | 434 | | | 328 | |
| Accrued professional services | | 207 | | | 305 | |
| Accrued other | | 56 | | | 331 | |
| Total accrued expenses and other current liabilities | | $ | 2,477 | | | $ | 3,849 | |
Warrant Derivatives
In an underwritten public offering (the “2019 Offering”), the Company issued Series 1 Redeemable Convertible Non-Voting Preferred Stock (the “Series 1 Preferred Stock”) and warrants (the “2019 Public Warrants”) to purchase its common stock. These 2019 Public Warrants are classified as liabilities in the accompanying consolidated balance sheets because the public warrants embody a conditional or unconditional obligation to repurchase the Company’s shares. The Company accounted for these warrants at fair value on the date of issuance and they are subject to re-measurement to fair value at each balance sheet date. Any change in fair value is recognized as a component of other income (expense) on the accompanying consolidated statements of operations and comprehensive loss. The Company estimates the fair value of these liabilities using the Black-Scholes valuation technique, which utilizes assumptions including (i) the fair value of the underlying stock at the valuation measurement date, (ii) volatility of the price of the underlying stock, (iii) the expected term, and (iv) risk-free interest rates. The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the warrants or a change in control, as defined. The warrants are freely exercisable at any time from the issuance date until the expiration date, provided exercise does not cause a warrant holder to exceed a pre-determined beneficial ownership limit. See Note 4 - Public Offering and Private Placement for discussions of the 2019 Public Warrants.
In November 2020 and December 2021, the Company issued prefunded warrants and accompanying warrants (the “2020 Pre-funded Warrants” and “2020 Common Warrants”, the “2021 Pre-funded Warrants” and “2021 Common Warrants”, respectively). These pre-funded warrants and common warrants are classified as equity. The pre-funded warrants and common warrants neither embody a conditional or unconditional obligation, nor are they indexed to an obligation, to repurchase the Company’s shares by transferring assets. Furthermore, the monetary value of the pre-funded warrants and accompanying warrants, at inception, is not solely or predominately based on (a) a fixed monetary amount, (b) variations in something other than the fair value of the Company’s shares, or (c) variations inversely related to the fair value of the Company’s own shares. Therefore, the pre-funded warrants and common warrants do not meet the criteria requiring liability classification. See Note 4 - Public Offering and Private Placement for discussions of the 2020 Pre-funded and Common Warrants and 2021 Pre-funded and Common Warrants.
Private Placement Option
Besides the 2019 Offering, the Company completed a private placement and entered into the 2019 Securities Purchase Agreement that contained a call option on preferred shares that are puttable outside the control of the Company. Prior to the fourth quarter of 2021, the Company recorded the option as a liability and measured the option at fair value. The Company re-measured the option to fair value at each balance sheet date and recorded changes in fair value in other income (expense) in the accompanying consolidated statement of operations and comprehensive loss at each reporting period. Offering expenses arising from the issuance of the private placement option were expensed as incurred.
The Company estimated the fair value of these liabilities using a binomial lattice model, which utilized assumptions including (i) the fair value of the underlying stock at the valuation measurement date, (ii) volatility of the price of the underlying stock, (iii) the expected term, and (iv) risk-free interest rates.
In 2021, the Company entered into the 2021 Securities Purchase Agreement, pursuant to which certain of the purchasers irrevocably waived the right to cause the Company to conduct the “First Closing” and “Second Closing” under the private placement option contained in the 2019 Securities Purchase Agreement (each term as defined in the 2019 Securities Purchase Agreement), which releases the Company of potential obligations. The Company has therefore derecognized the option liability at its balance sheet date ended on December 31, 2021.
Preferred Stock
Preferred shares issued by the Company that are subject to mandatory redemption are classified as liability instruments in the accompanying consolidated balance sheets and are measured at fair value at the date of issuance. Conditionally redeemable preferred shares (including preferred shares that feature redemption rights that are either within the control of the holder or subject to
redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified within mezzanine equity in the accompanying consolidated balance sheets. At all other times, preferred shares are classified within stockholders’ equity.
Operating Leases
At the inception of a contractual arrangement, the Company determines whether the contract contains a lease by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset in exchange for consideration over a period of time. If both criteria are met, upon lease commencement, the Company records a lease liability which represents the Company’s obligation to make lease payments arising from the lease, and a corresponding right-of-use (“ROU”) asset which represents the Company’s right to use an underlying asset during the lease term.
Operating leases are recognized as ROU assets and operating lease liabilities on the balance sheet at the commencement date based on the present value of the future minimum lease payments over the lease term calculated using the Company’s incremental borrowing rate applicable to the underlying asset unless the implicit rate is readily determinable. Any lease incentives received are deferred and recorded as a reduction of the ROU asset and amortized over the term of the lease. Rent expense, comprised of amortization of the ROU asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term. The Company determines the lease term as the noncancellable period of the lease and may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. Leases with a term of 12 months or less are not recognized on the balance sheets.
Fair Value of Financial Instruments
Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a fair value hierarchy has been established that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).
These inputs are classified into the following hierarchy:
Level 1 Inputs - quoted prices (unadjusted) in active markets for identical assets that the reporting entity has the ability to access at the measurement date;
Level 2 Inputs - inputs other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly; and
Level 3 Inputs - unobservable inputs for the assets.
The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The Company believes the recorded values of its financial instruments, including cash and cash equivalents, accounts payable, accrued liabilities, and debt approximate their fair values due to the short-term nature of these instruments.
Financial Instruments and Credit Risks
Financial instruments that potentially subject the Company to credit risk include cash and cash equivalents and accounts receivable. Cash is deposited in demand accounts in federally insured domestic institutions to minimize risk. Insurance is provided through the Federal Deposit Insurance Corporation and Security Investor Protection Corporation. Although the balances in these accounts exceed the federally insured limit from time to time, the Company has not incurred losses related to these deposits.
Equity Issuance Costs
Equity issuance costs represent costs paid to third parties in order to obtain equity financing. These costs have been netted against the proceeds of the equity issuances.
Licenses and Patents
Licenses and patent costs for technologies that are utilized in research and development and have no alternative future use are expensed as incurred. Costs related to the license of patents from third parties and internally developed patents are classified as research and development expenses. Legal costs related to patent applications and maintenance are classified as general and administrative expenses in the accompanying consolidated statements of operations and comprehensive loss.
Research and Development
Research and development expenses consist of expenses incurred in performing research and development activities, including compensation and benefits for research and development employees and consultants, facilities expenses, overhead expenses, cost of laboratory supplies, manufacturing expenses, fees paid to third parties and other outside expenses.
Research and development costs are expensed as incurred. Clinical trial and other development costs incurred by third parties are expensed as the contracted work is performed. The Company accrues for costs incurred as the services are being provided by monitoring the status of the clinical trial or project and the invoices received from its external service providers. The Company’s estimates depend on the timeliness and accuracy of the data provided by the vendorsinformation regarding the statuscompensation of each project and total project spending. The Company adjusts its accrual as actual costs become known.
Collaboration Agreements
The Company enters into collaboration agreements that include varying arrangements regarding which parties perform and bear the costs of research and development activities. The Company may share the costs of research and development activities with a collaborator, or the Company may be reimbursed for all or a significant portion of the costs of the Company’s research and development activities. The Company records its internal and third-party development costs associated with these collaborations as research and development expenses. When the Company is entitled to reimbursement of all or a portion of the research and development expenses that it incurs under a collaboration, the Company records those reimbursable amounts as a deduction to the research and development expenses. If the collaboration is a cost-sharing arrangement in which both the Company and its collaborator perform development work and share costs, the Company also recognizes, as research and development expenses in the period when its collaborator incurs development expenses, the portion of the collaborator’s development expenses that the Company is obligated to reimburse.
Contract Manufacturing Services
Contract manufacturing services are expensed as incurred. Prepaid expenses are capitalized and amortized as services are performed.
Share-Based Compensation
The Company accounts for share-based compensation based on the measurement and recognition of compensation expense for all share-based payment awards made to employees, directors and consultants to be recognized in the financial statements, based on their fair value.
The Company calculates the fair value of stock options on the date of grant using the Black-Scholes pricing model, which requires a number of estimates, including the expected life of awards, interest rates, stock volatility and other assumptions. Restricted stock is measured based on the fair market value of the underlying stock on the date of grant. If the awards are classified as liability awards, the fair value is remeasured at each reporting date and the compensation expense is adjusted accordingly. Additionally, the Company applies a forfeiture rate to estimate the number of grants that will ultimately vest, as applicable, and adjusts the expense as these awards vest. All of the Company’s current equity awards are service based awards and the share-based compensation cost is being recognized over the requisite service period of the awards on a straight-line basis.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. This method also requires the recognition of future tax benefits such as net operating loss and tax credit carry forwards, to the extent that realization of such benefits is more likely than not. A valuation allowance is recorded when the realization of future tax benefits is uncertain. The Company records a valuation allowance for the full amount of deferred tax assets, which would otherwise be recorded for tax benefits relating to the operating loss and tax credit carryforwards, as realization of such deferred tax assets cannot be determined to be more likely than not.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statement of operations in the period that includes the enactment date.
As of December 31, 2022, the Company had recorded a full valuation allowance on its net U.S. and foreign deferred tax assets because the Company expects that it is more likely than not that its deferred tax assets will not be realized in the foreseeable future. Should the actual amounts differ from our estimates, the amount of the valuation allowance could be materially impacted.
The Company accounts for uncertain tax positions in accordance with the provisions of the Accounting Standards Codification (ASC) 740, Income Taxes. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the
benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. As of December 31, 2022 and 2021, the Company had no uncertain tax positions and no interest or penalties have been charged foronly two executive officers during the years ended December 31, 2022 and 2021. The Company is subjectWe refer to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The tax years 2005 through 2022 remain open to examination bythese executive officers as our named executive officers.
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| Name and Principal Position | | Year | | Salary($) | | Option Awards($)(1) | | Non-Equity Incentive Plan Compensation($)(2) | | All Other Compensation($)(3) | | Total ($) |
| Richard A. Fair | | 2022 | | $602,147 | | $431,387 | | $337,804 | | $22,445 | | $1,393,783 |
| President and Chief Executive Officer | | 2021 | | $600,686 | | $551,891 | | $293,924 | | $20,673 | | $1,467,174 |
Charity D. Scripture, MS, PharmD(4) | | 2022 | | $400,000 | | $269,617 | | $163,200 | | $1,823 | | $834,640 |
| Chief Development Officer | | 2021 | | $157,633 | | $287,764 | | $67,575 | | $1,020 | | $513,992 |
(1) In accordance with SEC rules, this column reflects the U.S. Internal Revenue Service.
Comprehensive Loss
Comprehensive loss is defined as the change in equity of a business enterprise during a period, from transactions, and other events and circumstances from non-owner sources. Components of other comprehensive loss includes, among other items, unrealized gains and losses on the changes in fair value of investments and unrealized gains and losses on the change in foreign currency exchange rates. These components are added, net of their related tax effect, to the reported net loss to arrive at comprehensive loss.
Net Loss and Net Loss per Share of Common Stock Attributable to Common Stockholders
Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period without consideration for common stock equivalents. Diluted earnings per share is based on the more dilutive method between the two-class method and the treasury stock method and includes the effect from potential issuance of ordinary shares, such as shares issuable pursuant to the conversion of preferred stock to common stock, exercise of warrants to purchase common stock, exercise of stock options, and vesting of restricted stock units. For periods of net loss, diluted net loss per share is calculated similarly to basic net loss per share.
The following outstanding shares of common stock equivalents were excluded from the computations of diluted earnings per share of common stock attributable to common stockholders for the periods presented as the effect of including such securities would be anti-dilutive.
| | | | | | | | | | | | | | |
| | December 31, 2022 | | December 31, 2021 |
| Anti-dilutive common stock equivalents: | | Number of Shares |
| Redeemable convertible series 1 preferred stock | | 4,520,000 | | 4,520,000 | |
| Warrants to purchase common stock | | 5,750,000 | | 5,750,000 | |
| Options to purchase common stock | | 3,678,176 | | 2,140,618 |
| Unvested shares of restricted stock units | | 223,133 | | 137,504 |
| Total anti-dilutive common stock equivalents | | 14,171,309 | | 12,548,122 |
New Accounting Requirements and Disclosures
There are no accounting standards updates (“ASUs”) that have been recently adopted or effective that have had or are expected to have a material effect on our consolidated financial statements.
NOTE 2 - FAIR VALUE OF MEASUREMENTS AND INVESTMENT SECURITIES
Investment Securities
The following tables present the Company’s investment securities (including those classified on the Company’s balance sheet as cash equivalents) that are measured at fair value on a recurring basis as of December 31, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value at December 31, 2022 | | Fair Value at December 31, 2021 |
| (in thousands) | Level 1 | | Level 2 | | Level 3 | | Level 1 | | Level 2 | | Level 3 |
| Cash Equivalents: | | | | | | | | | | | |
| Money market funds and treasury bills | $ | 20,024 | | | $ | — | | | $ | — | | | $ | 42,487 | | | $ | — | | | $ | — | |
| Total Cash Equivalents | $ | 20,024 | | | $ | — | | | $ | — | | | $ | 42,487 | | | $ | — | | | $ | — | |
Money market funds and U.S. Treasury bills are valued based on various observable inputs such as benchmark yields, reported trades, broker/dealer quotes, benchmark securities and bids.
Warrant Derivative Liability and Private Placement Option Liability
The Company’s financial liabilities recorded at fair value on a recurring basis include the fair values of the warrant derivative liability and the private placement option liability prior to its derecognition in December 2021. Inputs used to determine estimated fair value (Level 3) of the warrants include theaggregate grant date fair value of the underlying stock relative to the warrant exercise price at the valuation measurement date, volatility of the price of the underlying stock, the expected term of the warrants,option awards granted during 2022 and risk-free interest rates which are derived from the U.S. Treasury yield curve2021, as applicable, computed in effect based on the expected term of the warrants.
The fair values of the warrant derivative liability and the private placement option liability, prior to its derecognition in December 2021, are classified as current liabilitiesaccordance with Financial Accounting Standard Board Accounting Standards Codification Topic 718 for stock-based compensation transactions (ASC 718). Assumptions used in the accompanying consolidated balance sheets. These liabilitiescalculation of these amounts are classified as current liabilitiesincluded in Note 6 to our audited financial statements included in our Annual Report on the balance sheet because the exercisability of such warrants is outside of the Company’s control, and the Company does not have the unconditional right to defer settlement beyond 12 months. On December 4, 2021, the Company entered into the 2021 Securities Purchase Agreement, pursuant to which certain of the investors irrevocably waived the right to cause the Company to conduct the “First Closing” and “Second Closing” under the private placement option contained in the 2019 Securities Purchase Agreement (each term as defined in the 2019 Securities Purchase Agreement). The Company derecognized the private placement option liability and recorded a gain on change in the fair valueForm 10-K for the year ended December 31, 2022. These amounts do not reflect the actual economic value that will be realized by the named executive officer upon the vesting of the stock options, the exercise of the stock options, or the sale of the common stock underlying such stock options. For more information, see “—Change in Control Severance Benefits” below.
(2) Amounts represent the sum of quarterly performance-based bonuses earned for 2021 of $2.8 millionand for 2022, respectively. For more information, see “—Bonus Opportunity” below.
(3) Amounts reflect the following for 2022: for Mr. Fair, $19,833 for health insurance costs, $1,370 in cell phone and internet reimbursement costs and $1,242 for life insurance premiums; and for Dr. Scripture, $45 for health insurance costs, $1,370 in cell phone and internet reimbursement costs, and $408 for life insurance premiums. Amounts reflect the accompanying statements of operationsfollowing for 2021: for Mr. Fair, $18,411 for health insurance costs, $1,020 in cell phone reimbursement costs and comprehensive loss.$1,242 for life insurance premiums; and for Dr. Scripture, $1,020 in cell phone reimbursement costs.
Annual Base Salary
The fair valuecompensation of our named executive officers is determined and approved by the warrants has been estimated with the following weighted-average assumptions, including the most sensitive input, volatility:
| | | | | | | | | | | | | | |
| | December 31, 2022 | | December 31, 2021 |
| Risk-free interest rate | | 4.1 | % | | 1.22 | % |
| Volatility | | 102 | % | | 94 | % |
| Expected life (years) | | 3.63 | | 4.64 |
Compensation Committee of our Board. The following table provides the warrant derivative reported at fair value and measured on a recurring basis:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value at December 31, 2022 | | Fair Value at December 31, 2021 |
| (in thousands) | Level 1 | | Level 2 | | Level 3 | | Level 1 | | Level 2 | | Level 3 |
| Warrant derivative liability | $ | — | | | $ | — | | | $ | 809 | | | $ | — | | | $ | — | | | $ | 2,773 | |
| | | | | | | | | | | |
The ending balance of the Level 3 financial instruments presented above represents the Company’s best estimate of valuation and may not be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments.
NOTE 3 - LEASES
The Company entered into two agreements and exited its Houston and South San Francisco office locations during the first quarter of 2021 and, therefore, did not have any lease liabilities as of December 31, 2022. In connection with the lease termination and exit of the Houston office, a third party also acquired all of the property and equipment associated with the location. The consideration included an unsecured promissory note of $0.2 million with a simple interest of 4% per annum, which was due and payable on or before June 30, 2022. The payment, including accrued interest, was received in full in July 2022.
Components of lease cost are2022 annual base salaries were as follows:
| | | | | | | | | | | |
(in thousands) | Year Ended December 31, 2022 | | Year Ended December 31, 2021 |
Finance lease cost: | | | |
Amortization of leased assets | $ | — NAME | | | $ | 16 2022 BASE | |
Interest on lease liabilities | — Richard A. Fair | | | 5 $602,147 | |
Operating lease cost | — Charity D. Scripture, MS, PharmD | | | 56 | |
Short-term lease cost | — | | | 53 | |
Total lease cost | $ | — | | | $ | 130 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | 400,000 | |
SupplementalBonus Opportunity
In addition to base salaries, our named executive officers are eligible to receive performance-based cash flow informationbonuses. Beginning with the first quarter of 2021, the Compensation Committee implemented a quarterly bonus framework in lieu of traditional annual
performance bonuses. The intent of the new framework was to tightly align performance-based bonuses to strong short-term execution in line with the Company’s long-term strategy. Under this new framework, the Compensation Committee approved three-year strategic Objectives and non-cash activityKey Results (“OKRs”) designed to maximize long-term value for our stockholders. Each quarter, our management proposes tactical OKRs for Compensation Committee review and approval reflecting the progress our management believes is necessary to achieve in that quarter to successfully deliver the three-year strategic OKRs. At the end of each quarter, the Compensation Committee evaluates management’s performance against each of these tactical quarterly OKRs and determines an overall level of achievement, expressed as a percentage. To determine a quarterly bonus payout, this percentage is then multiplied by the applicable annual target bonus percentage for each employee (as a percentage of base salary). For 2022, the annual target bonus percentage of base salary was 55% for Mr. Fair; and the annual target bonus percentage of base salary was 40% for Dr. Scripture.
For 2022, the Compensation Committee approved OKRs related to:
•BPX-601 – Patient enrollment and clinical trial execution, including mitigation of national fludarabine shortage; clinical trial site activation; clinical trial modification to enable rimiducid dose optimization; and completion of certain cell and virus CMC and regulatory activities necessary to maintain supply and prepare for late-stage trials
•BPX-603 – Clinical trial site selection and activation; patient enrollment; and clinical trial modification to facilitate enrollment by enabling apheresis of patients prior to treatment with approved HER2-directed therapies
•Rimiducid – Process development and characterization activities to prepare for late-stage trials and potential future regulatory approvals; completion of initial steps in production of a new lot of Drug Substance; completion of initial activities to develop an alternative formulation of rimiducid
Based on the Compensation Committee’s evaluation of our performance, which included enrollment and analysis of interim results of BPX-601 in metastatic castration-resistant prostate cancer patients presented at the ASCO Genitourinary Cancers Symposium in February, 2023; alignment with FDA via Type C meeting on certain CMC plans for BPX-601; clinical trial modifications to enable rimiducid dose optimization in the BPX-601 trial and proactive apheresis of BPX-603 patients in earlier lines of treatment; activation of seven new clinical trial sites; extension of an existing manufacturing agreement with cell therapy CDMO; technical improvements in rimiducid manufacturing processes; and identification of several rimiducid subcutaneous formulation candidates, the % of target bonus achieved was: 75% for the first quarter; 131.25% for the second quarter; 123.75% for the third quarter; and 78% for the fourth quarter.
Equity-Based Incentive Awards
Our equity-based incentive awards are designed to align our interests with those of our employees and consultants, including our named executive officers. Our Board or the Compensation Committee approves equity grants. Vesting of equity awards is generally tied to continuous service with us and serves as an additional retention measure. Our executives as well as our other employees, generally are awarded an initial new hire grant upon commencement of employment. Additional grants may occur periodically in order to specifically incentivize employees, including our executives with respect to achieving certain corporate goals or to reward such employees for exceptional performance.
Prior to the Company’s operating and finance leases are as follows:
| | | | | | | | | | | |
(in thousands) | Year Ended December 31, 2022 | | Year Ended December 31, 2021 |
Cash paid for amounts included in the measurement of lease liabilities: | | | |
Operating cash flows from operating leases | $ | — | | | $ | 71 | |
Operating cash flows from finance leases | — | | | 5 | |
Financing cash flows from finance leases | — | | | 35 | |
NOTE 4 - PUBLIC OFFERING AND PRIVATE PLACEMENT
December 2021 Private Placement
On December 4, 2021, the Company entered into a Securities Purchase Agreement (the “2021 Securities Purchase Agreement”) with certain institutional investors (the “Purchasers”adoption of our 2019 Equity Incentive Plan (“2019 Plan”), we granted all equity awards pursuant to our 2014 Equity Incentive Plan (the “2014 Plan”). Upon and following the adoption of the 2019 Plan, all equity awards are granted under the 2019 Plan. We have primarily granted equity awards in the form of stock options and restricted stock unit awards. All options are granted with a per share exercise price no less than the fair market value of a share of our common stock on the date of the grant of such award, as determined by our Board or the Compensation Committee. Generally, our stock option and restricted stock unit awards vest over a four-year period subject to the holder’s continuous service to us.
For 2022, the Compensation Committee determined that equity grants for our named executive officers should consist of stock options, which the Company agreedCompensation Committee believes continue to issuebe a key tool in serving to align the interests of our executive officers and our stockholders; stock options are inherently performance based, and automatically link executive pay to stockholder return, as the value realized, if any, by the executive from an award of stock options is dependent upon, and directly proportionate to, appreciation in stock price. Executives will only receive value from the stock option awards if the price of our common stock increases above the price at time of grant and remains above as the stock options continue to vest. Stock options also do not have downside protection, and the awards will not provide value to the Purchasers 2021 pre-funded warrantsholder when the stock price is below the exercise price.
As part of the Company’s annual equity compensation review, in August 2022 Mr. Fair received an option to purchase an aggregate of 20,559,210400,000 shares of itsour common stock and accompanying 2021 common warrantsDr. Scripture received an option to purchase an aggregate of 2,055,920250,000 shares of our common stock. Each pre-funded warrant to purchase one share of common stock will be sold together with a warrant to purchase one-tenth of one share of common stockThe options were granted at a combined unit price of $1.7024. The pre-funded warrants will be immediately exercisable at anper share exercise price of $0.0001 per share of common stock. The accompanying common warrants will be immediately exercisable at an exercise price of $1.69 per share of common stock and will expire seven years from$1.44, equal to the fair market value on the date of issuance.
The gross proceedsgrant, and vest as follows: one third of the shares subject to the Company fromstock options will vest and become exercisable on August 15, 2023, and the private placement were approximately $35.0 million before deducting placement agent commissionsremaining shares subject to the stock options will vest and offering expenses payablebecome exercisable in 24 equal monthly installments thereafter, subject to their continued service with us.
Agreements with our Named Executive Officers
Below are descriptions of our employment agreements with our named executive officers. For a discussion of the severance pay and other benefits to be provided in connection with a termination of employment and/or a change in control under the arrangements with our named executive officers, please see “—Potential Payments Upon Termination or Change in Control” below.
Richard Fair. We entered into an employment agreement with Mr. Fair in January 2017 that governs the terms of his employment with us, under which Mr. Fair’s base salary and annual target performance bonus are periodically reviewed and adjusted by the Company, excluding any proceedsCompensation Committee from time to time. The employment agreement also provides that Mr. Fair is eligible to receive certain severance benefits, the terms of which are described below under “—Change in Control Severance Benefits.”
Charity D. Scripture, MS, PharmD. We entered into an amended and restated employment agreement with Dr. Scripture which became effective in December 2021that governs the terms of her employment with us, under which Dr. Scripture’s base salary and annual target performance bonus are periodically reviewed and adjusted by the Compensation Committee from time to time. The amended and restated employment agreement also provides that Dr. Scripture is eligible to receive certain severance benefits, the terms of which are described below under “—Change in Control Severance Benefits.”
Change in Control Severance Benefits
Regardless of the manner in which a named executive officer’s service terminates, the named executive officers are entitled to receive amounts earned during their term of service. Each of our named executive officers holds equity awards under our equity incentive plans that were granted subject to the general terms of our equity incentive plans and form of award agreements. A description of the termination and change of control provisions in such equity incentive plans and awards granted thereunder is provided below under “—Equity Benefit Plans” and the specific vesting terms of each named executive officer’s awards are described below under “-Outstanding Equity Awards at Fiscal Year-End.”
Mr. Fair. Under the terms of Mr. Fair’s employment agreement, Mr. Fair’s employment is “at will” and may be receivedterminated at any time. Under his employment agreement, upon exercisea termination without “cause” or resignation for “good reason” (each as defined below), Mr. Fair is eligible to receive payments equal to his base salary for 12 months, COBRA premium payments for 12 months and a lump sum payment equal to his pro-rated target annual performance bonus. If such termination without cause or resignation for good reason occurs immediately prior to, on or within the 12 months following a change of control (as defined in the 2014 Plan), instead of the accompanying warrants.
In addition, pursuantbenefits described above, Mr. Fair will be eligible to receive (1) continued base salary payments and COBRA premium payments for 12 months, (2) a lump sum payment equal to his full target bonus for the 2021 Securities Purchase Agreement, certainyear of the Purchasers irrevocably waived the righttermination, and (3) full vesting acceleration of all outstanding equity awards that are subject to cause the Company to conduct the “First Closing” and “Second Closing”time-based vesting. All severance benefits under the 2019 Securities Purchase Agreement (each termemployment agreement are contingent upon Mr. Fair executing an effective release and waiver of claims against us as well as complying with certain other post-termination obligations to us.
Dr. Scripture. Under the terms of Dr. Scripture’s amended and restated employment agreement, Dr. Scripture’s employment is “at will” and may be terminated at any time. Under her amended and restated employment agreement, upon a termination without “cause” (as defined below), Dr. Scripture is eligible to receive payments equal to her base salary for 12 months and a lump sum payment equal to her pro-rated target annual performance bonus. If such termination without cause occurs immediately prior to, on or within the 12 months following a change of control (as defined in the 2019 Securities Purchase Agreement)Plan), which releasesinstead of the Company of potential cash or equity obligations. The representations, warranties and covenants contained in the 2021 Securities Purchase Agreement were made onlybenefits described above, Dr. Scripture will be eligible to receive (1) continued base salary payments for purposes of such agreement and as of specific dates, were solely12 months, (2) a lump sum payment equal to her full target bonus for the benefityear of the parties to such agreementtermination, and may be(3) full vesting acceleration of all outstanding equity awards that are subject to limitations agreed upon bytime-based vesting. In April 2023, the contracting parties.
November 2020 Underwritten Offering
On November 2, 2020, the Company closedCompensation Committee approved providing Dr. Scripture with COBRA premium payments for 12 months as an underwritten offering of 1,040,000 shares of its common stock, 2020 pre-funded warrants to purchase 3,109,378 shares of its common stock, and accompanying 2020 common warrants to purchase up to an aggregate of 4,149,378 shares of its common stock. Each share of common stock and pre-funded warrant to purchase one share of common stock was sold together with a common warrant to purchase one share of common stock. The public offering price of each share of common stock and accompanying common warrant was $6.025 and $6.024 for each pre-funded warrant. The pre-funded warrants were immediately exercisable at a price of $0.001 per share of common stock. The common warrants were immediately exercisable at an exercise price of $6.50 per share of common stock and will expire five years from the date of issuance. The shares of common stock and pre-funded warrants, and the accompanying common warrants, were issued separately and were immediately separable upon issuance. The gross proceeds to the Company were approximately $25.0 million before deducting underwriting discounts and commissions and other offering expenses.
August 2019 Public Offering
On August 16, 2019, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Jefferies LLC and Wells Fargo Securities, LLC, as representatives of the several underwriters named therein (the “Underwriters”), relating to an underwritten public offering (the “2019 Offering”) of 575,000 shares of the Series 1 Redeemable Convertible Non-Voting Preferred Stock of the Company (the “Series 1 Preferred Stock”) and warrants (the “2019 Public Warrants”) to purchase up to 5,750,000 shares of its common stock. Each share of Series 1 Preferred Stock was sold together with a warrant to purchase 10 shares of common stock at a combined price to the public of $100.00. Under certain circumstances, each warrant to purchase 10 shares of common stock will be exercisable, at the irrevocable election of the holder, for one share of Series 1 Preferred Stock. The offering closed on August 21, 2019, and the net proceeds to the Company from the Offering was approximately $53.8 million, after deducting underwriting discounts and commissions and offering expenses payable by the Company, and excluding any proceeds that the Company may receive upon exercise of the Public Warrants.
All of the 2019 Public Warrants sold in the 2019 Offering have an exercise price of $13.00 per share of common stock or, in certain circumstances, for $130.00 per share of Series 1 Preferred Stock, subject to proportional adjustments in the event of stock splits or combinations or similar events. The 2019 Public Warrants were immediately exercisable upon issuance, provided that the holder is prohibited, subject to certain exceptions, from exercising a warrant for shares of common stock to the extent that immediately prior to or after giving effect to such exercise, the holder, together with its affiliates and other attribution parties, would own more than 9.99% of the total number of shares of common stock then issued and outstanding, which percentage may be changed at the holder’s election to a lower percentage at any time or to a higher percentage not to exceed 19.99% upon 61 days’ notice to the Company. The Public Warrants will expire on August 21, 2026, unless exercised prior to that date.
The following table reflects the fair value roll forward reconciliation of the 2019 Public Warrants liabilities for the period ended December 31, 2022:
| | | | | | |
(in thousands) | Warrant Derivative Liability | |
Balance, December 31, 2021 | $ | 2,773 | | |
Change in fair value | (1,964) | | |
Balance, December 31, 2022 | $ | 809 | | |
Private Placement
On August 16, 2019, the Company entered into a securities purchase agreement (the “2019 Securities Purchase Agreement”) with certain institutional investors named therein (the “Purchasers”), pursuant to which the Company agreed to issue in a private placement (i) 350,000 shares of its Series 2 Redeemable Convertible Non-Voting Preferred Stock (the “Series 2 Preferred Stock”), at a purchase price of $100.00 per share, and related warrants to purchase up to 2,800,000 shares of common stock at an exercise price of $10.00 per share, and (ii) 250,000 shares of its Series 3 Redeemable Convertible Non-Voting Preferred Stock (the “Series 3 Preferred Stock” and, together with the Series 1 Preferred Stock and Series 2 Preferred Stock, the “Preferred Stock”), at a purchase price of $140.00 per share, and related warrants to purchase up to 875,000 shares of common stock at an exercise price of $14.00 per share. The right of the Purchasers to purchase such securities was waived, effective as of December 4, 2021, pursuant to the 2021 Purchase Agreement.
The Company received $11.2 million in net option fee proceeds, net of offering costs, upon the execution of the 2019 Securities Purchase Agreement. Pursuant to the 2021 Securities Purchase Agreement entered into on December 4, 2021, the Company derecognized the private placement option liability, and the Company is no longer obligated to issue the Series 2 Preferred Stock, Series 3 Preferred Stock, or any associated Private Warrants.
A summary of warrants outstanding and exercisable as of December 31, 2022 is as follows:
| | | | | | | | | | | | | | | | | | | | |
| Warrants Outstanding | | Warrants Exercisable |
| Year Issued | Number Outstanding | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | | Number Exercisable | Weighted Average Exercise Price |
| | (in years) | (per share) | | | (per share) |
| 2019 | 5,750,000 | 3.64 | $ | 13.00 | | | 5,750,000 | $ | 13.00 | |
| 2020 | 4,149,378 | 2.84 | $ | 6.50 | | | 4,149,378 | $ | 6.50 | |
| 20201 | 1,659,752 | — | $ | — | | | 1,659,752 | $ | — | |
| 2021 | 2,055,920 | 5.94 | $ | 1.69 | | | 2,055,920 | $ | 1.69 | |
| 20212 | 20,559,210 | — | $ | — | | | 20,559,210 | $ | — | |
| 34,174,260 | | | | | 34,174,260 | |
NOTE 5 - REDEEMABLE CONVERTIBLE PREFERRED STOCK
In August 2019, the Company sold Series 1 Preferred Stock pursuant to the 2019 Offering. The Company has 10,000,000 authorized shares of preferred stock with a par value of $0.01, of which the Company has designated 1,517,500 shares as Series 1 redeemable convertible non-voting preferred stock, 350,000 shares as Series 2 redeemable convertible non-voting preferred stock and 250,000 shares as Series 3 redeemable convertible non-voting preferred stock. There were 452,000 shares of Series 1 Preferred Stock issued and outstanding as of both December 31, 2022 and December 31, 2021. The Series 1 Preferred Stock was issued together with warrants for a combined purchase price of $100.00 per share of Series 1 Preferred Stock and one warrant to purchase 10 shares of common stock. There were no shares converted during December 31, 2022 and December 31, 2021.
There were no shares of Series 2 or 3 Preferred Stock issued or outstanding as of December 31, 2021. The Series 2 and 3 Preferred Stock were cancelled during 2021 pursuant to the 2021 Securities Purchase Agreement.
As of December 31, 2022 and 2021, the Company classified the Series 1 preferred stock within mezzanine equity, as the Series 1 preferred stock is redeemable at the option of the holders upon passage of time, which is outside of the Company’s control to prevent.
The Series 1 Preferred Stock is not currently redeemable and is only redeemable upon a fundamental change or, at the option of the holder, on or after the date that is the fifth (5th) anniversary of the initial issue date of the applicable series of preferred stock, if certain Conditions have not been met (described below) before that date.
The “Conditions” mean: (1) the closing price of the Company’s common stock has been equal to or exceeded $25.00 per share for 180 calendar days (for determining if the Conditions are met for the Series 1 Preferred Stock) for 180 calendar days; (2) the 50-day average trading volume of the Company’s common stock on the Nasdaq stock market is greater than 50,000 shares; and (3) a Phase 3 or Phase 2 pivotal clinical trial for one of the Company’s CAR-T product candidates has been initiated, meaning that at least one clinical trial site has been activated.
A subsequent adjustment of the amount presented within mezzanine equity to its redemption amount is necessary if it is probable that the instrument will become redeemable.The Company does not believe a fundamental change is considered probable until it occurs. However, as of December 31, 2022, the Company believes that it is probable that the Conditions will not be met before the fifth (5th) anniversary of the initial issue date of the applicable series of preferred stock. Therefore, the Company will prospectively accrete the Series 1 Preferred Stock to its redemption amount of $45.2 million over the future reporting periods until the earliest redemption date.
Optional Conversion
Each share of Preferred Stock is initially convertible into 10 shares of Common Stock. The conversion price at which Preferred Stock may be converted into shares of common stock is subject to adjustmentadditional severance benefit in connection with regular and change of control severance scenarios. All severance benefits under the employment agreement are contingent upon Dr. Scripture executing an effective release and waiver of claims against us as well as complying with certain specified events.
1The pre-funded warrants issued on November 2, 2020 do not have an expiration date.
2The pre-funded warrants issued on December 7, 2021 do not have an expiration date.
Redemption
Until the applicable Transition Date (defined below), at any time on or after the date that is the fifth (5th) anniversaryFor purposes of the initial issue date of the applicable series of preferred stock, all or any portion of the preferred stock is redeemable at the option of the holder at a redemption price of $100.00 per share (for Series 1 Preferred Stock). The “Transition Date”Mr. Fair’s employment agreement and Dr. Scripture’s amended and restated employment agreement, “cause” generally means the first date following August 21, 2021, on which each of the Conditions (as defined below) is met.
The “Conditions” mean: (1) the closing price of the Company’s common stock has been equal to or exceeded $25.00 per share for 180 calendar days (for determining if the Conditions are met for the Series 1 Preferred Stock) for 180 calendar days; (2) the 50-day average trading volume of the Company’s common stock on the Nasdaq stock market is greater than 50,000 shares; and (3) a Phase 3 or Phase 2 pivotal clinical trial for one of the Company’s CAR-T product candidates has been initiated, meaning that at least one clinical trial site has been activated.
Dividends
Shares of Preferred Stock will be entitled to receive dividends equal to (on an as-if-converted-to-common stock basis), and in the same form and manner as, dividends actually paid on shares of common stock.
Liquidation
Until the applicable Transition Date, in the event of a liquidation, dissolution, winding up or deemed liquidation, holders of the Preferred Stock will receive a payment equal to the applicable per share purchase price of their Preferred Stock before any proceeds are distributed to the holders of Common Stock. The liquidation preferences, protective voting provisions and redemption rights of the Preferred Stock terminate upon the occurrence of certain events.
Voting
Sharesany of Preferred Stock will generally have no voting rights, exceptthe following events, conditions or actions with respect to the extent expressly provided in the Company’s certificate of incorporationexecutive: (1) willful misconduct that is demonstrably and materially injurious to our reputation, financial condition, or as otherwise required by law.
NOTE 6 - SHARE-BASED COMPENSATION PLANS
The Company has five share-based compensation plans, including the 2019 Equity Incentive Plan the (“2019 Plan”) which was adopted in June 2019. Each plan authorizes the granting of shares of common stock and/or options to purchase common stock to employees and directors of the Company, as well as non-employee consultants, and allows the holder of the option to purchase common stock at a stated exercise price. The only plan under which the Company may currently grant equity awards is the 2019 Equity Incentive Plan although there remain outstanding awards under the other four plans. Options vest according to the terms of the grant, which may be immediately or based on the passage of time, generally over two to four years, and have a term of up to 10 years. Unexercised stock options terminate on the expiration date of the grant. The Company recognizes the share-based compensation expense over the requisite service period of the individual grantees, which generally equals the vesting period.
2019 Equity Incentive Plan
The 2019 Plan is designed to secure and retain the services of the Company’s employees and directors. The 2019 Plan is successor to and continuation of the 2014 Equity Incentive Plan, as amended, the (“2014 Plan”), and no additional awards may be issued from the 2014 Plan. Subject to adjustment for certain changes in the Company’s capitalization, the aggregate number of shares of common stock that may be issued under the 2019 Plan (the “Share Reserve”) will not exceed the sum of (i) 250,000 new shares, plus (ii) an additional 600,000 shares that were approved at the Company’s Special Meeting of Stockholders in January 2020, plus (iii) an additional 500,000 shares that were approved at the Company’s Annual meeting of Stockholders in June 2020, plus (iv) an additional 500,000 shares that were approved at the Company’s Annual Meeting of Stockholders in June 2021, plus (v) an additional 2,250,000 shares that were approved at the Company’s Annual meeting of Stockholders in June 2022 and plus (vi) the Prior Plans’ Returning Shares, as defined in the 2019 Plan documents, in an amount not to exceed 600,540 shares, including any stock award granted under the 2014 Plan, 2011 Stock Option Plan, as amended, or 2006 Stock Option Plan, as amended, that were outstanding as of the date the 2019 Plan were approved by the Company’s stockholders, as such shares become available from time to time.
The following shares of common stock (the “2019 Plan Returning Shares”) will also become available again for issuance under the 2019 Plan: (i) any shares subject to a stock award granted under the 2019 Plan that are not issued because such stock award expires or otherwise terminates without all of the shares covered by such stock award having been issued; (ii) any shares subject to a stock award granted under the 2019 Plan that are not issued because such stock award is settled in cash; and (iii) any shares issued pursuant to a stock award granted under the 2019 Plan that are forfeited back to or repurchased by the Company because of abusiness relationships; (2) failure to vest.
The 2019 Plan provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, and other stock awards.
At December 31, 2022 and 2021, outstanding awards were comprised of the following:
| | | | | | | | | | | |
| December 31, 2022 | | December 31, 2021 |
| Options | 3,340,109 | | | 2,074,858 | |
| Inducement option awards | 338,067 | | | 65,760 | |
| Restricted stock units | 223,133 | | | 137,004 | |
| Inducement restricted stock units | — | | | 500 | |
| Total outstanding awards | 3,901,309 | | | 2,278,122 | |
Grant Date Fair Value
The valuation of the share-based compensation awards is a significant accounting estimate that requires the use of judgments and assumptions that are likely to have a material impact on the financial statements. The fair value of option grants is determined using the Black-Scholes option-pricing model. Expected volatilities utilized in the model are based on historical volatility of the Company’s common stock. Similarly, the dividend yield is based on historical experience and the estimate of future dividend yields. The risk-free interest rate is derived from the U.S. Treasury yield curve in effect at the time of grant. The expected term of the options is based on the average period the stock options are expected to remain outstanding. As the Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior, the expected term is calculated as the midpoint between the weighted-average vesting term and the contractual expiration period also known as the simplified method.
The fair value of the option grants has been estimated, with the following weighted-average assumptions:
| | | | | | | | | | | | | | |
| | Year Ended |
| | December 31, 2022 | | December 31, 2021 |
| Options granted | | 1,712,000 | | | 1,023,000 | |
| Weighted-average exercise price | | 1.39 | | | 2.80 | |
| Weighted-average grant date fair value | | 1.04 | | | 2.02 | |
| Assumptions: | | | | |
| Risk-free interest rate | | 2.98 | % | | 0.92 | % |
| Volatility | | 90 | % | | 90 | % |
| Expected life (years) | | 5.88 | | 5.63 |
| Expected dividend yield | | — | | | — | |
Share-Based Compensation Activity
The following table summarizes the stock option activity for all stock plans during the year ended December 31, 2022 and 2021 as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Options | | Outstanding Stock Options | | Weighted Average Exercise Price | | Weighted Average Remaining Contractual Term (in years) | | Aggregate Intrinsic Value (in thousands) |
| Balance at December 31, 2020 | | 1,510,968 | | | $ | 27.36 | | | 8.19 | | $ | 379 | |
| Granted | | 1,023,000 | | | $ | 2.80 | | | | | |
| Exercised | | — | | | | | | | |
| Forfeited | | (393,350) | | | $ | 30.66 | | | | | |
| Balance at December 31, 2021 | | 2,140,618 | | | $ | 15.01 | | | 8.48 | | $ | — | |
| Granted | | 1,712,000 | | | $ | 1.39 | | | | | |
| Exercised | | — | | | | | | | |
| Forfeited | | (174,442) | | | $ | 10.41 | | | | | |
| Balance at December 31, 2022 | | 3,678,176 | | | $ | 8.89 | | | 8.61 | | $ | — | |
| Exercisable at December 31, 2022 | | 1,599,680 | | | $ | 17.95 | | | 7.59 | | $ | — | |
There were no options exercised or cash received for the years ended December 31, 2022 and December 31, 2021.
The following table summarizes the options outstanding and exercisable at December 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Options Outstanding | | Options Exercisable | |
| Exercise Price | | Total Shares | | Weighted Average Remaining Contractual Term (in years) | | Weighted Average Exercise Price | | Total Shares | | Weighted Average Remaining Contractual Term (in years) | | Weighted Average Exercise Price | |
| $1.06 to $1.32 | | 339,000 | | | 9.59 | | $ | 1.15 | | | — | | | 0.00 | | $ | — | | |
| $1.33 to $1.50 | | 1,325,000 | | | 9.62 | | $ | 1.44 | | | — | | | 0.00 | | $ | — | | |
| $1.51 to $2.93 | | 877,687 | | | 8.72 | | $ | 2.57 | | | 531,350 | | | 8.68 | | $ | 2.66 | | |
| $2.94 to $3.88 | | 524,000 | | | 7.99 | | $ | 2.99 | | | 524,000 | | | 7.99 | | $ | 2.99 | | |
| $3.89 to $234.70 | | 612,489 | | | 6.27 | | $ | 43.38 | | | 544,330 | | | 6.15 | | $ | 47.27 | | |
| Total | | 3,678,176 | | | 8.61 | | $ | 8.89 | | | 1,599,680 | | | 7.59 | | $ | 17.95 | | |
The following table summarizes the stock award activity for all restricted stock units during the year ended December 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Awards | | Outstanding Restricted Stock Awards and Units | | Weighted-Average Grant Date Fair Value Per Share | | Outstanding Aggregate Intrinsic Value (in thousands) | | Total Fair Value of Restricted Awards Vested (in thousands) |
| Balance at December 31, 2020 | | 129,861 | | | $ | 5.59 | | | $ | 458 | | | |
| Granted | | 136,626 | | | $ | 3.54 | | | | | |
| Vested | | (126,477) | | | $ | 5.05 | | | $ | 413 | | | $ | 659 | |
| Forfeited | | (2,506) | | | $ | 4.85 | | | | | |
| Balance at December 31, 2021 | | 137,504 | | | $ | 4.06 | | | $ | 205 | | | |
| Granted | | 220,633 | | | $ | 1.13 | | | | | |
| Vested | | (135,004) | | | $ | 4.05 | | | $ | 207 | | | $ | 527 | |
| Forfeited | | — | | | $ | — | | | | | |
| Balance at December 31, 2022 | | 223,133 | | | $ | 1.17 | | | $ | 161 | | | |
2014 Employee Stock Purchase Plan
The 2014 Employee Stock Purchase Plan, the “ESPP”, provides for eligible Company employees, as defined by the ESPP, to be given an opportunity to purchase the Company’s common stock at a discount, through payroll deductions, with stock purchases being made upon defined purchase dates. The ESPP authorizes the issuance of up to 55,000 shares of the Company’s common stock to participating employees and allows eligible employees to purchase shares of common stock at a 15% discount from the lesser of the grant date or purchase date fair market value. The ESPP has been suspended since December 2020. As of December 31, 2022, there were 18,488 shares available for issuance under the ESPP. There was no activity within the ESPP for the years ended December 31, 2022 and December 31, 2021.
Share-Based Compensation Expense
Share-based compensation expense by classification for December 31, 2022 and 2021 are as follows:
| | | | | | | | | | | | | | |
| | Year Ended |
| (in thousands) | | December 31, 2022 | | December 31, 2021 |
| General and administrative | | $ | 1,328 | | | $ | 2,275 | |
| Research and development | | 1,281 | | | 1,164 | |
| Total | | $ | 2,609 | | | $ | 3,439 | |
At December 31, 2022, total compensation cost not yet recognized was $2.4 million and the weighted-average period over which this amount is expected to be recognized is 1.68 years. The aggregate fair value of options and restricted shares vesting in the years ended December 31, 2022 and 2021 was $3.3 million and $4.3 million, respectively.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Co-Development and Co-Commercialization Agreement - Adaptimmune Therapeutics plc
On December 16, 2016, the Company entered into a Co-Development and Co-Commercialization Agreement with and Adaptimmune Therapeutics plc (Adaptimmune) in order to facilitate a staged collaboration to evaluate, develop and commercialize next generation T cell therapies. Since we have stopped all development activity related to our product candidates, we are not currently performing any development efforts under this agreement. Under the Agreement, the parties agreed to evaluate the Company’s GoTCR technology (inducible MyD88/CD40 co-stimulation, or iMC) with Adaptimmune’s affinity-optimized SPEAR® T cells for the potential to create enhanced TCR product candidates. Depending on results of the preclinical proof-of-concept phase, the parties expect to progress to a two-target co-development and co-commercialization phase. To the extent necessary, and in furtherance of the parties’ proof-of-concept and co-development efforts, the parties granted each other a royalty-free, non-transferable, non-exclusive license covering their respective technologies for purposes of facilitating such proof-of-concept and co-development efforts. In addition, as to covered therapies developed under the agreement, the parties granted each other a reciprocal exclusive license for the commercialization of such therapies. With respect to any joint commercialization of a covered therapy, the parties agreed to negotiateattempt in good faith to follow the commercially reasonable termslegal written direction of a co-commercialization agreement. The parties also agreed thatour Board (or for Dr. Scripture our Chief Executive Officer); (3) failure to attempt in good faith to perform the executive’s duties (other than any such agreement shall providefailure resulting from incapacity due to physical or mental illness) after receiving a written demand for among other things, equal sharingsubstantial performance from our Board (or for Dr. Scripture, our Chief Executive Officer); (4) conviction of, the costsindictment for, or a plea of guilty or nolo contendere to, a felony or any such joint commercialization and the calculation of profit shares as set forthcrime involving dishonesty, fraud or moral turpitude; (5) dishonesty with regard to us or in the Agreement. The Agreement will expireperformance of his duties under the employment agreement, which in either case has a material adverse effect on a country-by-country basis once the parties cease commercialization of the T cell therapies covered by the Agreement, unless earlier terminated by either party forus; (6) material breach non-performanceof executive’s agreement unless corrected within ten days of written notification of such breach from us; or cessation of development, bankruptcy/insolvency, or(7) failure to progress to co-development phase.
License Agreement - Baylor
In 2008, 2010, 2014 and 2016, the Company and Baylor Collegecomply in any material respect with our policies and/or procedures, unless corrected within 10 days of Medicine (“BCM”) entered into license agreements pursuant to which the Company obtained exclusive rights to certain technologies and patent rights owned by BCM.
Under the 2014 license agreement, the Company is required to pay BCM a low annual maintenance fee on each anniversary of the agreement date. The Company is also required to make royalty payments in the low single digits, subject to certain annual minimums, on net sales of products covered by the license and,written notification to the extentexecutive of such breach.
For purposes of Mr. Fair’s employment agreement, “good reason” generally means the Company enters into a sublicensing agreement relating to a licensed product, the Company is also required to pay BCM a percentage in the low double-digits on all non-royalty income received from sublicensing revenue.
During the second quarter of 2021, the Company determined that $0.6 million of sublicense expense was incurred in 2019 through 2020 related to the Company’s obligation to pay BCM a percentage of sublicense revenue earnedfollowing events, conditions or actions taken by the Company under the 2014 license agreement. Management evaluated the impact of the adjustment and determined that the amount was immaterial to the consolidated financial statements for the current year and prior years. As such, the entire amount of $0.6 million was recorded during the second quarter in 2021. During the third quarter of 2021, the Company earned additional sublicense revenue and, therefore, recorded additional sublicense expense of $0.5 million.
License Agreement - Agensys, Inc.
On December 10, 2015, the Company and Agensys, Inc. (“Agensys”), entered into a license agreement (the “Agensys Agreement”), pursuant to which (i) Agensys granted the Company, within the field of cell and gene therapy of diseases in humans, an exclusive, worldwide license and sublicense to its patent rights directed to prostate stem cell antigen 1 (“PSCA”) and related antibodies, and (ii) the Company granted Agensys a non-exclusive, fully paid license to the Company’s patents directed to inventions that were made by the Company in the course of developing the Company’s licensed products, solely for use with Agensys therapeutic products containing a soluble antibody that binds to PSCA or, to the extent not based upon the Company’s other proprietary technology, to non-therapeutic applications of antibodies not used within the field. As consideration for the rights granted to the Company under the Agreement, the Company agreed to pay to Agensys a non-refundable upfront fee of $3.0 million, which was included in license fee expense. The Company is also required to make aggregate milestone payments to Agensys of up to (i) $5 million upon the first achievement of certain specified clinical milestones for its licensed products, (ii) $50 million upon the achievement of certain specified clinical milestones for each licensed product, and (iii) $75 million upon the achievement of certain sales milestones for each licensed product. The Agreement additionally provides that the Company will pay to Agensys a royalty that ranges from the mid to high single digits based on the level of annual net sales of licensed products by the Company, its affiliates or permitted sublicensees. The royalty payments are subject to reduction under specified circumstances. These milestone and royalty payments will be expensed as incurred. Under the Agreement, Agensys also was granted the option to obtain an exclusive license, on a product-by-product basis, from the Company to commercialize in Japan each licensed product developed under the Agensys Agreement that has completed a phase 2 clinical trial. As to each such licensed product, if Agensys or its affiliate, Astellas Pharma, Inc., exercises the option, the Agensys Agreement provides that the Company will be paid an option exercise fee of $5 million. In addition, the Agensys Agreement provides that the Company will be paid a royalty that ranges from the mid to high single digits based on the level of annual net sales in
Japan of each such licensed product. If the option is exercised, the aggregate milestone payments payable by the Company to Agensys, described aboveus with respect to each licensed product, would be reduced by up to an aggregate of $65 million upon the achievement of certain specified clinical and sales milestones. The Agensys Agreement will terminate uponexecutive without the expirationexecutive’s written consent: (1) a material reduction in base salary; (2) a material reduction in the executive’s authority, duties or responsibilities; (3) a relocation of the last royalty term for the products covered by the Agensys Agreement, which is the earlierexecutive’s principal place of (i) the date of expiration or abandonment of the last valid claim within the licensed patent rights covering any licensed products under the Agreement, (ii) the expiration of regulatory exclusivity asemployment to a licensed product, and (iii) 10 years afterplace that increases the first commercial sale of a licensed product. Either party may terminate the Agensys Agreement upon aexecutive’s one-way commute by more than 50 miles; or (4) our material breach by the other party that remains uncured following 60 days after the date of written notice of such breach (or 30 days if such material breach is related to failure to make payment of amounts due under the Agensys Agreement) or upon certain insolvency events. In addition, Agensys may terminate the Agensys Agreement immediately upon written notice to the Company if the Company or any of its affiliates or permitted sublicensees commences an interference proceeding or challenges the validity or enforceability of any of Agensys’ patent rights.
License Agreement - BioVec
On June 10, 2015, the Company and BioVec Pharma, Inc. (“BioVec”) entered into a license agreement (the “BioVec Agreement”) pursuant to which BioVec agreed to supply the Company with certain proprietary cell lines and granted to the Company a non-exclusive, worldwide license to certain of its patent rights and related know-how related to such proprietary cell lines. As consideration for the products supplied and rights granted to the Company under the BioVec Agreement, the Company agreed to pay to BioVec an upfront fee of $100,000 within ten business days of the effective date of the BioVec Agreement and a fee of $300,000 within ten business days of its receipt of the first release of GMP lot of the products licensed under the BioVec Agreement. In addition, the Company agreed to pay to BioVec an annual fee of $150,000, commencing 30 days following the first filing of an Investigational New Drug Application (an IND filing), or its foreign equivalent, for a product covered by the license; with such annual fees being creditable against any royalties payable by the Company to BioVec under the BioVec Agreement. The Company also is required to make a $250,000 milestone payment to BioVec for each of the first three licensed products to enter into a clinical phase trial and one-time milestone payments of $2.0 million upon receipt of a registration granted by the Federal Drug Administration or European Medicines Agency on each of the Company’s first three licensed products. The BioVec Agreement additionally provides that the Company will pay to BioVec a royalty in the low single digits on net sales of products covered by the BioVec Agreement. The Company may also grant sublicensees under the licensed patent rights and know-how to third parties for limited purposes related to the use, sale and other exploitation of the products licensed under the BioVec Agreement. The BioVec Agreement will continue until terminated. The BioVec Agreement may be terminated by the Company, in its sole discretion, at any time upon 90 days written notice to BioVec. Either party may terminate the BioVec Agreement in the event of a breach by the other party of any material provision of the BioVec Agreement that remains uncured on the date that is 60 days after written notice of such failure or uponemployment agreement.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth certain insolvency eventsinformation regarding equity awards granted to our named executive officers that remain uncured following the date that is 30 days after the date of written notice to a party regarding such insolvency event.
Litigation
On May 29, 2019, Bellicum was served with a second amended complaint indicating that the Company had been added as an additional defendant in an ongoing civil tort lawsuit, captioned Kelly v. Children’s Hospital of Los Angeles et al., filed in the Los Angeles County Superior Court, Case No. BC681477. On July 10, 2019 plaintiffs filed a third amended complaint seeking unspecified monetary damages including punitive damages and alleging claims for wrongful death, negligence, breach of fiduciary duty, fraud, medical battery on decedent, medical battery on individual plaintiffs, products liability - failure to warn, breach of express warranty and products liability design or manufacturing defect. Bellicum filed a demurrer and motion to strike plaintiffs’ third amended complaint, which were granted in part on August 5, 2020 with the Court dismissing (without prejudice) all claims against Bellicum with the exception of the breach of express warranty and products liability design or manufacturing defect causes of action. The Court also granted Bellicum’s motion to strike plaintiffs’ claim for punitive damages. On September 15, 2020, plaintiffs filed a fourth amended complaint alleging the same causes of action and damages against Bellicum as were pled in the third amended complaint. On November 3, 2020, Bellicum filed a demurrer and motion to strike the fourth amended complaint, which was heard by the Court on May 19, 2022. The Court sustained the demurrer without leave to amend as to the causes of action for wrongful death, negligence, fraud, battery, and products liability-failure to warn, and overruled the demurrer as to products liability-design/manufacturing defect. The Court also granted Bellicum’s motion to strike punitive damages.
The parties engaged in discovery in advance of the trial date set for March 13, 2023. On November 22, 2022, Bellicum filed a motion for summary judgment seeking an order from the Court that the undisputed material facts warranted a dismissal of Bellicum from the case. On February 9, 2023, the Court held a hearing on Bellicum’s motion for summary judgment, and granted the motion. Entry of the final judgment in favor of Bellicum and against the plaintiffs is pending.
NOTE 8 - INCOME TAXES
The reconciliation between federal income taxes at the statutory U.S. federal income tax rate and the Company’s income tax expense for the year is as follows:
| | | | | | | | | | | | | | |
| (in thousands) | | December 31, 2022 | | December 31, 2021 |
| Tax benefit at statutory rate | | $ | (5,244) | | | $ | (2,038) | |
| Stock based compensation | | 207 | | | 780 | |
| Offering issuance costs and changes in fair value of warrants and private placement option | | (413) | | | (3,176) | |
| Change in valuation allowance | | 6,066 | | | 4,718 | |
| Research and development credit | | (585) | | | (288) | |
| Other | | (29) | | | 4 | |
| Income tax expense | | $ | 2 | | | $ | — | |
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes, and the amounts used for income tax purposes. Significant components of the Company’s deferred taxes as of December 31, 2022 and 2021 are as follows:
| | | | | | | | | | | | | | |
| (in thousands) | | December 31, 2022 | | December 31, 2021 |
| Deferred tax assets (liabilities): | | | | |
| Net operating loss carryforward | | $ | 104,707 | | | $ | 100,346 | |
| Stock compensation | | 3,838 | | | 3,541 | |
| Intangible assets | | 6,096 | | | 7,156 | |
| Section 174 expenses, net of amortization | | 1,639 | | | — | |
| Research and development credit | | 18,661 | | | 18,076 | |
| | | | |
| | | | |
| Other | | 63 | | | (144) | |
| Total deferred tax assets, net of deferred tax liabilities | | 135,004 | | | 128,975 | |
| Valuation allowance | | (135,004) | | | (128,975) | |
| Net deferred tax | | $ | — | | | $ | — | |
Net operating loss carryforwards and research tax credits as of December 31, 2022 and 2021 are as follows:
| | | | | | | | | | | | | | |
| (in thousands) | | December 31, 2022 | | December 31, 2021 |
| U.S. federal income tax net operating loss carryforwards | | $ | 498,607 | | | $ | 477,839 | |
| U.K. net operating loss carryforwards | | $ | — | | | $ | — | |
| U.S. federal research tax credits | | $ | 13,569 | | | $ | 12,985 | |
| Texas research tax credits | | $ | 5,091 | | | $ | 5,091 | |
The Company has $277.4 million of U.S. federal net operating loss carryovers that have no expiration date and the remaining begin to expire in 2025. The U.S. Federal and state research credits will begin to expire in 2028 and 2034, respectively. No study has been performed on the research and development (R&D) credits and gross R&D credits in the amount of $18.7 million could be limited based on review by the Internal Revenue Service.
The Internal Revenue Code Section 382 limits NOL and tax credit carry forwards when an ownership change of more than 50% of the value of the stock in a loss corporation occurs. Accordingly, the ability to utilize remaining NOL and tax credit carryforwards may be significantly restricted.
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax asset will be realized. The ultimate realization of deferred tax assets is dependent upon the Company attaining future taxable income during periods in which those temporary differences become deductible.
Due to the uncertainty surrounding the realization of the benefits of its deferred assets, including NOL carryforwards, the Company has provided a 100% valuation allowance on its net deferred tax assets at December 31, 2022 and 2021. The changes in the valuation allowance were an increase of $6.0 million and an increase of $4.7 million for the years ended December 31, 2022 and 2021, respectively.
The Internal Revenue Code Section 174 requires that taxpayers capitalize and amortize R&D expenses that were previously eligible for immediate expensing, for tax years commencing after January 1, 2022. Under the Code, expenses incurred within the U.S. will be amortized over a five-year period beginning with the midpoint of the year in which the expenses were paid or incurred. The expenses that are required to be capitalized will include both the qualified expenses that go into calculating the R&D tax credit and the indirect costs that can be attributed to R&D activities. For the year ended December 31, 2022, the estimated Section 174 expenses, net of amortization, are $1.6 million.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
ITEM 9A. Controls and Procedures
Management’s Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Principal Executive and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act,outstanding as of December 31, 2022. The term “disclosure controls and procedures,” as definedWe did not materially modify any outstanding equity award held by our named executive officers in Rules 13a-15(e) and 15d-15(e)2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | Option Awards(1) |
| Name | | Grant Date | | | Number of
Securities
Underlying
Unexercised
Options
Exercisable (#) | | Number of
Securities
Underlying
Unexercised
Options
Unexercisable (#) | | | Option
Exercise
Price ($)(2) | | | Option
Expiration
Date | |
| Richard A. Fair | | | 1/30/2017 | | | | 50,000 | | | — | | | | 118.70 | | | | 1/29/2027 | |
| | | 1/2/2018 | | | | 22,500 | | | — | | | | 92.30 | | | | 1/1/2028 | |
| | | 7/2/2018 | | | | 22,499 | | | — | | | | 77.20 | | | | 7/1/2028 | |
| | | 2/1/2019 | | | | 29,375 | | | 625 | | | | 33.50 | | | | 1/31/2029 | |
| | | 6/11/2019 | | | | 29,374 | | | 625 | | | | 18.70 | | | | 6/10/2029 | |
| | | 2/3/2020 | | | | 89,040 | | | 36,659 | | | | 13.60 | | | | 2/2/2030 | |
| | | 12/15/2020 | | | | 286,000 | (3) | | — | | | | 2.97 | | | | 12/14/2030 | |
| | | 8/16/2021 | | | | 176,666 | (4) | | 88,334 | | | | 2.88 | | | | 8/15/2031 | |
| | | 8/15/2022 | | | | — | (5) | | 400,000 | | | | 1.44 | | | | 8/15/2032 | |
| | | | | | | | | | | | | | | | | | | |
| Charity D. Scripture, MS, PharmD | | | 11/1/2018 | | | | 2,500 | | | — | | | | 44.10 | | | | 11/1/2028 | |
| | | 2/3/2020 | | | | 13,671 | | | 5,628 | | | | 13.60 | | | | 2/2/2030 | |
| | | 8/3/2020 | | | | 20,000 | (6) | | — | | | | 7.13 | | | | 8/2/2030 | |
| | | 12/15/2020 | | | | 35,000 | (7) | | — | | | | 2.97 | | | | 12/14/2030 | |
| | | 8/16/2021 | | | | 33,333 | (8) | | 16,667 | | | | 2.88 | | | | 8/15/2031 | |
| | | 12/1/2021 | | | | 75,000 | (9) | | 75,000 | | | | 1.73 | | | | 11/30/2031 | |
| | | 8/15/2022 | | | | — | (10) | | 250,000 | | | | 1.44 | | | | 8/15/2032 | |
(1) Equity awards granted after June 13, 2019 were granted under the Exchange Act, means controls2019 Plan, and all other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submitsequity awards were granted under the Exchange Act is recorded, processed, summarized and reported within2014 Plan.
(2) All of the time periods specified inoption awards were granted with a per share price not less than the SEC rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its Principal Executive and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurancefair market value of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationshipone share of possible controls and procedures. Basedour common stock on the evaluationdate of grant, as determined in good faith by our disclosure controls and procedures as of December 31, 2022, our Principal Executive Officer and our Principal Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at a reasonable assurance level.
Management’s Annual Report on Internal Control over Financial Reporting
Management is responsibleBoard. Unless otherwise noted, all stock awards granted provide for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f) and 15d-15(f). Our internal control over financial reporting is designed under the supervision of our management to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with United States generally accepted accounting principles.
The Company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositionsfollowing “standard” vesting schedule: 25% of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the Consolidated Financial Statements.
Under the supervision of and with the participation of our Principal Executive and Principal Financial Officer, our management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2022, based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) in Internal Control-Integrated Framework. Based on this assessment, management has concluded that our internal control over financial reporting was effective at the reasonable assurance level as of December 31, 2022.
Inherent Limitations of Internal Controls
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods areshares subject to the risks that controls mayoption vest on the 12-month anniversary of the grant date and 1/36th of the remaining shares subject to the option vest in equal monthly installments over the next three years thereafter subject to the officer’s continued service to us.
(3) On December 15, 2020, Mr. Fair received an option to purchase 286,000 shares of our common stock. The option vests as follows: 50% of the shares subject to the stock option vested and became exercisable on December 15, 2021, and the remaining shares subject to the stock option vest and become inadequate becauseexercisable in 12 equal monthly installments thereafter, subject to his continued service with us.
(4) On August 16, 2021, Mr. Fair received an option to purchase 265,000 shares of changesour common stock. The option vests as follows: 50% of the shares subject to the stock option vest and become exercisable on August 16, 2022, and the remaining shares subject to the stock option vest and become exercisable in conditions, or that12 equal monthly installments thereafter, subject to his continued service with us.
(5) On August 15, 2022, Mr. Fair received an option to purchase 400,000 shares of our common stock. The option vests as follows: 33% of the degreeshares subject to the stock option vest and become exercisable on August 15, 2023, and the remaining shares subject to the stock option vest and become exercisable in 24 equal monthly installments thereafter, subject to his continued service with us.
(6) On August 3, 2020, Dr. Scripture received an option to purchase 20,000 shares of complianceour common stock. The option vests as follows: 100% of the shares subject to the stock option vested and became exercisable on August 3, 2021.
(7) On December 15, 2020, Dr. Scripture received an option to purchase 35,000 shares of our common stock. The option vests as follows: 50% of the shares subject to the stock option vested and became exercisable on December 15, 2021, and the remaining shares subject to the stock option vest and become exercisable in 12 equal monthly installments thereafter, subject to her continued service with the policies or procedures may deteriorate.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our latest fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. Other Information
None.(8) On August 16, 2021, Dr. Scripture received an option to purchase 50,000 shares of our common stock. The option vests as follows: 50% of the shares subject to the stock option vest and become exercisable on August 16, 2022, and the remaining shares subject to the stock option vest and become exercisable in 12 equal monthly installments thereafter, subject to her continued service with us.
Perquisites Health, Welfare and Retirement Benefits
ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
Certain information required by Part III is omitted from this Annual Report since we intend to file our definitive proxy statementWe maintain a defined contribution employee retirement plan, or 401(k) plan, for our 2023 Annual Meetingemployees. Our named executive officers are also eligible to participate in the 401(k) plan on the same basis as our other employees. The 401(k) plan is intended to qualify as a tax-qualified plan under Section 401(k) of Stockholders,the Code. The plan provides that each participant may contribute 100% of his or her eligible compensation up to the statutory limit, which was $19,500 for calendar year 2021. Participants that are 50 years or older can also make “catch-up” contributions, which in calendar year 2021 was up to an additional $6,500 above the statutory limit. We may also elect to provide for discretionary profit-sharing contributions, but we did not provide any such contributions in 2021. The 401(k) plan currently does not offer the ability to invest in our Proxy Statement,securities.
Nonqualified Deferred Compensation
None of our named executive officers participate in or have account balances in nonqualified defined contribution plans or other nonqualified deferred compensation plans maintained by us. Our Board may elect to provide our officers and other employees with nonqualified defined contribution or other nonqualified deferred compensation benefits in the future if it determines that doing so is in our best interests.
Clawback Policy
We have adopted a clawback policy applicable to our executive officers that became effective in June 2019. Under our clawback policy, if we are required to prepare an accounting restatement for any fiscal quarter or year due to material noncompliance with a financial reporting requirement, and our Compensation Committee determines that an officer’s misconduct contributed to such material noncompliance, our Compensation Committee may seek to recover, within the twelve month period following the date on which we were required to prepare the accounting restatement, certain incentive compensation (or gains from the sale of shares acquired pursuant to an equity award) from such officer. Incentive compensation for purposes of this policy means an officer’s stock option, restricted stock unit or other equity-based compensation that was granted, earned or vested based in whole or in part on the attainment of a financial reporting measure. Our Compensation Committee intends to revisit our clawback policy after the SEC within 120 days afteradopts final rules implementing the endrequirements of Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Non-Employee Director Compensation
The following table shows for the fiscal year ended December 31, 2022 and certain information with respect to bethe compensation of all of our non-employee directors:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name(1) | | Fees Earned or
Paid in Cash | | | Option
Awards(2)(3) | | | Stock Awards(2)(4) | | | Total | |
| James Daly | | | — | | | | $12,347 | | | $39,643 | | | | $51,990 | |
| Stephen Davis | | | — | | | | $12,347 | | | $49,042 | | | | $61,389 | |
| Reid M. Huber, Ph.D. | | | — | | | | $12,347 | | | $52,533 | | | | $64,880 | |
| Judith Klimovsky, M.D. | | | — | | | | $12,347 | | | $39,643 | | | | $51,990 | |
| Jon P. Stonehouse | | | $1,088 | | | | $12,347 | | | $68,455 | | | | $81,890 | |
(1) Mr. Fair did not earn compensation during 2022 for his services on the Board. Mr. Fair’s compensation is reflected in the “—Summary Compensation Table” above.
(2) Amounts listed represent the aggregate grant date fair value of option awards and restricted stock unit awards granted during 2021 computed in accordance with ASC 718. Assumptions used in the calculation of these amounts are included in Note 7 to our audited financial statements included in our Proxy Statement is incorporated herein by reference.
ITEM 10. Directors, Executive Officers and Corporate Governance
The information required by this itemAnnual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 31, 2023. These amounts do not reflect the actual economic value that will be realized by the non-employee director upon vesting of the awards, the exercise of the stock options, or the sale of the common stock underlying such awards. As of December 31, 2022, each non-employee director held stock options and restricted stock units (“RSUs”) to purchase the following numbers of shares of our common stock: Mr. Daly held options to purchase 35,583 shares of our common stock and RSUs covering 35,082 shares of our common stock; Mr. Davis held options to purchase 36,416 shares of our common stock and RSUs covering 43,400 shares of our common stock; Dr. Huber held options to purchase 36,852 shares of our common stock and RSUs covering 46,489 shares of our common stock; Dr. Klimovsky held options to purchase 36,750 shares of our common stock and RSUs covering 35,082 shares of our common stock; Mr. Stonehouse held options to purchase 36,852 shares of our common stock and RSUs covering 60,580 shares of our common stock;
(3) Reflects an annual option grant to purchase 15,000 shares of our common stock in 2022 granted to each of our directors pursuant to our non-employee director compensation policy.
(4) Reflects restricted stock unit awards granted to our non-employee directors in lieu of cash compensation, pursuant to our non-employee director compensation policy.
Our Board maintains a non-employee director compensation policy that is applicable to all of our directors who are not serving as our employees or consultants (other than solely as a result of serving on our Board). This compensation policy, as in effect in 2022, provided that each director not also serving as an employee of the Company will receive the following compensation for service on our Board as set forth below:
•an annual cash retainer of $40,000;
•an additional annual cash retainer of $30,000 for service as chairman of the Board;
•an additional annual cash retainer of $15,000 for service as our lead independent director;
•an additional annual cash retainer of $7,500, $5,000, $5,000, $5,000, and $3,500 for service as a member of the Audit Committee, Compensation Committee, Science Committee, Finance Committee, and the Nominating and Governance Committee, respectively;
•an additional annual cash retainer of $7,500, $5,000, $5,000, $5,000 and $4,000 for service as chairman of the Audit Committee, Compensation Committee, Science Committee, Finance Committee, and the Nominating and Governance Committee, respectively;
•an additional per-meeting attendance fee of $1,000, not to exceed $7,000 annually, to non-employee members of the Science Committee for each meeting held in excess of five meetings per year;
• an initial option grant to purchase 13,000 shares of our Proxy Statement as follows:
•The information relatingcommon stock on the date of each new non-employee director’s appointment to our directorsBoard, one-third of which shares vest on the one-year anniversary of the grant and nominees for director isthe remaining shares vesting monthly over a two-year period thereafter; and
• an annual option grant to be includedpurchase 15,000 shares of our common stock on the date of each of our annual stockholder meetings, vesting in full on the one-year anniversary of the date of grant.
Each of the initial and annual option grants described above will vest as described above, and become exercisable, subject to the director’s continuous service with us, provided that each option will vest in full upon a change in control (as defined in the section entitled “Election2019 Plan). The term of Directors,”each option will be 10 years, subject to earlier termination as provided in the 2019 Plan, except that the post-termination exercise period will be for 12 months from the date of termination, if such termination is other than for cause or due to death or disability.
•Commencing on January 1, 2021, in lieu of the cash compensation described above (other than the per-meeting attendance fee for Science Committee), each director not also serving as an employee of the Company (each, an “Eligible Director”) instead received a restricted stock unit award (each a “Retainer Grant”). The Retainer Grant shall be automatically granted to each Eligible Director on January 1 of each year (or if such date is not a market trading day, the first market trading day thereafter) or, if later, on the date of the Eligible Director’s initial election to the Board (or if such date is not a market trading day, the first market trading day thereafter), and will cover a number of shares of Company common stock equal to (1) the aggregate amount of annual cash compensation otherwise payable to such Eligible Director for the upcoming calendar year divided by (2) VWAP (as defined below) over a 30 calendar day period ending on the last trading day before the date of grant, rounded down to the nearest whole share. The Retainer Grant will vest in
full upon the one year anniversary of the date of grant, subject to the Eligible Director’s Continuous Service (as defined in the 2019 Plan) through each such vesting date and will vest in full upon a Change in Control (as defined in the 2019 Plan). “VWAP” means, for any trading day, the per share volume-weighted average price of the Company’s common stock on Nasdaq, in respect of the period from the scheduled open of trading until the scheduled close of trading of the primary trading session of Nasdaq on such trading day (or if such volume-weighted average price is unavailable, the market value of one share of our common stock on such trading day determined, using a volume-weighted average method, by a nationally recognized independent investment banking firm retained for this purpose by us). The VWAP for any given trading day will be determined without regard to pre-market hours or after-hours trading or any other trading outside of the regular trading session trading hours.
Effective in April 2022, based on information relatingprovided by Radford, including equity compensation metrics for our peer companies, the Compensation Committee approved an amendment to this compensation policy to provide that new non-employee directors shall receive an initial option grant to purchase 30,000 shares of our common stock effective on the date of their appointment to our executive officers isBoard, and our existing non-employee directors shall receive an annual option grant to be included inpurchase 15,000 shares of our common stock on the section entitled “Information aboutdate of each of our Executive Officers,”annual stockholder meetings.
•In November 2021, our Board unanimously approved a temporary suspension of all compensation for service on our Board and committees with respect to the 2022 fiscal year. In August 2022, the Compensation Committee approved ending such temporary suspension and granting to the non-employee directors that number of RSUs equal to the aggregate amount of annual cash compensation for 2022 otherwise payable to such director pursuant to the compensation policy divided by the VWAP of our common stock over a 30 calendar day period ending on the last trading day before the grant date, rounded down to the nearest whole share. The information relating to our audit committee and audit committee financial expert is to be included in the section entitled “Information Regarding the Board of Directors and Corporate Governance,” andgrant date for such RSU grants was September 1, 2022.
•If required, the information regarding delinquent reports under Section 16(a) of the Exchange Act is to be included in the section entitled “Delinquent Section 16(a) Reports.
Such information is to be included in our Proxy Statement and is incorporated herein by reference.
We have adopted a written Code of Business Conduct and Ethics,not historically paid cash or Ethics Code, that appliesequity compensation to all officers, directors andwho are also our employees including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Ethics Code is availablefor their service on our website at www.bellicum.com. If we ever wereBoard. We have reimbursed and will continue to amend or waive any provision that applies toreimburse all of our principal executive officer, principal financial officer, principal accounting officer or any person performing similar functions, we intend to satisfynon-employee directors for their travel, lodging and other reasonable expenses incurred in attending meetings of our disclosure obligations, if any, with respect to any such waiver or amendment by posting such information onBoard and committees of our website, rather than by filing a Current Report on Form 8-K.Board.
ITEM 11. Executive Compensation
The information required by this item will be set forth in the section entitled “Executive and Director Compensation” in our Proxy Statement and is incorporated herein by reference.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth certain information requiredregarding the ownership of the Company’s common stock within 60 days of March 31, 2023 by: (i) each director; (ii) each of our named executive officers; (iii) all executive officers and directors of the Company as a group; and (iv) all those known by the Company to be beneficial owners of more than 5% of its common stock.
The following table is based upon information supplied by officers, directors and principal stockholders and Schedules 13D and 13G filed with the SEC. Unless otherwise indicated in the footnotes to this itemtable and subject to community property laws where applicable, the Company believes that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. Applicable percentages are based on 9,046,298 shares outstanding on March 31, 2023, adjusted as required by rules promulgated by the SEC. Unless otherwise indicated, the address for the following stockholders is care of: Bellicum Pharmaceuticals, Inc., 3730 Kirby Drive, Ste. 1200, Houston, Texas 77098.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Beneficial Ownership | |
| Beneficial Owner | | Number of
Shares (#) | | | Percent of
Total (%) | |
| Greater than 5% stockholders | | | | | | | | |
Armistice Capital, LLC(1)
510 Madison Avenue, 7th Floor
New York, New York 10022 | | | 955,995 | | | | 10.57 | % |
| Named Executive Officers and Directors | | | | | | | | |
Richard A. Fair(2) | | | 788,020 | | | | 8.02 | % |
Charity D. Scripture, MS, PharmD(3) | | | 237,768 | | | | * | |
James M. Daly, Director(4) | | | 34,960 | | | | * | |
Stephen Davis, Director(5) | | | 40,131 | | | | * | |
Reid M. Huber, Ph.D., Director(6) | | | 41,346 | | | | * | |
Judith Klimovsky, Director(7) | | | 36,352 | | | | * | |
Jon P. Stonehouse, Director(8) | | | 43,906 | | | | * | |
| All executive officers and directors as a group (7 persons) | | | 1,222,483 | | | | 12.07 | % |
* Less than one percent.
(1) Based solely upon a Schedule 13G filed with the SEC on February 14, 2023 jointly by Armistice Capital, LLC, and Steven Boyd. Armistice Capital Master Fund Ltd., a Cayman Islands exempted company that is an investment advisory client of Armistice Capital, LLC, has the right to receive dividends from, or the proceeds from the sale of, the reported securities.
(2) Consists of (i) 13,012 shares of common stock and (ii) 775,008 shares of common stock subject to options exercisable by Mr. Fair within 60 days of March 31, 2023.
(3) Consists of (i) 14,587 shares of common stock and (ii) 223,181 shares of common stock subject to options exercisable by Dr. Scripture within 60 days of March 31, 2023.
(4) Consists of (i) 14,377 shares of common stock and (ii) 20,583 shares of common stock subject to options exercisable by Mr. Daly within 60 days of March 31, 2023.
(5) Consists of (i) 18,715 shares of common stock and (ii) 21,416 shares of common stock subject to options exercisable by Mr. Davis within 60 days of March 31, 2023.
(6) Consists of (i) 19,494 shares of common stock and (ii) 21,852 shares of common stock subject to options exercisable by Dr. Huber within 60 days of March 31, 2023.
(7) Consists of (i) 14,602 shares of common stock and (ii) 21,750 shares of common stock subject to options exercisable by Dr. Klimovsky within 60 days of March 31, 2023.
(8) Consists of (i) 22,504 shares of common stock and (ii) 21,852 shares of common stock subject to options exercisable by Mr. Stonehouse within 60 days of March 31, 2023.
Equity Compensation Plan Information
The following table provides certain information with respect to all of the Company’s equity compensation plans will be set forth in effect as of December 31, 2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Plan Category | | Number of
securities to be
issued
upon exercise
of outstanding
options, warrants
and rights (a) | | | Weighted-
average
exercise price
of outstanding
options,
warrants
and rights (b) | | | Number
of securities
remaining available
for issuance under
equity compensation
plans (excluding
securities reflected
in column (a)) (c) | |
| Equity compensation plans approved by security holders | | | 3,563,242 | (1) | | $8.89 | (2) | | | 727,652 | (3) |
| Equity compensation plans not approved by security holders | | | 338,567 | (4) | | $8.89 | (2) | | | 44,133 | |
| Total | | | 3,901,809 | | | | | | | | 771,785 | |
| | | | | | | | | | | | |
(1) Includes 223,133 shares of common stock issuable upon the section entitled “Equity Benefit Plans” and the information required by this item with respect to security ownershipvesting of certain beneficial owners and management is to be included in our Proxy Statementoutstanding restricted stock units.
(2) The weighted-average exercise price does not take into account shares issuable upon vesting of outstanding restricted stock units, which have no exercise price.
(3) Includes 18,488 shares of common stock available for future issuance under the section entitled “Security Ownership2014 Employee Stock Purchase Program, or 2014 ESPP. Effective in December 2020, the 2014 ESPP was suspended indefinitely.
(4) Includes 500 shares of Certain Beneficial Ownerscommon stock issuable upon the vesting of outstanding restricted stock units. Reflects awards granted as inducement awards under the 2019 Plan and Management” in our Proxy Statement and in each case is incorporated herein by reference.2014 Plan.
The information required by Item 201(d) of Regulation S-K will be set forth in the section entitled “Executive and Director Compensation” in our Proxy Statement and is incorporated herein by reference.
ITEM 13. Certain Relationships and Related Party Transactions, and Director Independence
Related-Person Transactions Policy and Procedures
We have adopted a written related-person transactions policy that sets forth our policies and procedures regarding the identification, review, consideration and oversight of “related-person transactions.” For purposes of our policy only, a “related-person transaction” is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we and any “related person” are participants.
Transactions involving compensation for services provided to us as an employee, consultant or director are not considered related-person transactions under this policy. A related person is any executive officer, director or a holder of more than 5% of our common stock, including any of their immediate family members and any entity owned or controlled by such persons.
Under the policy, where a transaction has been identified as a related-person transaction, management must present information regarding the proposed related-person transaction to the Audit Committee (or, where review by the Audit Committee would be
inappropriate, to another independent body of our Board) for review. The presentation must include a description of, among other things, the material facts, the direct and indirect interests of the related persons, the benefits of the transaction to us and whether any alternative transactions are available. To identify related-person transactions in advance, we rely on information requiredsupplied by this itemour executive officers, directors and certain significant stockholders. In considering related-person transactions, the Audit Committee or another independent body of our Board takes into account the relevant available facts and circumstances including, but not limited to:
•the risks, costs and benefits to us;
•the impact on a director’s independence in the event the related person is a director, immediate family member of a director or an entity with which a director is affiliated;
•the terms of the transaction;
•the availability of other sources for comparable services or products; and
•the terms available to or from, as the case may be, unrelated third parties or to or from our employees generally.
In the event a director has an interest in the proposed transaction, the director must recuse himself or herself from the deliberations and approval.
Indemnification Agreements
We have entered, and intend to continue to enter, into separate indemnification agreements with our directors and executive officers, in addition to the indemnification provided for in our amended and restated bylaws. These agreements, among other things, require us to indemnify our directors and executive officers for certain expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by a director or executive officer in any action or proceeding arising out of their services as one of our directors or executive officers or as a director or executive officer of any other company or enterprise to which the person provides services at our request. We believe that these bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and liability and indemnification provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit us and our stockholders. A stockholder’s investment may decline in value to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
Director Independence
Our common stock is listed on the Nasdaq Capital Market. Under the rules of the Nasdaq Stock Market, independent directors must constitute a majority of a listed company’s board of directors. In addition, the rules of the Nasdaq Stock Market require that, subject to specified exceptions, each member of a listed company’s Audit, Compensation and Nominating and Corporate Governance Committees must be an “independent director.” Under the rules of the Nasdaq Stock Market, a director will only qualify as an “independent director” if, in the opinion of that company’s Board of Directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Additionally, Compensation Committee members must not have a relationship with the listed company that is material to the director’s ability to be independent from management in connection with the duties of a Compensation Committee member.
Audit Committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the sections entitled “Certain RelationshipsExchange Act. In order to be considered independent for purposes of Rule 10A-3, a member of an Audit Committee of a listed company may not, other than in his or her capacity as a member of the Audit Committee, the Board of Directors or any other Board committee: (i) accept, directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries or (ii) be an affiliated person of the listed company or any of its subsidiaries.
Our Board of Directors has undertaken a review of the independence of each director and Related Party Transactions”considered whether each director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, our Board of Directors determined that all of our directors except Mr. Fair, representing one of our six directors, are “independent directors” as defined under the applicable rules and “Electionregulations of Directors” inthe SEC and the listing requirements and rules of the Nasdaq Stock Market. In making these determinations, our Proxy StatementBoard of Directors reviewed and is incorporated hereindiscussed information provided by reference.the directors and us with regard to each directors’ business and personal activities and relationships as they may relate to us and our management, including the beneficial ownership of our capital stock by each non-employee director and any affiliates.
ITEM 14. Principal Accountant Fees and Services
The information requiredfollowing table represents aggregate fees billed to us for the fiscal years ended December 31, 2022, and December 31, 2021, by this item will be set forth inErnst & Young, the section entitled “Principal Accountant Fees and Services” in our Proxy Statement and is incorporated herein by reference.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | Fiscal Year
Ended | | | Fiscal Year
Ended | |
| | December 31,
2022 | | | December 31,
2021 | |
Audit Fees(1) | | $416,093 | | | $332,312 | |
| Audit-Related Fees | | | — | | | | — | |
| Tax Fees | | | — | | | | — | |
All Other Fees(2) | | | — | | | | — | |
| Total Fees | | $416,093 | | | $332,312 | |
| | | | | | | | |
(1) Audit Fees consist of fees billed for professional services by Ernst & Young LLP for audit and quarterly review of our financial statements and review of our registration statements and related services that are normally provided in connection with statutory and regulatory filings or engagements.
(2) All Other Fees consist of fees billed for the Company’s subscription to an Ernst & Young LLP online service used for accounting research purposes.
All fees described above were pre-approved by the Audit Committee.
In connection with the audit of the 2019 financial statements, the Company entered into an engagement agreement with Ernst & Young LLP that sets forth the terms by which Ernst & Young LLP will perform audit services for the Company.
PRE-APPROVAL POLICIES AND PROCEDURES
The Audit Committee has adopted a policy and procedures for the pre-approval of audit and non-audit services rendered by the Company’s independent registered public accounting firm, Ernst & Young LLP. The policy generally pre-approves specified services in the defined categories of audit services, audit-related services and tax services up to specified amounts. Pre-approval may also be given as part of the Audit Committee’s approval of the scope of the engagement of the independent auditor or on an individual, explicit, case-by-case basis before the independent auditor is engaged to provide each service. The pre-approval of services may be delegated to one or more of the Audit Committee’s members, but the decision must be reported to the full Audit Committee at its next scheduled meeting. The Audit Committee has determined that the rendering of services other than audit services by Ernst & Young LLP is compatible with maintaining the principal accountant’s independence.
PART IV
ITEM 15. Exhibit and Financial Statement Schedules
(a)(1) Financial Statements.
The response tofinancial statements required by this portionitem are listed in Item 8. “Financial Statements and Supplementary Data” as part of Item 15 is set forth under Part II, Item 8 of this Annual Report.the Original Filing.
(a)(2) Financial Statement Schedules.
We have
All schedules are omitted these schedules because they are not required, or areapplicable, not applicable,required or the required information is shown in the consolidated financial statements or notes thereto under Part II, Item 8 of this Annual Report.thereto.
(a)(3) Exhibits.
The documents listed in the following Exhibit Index of this Annual Report are incorporated by reference or are filed with this Annual Report, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).
| | | | | | | | | | | | | | |
Exhibit
Number | | Description |
| | |
| 3.1 | | |
| | |
| 3.2 | | |
| | |
| 3.3 | | |
| | |
| 4.1 | | Reference is made to Exhibits 3.1 and 3.2. |
| | |
| 4.2 | | |
| | |
| 4.3 | | |
| | |
| 4.4 | | |
| | |
| 4.5 | | |
| | |
| 4.6 | | |
| | |
| 4.7 | | |
| | |
| 4.8 | | |
| | |
| 4.9 | | |
| | |
4.104.1 | | |
| | |
| 4.11 | | |
| | |
| | | | | | | | | | | | | | |
Exhibit
Number | | Description |
| 4.12 | | |
| | |
| 10.1+ | | |
| | |
| 10.3+ | | |
| | |
| 10.4(A)+ | | |
| | |
| 10.4(B)+ | | |
| | |
| 10.4(C)+ | | |
| | |
| 10.4(D)+ | | |
| | |
| 10.4(E)+ | | |
| | |
| 10.4(F)+ | | |
| | |
| 10.4(G)+ | | |
| | |
| 10.5(A)+ | | |
| | |
| 10.5(B)+ | | |
| | |
| 10.6+ | | |
| | |
| 10.8+ | | |
| | |
| 10.9+ | | |
| | |
| 10.15 | | |
| | |
| 10.16* | | |
| | |
| 10.17* | | |
| | | | | | | | | | | | | | |
Exhibit
Number | | Description |
| |
| 10.18* | | |
| | |
| | | | | | | | |
| 10.19* | | |
| | |
| 10.20* | | |
| | |
| 10.21* | | |
| | |
| 10.22* | | |
| | |
| 10.23* | | |
| | |
| 10.24* | | |
| | |
| 10.25 | | |
| | |
| 21.1 | | |
| | |
| 23.1 | | |
| | |
| 24.1 | | |
| | |
| 31.1# | | |
| | |
32.1#31.2# | | |
| | |
| 32.1# | | |
| | |
| 101.INS** | | XBRL Instance |
| | |
| 101.SCH** | | XBRL Taxonomy Extension Schema |
| | |
| 101.CAL** | | XBRL Taxonomy Extension Calculation |
| | |
| 101.DEF** | | XBRL Taxonomy Extension Definition |
| | |
| 101.LAB** | | XBRL Taxonomy Extension Labels |
| | |
| 101.PRE** | | XBRL Taxonomy Extension Presentation |
| + | | | | | | | | |
+ | | Indicates management contract or compensatory plan. |
| | |
| * | | Pursuant to Item 601(b)(10) of Regulation S-K, certain portions of this exhibit have been omitted (indicated by “[***]”) because the Registrant has determined that the information is not material and is the type that the Registrant treats as private or confidential. |
| | |
| # | | This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended. |
| | |
ITEM 16. Form 10-K Summary
Not applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | | | | | |
| Bellicum Pharmaceuticals, Inc. |
| | |
Date: March 31,April 28, 2023 | By: | /s/ Richard A. Fair |
| | Richard A. Fair President and Chief Executive Officer |
| | |
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Richard A. Fair as his true and lawful attorney-in-fact, with the power of substitution, for him in any and all capacities, to sign any amendments to this report, and to file the same, with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorney-in-fact, or his substitute or substitutes may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated:
| | | | | | | | | | | | | | |
Signature | | Title | | Date |
| | | | |
/s/ Richard A. Fair | | President, Chief Executive Officer and Director | | March 31, 2023 |
Richard A. Fair | | (Principal Executive Officer and Principal Financial Officer) | | |
| | | | |
/s/ Charles S. Grass | | Principal Accounting Officer | | March 31, 2023 |
Charles S. Grass | | | | |
| | | | |
/s/ Jon P. Stonehouse | | Chairman of the Board of Directors | | March 31, 2023 |
Jon P. Stonehouse | | | | |
| | | | |
/s/ James M. Daly | | Member of the Board of Directors | | March 31, 2023 |
James M. Daly | | | | |
| | | | |
/s/ Stephen R. Davis | | Member of the Board of Directors | | March 31, 2023 |
Stephen R. Davis | | | | |
| | | | |
/s/ Reid M. Huber, Ph.D. | | Member of the Board of Directors | | March 31, 2023 |
Reid M. Huber, Ph.D. | | | | |
| | | | |
/s/ Judith Klimovsky | | Member of the Board of Directors | | March 31, 2023 |
Judith Klimovsky | | | | |